The team is joined by GuestKats Mirko Brüß, Rosie Burbidge, Nedim Malovic, Frantzeska Papadopolou, Mathilde Pavis, and Eibhlin Vardy
InternKats: Rose Hughes, Ieva Giedrimaite, and Cecilia Sbrolli
SpecialKats: Verónica Rodríguez Arguijo (TechieKat), Hayleigh Bosher (Book Review Editor), and Tian Lu (Asia Correspondent).

Friday, 31 August 2012

Digital libraries as modern Charon's obol?

Coins and major digital libraries are accepted here 
As recalled by the relevant Wikipedia entry, Charon's obol is an allusive term for the coin ancient Mediterranean civilisations (notably the Greeks and Romans) used to place in or on the mouth of a dead person before burial. The coin was meant as a payment or bribe for the ferryman (ie Charon, as also notably featured in Dante's Inferno) who conveyed souls across the river that divided the world of the living from that of the dead. 
Like the coin which was buried with the dead person, it seems that a similar fate may now be reserved to one's own digital libraries.
A few days ago an intriguing article was published on The Wall Street Journal, attempting to provide an answer the following question: Who inherits your iTunes library
Well, the response seems to be ... no one. 
As is well known, analogue copies of books and music (CDs, vinyl) pass into the hands of one's own heirs upon death. However, this may not be the case when it comes to iTunes or Kindle libraries. In fact, purchasers of digital works just get a licence to use the digital files, but do not actually own them. According to Amazon’s terms of use, “You do not acquire any ownership rights in the software or music content.
So, can you transfer what you don’t own? According to Apple's terms of use, the answer seems to be negative The use of digital files is in fact limited to Apple devices used by the account holder. This means that the licence acquired is non-transferable. In other words, "if you buy the complete works of the Beatles on iTunes, you cannot give the “White Album” to your son and “Abbey Road” to your daughter."
As observed by TechDirt
"It is this non-transferability of the content that is the stickler. If you cannot transfer your digital files to another person then you cannot technically bequeath them to an heir. However, you can still leave your entire account to someone else, but even that might hit some issues if the terms of service don't allow it. Steam is one example of a service that does not allow for the transfer of accounts, even in whole. Valve is willing to kill an account, swallowing up all money spent on it rather than letting someone other than the original owner getting a hold of it."
Fran's terrified her kittens won't be 
able to inherit her digital copy of 
The Best of Take That  
TechDirt also recalls that the issue of transferability of licences has been recently appreciated under the lens of EU law in the decision of the Court of Justice of the European Union (ECJ) in Case C-128/11 UsedSoft (see IPKat post here). On that occasion, the ECJ held that the grant of a licence for an unlimited period is akin to a sale. However, it also ruled that the first purchaser of a licence is not authorised by the effect of the exhaustion of the distribution right within the EU to subsequently divide the licence he has acquired. So, the grant of a licence is tantamount to a transfer of property, but this type of property has very peculiar features which make it more limited than traditionally intended 'property'.

This being the current (controversial) scenario in the EU, in the US the situation is clearer (although not in favour of potential digital libraries’ heirs). In 2010, in Vernor v Autodesk, the US District Court of Appeals for the 9th Circuit  ruled in fact that "a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions."
It is apparent that what is going to happen to one’s digital libraries upon his/her death has the potential to become a truly problematic issue. Whilst waiting for greater legal and judicial clarity, there have been recent attempts (to try) to avoid the possibility that digital libraries may follow their owner in the afterlife. Initiatives have in fact been undertaken to help estate planners to create a legal trust for their clients’ online accounts that hold music, e-books, movies … and (digital) coins. One example is the recent launch of Dap Trust in the US. 

Friday fantasies

Goodbye August, hello September: that's when David Carson (General Counsel, US Copyright Office) metamorphoses from public servant to private sector policy panjandrum.  A long-term Londoner, this Kat looks forward to welcoming David to his native city where he will assume the role of head of global legal policy at the International Federation of the Phonographic Industry (IFPI). Good luck, David, says the Kat -- who has a friend or two at IFPI and has enjoyed more than one or two cups of coffee there in his time -- and enjoy yourself in Piccadilly.

A little inattentive, Merpel was
certain that the PCC was
introducing a small train track
And what about October?  That's when the good folk of England and Wales were promised a brand-new small claims track in the now incredibly impressive and popular Patents County Court from October, is happening?  Neither the IPKat nor Merpel have heard anything about this for ages.  The Kats wonder whether there has been a serious re-think about the sort of resources that would be needed to staff and diminish an IP small claims court, given the potential for flooding it from Day One with a multitude of claims from disgruntled copyright owners who have spent the past decade being told that the cost of even minimal legal representation would set them back by a larger amount than they could ever recoup if they succeeded in an action for damages.  There must be someone out there who does know what is happening, surely, they mew ...

Never mind the Olympic flame, what about the Digital Spark!  As the IPKat may have mentioned a month or two ago, Digital Spark is being rekindled next week, on 5-6 September 2012.  This conference, which addresses a broad range of IP and related topics for the Digital Creative Industries, is based on the premise that IP is a vital and dynamic aspect of those industries -- but that it should be viewed in a practical and joined-up manner with the commercial and technical context in which it is used in these industries. The event is run by the University of Abertay, Dundee ("The UK's first national centre for excellence in computer games education"). It's almost too late to register, but not quite: further details and registration here.

