From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Wednesday, 26 April 2017

Happy World IP Day!

The AmeriKat is currently writing this post at 37,000 feet somewhere off the east coast of the US. As eye-rolling as this may sound, she loves these moments where she can look towards the horizon and ponder on the various things going on in her life. However, she has been finding it more difficult to ponder and to plan given the turbulent times in which we live and the impact on our IP field.

Political discourse across the world is being exchanged at a fevered pace and in fevered tones.  Uncertainty as to the direction and destination of some of the world's biggest consumer markets permeates news headlines.  In the midst of this flux, what role does IP have?  Well,in the vein of Brad Smith's (General Counsel, Microsoft), comments during Fordham last week, IP will have an important role to play and one that it has been accustomed in playing through centuries of technological upheaval, political change and troubling periods of history.  

The way in which nations, innovators and the public have engaged with IP during these times have been diverse and context specific.  Some countries in their infancy, like the US, chose not to engage with IP at all (or at least minimally).  Other countries through various periods have adopted different approaches on substantive IP and trade issues.  There has been a continuum of different national approaches towards IP and, belatedly, some international harmonization.  

But, perhaps, in these polarized and divisive times there may be a new role of IP.  That as a unifying force. IP has common goals of incentivzing innovation and creation for the benefit of society.   IP also touches on everything.  It is the life blood of companies and individuals who rely on protection to get their products and works to the public.  It employs people.  It nourishes people.  It challenges people. 

So on this IP day perhaps we should think a bit about what unites us in our profession, despite all the challenges (and opportunities) that lay head politically and how we can provide strong united leadership in IP, policy and innovation over the coming year for the benefit of all.  

And with that rosy, high-altitude perspective relayed.... 

Happy World IP Day from the entire IPKat team!

(And happy birthday Sir Robin Jacob!)

Varsity Brands and Star Atheltica - A Closer Look

Varsity Brands' registered copyright works
In March the IPKat reported the breaking news that the long awaited US Supreme Court decision in Star Athletica v Varsity Brands had finally come out.

Now, in the words, of Seth Meyers, it's time for A Closer Look.

The Supreme Court decision is not about whether the cheerleader uniforms in issue met the requisite level of creativity to qualify for protection as copyright works (although both majority opinions did note that the level of creativity required is "extremely low" following Feist).

Instead, this case was concerned with art as it is applied to functional (or "useful") items be that a cheerleader's outfit, a lamp or anything in between.  More specifically it was about the circumstances in which it is possible to separate the artistic work from the functional item and the method for doing so.

Some applied art
(at Tate Britain until 29 May 2017)
Why is this an issue?

§101 of the US Copyright Act defines “Pictorial, graphic, and sculptural works” as including:
two-dimensional and three-dimensional works of fine, graphic, and applied art...  the design of a useful article, as defined in this section, shall be considered a pictorial, graphic, or sculptural work only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article (emphasis added).
Star Atheltica argued that the five designs in issue served the useful function of identifying the garments as cheerleading uniforms and therefore they could not be physically or conceptually separated from the cheerleading uniforms.

Is it necessary to consider separation at all?

Varsity Brands' primary argument was that the copyright works in issue are two dimensional graphic designs which appear on useful articles but are not themselves designs of useful articles.  The above images depict the registered copyright works.  They were all created before the cheerleading uniforms rather than taken from the uniforms after creation.  Therefore, they said, it is not necessary to consider whether the artistic work can be separated from or exist independently of the cheerleading uniform because the designs in issue are not for a useful article.

The Supreme Court disagreed. Because the designs were incorporated into the design of a useful article and §101 explicitly provides for two dimensional items being part of a useful article, this must be the sort of issue that congress had in mind when drafting the section.  Therefore, the majority held that the separability analysis applies in this instance.

Ginsburg J disagreed with this analysis and noted that because the designs were created before they were applied, "the designs are themselves copyrightable pictorial or graphic works reproduced on useful articles" (emphasis in original).  Therefore, in her view, the separability analysis is not necessary at all.

What is the separability test?

The separability test consists of two requirements (as set out in the statute):
  1. separate identification - this was considered to be "not onerous" as anyone can look at a useful article and identify some 2D or 3D component which has PGS qualities (i.e. pictorial, graphic or sculptural qualities);
  2. independent existence - is usually "more difficult to satisfy".  This requires that the PGS work must be able to exist alone once it is separated from the useful article. 
One of the statuettes from Mazer
The key authority in this decision was able to shed some light on this issue.  Mazer v Stein, 347 US 201, 214 (1954) concerns the protection of lamps.  More specifically it answered the question as to whether a statuette which was intended for use as a lamp base could be protected by copyright.

Mazer held that: (i) copyright subsisted in the statuette even though it was intended for use as a lamp base; and (ii) it was irrelevant whether the statuette was initially created as a freestanding sculpture or as a lamp base.

Therefore, Mazer said that "if a design would have been copyrightable as a standalone pictorial, graphic or sculptural work, it is copyrightable if created first as part of a useful article".   The Supreme Court traced the origins of §101 to Mazer and consequently intepreted §101 in line with Mazer.

