Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Friday, 5 February 2016

Star Wars: Good or bad for movie myth-making?


Software aside, copyright protection is seldom viewed as a means for acquiring market leadership
in content-creation industries. Truth be told, the treatment of such a clearly functional creation as software as a literary work has always required a bit of analytical sleight-of-hand. In any event, the role of network effects is far-removed from the context in which most works of copyright are created and commercialized. Against this background, it is worth pausing a moment to consider how The Economist has chosen to elaborate on the “wider” significance of the December 2015 launch of the movie, “The Force Awakens”, the latest and probably the most profitable installment of the Star Wars saga. Intellectual property, in general, and copyright, in particular, may be doing harm to our reservoir of content creation.

Kat readers with no direct memory of the circumstances of the screening of the initial movie in 1977 may be hard-pressed to appreciate the impact that the movie had on a broad swathe of movie-goers worldwide. To say that it broke new ground barely captures the impact that it had on the film industry and the viewer experience. It is no secret that the Star Wars series, in all of its forms of commercial exploitation, has made a ton of money for Lucasfilm (and now Disney). But no one is forced to go to a Star Wars movie or buy a movie-themed toy. It is a tribute to Hollywood bringing together this combination of experiential and commercialization success.

Not so fast, Kat readers. According to The Economist--
“… Disney has skilfully capitalized on their intellectual property—and in so doing, cemented its position as the market leader in the industrialisation of mythology.”
In its view, this movie, like many other Disney creations,
“…draw[s] on well-worn devices of mythic structure to give their stories cultural resonance. Walt Disney himself had an intuitive grasp of the power of fables. George Lucas, the creator of Star Wars, is an avid student of the work of Joseph Campbell, an American comparative mythologist who outlined the “monomyth” structure in which a hero answers a call, is assisted by a mentor figure, voyages to another world, survives various trials and emerges triumphant. Both film-makers merrily plundered ancient mythology and folklore. The Marvel universe goes even further, directly appropriating chunks of Greco-Roman and Norse mythology. (This makes Disney’s enthusiasm for fierce enforcement of intellectual-property laws, and the seemingly perpetual extension of copyright, somewhat ironic.)”
What Disney (and Lucasfilm) have done is “plunder” time-honored myths with cross-cultural resonance. The Star Wars series is a less impressive creative enterprise than it seems. The really “creative” contribution of Star Wars has been to successfully package these myths by cleverly exploiting modern technology and the expanding possibilities of product merchandising and theme parks. As such, Disney and Lucasfilm are using intellectual property not to protect their relative modest creative contributions, but to gain a leading position in the way that some of our most fundamental cultural heritage is being used for entertainment and commercial purposes. People need to find ways to relate to their most deeply-felt myths, and Disney is increasingly dominating the way that this is being done.

What exactly is the claim here? Is it that because the movie is making abundant use of cultural myths, and the creative contribution is alleged to be modest, Disney should be more measured about the enforcement of its copyright? That is an odd way to view the situation. After all, copyright law has various means to deal with this kind of thing, such as the idea/expression dichotomy and the notion of scène à faire. If Disney oversteps the bounds of its protected copyright, and the courts are correctly applying the appropriate legal principles, then efforts to claim copyright protection in cultural myths will be denied. But it seems that the root of the magazine’s complaint is not legal but moral. Someone like Disney, which makes good money (at the moment) from generating popular contents, should be showing more gratitude. The ultimate problem is not legal but a flaw in corporate character—being less “fierce” (how much less so is not clear) in protecting its intellectual property rights is one way that the company could be saying thank you to the cultural antecedents that have enabled it to successfully create its products.

But the criticism is not merely about a flaw in corporate character, but also the veiled
suggestion that Disney’s increasing presence in the market for creations about myth may have a dampening effect. Using intellectual property as a sword, the ultimate result is that fewer creations might be made than would be the case if intellectual property was being properly applied. Seen in this way, the criticism by The Economist is an extension of the attack that it mounted in August 2015 regarding the alleged deleterious effect of patents on innovation. When it applied to Disney, at least, we can now add to the black list the harm being done to the market for creations that make use of cultural myths.

Thursday, 4 February 2016

Katcall for new positions in the IPKat team

The IPKat is pleased to announce a new and exciting opportunity for aspiring community bloggers!  Considering the running of the IPKat blog in the future, the IPKat team is proposing to create a new role, to be called "InternKat".