Around the weblogs. The furious litigation between Anheuser-Busch and Budejovicky Budvar over the right to use the terms BUD and BUDWEISER as trade marks may have abated, but AB is obviously finding it hard both to kick the litigation habit and to do it properly. In the horribly-named but very readable Los Angeles Intellectual Property Trademark Attorney Blog the splendidly-named Milord A. Keshishian writes on a spat over a bow-tie which has left the cold beer men in hot water [it took this Kat about three tries to work out what AB was up to ...]. A katpat, incidentally, goes to Alice Gould for providing the link.  Elsewhere, the jiplp weblog picks up a story from IP Draughts about the BlaBlaMeter, Kingsley Egbuonu reports on Afro-IP that the condition of Cameroon's official IP websites has actually deteriorated in the past year, which is quite a feat when you consider how poor they were 12 months ago.  Finally the 1709 Blog's commentary on Danuta Kean's advice on how individual authors and copyright owners can fight back against online pirates has attracted a good deal of comment of its own.

Getting back into the Cage

A tacit urn
John Cage's famously silent piece of music (sic4'33" has been the subject of numerous Katposts (see eg here, most recently) and the IPKat had rather imagined that this little piece of copyright nonsense had run its course. Curiously, though, the concept of creative silence has just crossed his line of vision again thanks to a lead from London barrister Jonathan Turner (take a katpat, Jonathan!).  It appears that the Middle Temple Library is hosting an exhibition entitled Tacit Urns, this being a play on the words "tacit", meaning "silent", and "urns" as in "Grecian". The exhibition features the work of Sophie Arkette who explains:
"In Tacit Urns I have designed a series of glass urns (approximately 53 centimetres in height) that are receptacles for holding different types of silence. It can be thought of as similar to the idea of bottled water: as essentially a commodity. What happens to the value of silence if there is little of it around due to an ever increasing noisy environment? 
Would value be given to silence if it were captured and contained? In a future scenario, I propose that silence is bought and sold and valued relatively, according to the type of silence it represents. A rarefied silence of the kind found in a monastery might be considered more valuable than say the silent pauses that contribute towards a musical composition".
Where do John Cage and copyright silence come in?
John Cage
"The work Tacit Urns is as much about the way the urns come to contain the particular silence they do as the silent urns themselves. This means that the urns are required to undergo a period of infusion before they can be certified as containing that particular silence. An urn certified to contain Quaker silence is required to be present at a meeting of the brethren and a quiet urn is required to have been in an anechoic chamber. Copyright silence urn is to be infused by its being on stage during a performance of John Cage’s 4’33".

Thursday, 30 August 2012

Thursday thingies

The IPKat is a magnanimous mammal who is occasionally  sometimes always happy to share the limelight with Merpel. He is therefore delighted to see that Merpel's truly excellent analysis of the US Apple v Samsung patent infringement damages award has found its way into the leading UK practitioners' organ, Legal Week. The same post has also made it to The Inquirer --  Merpel's a little miffed at not getting her own name-check on either occasion but, as the IPKat is fond of reminding her, fictional felines have no moral right to be named as the author ...

Clouding the issue.  The IPKat's webinar-friendly friend Susan Keston is at it again. The D Young & Co. IP enthusiast ran a Smartphone Wars seminar earlier this year, which received a mention on this weblog.  "Your blog proved to be the most effective vehicle we had for boosting our audience, for which I am very grateful", says Susan -- but of course the IPKat knew that. Buoyed by her instant popularity, Susan and some of her friends have now opted for a follow-up, “Cloud Computing”, which is coming up on 19 September 2012.  Registration is free and all are gloriously welcome. Just click here for registration and details [Merpel's quite excited about this. Now that she knows how to use a smartphone, she thinks she might pick up some tips about using clouds too ...].

The Best IP Judgment That Has Never Been Written -- that's the competition currently on offer at the Journal of Intellectual Property Law & Practice (JIPLP). You can read all about the rules and the rewards here.  So far there have been some excellent and preponderantly British entries, though one of the strongest contenders to date hails from continental Europe.  Don't be shy, take a shot at it!  The closing date for entries is 30 September, so there are still a few weekends to go if you're a slow writer who needs a bit of extra time to get those brain-cells going.

One Report, two tongues. The Irish Patents Office has issued its Annual Report for 2011.  As one might expect, it's full of data, handsome tabulations and text, both in English and from the original Irish from which this Kat dreams it must have been translated.  The two versions combined total just 51 pages, and you can read it here.

Now that the football season has started in most if not all of Europe, can there be a better time to exhort all the IPKat's patent-y people to register (in the unlikely event that they have not yet done so) for the UK Chartered Institute of Patent Attorneys' Congress on 11 to 12 October.  "IP United -- Global Harmonisation" is the name of the game and -- a bit like the Transfer Window -- the period for registering to secure the Early Bird discount will soon be over.  Tomorrow, in fact.  Details of the Congress and registration for it may be accessed here.

Telekable and filtering: will the ECJ clear things up?