They summarised the test as:
"[A] feature of the design of a useful article is eligible for copyright if, when identified and imagined apart from the useful article, it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium."
When applying this test to the cheerleading uniforms in issue they found that:
  1. the surface decorations on the uniforms could be identified as features having pictorial, graphic or sculptural qualities;
  2. the arrangement of colours and chevrons etc could be separated from the uniform and applied to another medium e.g. a painting;
  3. removing the surface decorations from the uniforms would not replicate the uniforms themselves.
If the decoration is removed, what is left?
Why was the Supreme Court divided?

This was not a unanimous decision.  The court was split 6-2 with Breyer J and Kennedy J dissenting.  

The court's opinion was divided on the following key issues.


The dissent argued that removing the designs from the cheerleading uniforms and placing them in some other medium, e.g. a canvas, would create "pictures of cheerleader uniforms".  In other words, even when the surface decoration is extracted, you cannot entirely remove the useful article (the uniform).  

The majority noted that two-dimensional applied art inevitably correlates to the medium on which it is recorded and it would be ludicrous for a fresco, ceiling panel or dome to lose copyright protection simply because they are designed to track the dimensions of the surface on which is is painted. 

Moving from fine art to a more popular realm, the justices applied the same reasoning to painted guitars being replicated on album covers.  They noted that it would create an anomaly if they (a) deny copyright protection to art that was first applied to a useful object whilst (b) allowing art which was later applied to a useful object to be protected.

The dissent allowed that a work of art printed on a T-shirt could be protected.  The majority noted that there is no material difference between a T-shirt and the uniforms.  They were clear that this decision does not give anyone the right to prevent the manufacture of cheerleading uniforms of the same shape, cut or dimensions.

Physical vs conceptual separability - usefulness after removal

One of the arguments around separability focused on whether it was necessary for the original item to remain as useful after the artistic work is removed.  In this instance, the dissent considered that the designs were necessary to identify the wearer as a cheerleader.  If the surface decoration it would simply be a plain white outfit rather than a cheerleading uniform.  

The majority gave this argument short shrift.  They noted that it you took the lamp in Mazer and removed the statuette you would be left with a shade, bulb and wires - i.e. it would not be equally useful after removal.  Importantly, "the statute does not require that we imagine a nonartistic replacement for the removed feature to determine whether that feature is capable of independent existence" (emphasis in original).

As a result of their analysis, the court "necessarily abandon[ed] the distinction between 'physical' and 'conceptual' separability which some courts and commentators have adopted".  The justices were very clear that because the statute does not require the underlying useful article to remain, the physical-conceptual distinction is unnecessary.  The only relevant question for separability is: can the artistic work be conceptually separated from the useful article?

Artistic judgment and marketability

There was an argument that the test for identifying an artistic work should include two objective components:

(1) do the design elements reflect the designer's artistic judgment?
(2) would the artistic feature be marketable to a significant segment of the community without its utilitarian function?

As neither test has any basis in the US Copyright Act, both tests were rejected.  Adding market surveys into the copyright process did not sound like a good idea to the justices as it "threatens to prize popular art over other forms or to substitute judicial aesthetic preferences for the policy choices embodied in the Copyright Act".

Inconsistent with the exclusion of industrial design

There has been a long history of the fashion industry trying to get protection for clothing as a specific useful article (in a similar way that semiconductor chips and boat hulls have been protected).

Because congress has declined to specifically protect clothing as copyright (and left it to be covered by design patents), Star Athletica argued that there was a "presumption against copyrightability".

The majority noted that (i) "congressional inaction lacks persuasive significance", (ii) design patents and copyright are not mutually exclusive; and (iii) the test formulated by the Supreme Court would not protect the physical garments including their shape, cut and dimensions but only the surface decoration applied to those uniforms. 

Although the ultimate decision on infringement could still go in Star Athletica's favour, the basic principle from this decision (i.e. that art can be protected as a copyright work if it can be conceptually separated from a utilitarian object) seems perfectly reasonable to me.  Whether this will make a tremendous change to industry remains to be seen.   

For more on the history of the Mazer v Stein statuettes including more images of the statuettes at issue in the case and an explanation for any ballet dancer/Balinese dancer confusion see Zvi Rosen's fascinating blog here.

Finally - a big caveat and a shout out to all the US copyright lawyers.  I am an English lawyer and whilst many of the principles in this judgment are similar, if there are any errors or omissions, whether in use of language or interpretation of the decision, please let me know and I can update the post.

By Rosie Burbidge

BREAKING: CJEU in Filmspeler rules that the sale of a multimedia player is a ‘communication to the public’

Did you think that the story with copyright, linking, and the right of communication to the public was over? 

Of course not.

Today the Court of Justice of the European Union (CJEU) issued its long-awaited [even more keenly awaited is however the forthcoming ruling in Ziggo, aka The Pirate Bay case, heredecision in Filmpeler, C-527/15.


As readers will remember, this reference for a preliminary ruling had arisen in the context of litigation between Dutch anti-piracy organization Stichting Brein and Jack Frederik Wullems over the sale, by the latter and through - among other things - his site, of various models of a multimedia player under the name ‘filmspeler’. 

Filmspeler is a player for connecting a source of image and/or sound signals to a television screen. If the multimedia player is connected to the internet, on the one hand, and to a user’s screen (for example, a television screen), on the other, the user is able to stream the image and the sound from a web portal or website.