The IPKat team is therefore looking for 2 keen intellectual property enthusiasts to fill the position of InternKats. It is envisaged that the InternKats selected would carry out the role for a period of 6 months, and be responsible for tasks including:

  • Round-up posts (example);
  • Never-too-late posts (example);
  • Around-the-blog posts (example);
  • Book reviews (example);
  • Updating the events calendar (here);
  • Reporting of statistics and analytics of the IPKat blog and coverage with a monthly round-up.
If the InternKats wish, they are also invited to write independent posts with a suggested contribution rate of about once a month.  Throughout the period the InternKats will receive training as required for the tasks that the role involves, as well as mentoring and guidance from the IPKat team in writing posts.

Anyone may apply for this role, but the Kats think that it will be most suited to graduate students in the field of IP law or trainees (or recently qualified people) in one of the IP-related professions.

To apply, applicants should send their CV and a 400-word sample post on the topic of their choice by email to theipkat@gmail.com, and include the word "InternKat" in the subject line of the email. The covering email should include the applicant's name, qualifications, current occupation, areas of IP interest, and 150 words on why they would like to be an InternKat.

The deadline for applications is 29 February 2016. Successful applicants will begin their internship on 1 April 2016.

So if you want to get your paws on one of the most stimulating opportunities in feline IP blogging [a crowded market, Merpel notes], get in touch now!

Can GIFs infringe copyright? In Europe the answer is potentially 'yes'

Facebook GIF button
Thanks to Katfriend and scholar Martin Husovec (Tilburg University) this Kat has become aware that, after Facebook, also Twitter is on the move to introduce a dedicated GIF button (although for the moment it is only testing it on its mobile version).

As most IPKat readers will know, a GIF [which stands for graphic interchange format and - importantly - must be pronounced with the same soft 'g' of 'gelato'] is "something between an emoticon and a video clip" and "looks like a short, slightly grainy video file that plays over and over again".

Usually GIFs reproduce (very) short extracts of films or other likely-to-be-copyright-protected material, more-often-than-not for non-commercial purposes [if you wish to create your own GIFs, learn how here].

This Kat is not aware of any specific decision on the copyright status of GIFs, although determining whether a GIF is something that has the potential to infringe third-party rights may become particularly relevant. This is so on consideration: (1) of their increasing availability, now also by means of dedicated buttons; and (2) that there are entire news portals that provide daily good journalism also by using GIFs as a visual aid.

In the recent past the NFL has submitted takedown requests to Twitter over allegedly-infringing GIFs, although some commentators have concluded that - even if likely to fall within the scope of copyright protection - under US law GIF-providers would be likely shielded from liability for copyright infringement thanks to the 'fair use' doctrine.

But would the same be true in Europe?


GIFs prima facie infringing?

Among other things, Article 2 of the InfoSoc Directive mandates upon EU Member States "to provide for the exclusive right of authors to authorise or prohibit direct or indirect, temporary or permanent reproduction by any means and in any form, in whole or in part" of their works.

The notion of 'reproduction in part' was interpreted by the Court of Justice of the European Union (CJEU) in its landmark decision in Infopaq.

In that case the CJEU held that there is 'reproduction in part' any time extracts that "contain an element of the work which, as such, expresses the author’s own intellectual creation" [para 48].

Although the Court conceded that reproduction of individual words would not fall within the scope of Article 2, it is apparent - also in light of subsequent case law - that reproduction of anything above a de minimis threshold would be likely regarded as reproduction in part.

In relation to GIFs, it is arguable that they contain protectable elements of a work or, to borrow from the language of trade mark law, elements of a work that are used because of their very distinctive and recognisable nature.

The real point would then be to determine whether any defences could be available to GIF-providers.


GIFs as quotations?
Any defences?

There is probably no need to recall that, unlike US law, under EU law there is a closed list of exceptions and limitations in Article 5 of the InfoSoc Directive that EU Member States are free (with the sole exclusion of the exemption for temporary copies in Article 5(1)) to implement into their own legal systems. 