Henry pictured whilst 
watching his favourite 
rom-com in streaming
These seem indeed to be challenging times for streaming services over the internet. 
Shortly after a significant win of US major broadcasters in proceedings brought before the US Court of Appeals for the Second Circuit against Seatlle-based ivi (you can read today's report by Ben on The 1709 Blog), now it's up to the Court of Justice of the European Union (ECJ) to clarify internet streaming of protected contents from a EU law perspective.
As reported on UK IPO's website, a new case has been referred to the CJEU by the Oberster Gerichtshof (Austria). This is Case C-314/12 UPC Telekable Wien. Comments can be submitted by 7 September, whilst the deadline for observations is 10 October.
The dispute pending before the Austrian court concerns the availability of protected films via the internet. The plaintiff, who holds the rights in various films, has applied for an interim injunction aimed at prohibiting the defendant (an Austrian internet access provider) from providing access to a website ( where such films are made illicitly available. 
Vintage casting call for black cats
(Los Angeles Times, 1961)
The Oberster Gerichtshof has decided to stay the proceedings, and reverted to the ECJ for guidance as to the interpretation of Articles 8(3) [injunctions against intermediaries for third parties' infringements] and 5(2)(b) [exception or limitation for private copying] of the InfoSoc Directive. In particular, the Court seeks clarification as to the following:

1.    Is Article 8(3) of the Directive to be interpreted as meaning that a person who makes protected subject matter available on the internet without the right holder's consent is using the services of the access providers of persons seeking access to that protected subject matter?
2.    If the answer to the first question is in the negative, are reproduction for private use and transient and incident reproduction permissible only if the original reproduction was lawfully reproduced, distributed or made available to the public?
3.    If the answer to the first and second question is in the affirmative, and an injunction is therefore to be issued against the user's access provider in accordance with Article 8(3) of the Directive, is this compatible with Union law, in particular with the necessary balance between the parties' fundamental rights?
4.    If the answer to the third question is in the negative, is it compatible with Union law to require an access provider to take specific measures to make it more difficult for its customers to access a website containing material made available unlawfully if those measures require not considerable costs and can easily be circumvented without any special technical knowledge?

Could filtering be simpler than this?
This Kat thinks that this reference is a pretty (interesting) – and possibly controversial - one, especially if one considers the last question. This is because recent ECJ rulings in Scarlet and Netlog did not really clarify whether and to what extent the installation of filtering systems would be contrary to EU law. Indeed, the answers given by the Court in both cases were heavily fact-dependent and, therefore, not very helpful. The ECJ held that what EU law prohibits is the issuing of an injunction against an ISP which requires it to install a system for filtering:
(1) all electronic communications passing via its services, in particular those involving the use of peer-to-peer software; 
(2) which applies indiscriminately to all its customers; 
(3) as a preventive measure; 
(4) exclusively at its expense; and 
(5) for an unlimited period. 

From a literal interpretation of the Scarlet and Netlog rulings, it seems that those above are to be intended as cumulative conditions. 
So, it will be very interesting to see what the CJEU says in relation to the new set of questions referred by the Austrian court.
Whilst waiting for ECJ developments, could any Austrian readers provide more details about the factual background?

When The Runaway Jury meets The Matrix

A connoisseur of contemporary US literature and cinematography, this Kat is well familiar with John Grisham's classic The Runaway Jury and simulated reality movie The Matrix (which contains one of the great cat scenes of all time, here).  Until recently, however, he had never considered whether there was any point of intersection between the two great cultural icons. Now, following the hugely-publicised billion-dollar patent infringement damages award in the recent Californian trial of Apple v Samsung, pungently depicted by the ever-perceptive Merpel here, he thinks he has his answer.

Some astute readers have pointed various members of the Kat collective in the general direction of an interview given with [warning: real name coming up ...] Velvin R. Hogan, the foreman of the jury which assessed the quantum.  So just how did the jury go about it?
"In the evidence, Apple had declared that Samsung had cost them in profits 35% of their revenue. On the other hand, Samsung said that it is because they took out operating costs and the value is 12%. ... What we did was look at it against our matrix of what infringed and what did not. We determined that in our experience, the percentage was not 12%, and it certainly was not 35%. It should be closer between 13% to 15%. We zeroed in on 14%. That became the magic number. Then we did our own calculations for each of the areas, adding those up with royalties that were entitled for some of the items. And we cut that value in half. When we added them together and tallied them up, that is the number we came up with".
Magic tricks with numbers here, here and here
How to make a billion dollars in one week here
How to look like a billion dollars here

Tuesday, 28 August 2012

Having Trouble Sleeping? Maybe Counting All the Entrepreneurs in China Will Help?

Try as I might, this Kat simply cannot get his analytical paws around how to understand the mass of data that are trotted out in connection with start-ups, innovation and entrepreneurship. One does not need a sea of metrics to confirm various anecdotal impressions about the current winners and losers of the on-going entrepreneurship Olympics. We all know that Silicon Valley is in a world unto itself, that Boston is a respectable trailer, that Israel punches above its start-up weight, that the press of 15 million people in Mumbai or six million in Bangalore cannot hide their innovative energy, and that Singapore strives to take its economic dynamism to a new innovative level.