Among other things, Wullems installed add-ons [over which he had no influence] containing hyperlinks which, if clicked, would redirect the user to streaming websites, controlled by third parties, on which films, television series and (live) sporting events could be enjoyed free of charge, with or without the authorisation of relevant rightholders. 

Stichting Brein sued Wullems for copyright infringement before the District Court of Central Netherlands, claiming that through the sale of the Filmspeler player, Wullems was carrying out a ‘communication to the public’ contrary to Dutch copyright law.

The District Court held the view that the relevant Dutch provisions should be interpreted in light of Article 3 of the InfoSoc Directive but considered that: 

(1) CJEU case law existing at that time [notably Svensson and BestWaterwould not provide criteria sufficient for reaching a decision in this case; and 
(2) it was unclear whether the defence for temporary copies, pursuant to the Dutch transposition of Article 5(1) of the InfoSoc Directive, would be applicable to relevant streaming activities.

The District Court decided therefore to stay the proceedings and seek guidance from the CJEU as to the following:

‘1)      Must Article 3(1) of the [InfoSoc] Directive be interpreted as meaning that there is “a communication to the public” within the meaning of that provision, when someone sells a product (mediaplayer) in which he has installed add-ons containing hyperlinks to websites on which copyright-protected works, such as films, series and live broadcasts are made directly accessible, without the authorisation of the right holders?
2)      Does it make any difference:
-      whether the copyright-protected works as a whole have not previously been published on the internet or have been published only through subscriptions with the authorisation of the right holder?
-      whether the add-ons containing hyperlinks to websites on which copyright-protected works are made directly accessible without the authorisation of the right holders are freely available and can also be installed in the mediaplayer by the users themselves?
-      whether the websites and thus the copyright-protected works made accessible thereon — without the authorisation of the right holders — can also be accessed by the public without the mediaplayer?
3)      Should Article 5 of the [InfoSoc] Directive (Directive 2001/29/EC) be interpreted as meaning that there is no “lawful use” within the meaning of Article 5(1)(b) of that Directive if a temporary reproduction is made by an end user during the streaming of a copyright-protected work from a third-party website where that copyright-protected work is offered without the authorisation of the right holder(s)?
4)      If the answer to the third question is in the negative, is the making of a temporary reproduction by an end user during the streaming of a copyright-protected work from a website where that copyright-protected work is offered without the authorisation of the right holder(s) then contrary to the “three-step test” referred to in Article 5(5) of the [InfoSoc] Directive (Directive 2001/29/EC)?’

Today's decision

At a first glance it would appear that the CJEU substantially followed the Opinion of Advocate General (AG) Manuel Campos Sánchez-Bordona [here], who proposed a broad(er) interpretation of the right of communication to the public and, with it, a broader reading of what amounts to an 'indispensable intervention'.

The CJEU decision is not yet available on the Curia website, but according to the press release:

"In its judgment today, the Court of Justice holds that the sale of a multimedia player, such as the one in question, is a ‘communication to the public’, within the meaning of the directive. 

The Court recalls, in that regard [and unsurprisingly], its case-law according to which the aim of the directive is to establish a high level of protection for authors. The concept of ‘communication to the public’ must therefore be interpreted broadly. In addition, the Court has already held that the availability, on a website, of clickable links to protected works published without any access restrictions on another website offers users of the first website direct access to those works. That is also the case in respect of a sale of the multimedia player in question. 

In the same way, Mr Wullems, in full knowledge of the consequences of his conduct, preinstalls, on the multimedia player add-ons that make it possible to have access to protected works and to watch those works on a television screen. Such actions are not to be confused with the mere provision of physical facilities, referred to in the directive. In that regard, it is clear from the observations submitted to the Court that streaming websites are not readily identifiable by the public and the majority of them change frequently. 

The Court also observes that, according to the referring court, the multimedia player has been purchased by a fairly large number of people. Furthermore, the communication at issue covers all persons who could potentially acquire that media player and have an internet connection. Thus, that communication is aimed at an indeterminate number of potential recipients and involves a large number of persons. In addition, the provision of the multimedia player is made with a view to making a profit [clearly consideration of the defendant's profit-making intention was due to become central, especially after GS Media], the price for the multimedia player being paid in particular to obtain direct access to protected works available on streaming websites without the consent of the copyright holders. 

The Court also finds that temporary acts of reproduction, on that multimedia player, of a copyright protected work obtained by streaming on a website belonging to a third party offering that work without the consent of the copyright holder, cannot be exempted from the right of reproduction [within Article 5(1)]

Under the directive, an act of reproduction is only exempt from the right of reproduction if it satisfies five conditions, namely (1) the act is temporary, (2) it is transient or incidental, (3) it is an integral and technical part of a technological process, (4) the sole purpose of that process is to enable a transmission in a network between third parties by an intermediary or a lawful use of a work or subject matter, and (5) that act does not have any independent economic significance. Those conditions are cumulative in the sense that non-compliance with one of them will lead to the act of reproduction not being exempted. Furthermore, the exemption is to be applied only in certain special cases which do not impair the normal exploitation of the work or other subject matter and do not unreasonably prejudice the legitimate interests of the right holder. 

In the present case and having regard, in particular, to the content of the advertising of the multimedia player and to the fact that the main attraction of that player for potential purchasers is the pre-installation of the add-ons concerned, the Court finds that the purchaser of such a player accesses a free and unauthorised offer of protected works deliberately and in full knowledge of the circumstances. 