If we take the (general) case of a GIF that reproduces part of a protected work without modifications (so that there would be no issues of whether the GIF at stake could be regarded, for instance, as a parody), it would appear that in general this is unlikely to treated as criticism or review of a work or its underlying ideas, or news reporting [a while ago this Kat discussed this very possibility in relation to vines of Premier League goals]

As such, the applicable defence might be potentially the one for quotation within Article 5(3)(d) of the InfoSoc Directive. This exception allows Member States to permit "quotations for purposes such as criticism or review, provided that they relate to a work or other subject-matter which has already been lawfully made available to the public, that, unless this turns out to be impossible, the source, including the author's name, is indicated, and that their use is in accordance with fair practice, and to the extent required by the specific purpose."

Besides the fact that this exception is optional for Member States to implement, the problem is that different Member States that have introduced it into their own laws have done so in different terms.


Quotation: yes, but where?

Introduced in 2014, section 30(1ZA) of the Copyright, Designs and Patents Act 1988 provides that:

"Copyright in a work is not infringed by the use of a quotation from the work (whether for criticism or review or otherwise) provided that— 
(a) the work has been made available to the public, 
(b) the use of the quotation is fair dealing with the work, 
(c) the extent of the quotation is no more than is required by the specific purpose for which it is used, and 
(d) the quotation is accompanied by a sufficient acknowledgement (unless this would be impossible for reasons of practicality or otherwise)."

This exception has not yet been applied by a UK court, so its scope is uncertain for the time being. However, in this Kat's opinion a GIF would likely satisfy all the conditions indicated by this provision, including fair dealing. The main problem could be however with acknowledgment, although a GIF could possibly be excused from failing to providing it.

Whether a GIF could be however regarded as a quotation might be more problematic in other EU Member States.

For instance in France Article L-122-5(3)(a) of the Code de la propriété intellectuelle states that quotations are allowed insofar as (1) they clearly indicate the name of the author and the source; and (2) are justified for by the critical, polemic, educational, scientific or information of the work in which they are incorporated.

Both conditions may be difficult to meet for GIFs, particularly the latter. This is because GIFs are self-standing quotations, not attached to any other work.

Finally, if we take the case of this Kat's native land, Italy, Article 70(1-bis) of the Legge sul Diritto d'Autore allows online free publication of low resolution or degraded images and musical works, for educational or scientific uses and only where such use is for non-commercial reasons.

As far as this provision is concerned, the main problem for GIFs would be to determine whether they can be regarded as educational or scientific uses of protected works.

In conclusion

The creation and provision of GIFs under the laws of EU Member States does not appear necessarily a safe enterprise from a copyright standpoint, especially if one considers jurisdictions like France or Italy.

This means that both direct creation and making available of GIFs (as it appears to be the case, for instance, of Buzzfeed) and the hosting of GIFs (eg on Facebook and Twitter through their GIF buttons) have the potential to generate some copyright headaches, at least in some European countries, for GIF-creators and internet service providers alike.

But what do readers think?

EPO appoints new Chief Economist

The EPO has announced the appointment of its new Chief Economist, Yann Ménière.

According to the press release:

Yann Ménière, EPO photo
"Yann Ménière is professor of economics on leave from MINES ParisTech, where he was leading the Chair on "IP and Markets for Technology" until joining the EPO. His research and expertise relate to the economics of innovation, competition and intellectual property. In recent years, he has been focusing more specifically on IP and standards, markets for technology, and IP issues in climate negotiations. Besides his academic publications, he has also written a number of policy studies for the European Commission, French government and other public organisations. Outside MINES ParisTech, he has been teaching the economics of IT standards at Imperial College Business School and the economics of IP law at the Law School of Université Catholique de Louvain."
The Office of Chief Economist at EPO typically runs as fixed-term appointment from as short as one year to as long as nearly six. The appointment has always been external and the career profile has thus far been civil servant, academic or consultant. Most previous post holders have had strong ties with France or Belgium. Yann, a French national, will be the fifth Chief Economist.

Presumably high on the list of the incoming economist's agenda will be modelling the Unitary Patent and its financial impact on the EPO. This impact is heavily dependent on how the agreement works out, and what demand for the UP looks like.

Welcome to the patent policy world, Yann!

EPO Chief Economists of the past - Theon van Dijk, Bruno van Pottelsberghe, Dominique Guellec and Nikolaus Thumm

Thursday Thingies

OHIM has announced the opening of the entry period for DesignEuropa Awards 2016. All designs entered must be valid Registered Community Designs (RCD).  The award is in partnership with the Italian IP office, UIBM and is awarded in three categories: industry, small & emerging company, and lifetime achievement. The application window closes July 15th.  Fun fact: The Italian word for patent, brevetto, comes from the latin brevis, meaning short.