And then there is Europe. As described in the 28 July article entitled "Les miserables" that appeared in The Economist , "Europe not only has a euro crisis, it also has a growth crisis. That is because of its chronic failure to encourage ambitious entrepreneurs." Those of you who wish to read the entire article are invited to do so here. My interest is the following paragraph which, in this Kat's humble view, embodies the puzzlement that he frequently senses in encountering macro-data on entrepreneurship. Thus we are told as follows:
"Data show that continental Europe has a problem with creating new businesses destined for growth. According to the Global Entrepreneurship Monitor, which compiles comparable data across countries, in 2010 “early-stage” entrepreneurs made up just 2.3% of Italy’s adult population, 4.2% of Germany’s, and 5.8% of France’s. European countries are below—in many cases well below—America’s 7.6%, let alone China’s 14% and Brazil’s 17%." 
 This Kat pondered and pondered this paragraph--and yet he still remains a bit confounded. Okay, it is a fair observation that Europe as a whole might lack some of the innovative zip of Palo Alto. But having said that, what are to make of these data? Let me explain.

First, one cannot help but notice the breathtaking precision of the percentage of entrepreneurs reported for certain reported countries. For Italy, Germany, France and the United States, the percentage of entrepreneurs has been refined to the tenth of a percent. On the other hand, the reported percentages for Brazil and China are presented in rounded numbers. Is that just an accident, or is there something about the way that the data were gathered for Brazil and China that is different from the manner in which they were collected in the U.S., Germany, France and Italy? If so, should we treat all of these results with the same degree of reliability and validity?

 Secondly, there is the issue of how one defines "entrepreneur". After all, the reported results purport to provide granular information about entrepreneurial activity across countries. If so, it is incumbent on us to understand what is meant by "entrepreneur", as reported in the article on the basis of a 2010 study by the Global Entrepreneurship Monitor here. Is anyone who sets up his or her own business, as opposed to being a salaried employee, an entrepreneur? If not (and this characterization does sound a bit over-inclusive), then what is meant by the term? Is the person who opens a franchisee branch of a proven pizza concept in a heretofore underserviced neighborhood an entrepreneur? Or is such a person "merely" a small business person, the notion of entrepreneur being reserved for the new pizza outlet that develops proprietary software to generate the shortest route for the delivery staff to take in making home deliveries?

Thirdly, however that definitional challenge is resolved, what are we to make of the reported results about the percentage of "entrepreneurs" in select countries? Let's begin with the U.S. According to Wikipedia,
"[p]eople under 20 years of age made up over a quarter of the U.S. population (27.3%), and people age 65 and over made up one-eighth (12.8%) in 2009." 
One-eighth plus one quarter seems to suggest that 5/8 of the US population, being approximately 197 million people (out of 315 million in toto) are adults in the U.S. Based on The Economist article, 7.6% of 197 million, meaning nearly 15 million Americans are entrepreneurs. Stated otherwise, this suggests that approximately 1 out of every 14 adults in the U.S. is an entrepreneur. Is this reasonable or unreasonable?

But the data that are more challenging are the results reported for China and Brazil. Assume that China has a population of approximately 1.3 billion residents and, again according to Wikipedia, about 72% of its overall population is between ages 15-64. That would mean that there are approximately up to 94 million adult entrepreneurs in China. Even if we acknowledge that the adult cohort should probably be less than the entire population between ages 15-64, say 75% of that total, that still leaves us with approximately 70 million entrepreneurs in China. That means that about one out of every approximately 7 adults in China is an entrepreneur. Reasonable or unreasonable?

For Brazil, Wikipedia reports that the overall population is approximately 190 million persons, of whom approximately 67% percent are between 15–64 years. That means that there approximately 127 million people are in this age cohort. If we treat the relevant cohort to be 75% of that total, that means that approximately 95 million adults in Brazil. Among these adults, approximately 15 million people in Brazil are entrepreneurs. That means that approximately 1 out of every 6 adult Brazilians is an entrepreneur. Reasonable or unreasonable?

Let's consider these results further, taking Brazil first. It is my understanding that Brazil's dynamic economy is primarily based on trading in commodities, with a small non-commodity export market. As well, there remain significant social disparities in the Brazilian population. On that basis, it is difficult for this Kat to accept that there are 15 million entrepreneurs active in Brazil. As for China, there is a more active export market. But, given the sizable number of Chinese citizens that still live in non-urban settings, the thought that 1 out of every 7 Chinese adults is an entrepreneur is simply hard to fathom.

Even for the European countries, this Kat must express a cautionary note. Assuming that the percentages for Italy and France are correct (at least on their own terms), what does one do with the hundreds of thousands of French expats who are reported to be living in London? To the extent that some of them are engaged in entrepreneurial activity, should they be considered part of the UK or the French cohort? To a lesser degree, the same comments an question pertain to Italy as well.

The upshot is that this Kat treats the results as reported in the article with a healthy degree of skepticism. China and Brazil, two card-carrying BRICs, may be flourishing, but is difficult accept that a major reason is the large number of entrepreneurs in these countries. Similarly, even in Europe, the challenge of innovation-driven growth is a far more complicated than can be captured in a single data point about the alleged number of entrepreneurs in those countries.