Furthermore, acts of temporary reproduction, on the multimedia player in question, of copyright-protected works adversely affects the normal exploitation of those works and causes unreasonable prejudice to the legitimate interests of the copyright holders because it usually results in a diminution of the lawful transactions relating to those protected works."

*Who* makes
acts of communication to the public?
Flash comment

A more detailed analysis will be provided as soon as the judgment becomes available. 

In the meantime, I can just say that this judgment is good news for rightholders, including those who are advocating the introduction of the 'value gap' provision in Article 13 of the draft directive on copyright in the Digital Single Market. The reason is that with this decision the CJEU appears to have relaxed the notion of 'indispensable intervention' and potentially paved the way to a broadening of the types of subjects that might be regarded as primarily responsible for acts of communication to the public.

In this article I wrote on GS Media I suggested in fact that, should the CJEU follows the AGs in both Filmspeler and Ziggo, the consequence indicated above might naturally follow.

In this sense, the concept of ‘communication to the public’ has been undergoing an evolution and the frontier Filmspeler and Ziggo represent is that of determining not just what amounts to an act of communication to the public, but also who makes an act of communication to the public. 

Stay tuned for a more detailed analysis! 

[UPDATE at 11:45 am: the text of the judgment is now available here]

Fordham 25 (Report 9): FRAND, SEPs & PAE's

Following on from the Pharma, IP and Competition panel, we stick with competition law issues, but change focus to the tech industry for a session on the latest developments in the perennially controversial area (or as discussed below, perhaps now less so) of SEPs and, later, NPEs.  Laura Whiting reports on the sessions:  
"FRAND/Standard Essential Patents 
This is not FRAND (it is a frond)
The panel was again introduced by Prof Daryl Lim and Nicholas Banasevic started by saying that he was pleased that there was now general consensus that there was a role for competition to play in relation to injunctions based on SEPs where there was a FRAND declaration.  Milan Kristof followed up on this by saying that although the CJEU's Huawei/ZTE decision has been criticised for not providing enough guidance on what is required in order from parties to SEP negotiations, in fact he felt that the CJEU had provided as much guidance as could reasonably be expected from a tribunal of its nature.  He commented that the roll-out of 5G and IoT could only lead to further litigation and that to address this the Commission is working on a policy paper which is aimed at plugging (some of) the gaps in the Huawei decision. 
Dina Kallay agreed that there had been a lot of progress in relation to FRAND commitments but did not feel there had been as much convergence between the varying viewpoints as might have been anticipated.  However, she felt the increased level of guidance from the courts was welcomed by industry.    David Por also thought the suggestion of convergence was optimistic.  There was still divergence in European national courts' application of the Huawei process which ranged from a "box-ticking" or "ping pong" approach all the way to the (UK style) detailed and careful analysis of the patents and licences in question.  In addition, he feels there is still insufficient guidance on the valuation of royalties from the courts.

Dirk Weiler
On the topic of setting suitable royalty rates, Dirk Weiler commented that the aggregate royalty rates for smartphones had not changed significantly from the high single digit rates (based on unit price) proposed by several companies for LTE in the mid-2000s.  He said that the big patent holders were interested in fostering the market rather than destroying it and that required a dialogue between patent holders and implementers, especially in the IoT sphere.  He does not think that the solution is government regulation but accepted that it might come to that if the market players could not agree suitable rates between themselves.  David commented that if the early LTE royalties offered by various companies were aggregated, they exceeded the total level of aggregate royalties per product that most companies considered reasonable.  That suggested that a solution may not be achievable by companies acting alone, and intervention may be required.  Timothy Syrett emphasised that in setting rates, he felt it hugely important that a licensor explains the merits of the patents in its portfolio and further justifies the level of its licence demand, potentially by reference to aggregate royalty rates.
Sir Robin Jacob commented from the audience that the UK Unwired Planet decision that a FRAND declaration amounts to an enforceable contract was, in his view, a game changer since it meant that the courts can now deal with the question of the appropriate royalty rate without further regulatory intervention.  Nicholas commented that the Commission still considered there was a role for competition law in setting rates, but agreed that now the principles had been established, national courts could implement them and the Commission was happy for them to do so - this was a positive development.
Dirk returned to the topic of transparency and said the ETSI IPR Committee were now focusing on increasing transparency as regards patent holdings.  In his view, the ETSI requirements for patent holders were very specific; however disclosure requirements varied between organisations in the industry and ETSI was therefore working to enhance its own declaration requirements and to make the declarations database more transparent.