AIPPI Spanish Group has announced the program for their next sessions. Me gusta el programa.  The event, to be held on the 18th and 19th of February in Madrid, covers all things IP. Registration here. Fun fact: round table in Spanish is mesa redonda, and both the English and Spanish terms are likely translations of the French table ronde. 

The USPTO has published a white paper on Remixes, First Sale, and Statutory Damages (summary version here.)  In it, their Internet Policy Task Force recommends no legislative action on remixes and first sale doctrine, but lots of 'monitoring,' 'guidelines' and 'best practices.' It recommends action on statutory damages to "provide both more guidance and greater flexibility to courts in awarding statutory damages ... changes to remove a bar to eligibility for the Act’s “innocent infringer” provision, and to lessen the risk of excessive statutory damages in the context of non-willful secondary liability for online service providers." It also suggests the establishment of a small claims tribunal for infringement cases against individuals. Covered here on 1709 blog.

Taylor Wessing is soliciting responses for their annual Global IP Index Survey.  The survey closes Friday and can be completed in three languages: English, French and German.  Readers are encouraged to respond -- data in IP is scarce! Fun fact: The word in German for survey is umfrage and I can't find anything else to say on that matter.

The UK government published its response to the planned ascension to the Hague Agreement, two weeks ago, as covered in this Taylor Wessing blog post. Fun fact: The 'the' in The Hague likely comes from an old tradition of calling a place by its medieval description, rather than a name.  According to Slate, The Hague, or Den Haag comes from, "from Des Graven Hage, which means "the counts' hedge" and refers to the fact that Dutch noblemen once used the land for hunting." The IPKat approves.

Wednesday, 3 February 2016

Trends in IP Data

You can't touch IP, most litigation devotes significant energy to even defining a right, and, by definition, any particular right is unique. So, how do you measure IP? Data on IP is scarce; inaccessible registries, unregistered rights and privately held information don't help. Yet, recent trends in IP data suggest progress is being made. In particular, trends in national offices are promising.

"Sh!t ton is my favourite unit of measurement."
Bill Murray Parody Twitter Account
Pallas cat looking angry, by Tambako the Jaguar

Economics is data-obssessed.  I’ve discussed before economists’ predilection for all things quantitative (numbers), but it’s worth emphasising why – objectivity.  Anecdotes and observations are susceptible to the subjective views of the observer. Shark attacks are a good example as our fear, horror stories and media coverage can lead us to vastly overestimate the actual risk.  Quantitative data provides an objective information on shark attacks to balance our subjective view. However, the objectivity of quantitative data is only relative and data collection involves oft-forgotten subjectivity (even deciding what to measure is subjective.) Nonetheless, I've never met a standard deviation that didn't do it for me.

The relative dearth of data in IP impacts both policy and business.  The lack of good data means that policy may be based on subjective views not in line with empirical evidence. Poor data on the value of IP, litigation risk and the importance of IP protection may mean that firms’ IP strategies are not optimised.  For example, the fear of patent litigation, even if such fear is unwarranted, increases demand for litigation insurance, and consequently increases insurance premiums.  Good data benefits everyone.

The trendy word in datasets these days is, “granular.” Granular, however, does not mean organic grains stuck between teeth, but “the size in which data fields are subdivided.” In short, it means detailed.  The kinds of datasets becoming available now are at an unprecedented level of detail.  <Merpel, were she an economist, would swoon at this point.>

Creating a database is challenging work.  In some cases, historical data, key to understanding trends, may be stored on legacy systems or in hard copy only.  Records may be poorly maintained due to error or even deliberately (managing data costs money) and ownership of data may be unclear.  Data must be “cleaned,” which is not some organised crime euphemism, but quality control.  Missing data, or an errant line of code, can mess up a database.  And once you’ve done all the work of extracting the right data, you may have to go through the same exercise next year.