Recent books

Nanotechnology Law: Best Practices, by Lorna Brazell, is a fascinating eye-opener for those of us (Kats included) who are apt to view areas of science as interchangeable commodities which are regulated by regulatory law, commercially exploited under commercial law and patented by patent law. Where a specific field of science, or its technological application, develops a character of its own, it's usually for one of two reasons: either it's because its use has a moral or ethical question-mark hanging over it (as in environmental or social impact) or because it's going to make a real difference to our daily routine. Nanotechnology doesn't cast much of a shadow, since it's more or less various other fields of science when carried out on an atomic or molecular level. But that doesn't mean that it is no importance in its own right: just as table tennis and table football are not merely shrunken versions of tennis and football respectively but require quite separate skills and mind-frames, so too does any application of nanotechnology demand something quite different from the full-size version.

Lorna's tome is actually a sort of nano-book, since it could very easily have been a great deal longer. The combination of lean and often terse prose, good organisation of subject matter and extensive deployment of acronyms however ensures that its content is manageable and accessible. The rather slender index is balanced by a generous table of contents, and it did not take this Kat long to find the bits he wanted to sample.

So what does the publisher (Wolters Kluwer Law & Business) say about it? The web-blurb has this:
"... This is the first book to offer a thorough analysis of the problems posed by nanotechnology in the context of existing legal schemes and trends, focusing on initiatives and debates in the European Union but also considering developments at the global level and in the United States, Canada, Australia, Japan and China.
Setting out how the current debate has arisen, how existing law deals with the issues arising around nanotechnology in areas such as patent rights and manufacturers’ liability, and how various international organizations are searching for some global consensus, the book addresses topics and issues including the following:
  • patentability of nanomaterial products and processes;
  • trade secrecy and nanotechnology;
  • waste and disposal issues;
  • occupational health and safety issues;
  • international initiatives – OECD, FAO, WHO, UNEP and the International Conference on Chemicals Management (ICCM);
  • intersection of nanotechnology with the most important fields of economic development;
  • the extent to which exclusive rights have been registered over early developments in nanotechnology;
  • the practical viability of pre-market toxicity investigation and postmarketing vigilance;
  • contractual and tortious approaches to real or potential liability for harm;
  • application of the precautionary principle in law and regulation; and
  • political responses to existing legislation.
Nanomaterials are already a commercial reality; the regulatory debate centres on the question of how to maximize the benefits they may offer while also limiting the risk from unforeseen hazards. This book clearly and comprehensively describes the range of issues relating to the legal framework and practicalities for commercial exploitation of nanotechnologies, and as such will prove of great value and importance to corporate counsel in many manufacturing sectors as well as to regulators and policy makers in environmental and trade law".
Curiously, neither the book nor its website give any clue as to the author's affiliation. Lorna is a partner in the London office of Bird & Bird LLP; the firm's web page for actually mentions her authorship of this book. Lorna also contributes to the same publisher's Guide to EU Pharmaceutical Regulatory Law, edited by her avian colleague Sally Shorthose (details of the 2012 edition can be accessed here).
Bibliographic data: ISBN: 9789041138262. Price $176. Hardback, xviii + 276 pages.  Rupture factor: mild. Web page here.


Refusals to License Intellectual Property: Testing the Limits of Law and Economics is a treatise which is fascinating in quite another way.  While Nanotechnology Law: Best Practices opened this Kat's eyes to a whole new technology with which, in legal terms, he was relatively unfamiliar, this book -- authored by New Zealand professors Ian Eagles and Louise Longdin -- tackles a topic with which he is quite familiar but subjects it to a degree of critical analysis which extends beyonf both his reading and, in some instances, his imagination.  This book is one of last winter's offerings from Hart Publishing, a company which has been increasingly bold in its choice of titles.

It is difficult to review any book when one has already read a review of it, and this Kat had not merely read but edited the full, fair and perceptive review by Browne Jacobson LLP partner Mark Snelgrove (published in the July 2012 issue of the Journal of Intellectual Property Law & Practice.  Mark concluded with the observation that this book would likely be of only limited usefulness to legal practitioners, a conclusion which is quite reasonable if one considers that only a relatively small stream of refusal-to-licence disputes per se trickles into court. However the text, if academic in content, offers much food for thought for those practitioners who are advising a client with regard to likely outcomes of licensing and non-licensing options between which it may wish to choose.

The publisher's web page describes the book in the following terms:
"Economic analysis rarely appears on the judicial horizon in intellectual property litigation [and there are many of us who hope to keep it that way says Merpel, particularly when the question of Euro-defences raised in IP enforcement actions arises]. In competition cases, by contrast, economists are familiar figures in the courtroom and the language of economics is scattered throughout the judgments of even the highest courts. One might expect, therefore, that refusals to license intellectual property would generate the same fruitful symbiosis between law and economics when those refusals surface in competition proceedings.
This however, has not been how the law on this subject has developed in most jurisdictions. Courts and enforcement agencies faced with a unilateral refusal to license have instead tended to retreat into sketchily articulated black letter rules and presumptions which then have to be fenced off from the rest of competition law by economically irrelevant qualifications and distinctions based on private law categorisations of, and rationales for, individual intellectual property rights [indeed, the 'fruitful symbiosis' mentioned above is seen by some as a last resort, when all attempts to fence IP off from competition law have failed ...]. This bypassing of case-by-case analysis in favour of more traditional modes of legal reasoning is not entirely the fault of lawyers. Economists have contributed to this state of affairs by urging judges and regulators to convert empirically undernourished theories about the proper role of intellectual property in a market economy into rules of law and evidentiary presumptions intended to be binding in future cases. How this came about and what it means for the future of effective competition enforcement globally are the twin concerns of this book".
This Kat was delighted to see the important position given to essential facilities doctrine within this volume, both in its EU and US embodiments.  Given the manner in which some IP rights can serve as essential ports of entry to a market, a technology or even a research aspiration, it has always surprised him that the relationship of IP law to competition law in the area of essential facilities has been so ambivalently treated at the legislative level -- but that's our problem, not the authors'. Anyway, apart from the excellent text, there's plenty to read in the footnotes, which reflect not just the author's depth of legal scholarship but the breadth of their literature sweep. Sadly the authors have had to reproduce the verba ipsissima of Humpty Dumpty in Through the Looking Glass since it can no longer be assumed that the contract lawyers of today will be familiar with that character's position with regard to the meaning of words.