Dina mentioned that industry was working on a "one stop shop" patent pool for cellular patents for 5G IoT devices which she hoped would be successful.  Dirk commented that there was ongoing discussions relating to 5G between the automotive/wireless industry; he repeated that in his view it was preferable for the industries to agree amongst themselves than for solutions to be imposed externally.
Fred faces off with the UP judgment
The panel turned next to an analysis of the UK Unwired Planet judgement (with Mr Justice Birss pricking up his ears in the audience).  Nicholas said that it was a fair application of Huawei/ZTE and while the Commission would have liked to have seen an analysis of the value of the technology ex ante as well as ex post, the decision reflected the principles that the Commission believes should be applied.  Milan commented that it was interesting to see the first European judgment which considered FRAND in detail – and that he would have welcomed even more discussion on the interaction between competition and contract law.  He noted that the General Court had held in Microsoft that FRAND could be a range as well as a single number and speculated that this could perhaps be considered in future cases.  
Dina Kallay
Dina welcomed the assessment of royalties on a global basis.  She thought the basis of the assessment was broadly consistent with Google v MMI in the US.  David noted that the judgment was very pragmatic and accepted that setting a FRAND rate will always involve a degree of approximation.  He responded to Nicholas's comment on FRAND ranges by saying that ranges were inherently difficult to set  Tim raised concerns about setting a worldwide licence without engaging in an analysis of where portfolio patents are (or are not) in force or valid: he felt that this placed the onus on the licensee to take a licence whether or not all the patents were valid.  He also noted that whilst royalty rates had been addressed in detail, he would also have liked to see further discussion of the appropriate royalty base to which those rates should be applied.
Jane Mutimear asked the panel whether any further regulatory involvement was really necessary (whether in traditional wireless industries or others) in light of the recent cases.  Nicholas agreed that prescriptive regulatory guidance was not needed but thought that, given the likelihood for IoT participants to be relatively inexperienced, some level of clarification could be merited to facilitate implementation of the principles already set out.  David suggested that although the initial cases in this area would inevitably be heavy with legal arguments, subsequent cases should be streamlined once an initial body of jurisprudence has been developed.

Patent Assertion Entities
After an introduction by John Richards, Nikolaus Thumm presented on a recent report on PAEs in Europe.  He introduced the history of activity by PAEs in the telecoms sector and noted that increasing interoperability is likely to see increased PAE activity in the automotive and white goods sectors, but that the report had found no evidence of assertions against European SMEs.
Whilst some commentators have suggested that the introduction of the UPC will lead to increased assertions by PAEs, Nikolaus suggested that the structure of the system contained some specific features which would prevent this. 

Suzanne Munck followed up by commenting on the results of an FTC report on PAEs and said that the FTC had worked together with the JRC on policy in this area.  The FTC report defined PAEs as entities which have acquired their patent portfolios and do not work them (as opposed to NPEs, which file their own patents).  The study covered 22 PAEs and >300 asserting affiliates over a 5 year period and the FTC had observed two main business models, described as litigation PAEs and portfolio PAEs.  The FTC found that the separation between the two was clearly defined, with litigation PAEs obtaining 93% of their licences after bringing proceedings.  The portfolio PAEs typically negotiated licences without resorting to litigation (albeit they did sometime litigate, and negotiated under the shadow of litigation) and generally held larger portfolios.  The study looked at >37,000 patents, of which 75% had software related claims and therefore the study concluded that the majority of these issues were focused on the tech sector.
Scott W Burt suggested that the majority of so-called "troll problems" originated from litigation PAEs rather than portfolio PAEs, which in his view behaved like the licensing arm of manufacturing companies.  In response to a question about how much Conversant invested in R&D, Scott commented that its current R&D spend is zero – with its patent portfolio being a combination of patents developed in house with those bought in.   
Myles Jelf
Approaching matters from a more philosophical point of view, Myles Jelf started from the contention that patents reflect a valuable item of property awarded to the patentee in return for their disclosure of the patented invention to the public.  In his view, any change in the rules regarding injunctions or assertions in order to disfavour one or other category of patentees based on their business model was not merited – he noted that this could potentially have unintended consequences (for example harming universities or lone inventors who may not be able to afford to commercialise their own invention).  However, there was possibly a case for special treatment based on the scenario in which a patent is asserted.  For example, the FRAND rules for SEPs are designed to compensate for the distorted value of patents included in standards so that those patents do not acquire a value disproportionate to their technological contribution. 
Steven Lieberman suggested that the boundary between litigation and portfolio PAEs was graduated.  He saw an increasing trend in the US courts for conscientious judges to speed up early case resolution (for example by granting summary motions), which was itself driving a trend for earlier settlement.  He also commented on the value of the IPR procedure for swiftly resolving patent assertions where the strength of the asserted patent is low."

Tuesday, 25 April 2017

Fordham 25 (Report 8): The sun rises on plausibility, but where (and when) will it set?

Everyone knows the AmeriKat is not a morning person.  Although in recent months she has been up and out at the crack of dawn, she is not a fan preferring prowling into the quiet night undisturbed.  So although there were two Sunrise Sessions at Fordham that struck her fancy (especially the data mining session), she left the reporting to her German pal Christopher Weber (Kather Augenstein). The AmeriKat enjoyed reading the report, which touched on points raised in her presentation the day before in the trade secrets session as to whether and what role sufficiency (and indeed plausibility) should really have in patent validity given the reality of technical disclosure in the product development cycle and the disclosure doctrine, while safeguarding against speculative patents (subject of another post).  Christopher reports:

Brian Cordery
"After getting an early start to my New York day, being fortunate enough to still be operating internally on CET, this Kat friend arrived early to the second day of the excellent Fordham Conference and just in time to eat bagels, drink coffee and attend the slightly misleadingly named “Sunrise Seminar I: Second Medical Use & UK Plausibility”. As it turned out, it was 99% about plausibility and only 1% about Second Medical Use.