Thankfully, IP offices are making data more accessible.  While the increasing availability of IP registries for search purposes is encouraging, one-off cases provide little insight. Comprehensive research requires complete databases rather than registry searches. It is these complete databases where we are seeing great improvements.
IP God?
British Museum Egypt
by Einsamer Schützer

Patents
I could write multiple posts on patent data, but suffice to say that it is much more widely available, from both offices and commercial databases, than other rights.  The USPTO has recently published some more data on application data, which the Written Description blog has covered.  IP Australia’s forthcoming 2016 version of their IP Government Open Data (IPGOD) has broader coverage than previous releases and includes attorney information, abstracts, transactions and process milestones.

Trade marks
The USPTO has led the trend in publishing trade mark data.  They've created good, easily accessible databases (accessibility here meaning comprehensive, high-quality, historical data in a format that can be easily ported into a variety of software.)  Hot on the heels of the USPTO are the UK IPO and IP Australia.  IP Australia has particularly exciting plans, according to Chief Economist, Ben Mitra-Kahn, “We are working with WIPO, USPTO, UK IPO, IPONZ and OHIM to create a global TM database with the Universities of Swinburne and Melbourne which will also be a first. Next steps are tools to work and look into the data. A lot of cool stuff.”

OHIM has plans to make its data more accessible and WIPO, in some cases, is restricted from sharing its data as it is often-third party. If readers could alert me to other offices making more data available, please do.  Most offices seem to be sticking to online searchable, but not downloadable, records systems and statistics releases (e.g. analysis of IP trends, often in published in pdf.)

Design rights
Alas, poor design rights. They are the lesser loved of the registered IP rights, so feel some pity.  Like trade marks, they’re heavily dependent on images, which makes large scale analysis challenging. However, improved image analysis techniques suggest we may get a lot more out of image data than we do at present. Unofficially, I hear offices are planning to publish more design data.

Copyright
The unregistered nature of copyright suggests we won’t be seeing much by way of copyright data boons from IP offices. However, the digital era creates opportunities for copyright-related data.  For example, Google makes its copyright removal requests available for download.  Digital copyright exchange-type initiatives and Orphan Works schemes are also ripe for creating valuable data.

I have very high hopes for the future of IP data.  Increased digitisation means that more data is available in formats that can be relatively easily mined.  So, keeping in mind you are what you measure, Merpel would like you to know her vital stats: Hairball average: 1.1 per month, Grooming sessions: 3 per day (summer) 5 per day (winter), CIQ (Cat I.Q.): 17/20 (but she was distracted by a mouse when taking the test.)

And remember, "“Measurement is like laundry. It piles up the longer you wait to do it.” - Amber Naslund

Tuesday, 2 February 2016

US trade secrets legislation on the way to full Senate consideration

Like the California sky in January,
will the future be bright
for the DTSA as it floats towards
full Senate consideration?
Last Thursday, the US Senate Committee on the Judiciary reported the proposed Defend Trade Secrets Act (DTSA) out of Committee (see video here).  This means that, following a mark-up session, the bill (with amendments) was approved.  It will now go to full Senate consideration.   For background on the DTSA see the AmeriKat's previous reports here.

Kat friend and trade secret expert, James Pooley, has flagged up two key changes to the DTSA relating to whistleblower protection and the language on "threatened misappropriation".  James, who recently testified before the Senate Judiciary Committee on the DTSA, comments as follows:
"Whistleblower Protection: Trade secret law in the U.S. has never had an express exception for those who need to disclose their employer’s confidential information in order to report a possible crime to the authorities. Although some cases have spoken of an implied exception based on public policy, this has never been clearly embraced in a reliable way. In order to ensure people come forward without the fear of retaliation, they need to know they have a safe harbor against persecution for their efforts. The amendment offered by Senators Leahy and Grassley will for the first time guarantee protection to employees against claims of trade secret misappropriation when all they have done is talk to a lawyer or to the authorities. This will of course not just help those individuals, but also give law enforcement better access to information about criminal activity that otherwise would remain bottled up behind employee nondisclosure agreements. 
Threatened Misappropriation: Here the story is a bit more complicated, but starts with the language of the Uniform Trade Secrets Act (now the law in 47 states) that expressly allows injunctions against “actual or threatened misappropriation.” In 1995 the Seventh Circuit in Pepsico v. Redmond (1995) approved a temporary 5-month injunction against a high level executive taking the same marketing position with a company that was about to launch a directly competing product. Importantly, the individual had lied about his plans and otherwise behaved in a way that showed he was not trustworthy. But in announcing its decision, the court in dictum said that an injunction could issue against an employee taking a new job when it would “inevitably” lead him to misuse confidential information. This came to be known as the “inevitable disclosure doctrine”. Naturally, because it was expressed in such broad terms many in California took it to be inconsistent with our state’s policy on the free movement of labor. A California court later said as much (see Central Valley General Hospital v Smith (2008)). This lead to a patchwork quilt of states where the doctrine was rejected or accepted.