Bibliographic data: paperback, xxvii + 270 pages. Price £65. ISBN 9781841138732. Rupture factor: low. Web page here.

Monday, 27 August 2012

Apple v Samsung: Galaxy hit by astronomical damages as jurors show they "understand"

In the hope that she too may be a juror in
 a US patent trial, Merpel shows that she too
is capable of understanding complex technology
A few months ago Merpel's colleague the AmeriKat informed her of an interesting discussion that took place between US Chief Judge Randall Ray Rader and Sir Robin Jacob at IBIL's Young IP Lawyers event this summer.  After chastising the poor AmeriKat for the fact that she is yet to post on that talk -- or the subsequent Annual Sir Hugh Laddie lecture --with the same distinguished speaker, Merpel listened as the AmeriKat recounted the valiant attempt of Judge Rader to defend the jury system in patent cases in the face of some trade mark provocation by Sir Robin.  Judge Rader, who has tried "as many patent jury trials as anyone", argued that juries "do as well as judges" and, when interviewed afterwards, explained that the juries showed that "they do understand complex technology".  But, asked the AmeriKat, do they understand complex technology and damages calculations?
Samsung's latest and non-
infringing challenge
to Apple: the William
Tell-aphone ...
The judge's statement and the question with which the previous paragraph concluded are both worth holding up to particular scrutiny in light of the recent jury ruling in the Apple v Samsung dispute in the US.  Even readers of the red-top press and children's comics will probably be well apprised of this case by now, although they might be forgiven for getting this case confused with the seeming millions of other Apple v Samsung, Apple v The World, The World v Apple-type disputes that have been plaguing courts across the globe.  In summary, in this latest US installment of the saga, Apple brought a patent infringement case against Samsung for infringement of three patents – US Patent No. 7,469,381 relating to "list scrolling and document translation, scaling and rotation on a touch-screen display", US Patent No. 7,844,915 relating to an "application for programming interfaces for scrolling operations" (zooming, bounce-back on scrolling, etc) and US Patent No. 7,864,163 relating to a "method for displaying at least a portion of a structured electronic document", as well as four design patents: US Patent Nos. D504,889, D593,087, D618,677 and D604,305.   The main design patent at issue was the '889 design patent which claimed the "the ornamental design for an electronic device" with depictions of the rounded cornered tablet.  Samsung counterclaimed for infringement of six of its own patents.   
After a three week trial, a jury of the AmeriKat's peers, Merpel hastens to add, and not her own, gave its verdict.  Seven Californian men and two women found that Samsung had infringed all Apple's patents and design patents, except the famous '889 design patent.  They also found that Apple had not infringed any of Samsung's patents.
Smoking crack
And how did the jury calculate damages?  Well, armed with these jury instructions, they did what most people seem to do when faced with the dark art of calculating patent infringement damages: they stuck their nine figures in the air,  filled out a form, and came up with a number.  Apple sought damages based on lost profits for some of Samsung's sales and a reasonable royalty on the rest of Samsung's allegedly infringing sales.  To prove lost profits, Apple had to show that, but for Samsung's infringement, there was a reasonable probability that it would have made the sales that Samsung made if the infringing products had not been on the market.  Importantly, presiding District Judge Lucy Koh, who charmed the world when, after a receiving a 75-page briefing from Apple with 22 listed rebuttal witnesses, asked Apple's lawyers if they were "smoking crack", instructed the jury that: 
"You must allocate the lost profits based upon the customer demand for the patented feature of the infringing products. That is, you must determine which profits derive from the patented invention that Samsung sells, and not from other features of the infringing products."
With that in mind (or not) the jury, who found that Samsung's infringement of the patents was wilful (see question 10 on page 9) in that Samsung knew or should have known that its actions constituted infringement of Apple's three patents, returned a verdict that Samsung should pay Apple a total of $1.05 billion in damages (see page 16 of the jury verdict form).  Although less than the original $2.75 billion Apple requested, the $1.05 billion damages award represents the fourth largest jury award in a patent case ever.     
Judge Koh of the Ninth Circuit has since scheduled a 20 September 2012 hearing date for Apple's request for an injunction against Samsung's ongoing infringement of the patents.  The products in questions, as set out in Apple's filing, are likely to include the Galaxy S 4G, Galaxy S2 (AT&T, Skyrocket, T-Mobile and Epic 4G models), Galaxy S Show case, Droid Charge and Galaxy Prevail. 
It is expected that Samsung -- who said that this verdict "is not the final word in this case" -- is likely to appeal the verdict either by filing a motion for judgement against the verdict (whereby the presiding judge may reverse or amend a jury verdict, otherwise known as "judgment notwithstanding the verdict": this is unlikely) or an appeal to the Court of Appeals for the Federal Circuit (otherwise known as the CAFC, where the wonderful Judge Rader presides: more likely).  If Samsung (or Apple) appeal, payment of the £1.05 billion damages figure will be stayed pending the appeal, though interest will accrue.  
Merpel is sceptical of the jury verdict.  How were the jury, after only two and half days of deliberations,  able to calculate that the lost profits attributable to customer demand for the patented features of the in the Galaxy S II (Epic 4G Touch)(JX 1034), for example, was $100,326,988?   Can we see your workings, please? 
Perhaps, as with damages awards generally, this has very little to do with actual calculations based on convincing economic evidence of market demand of the patent features, but more to do with "what feels right" in the case.  For nine Californian jurors from the state which launched Apple and who, like the rest of the American populus, have most likely been indoctrinated into coveting American Apple products in preference to those of the South Korean Samsung, perhaps a finding of rampant infringement with a $1.05 billion damages price-tag just "felt right" – but it doesn't mean that it is just or correct.  Contrary to the position taken by our American cousins as to their right for jury trials, does this jury verdict strongly argue against the case for jury trials? 
So with the news that Samsung's shares took their biggest one-day hit in four years today, and while the appeal briefs likely start their 20th draft, Merpel wonders if any UK or EU patent judge or reader would anonymously like to have a go at completing the jury verdict form in Apple v Samsung to see what number they come up with (email your efforts to Merpel at 