After an introduction by Brian Cordery (Bristows), who highlighted the importance that the plausibility check has gained in patent validity matters in the UK, Floyd LJ explained the complete history of plausibility in less than 5 minutes and with 5 decision. An astonishing act made somewhat necessary/easier by the strict rules of the conference itself. He reported that currently most cases would contain the allegation of lacking plausibility, which certainly raises the question why someone would use an implausible solution or even fight about it in the first place. The issue here is of course, that one has to look at the priority date.

The trouble began – so to say – with the EPO decision in AgrEvo/Triazole Herbicides (T 0939/92) of September 1995 – which does not even contain the word “plausible”. Headnote 1 of that decision describes the problem:
"1. If a claim concerns a group of chemical compounds per se, an objection of lack of support by the description pursuant to Article 84 EPC cannot properly be raised for the sole reason that the description does not contain sufficient information in order to make it credible that an alleged technical effect (which is not, however, a part of the definition of the claimed compounds) is obtained by all the compounds claimed (see reasons 2.2.2)."
The Lilly mega judgment on "educated guess"
The notion that there needs to be support e.g. in the form of (rudimentary?) test data or experiments first found its way into English law with the Prendergast’s Applications decision, which concerned four speculative applications in the swiss-type claim format for new medical uses of known compounds. The decision to decline the application was upheld to prevent applications being granted “in relation to all sorts of speculative uses for established drugs and other chemicals without a shred of evidence as to whether they would work, let alone as to whether they do work.” The other cases that were discussed where HGS v Lilly (follow this link to a classic Jeremy’s discussion of the “mega-judgment”) which set the bar at “an educated guess can suffice” and “some real reason for supposing that the statement is true” and Regeneron v Bayer in which an implausibility attack against the use of VEGF antagonists for certain diseases failed because the patent claim was deemed to be based on a “fair prediction”. Finally, in Warner-Lambert v. Generics UK the UK Court of Appeal found that the claims alleged to be infringed lacked sufficiency, because the patent did not render it plausible that it would work. The case law was summarized by the guideline that the patent’s monopoly should not exceed the patent’s contribution to the art and that it should not be possible to write a patent from an armchair. Although still “if you are lucky enough to draw up a working experiment, you would get it past the examiner”.

The first question of this still quite early day was asked by Trevor Cook and it turned out to be as concise as it was pertinent: “It is an old problem, why do we need a new solution?”

The "Plausiblity Attack Kat" is coming for your patent
Nicola Dagg (A&O) gave her perspective on the problem and pointed out that plausibility as a separate revocation ground is neither found in the UK Patents Act 1977, nor in the EPC and may even be prohibited by TRIPS because it is a limitation of intellectual property rights. She posited that it should be deemed sufficient if the active ingredient could be made and successfully used to treat the claimed indication at the priority date. Most cases would only cover a fraction of possible use cases and the EPO’s Factor-9/JOHN HOPKINS (T1329/04) considered that supplementary post-published evidence may in the proper circumstances also be taken into consideration, however, that it may not serve as the sole basis to establish that the application solves indeed the problem it purports to solve. She stressed that there is a need for a strong incentive for expensive medical research and that it is economically vital that the patent is able to file before clinical testing (which becomes public) even if the only available data to support the claim may be from animal testing.

Judge Rian Kalden of the Court of Appeal of The Hague, Dr. Ute Kilger (Böhmert & Böhmert), Munich, and Miquel Montana (Clifford Chance) then reported on their respective countries’ perspectives on plausibility as a separate requirement. I think it is fair to save everybody’s reading time by saying that there is hardly any such separate requirement in these countries and that the respective questions are handled under the headlines of sufficient disclosure and inventive step. It is not necessary e.g. that each and every claimed compound is explicitly disclosed to solve the patent’s problem.
Jurgen  Dressel 
Jürgen Dressel, Head of Global Patent Litigation Strategy at Novartis gave the innovators industry’s global perspective. The industry would increasingly be faced with prior art created by its own medical trial data. Thus, there is a need to safeguard inventions on the basis of surrogate parameters such as animal data or genetic data from which it should be fair to extrapolate from. His main wish, however, was for a realistic and pragmatic threshold for plausibility on a global basis. The industry would need patents across jurisdictions which diverge on this question around the world. He characterized the US as one extreme which would allow filing early for the patent and supplement tests only later and Asian countries as the other extreme where a lot of data would be needed early to get a patent. After all, the industry would need harmonization to have a fair chance to get a patent.

Nicola Dagg
This started the more general discussion. Here different attendees voiced concern for the Canadian patent system (i.e. the promise doctrine) in this regard before coming back to second medical use claims. It was posited that they are per se a functional limitation of a claim and that in the end the question should always be for the technical contribution of the patent. This was indeed the consensus: Patents need to add to the prior art to fulfil their part of the contract between patentee and society, i.e. disclosure for protection. However, no consensus emerged on the question whether there should be a plausibility test in the first place against the background of TRIPS and the limited number of revocations grounds enumerated in law.

Nevertheless, in the end everybody agreed with Brian Cordery, that the Sunrise Seminar was plausible in the original meaning: worthy of applause."