The amendment offered by Senator Feinstein (Democrat - California) reads that a court may not stop an employee from “entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows.” Some may think that this just forces California’s rejection of the inevitable disclosure doctrine on the federal courts, but I have a very different view. I consider that it will have the salutary effect of shifting the debate away from an abstraction that has almost never been applied in the way that people assume, and move back to the statutory language. This will refocus attention on the nature and quality of proof required to prove a “threat.” In other words, this could result in the end of the debate about the purported existence of the inevitable disclosure doctrine. In that sense, Senator Feinstein's amendment has not changed the law but reframed the debate to where it should have been all along."
There are other changes to the DTSA, including tightening up of the ex parte seizure orders by emphasizing that the remedy is available only in "extraordinary circumstances" and clarifying that only federal law enforcement can perform the seizure (with assistance from an independent expert).  To review all the amendments click here and here.

As the AmeriKat has mentioned previously, the DTSA stands a strong chance of being passed for all the reasons that bipartisan bills in an election year have a good chance of being passed.  For more detail about the amendments, see this excellent post by James published on Patently-O.

Inquiry as to damages: no longer a rare avis?


Brian Whitehead, at Kempner & Partners, has provided an edifying summary regarding the increased feasibility of
electing an inquiry as to damages in connection with patent litigation.

"AP Racing (a subsidiary of a leading motorsport and performance car brake manufacturer, Freni Brembo), brought a claim for patent infringement against Alcon Components Limited. The claim concerned a patent protecting AP Racing’s leading RadiCal family of calipers. The RadiCal calipers represented a huge step in high-performance caliper design on their release in 2007. When released in 2007 and, unlike previous generations of calipers, which were small and symmetrical in appearance, the RadiCal family are as large as space permits, but with much removal of unnecessary metal, leading to a highly asymmetric appearance. This innovation gives the calipers significantly improved lightness and stiffness over previous generations. Uptake of the calipers in high end motor racing was rapid, including in Formula 3 and NASCAR.

AP Racing’s market position was challenged by, Alcon, which introduced a similar family of calipers Indeed, from 2009 Alcon replaced AP Racing as the supplier of calipers to a number of NASCAR teams. In January 2014, the Court of Appeal ruled that AP Racing’s patent was valid, it having already been held by the Patents County Court to be infringed by a number of Alcon’s NASCAR calipers. AP Racing elected for an inquiry as to damages, the hearing of which took place in the Intellectual Property Enterprise Court in December 2015.

HHJ Hacon’s decision following that hearing has now been handed down. The judge held that every single caliper sale made by Alcon’s US distributor after the date of publication of the patent was a lost sale by AP Racing. AP Racing was therefore entitled to recover the profit it would have made on each of Alcon’s sales. Furthermore, AP Racing also recovered the profits it would have made on the other equipment likely to have been sold alongside the calipers. In total, AP Racing has been awarded damages of just under £0.5 million, plus interest and costs.

Until quite recently, inquiries as to damages were rare, as they had a reputation for being long and costly – instead, parties typically sought to settle the financial compensation aspects of IP disputes following a finding of infringement. Since the availability of the more streamlined procedure in the IPEC, accompanied by the cap on recoverable costs in that court, inquiries have become much more commonplace. Parties are now able to obtain a judicial ruling on points of dispute (typically which, if any, of the defendant’s sales represent a sale lost by the claimant, and what, if any, other products and services would have been sold alongside those lost sales) in a relatively low-cost manner, and without the risk of a large adverse costs award. This represents another means by which the IPEC improves access to justice for litigants, particularly for small and medium enterprises."

Kempner & Partners served as counsel for AP Racing.

German Federal Patent Court (partially) invalidates 80% of litigated patents

Patent grave yard?
A study by Hess, Müller-Stoy and Wintermeier provides an interesting empirical look at the invalidation rate before the German Federal Patent Court and German Federal Court of Justice. Based on data from 2010 to 2013, the authors report that the Federal Patent Court invalidates 44% of all litigated patents, partially invalidates 36% and maintains (unamended) just 20%. An earlier study by Henkel and Zischka came to essentially the same conclusion (78% partial or total invalidity for decisions from 2010 to 2012), but draws different policy recommendations.