Monday miscellany

Readers of this weblog occasionally complain that its contents are in poor taste -- though this is not so much the fault of the Kats as of the litigants, businesses, celebrities and members of the aristocracy who make it so by getting up to the sort of shenanigans [Merriam-Webster defines the word "shenanigan" thus but, in this Kat's experience, like London buses and summer showers anywhere in England, they are rarely if ever found in the singular] that end up as highly reportable IP disputes. Now, this weblog has reported one dispute of a distinctly tasteful nature since taste lay at the very heart of it -- Bailey and Williams v Graham and Levi Roots' Reggae Reggae Foods Ltd and another, the celebrated Reggae Reggae sauce case, the facts and outcome of which were lovingly garnished by Cat the Kat here and here).

After this case, the words
"grilling the witnesses"
will never sound
quite the same ...
The IPKat can now inform his readers that the Court of Appeal for England and Wales has granted the claimants leave to appeal the decision of Judge Pelling QC -- sitting in the High Court and therefore a little above his ordinary station --  in which he dismissed a claim against the Reggae Reggae folk for misuse of confidential information and breach of contract in relation.  According to the Court of Appeal, the trial judge's analysis, though not as full as holes as a colander, was open to challenges on a number of grounds including his methodology in evaluating the witnesses [Merpel is sure that this isn't a coded message that means "the Court of Appeal is itching to substitute its own finding of facts for those of the trial judge"] and his failure to refer to a number of salient matters in his judgment.  There's also an application by lawyers representing one of the claimants to have fresh evidence admitted to the effect that their client had (and still presumably has) a fairly low IQ -- not an everyday event in British IP litigation.  Anyway, the IPKat will do his best to keep his readers informed of the next course turn of events in this curious case. Topically, since the Notting Hill Carnival is now in full swing, the first claimant maintained that he had been selling jerk chicken prepared with his own sauce at the Carnival since 1988.


The Danish Royal Crest
could easily be adapted
to suit Prince Harry's
predilections ...
It's impolite to laugh at one's own jokes, or even repeat them too often. However, an opportunity for a bon mot arose on a Friday afternoon (not a good time for posting original blog material) which immediately preceded a British Public Holiday weekend and this Kat, having posted it on Twitter, is concerned that some people who might have appreciated it would already have turned their computers off, cleared their desks and headed for the nearest place in which to mark with appreciation their brief emancipation from the treadmill of their work.  Accordingly, complete with explanation, here it comes again.  To explain: last week Prince Harry (real forenames Henry Charles Albert David; when you're royal enough or as famous as Madonna, you don't need a surname) was caught by camera wearing nothing but his royal skin, a wristwatch and a necklace (see Katpost here).  Almost as many people viewed this spectacle online and in the non-British press as viewed the late Neil Armstrong's moonwalk, but the British press was asked to refrain from publishing the pics.

Suffering what most newspapers regarded as a slap in the face in terms of freedom of expression, most titles refrained from reproducing them [did they simply turn the other cheek, wonders Merpel ...].  The Sun newspaper however published photos of the Prince's bottom.  This led to the neatly symmetrical notion that formerly it was said that the sun shone out of Harry's backside. Now it appears that Harry's backside shines out of The Sun.


Are the Chinese pandering to EPO
demands? (photo by Emanuela
According to a media release from the European Patent Office, there's a neat little bit of reciprocity coming up in terms of document exchange, where European patent applications are claiming priority from a Chinese application or vice versa:
The European Patent Office is pleased to announce that as of 3 September 2012 it is implementing automatic electronic exchange of priority documents with the State Intellectual Property Office (SIPO) of the People's Republic of China for first filings at SIPO and the EPO.