Fordham 25 (Report 7): Pharma, IP & Competition

Friday afternoon.  For those still standing, the Fordham conference opened up a treasure trove of interesting topics with a little something for everyone.  Laura Whiting made her way to the panel discussion on Pharma, IP & Competition where she reports:

Koren Wong-Evrin
"After introducing the speakers, Prof Daryl LimKoren Wong-Ervin explained the background to reverse payment cases in the FTC.  She commented on her surprise that other countries had cases relating to patent settlement despite not applying regulatory procedures comparable to the Hatch-Waxman system.  She noted that she was concerned by the apparent recent approach of the EU General Court to apply a truncated market analysis, as in her opinion it was preferable to apply a full market analysis to each product and case.  She also felt that it was problematic to exclude an evaluation of the validity of the patent(s) from the economic or market analysis. 
Jurgen Dressel
Jürgen Dressel noted that the European cases showed parallels to the "rule of reason" cases coming out of the FTC.  He said that although there was no system similar to the Hatch-Waxman regime in the EU, the Servier and Lundbeck cases had showed that the arrangements that were entered into between companies could be extremely complex.  In his view, the most concerning aspect for the innovator pharmaceutical industry of the recent decisions was the very narrow definition of "market", which was essentially restricted to the particular molecule in question.  The other concerning issue was that the "by object" definition effectively shifted the burden of proof onto the patentee as soon as any payment was identified.  

Cordula Schumacher noted that since the settlement agreements that were the subject of the recent EU decisions involved so many market players, in her view it was not appropriate to reverse the burden of proof – the situation was too complex for such a simplistic approach.

Justin Watts commented that the agreed facts on which the General Court in Lundbeck made its decision were such that the originator had paid the generic an amount equal to the profits it would have made by selling the drug, without regard to this being linked to the (potential) patent infringement that such sales would arguably have amounted to.  In this extreme case, he says it is understandable that the Court found there to have been anticompetitive behaviour.  However he questioned whether this reflected the real world situation of most disputes and whether it was really possible to apply a bright line test holding any transfer of value to be a problem to other cases, which were inevitably more complex than the assumed fact pattern on which Lundbeck was based.  What was needed was a full analysis of the reality of the competitive environment that obtained in fact in every case.  Deputy Director-General, DG-Comp Cecilio Madero Villarejo commented from the audience that last autumn, the General Court had considered revising its decision that the Lundbeck agreements were anti-competitive, since they had replaced the uncertainty of determining the validity of the patents with the certainty provided for by the agreement in question.

Jürgen asked him whether the Commission still considered that there were still issues regarding reverse settlements following the sector inquiry.  Cecilio explained that the reason why Commissioner Vestager has decided to retain the reporting requirements for this year is because the EU Parliament had asked the Commission to keep looking into the pharmaceutical industry.  He commented that the source of this focus from the Parliament appeared to be the recent news stories relating to alleged price hikes for generic products.  Cordula commented on the cost burden that the continued requirement to answer questionnaires imposed on companies within the sector – and queried whether the Commission had considered the investment that is required?  Cecilio answered that this was one reason why the Commission had intended to discontinue the questionnaire this year.  
Justin Watts
Justin reiterated that the results from the sector inquiry demonstrated that only 10% of the agreements collected involved a reverse payment, and of those only 2% were considered by the Commission to be in any way problematic.  He commented that in light of this low prevalence, it would be helpful to have guidance from the Commission, perhaps even a safe harbour, to assist companies and their advisors to settle patent cases.  Cordula agreed that clear guidance would be useful and commented that legal certainty was highly valued by clients, so in effect it did not matter what the law was, as long as it was clear.  Lawyers would then be able to better advise their clients. 
It was suggested from the audience that a suitable safe harbour for the US might be that a settlement agreement should not allow any exclusivity period for the generic (which would in effect waive its Hatch-Waxman rights).  It was suggested that this would bring pharmaceutical settlements into line with other industries where there is always some kind of reverse payment in return for a settlement, but there is not usually any accompanying exclusivity period.  Koren did not agree that the 180 day exclusivity period needed to be waived as it represented a legislative compromise designed to encourage Paragraph IV challenges by generics.  Jürgen said that he admired the US system as it was predictable, in contrast to the European situation which was unpredictable and varied by country.  
In response to a question about whether there were any parallels which could be drawn from the recent cases on SEP licensing, Justin commented that there were interesting lessons to be learned from FRAND cases, but there are huge differences between assessing the royalty rate for a single basic patent to a compound, and the rate to apply to a whole portfolio of patents on eg. LTE technology.  Jürgen saw little interaction between the two licensing models but noted that this might change in the future, perhaps in the area of personalised medicines, if products evolved which involved a more complicated IP position than traditional small molecules."

Tuesday Miscellany

Rock on
1. Music promoter Tony Green was prevented from naming his bar Draft Punk, after Brewdog sent a cease and desist notice, the Guardian reports. Brewdog registered the marks “PUNK” in class 32: Beer, lager in 2007 and “PUNK DOG Class 32: Beer, ale, lager, alcoholic beers, alcohol free beers, alcohol free beverages, bottled water, ginger beer, soft drinks in 2007. Although Green planned to name a pub, not a beer, Brewdog’s were “concerned that provision of food and drink services under the mark Draft Punk would give rise to a likelihood of confusion in the marketplace, including a likelihood of association with our client’s earlier mark Punk.” Subsequently Green abandoned the idea altogether… 

2. In other news, on 4 Friday 21 April, Richard Taylor (DLA Piper UK LLP) presented "Copyright or Wrong"  on BBC Radio exploring the history, significance and nature of copyright law across the arts and sciences, and asking whether the law is in need of reform.  Richard's interviewees include High Court Judge Colin Birss, Eleanor Rosati of the world-leading IPKat blog, Ted Shapiro of the Motion Picture Association, MEP for the Pirate Party Julia Reda, Professor Estelle Derclaye, and forensic musicologist Peter Oxendale, with pop-ups from Terry Gilliam and George Harrison.  This is a fascinating study of a topic which, whether we know it or not, affects each of us every day. You can listen again here.