For software and telecommunications patents, the invalidation rate is even higher at 88% (58% totally invalid, 30% partially invalid, 12% maintained). Patentees fare slightly, but only slightly, better on appeal, as the win rate for appeals against decisions invalidating a patent is higher (60%) than the win rate for appeals against decisions maintaining a patent (40%).

These results are surprising as economic (i.e. rational choice) theory predicts that - if the stakes for both parties are the same (an assumption that does not necessarily hold for patent invalidity cases) - plaintiff and defendant win with equal probability (the Priest/Klein selection hypothesis, but see Gliksberg for empirical support for the "legal model" to which most lawyers would subscribe). The high invalidation rate would indicate that the stakes for the nullity plaintiff are much higher than the stakes for the patentee, which is possible but mere speculation.

Hess et al propose three tentative explanations for the high invalidation rate: (i) errors by the examiners, (ii) the introduction of new prior art before the court and (ii) different standards between the granting office and the court. New prior art could be found because potential infringers invest much more resources in prior art search than patent examiners. The authors consider this unlikely, because - according to their experience - "unsearchable" prior art is rarely dispositive; invalidations are rather based on (searchable) patent documents. The authors tend to think that the higher standard for inventive step by the court is the most important reason for the high invalidation rate.

If I may add my two cents, I would think that part of the puzzle lies in the categorization of "partially invalidated" patents as "invalidated", or "patentee loss". As everyone involved in patent litigation knows, there are claim amendments that really hurt (the patentee), and others that are mere formalities. Without knowing whether an amendment leads to a claim that is no longer infringed or is easily circumvented, it is difficult to say whether a partial invalidation is a win for the patentee or the nullity plaintiff. For an outsider, it is almost impossible to judge the importance of an amendment - this is not evident from the file wrapper, and certainly not from the file wrapper in a nullity proceeding, where the allegedly infringing embodiment is not at issue. If we were to classify the partial invalidations as 50% wins for patentee, we would arrive at an overall win rate for patentees in invalidity proceedings before the German Federal Patent Court of 38% (20% fully maintained plus half of 36% partially maintained). Still not great, but closing in on 50%.

A look at US data shows that patentees have a hard time there, too. While US Courts find for patentees in 58% of invalidity challenges, overall patentees only win 26% of cases (decisions from 2009 to 2013). Allison, Lemley & Schwartz summarize the reasons thus:
Why do patentees lose nearly three-quarters of the time when the court definitively resolves the merits? The answer is twofold. First, while courts turn away most validity challenges, patentees do not fare as well when it comes to infringement. Accused infringers won 54% (256 of 473) of their summary judgment motions alleging noninfringement of individual patents. That number rises to 57% (292 of 509) when we include stipulated judgments of noninfringement after claim construction, which are functionally equivalent to summary judgments of noninfringement; the patentee concedes that it cannot win under a particular claim construction in order to tee the case up for appeal. Second, the nature of patent litigation requires patentees to win every issue before the court. A patentee who defeats five of six invalidity challenges, only to lose the sixth, loses the case. So does a patentee who wins on validity and inequitable conduct but loses on infringement. One of us has referred to this as the “fractioning” of patent law. Our data suggest that it has a significant effect on patent cases overall because many of our cases had motions on multiple issues, and those motions were not always decided in favor of the same party. In patent law, a split decision is almost always a decision for the accused infringer, not the patentee.

Monday, 1 February 2016

Never too late: if you missed the IPKat last week

Away last week or too busy to read the IPKat? As usual, don’t worry because our friend and colleague Alberto Bellan is back with his Never Too Late feature, now on its 83rd edition.

This is what happened on this very blog last week:

The AmeriKat has decided to perk up her whiskers by taking a dose of California sun and American innovative spirit by relocating to Silicon Valley, from which she reports on the latest goings-on in the world of US patent litigation and a topic that even President Obama seemed to care about – the much-debated patent trolls.