To qualify for this service [ah, so it's not quite automatic], which is free of charge [good -- but why shouldn't it be?] and not subject to any formalities on the part of the applicant [ditto], the European patent application or the Chinese national patent or utility model application claiming priority from a first filing at the other office must have been filed on or after 3 September 2012.

Bad boys from Belize come unstuck.  From the IPKat's friend Joris van Manen (Hoyng Monegier, Amsterdam) comes news of the injunction which his firm has secured on behalf of luxury brand owners (including Gucci, Chanel, Dior and Breitling) against what he describes as "the most notorious counterfeit website hosting provider AltusHost" ("We Build the Future!").  The judgment, which may be read with ease and comfort by anyone who is fluent in legal Dutch, is here.  For those less linguistically talented, this note in Computerworld will probably be sufficient.  In short, not only has Belize-based AltusHost been ordered to block 25 counterfeit websites it hosts, but that company has signed an agreement which (inter alia) provides that it will shut down any and all counterfeit websites it hosts worldwide within five days of receiving a request from Joris & Co to do so.  Our hero adds: "We hope this may provide some support in the fight against online counterfeiting".  Says the Kat, "well done!"

Sunday, 26 August 2012

I'd walk a mile for an unbranded cigarette

If she were a cigarette, apparently your Katonomist would be a clove cigarette (this has ruined her hipster aspirations as she had hoped to be an American Spirit.)  If she were in Australia, she would soon be "olive green... with stark health warnings."  Given the debate over Australia's new law, it is time to have a look at the economics of cigarette packaging.

Economists have done a fair amount of work on the economics of tobacco and cigarettes.  A lot of the research is in the last century as a number of major economies enacted changes to their regulation of tobacco products.   The research argues various points as it examines the role of advertising on cigarette consumption.

McGuinness and Cowling wrote in 1974 that cigarettes function as a commodity.  This suggests that differentiation between cigarettes is less about quality and more about branding.  (I'm sure that smokers would disagree.)  They also investigated the purpose of advertising in cigarettes as it is very difficult to find causation between advertising and decision to purchase.  The authors calculated that 95% of the positive effects on demand from advertising carry over from one quarter to another.  They also found that a 10% increase in advertising correlates to a 2.8% increase in sales (which means that cigarette spending on advertising enjoys the Katonomist's second favourite economics term, diminishing marginal returns.)

In the late eighties, Tye, Warner and Glantz looked at the industry (they also have a very handy overview of the earlier literature.) They make an interesting observation that the tobacco market is both mature and a growth market.  Mature in the sense that total sales are stagnant.  However, the tobacco market suffers from a high attrition rate which requires growth to compensate. At the time, this meant that "to replace smokers who quit or die prematurely, the industry must attract approximately two million new users per year [in the U.S.]"  Most of these replacement smokers were children or adolescents.

Cigarette smokers are also very loyal. Tye, Warner and Glantz note that only ten percent will switch brands in any given year.  This switching is typically between brands owned by a single company and thus does not generate additional revenue for the company.  This suggests that advertising by the industry is more defensive rather than increasing the number of consumers.  However, the authors also note that there  are conflicting reports of the effects of advertising on demand.

Internationally, various restrictions on cigarette advertising have had mixed effects. A great example is Italy where cigarette consumption increased despite a ban on advertising.  However, in true Italian style, companies chose to treat government fines for flouting the ban as merely an additional cost of doing business.  In Norway, a ban decreased sales by 15%.  However, in Taiwan an increase in cigarette taxes in resulted in only a short term decrease in consumption.

A more recent work, by Harris and Chan, looked at cigarette smoking in relation to price amongst young Americans, and found that cigarette consumption is inversely related to the price of premium brands, but surprisingly not for discount brands.  Instead, low income, young smokers make actually view discount brands as giffen goods. This could have interesting implications for the Australian market if it holds true for other populations.  What happens when consumers are less able to differentiate between premium and budget cigarettes?

IPKat readers will particularly like the 1995 paper by Cunningham and Kyle which looks specifically at the case for plain packaging in cigarettes.  They point out that cigarette packaging performs the same promotional role as advertising in general.  In addition to having some great cartoons, they look at various economics arguments.  Plain packaging removes the status signals associated with the cigarettes.  It also reduces the impact of foreign advertising, sponsorships and shelf displays.  They argue that plain packaging will reduce the number of products available as the market will not sustain the the variety of brand variations.  Finally, they point out that plain packaging is relatively cost free for governments with the added bonus of reducing smuggling. On the flip side, plain packaging might make counterfeiting easier.  It may also result in job losses in the packaging industry and make inventory control more difficult. Among other concerns, the authors also highlight problems with the restriction on the use of trademarks without compensation as discussed by Kats here and here.

Finally, Warner again looked at myths and realities in the economics of tobacco.  A key economic argument in favour of discouraging tobacco use is the potential savings in health care costs. While smoking related illness is expensive, the shorter lifespan of smokers balances out this expense at least slightly by reducing the number of years of healthcare.  However, premature deaths also mean less tax paying citizens! He argues that there really isn't much data on the subject and the effect is likely modest.  He also notes that, despite years of economic research, the relationship between advertising and sales is still debated.

Overall, it looks like the research suggests that less advertising via packaging may reduce demand for cigarettes overall.  However, the research is far from reaching a consensus.  <Insert pun about blowing smoke here.>  <And a further pun about economists not coming a long way, baby.>

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