3. Recently published title: 'An Introduction to CompetitionLaw - 2nd Edition' by Piet-Jan Slot and Martin Farley. The Blurb informs us that “this book is intended to serve as a first acquaintance with competition law.  It aims to reach a broad range of readers: students, teachers in further and higher education, officials and practising lawyers who are not usually faced with competition law issues in their working lives.”

4. Call for Abstracts: New IP Lawyers [a network of young practitioners and academics in Intellectual Property Law] invites submissions from IP PhDs and early career researchers for their 2nd Workshop series: New Technologies and Challenges to the Existing Intellectual Property System. The workshop takes place on 14 September 2017 at Bocconi University in Milan. Full details here.

5. Clear your schedules for there are an abundance of coming IP events. See our forthcoming events page for a full list!

The CLA will be holding an evening meeting on Tuesday 25 April at Bristows LLP, 100 Victoria Embankment, London EC4Y 0DH. Registration at 6pm, followed by lecture at 6:15pm. Steve Rowan (UK IPO) will speak on “Trademarks and Designs - where next when the UK leaves the EU?”

The WIPO Roving Seminar on IP 4 Global Business The Protection and Commercial use of Inventions, Trademarks and Designs takes place in Utrecht, Netherlands on 2nd May 2017.

Dr Eleonora Rosati will be speaking about “Latest Developments in copyright” at IPSoc’s next educational event held on Wednesday 10 May 2017 from 18:30 to 21:30 (BST) at Simmons & Simmons 1 Ropemaker Street EC2Y 9SS London United Kingdom. [IPSoc is a society for junior IP practitioners.]

The European Copyright Society (ECS) Conference: Building a EU unitary copyright takes place on Friday 12th May at SciencesPo, Auditorium Caquot, 28 rue des Saints-Pères, 75007 in Paris.

On 12th June 2017 the GRUR meets Brussels Workshop 2017 focuses on The Digital Single Market Copyright Directive Proposal and beyond: Towards a ‘toolbox’ for future European Copyright Law and takes place in Rue Montoyer 47, B-1000 Brussels.

CREATe IP Summer Summit 2017 takes place from 26th to 30th June at the University of Glasgow, jointly organized with the National Law University Delhi, India. This year’s theme is ‘Open Science and Open Culture’ with a special focus on development in the Global South.

Photo credit: Jason Kasper

Around the IP Blogs!

This Kitten is delighted to bring you the highlights from some recently published IP blogs!

The fresh smell of some IP blogs!
Tibbie McIntyre reports on The 1709 Blog on a number of items, including the declaration of fair use filed by the Andy Warhol estate against Lynn Goldsmith regarding Warhol’s Prince Series; the settlement reached by singer Ed Sheeran and songwriters Martin Harrington and Thomas Leonard in connection with the song ‘Photograph’; the case Mavrix Photographs v LiveJournal, No. 14-56596, which considered whether the safe harbor defense applies to moderators who review infringing content before it is published online; and the cases Malibu Media, LLC v Doe, No. 3:17-cv-195(JAM), and Foshan Limited v, No. 2:17-mc-00037 UA, in both of which subpoenas were granted for obtaining information of infringing uploaders who used BitTorrent and Pornhub, respectively.

Staying with copyright, but from the perspective of Competition law, Marco Lo Bue analyzes on TrustinIP the Advocate General Opinion in the case Biedrība ‘Autortiesību un komunicēšanās konsultāciju aģentūra – Latvijas Autoru apvienība’ v Konkurences padome, EU:C:2017:286, which involves the interpretation of article 102 TFEU in relation to a fine imposed by the Competition Authority to the Latvian collecting society for charging excessive rates.

Moving to trademarks, Christian Tenkhoff discusses on MARQUES Class 46 the case adidas AG v Shoe Branding Europe BVBA, R1515/2016-2, in which the Second Board of Appeal of the EUIPO upheld the Cancellation Division decision, which declared invalid the “three parallel stripes” trademark on the ground of lack of distinctiveness.

Staying with trademarks, Lina Marcela Tello Perlaza recaps on IP tango the refusal of registration of the mark AESCO Colombia in class 45 for covering, inter alia, legal services, based on the article 136 (g) of the Decision No. 486 Establishing the Common Industrial Property Regime. Registration was refused because the mark reproduces the pre-Columbian figure of the “Jaguar man”, which belongs to the community Pijao and reflects “the belief that all the species of the Earth are human beings with different cosmologies”.

Moving to the commercial side of IP, IPKat Neil Wilkof ruminates on IP Finance whether the concept of the “long tail”, popularized by Chris Anderson, has been successfully applied to the indie film industry.

Finally, Carina Gommers blogs on JIPLP how the ratification by several European countries of the MEDICRIME Convention could help in the fight against the counterfeiting of pharmaceutical products in the context of the findings of the Report of the European Observatory on Infringements of Intellectual Property Rights.

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