Mark is the special Kat-reporter from Zurich, where the Institute for Industrial Property (INGRES) held its annual conference on developments in European IP law at the Sorrell Hotel. The esteemed speakers included Klaus Grabinski of the German Federal Court of Justice, Ursula Kinkeldey, former Permanent Member of the Enlarged Board of Appeal at the EPO, Stefan Luginbühl, International Legal Affairs with the EPO and expert on the Unitary Patent Package, and, guess who?, our very own Eleonora Rosati!

Nicola sinks her paws into the delicious 2015 update of the UK's creative industries' contribution to the economy, which the  UK Government's Department for Culture, Media & Sport (DCMS) has just published.

Elettra Bietti (A&O) summarises for the Kat-readership the recent and unreported decision of Mr Justice Carr in the on-going Stretchline v H&M dispute [see previous posts here], which serves as a warning for all those who draft IP settlement agreements in the event of future infringements.

A mammoth and much-awaited decision from Mr Justice Norris in the long-running trade mark co-existence saga Merck KGaA v Merck Sharp & Dohme [2016] EWHC 49 (Pat).  With limited time to digest the decision herself, Annsley had to rely on a helping paw in the form of Kat friend Nick Buckland (Irwin Mitchell) who has helpfully summarized the judgment for our readers.

A number of voices in the IP community have signed an, "Open Letter on Ethical Norms in Intellectual Property Scholarship."  It is a call to set, and uphold, high ethical standards in IP research. Largely concerned with legal scholarship, the letter focuses on private funding, transparency and objectivity in academic research. Nicola reports.

Whilst EPO staff were demonstrating (again) with 900 staff marching from the French embassy to the German embassy, AC members may have a hard time reconciling this unrest (considering also the 1300 who marched in Munich last week) with their promises to restore the social dialogue and sort out the staff disquiet. From what Merpel can see, the "social dialogue" mainly takes place in disciplinary hearing rooms during the final stages of proceedings against staff representatives instigated by Mr Battistelli or those close to him.


A newly uncovered story by Beatrix Potter, The Tale of Kitty-in-Boots, was discovered in the V&A Archives (where the majority of Potter’s papers reside) in 2015 by an amazingly fortunate editor at publisher Penguin Random House Children’s. Publication is anticipated in 2016, and there's an interesting IP story behind it, says Darren.

David reports of a brand-new reference to the CJEU (Case C-654/15) from the Swedish Supreme Court (case no. T 3403-14), asking two interesting questions on "genuine use" of trade marks.

The Whitney Museum of American Art of NYC has established a so-called replication committee (including one lawyer as a member) to determine under what conditions a work must be replicated if it cannot be fixed or otherwise restored in any traditional manner. The acute question that arises is whether it is still possible to talk about the original object when it has passed from conservation or even restoration to (mere?) replication. Neils takes the floor.


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PREVIOUSLY, ON NEVER TOO LATE

Never too late 82 [week ending on Sunday 24 January] – Economics of legal professions | One shot to boost your EU trade marks | AG's opinion on fair compensation | Enforcement Directive consultation and UPC | Armonised grace period | Draft UK Legislation on Unitary Patent and Unified Patents Court | Arnold J's ruling in KitKat | Linking and copyright | GE moves to Boston.

Never too late 81 [week ending on Sunday 17 January– Talented IP barristers 2015 | Wright Hassall LLP v Horton Jr & Anor [2015] EWHC 3716 (QB) | Economics of Collective Management Organisations | International jurisdiction in online EU trade mark infringement cases | SUEPO officials fired, downgraded | Electromagnetic Geoservices v Petroleum Geoservices  [2016] EWHC 27 | Accord Healthcare Limited v. medac Gesellschaft [2016] EWHC 24 (Pat) | New PCT Applicant's Guide | US Defend Trade Secrets Act.

Never too late 80 [week ending on Sunday 10 January] – Allergan's patent extortion claim, Samsung's damages petition, Revlimid generic settlement & more! | Recovery for pecuniary loss and moral prejudice | EU Trade Secrets Directive | Journal d’Anne Frank as a trade mark?! | New Patent Act in Spain | Yellow as a trade mark in Australia | Innovation is the dirty little secret of IP | David Keltie.


Never too late 79 [week ending on Sunday 3 January] – The politics of IP conferences in India | Australia’s tobacco plain packaging | EU’s no longer a logistical hub for counterfeiters | Patent amendments not allowed during court proceedings in Malaysia | Congratulations, Sir Nicholas Forwood!

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