LICENSING EXECUTIVES SOCIETY

Britain and Ireland

NEWS EXCHANGE
Issue 87: October - November 2002

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• A Route Around DNA Patents
• President's Diary
• A Tangled Web
• Successful Sports Licensing - the Commonwealth Games Experience
• Licensing Update - ipr in business
• "Edinburgh" Stem Cell Patent
• People News
• News from the Regions

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Since 1980, the US PTO alone has granted over 20,000 patents on genes or related inventions. With all these monopolies on genes floating about, it can be difficult to conduct research without infringing a patent, let alone devise a product offering such as a new drug. There has been much recent discussion on whether such patents are granted too easily and if this has led to a stifling of scientific research in the area (for example, the Nuffield Council on Bioethics report of 23 July 2002 "The Ethics of Patenting DNA", www.nuffieldbioethics.org). However, these restrictions have also inspired researchers to devise ways to circumvent these patents by using gene activation ("endogenous gene activation") rather than manipulating the gene and the technologies based on the gene itself, which are usually patented.

Endogenous gene activation allows researchers to do more than just further research on drug candidates, it also allows companies to create drugs closely related to the patented protein-based drugs without infringing that patent. Essentially, this concept is not new in patenting. These researchers are merely using the now public knowledge disclosed in the patent and building upon it without having to actually use it (and therefore, they are avoiding paying licence fees to the patent holder).

Endogenous gene activation is also the subject of the recent UK Court of Appeal decision of 31 July 2002 on the patent dispute regarding anti-anaemia drugs between Kirin Amgen Inc. ("Amgen") and Transkaryotic Therapies Inc ("TKT") (and the subject of concurrent US court actions). Amgen has a patent on the production of the protein erythropoietin ("EPO"), which covers both the DNA and amino acid sequence for EPO. EPO is a protein that regulates the production of red blood cells. When the oxygen level in the blood is low, more EPO is produced. When the level returns to normal, EPO production is reduced. Amgen did not discover EPO but its researchers identified its DNA and amino acid sequences. Amgen's technology took the human EPO DNA and, using known genetic manipulation techniques, inserted it into a non-human host cell where it could be manipulated to express EPO at high levels. This is "exogenous gene activation" as the human EPO is expressed in a non-human cell and did not originate from the original genetic material of that host cell. TKT's EPO technology inserts an exogenous promoter or "switch" upstream from the EPO DNA sequence and then the human cell can be manipulated to produce EPO. This is endogenous gene activation, as the genome containing the EPO DNA is in a human host cell (and the DNA is endogenous to that cell). Amgen sued TKT for infringement of Amgen's EPO patent.

Amgen's patent claims were structured in such a way that to infringe the patent, EPO had to be produced using particular methods of expression, which involved manipulation of the EPO DNA. The Court of Appeal in reversing the decision of the High Court held that TKT had not infringed Amgen's patent as "[t]here are real differences between an isolated DNA sequence which is suitable for use in a host cell and a DNA sequence in a cell which needs activation…. The patentee could not monopolise the gene per se as that existed in nature. The patentee therefore monopolised the DNA sequence encoding for DNA when isolated and in that respect was suitable for use to express EPO in a host cell…. To seek to monopolise use of the sequence when not isolated by inserting a construct into a human cell would provide a monopoly not properly supported by the description in the specification. We also believe that third parties could reasonably expect that if they did not use a DNA sequence for insertion into a host cell, there would be no infringement." The Court also held that TKT had not committed purposive or non-literal infringement (the UK equivalent to the doctrine of equivalents in US patent law).

It is expected that Amgen will seek leave to appeal this decision to the House of Lords. The outcome of TKT's appeal from a US court decision regarding Amgen's US EPO patents is yet to be handed down.

Whether endogenous gene activation is capable of being used to circumvent patents in this area will depend on how wide the claims in the exogenous gene patents are drafted (that is, to include not only the gene and the resulting protein, but all manner of methodologies capable of producing that protein from the gene). Although Amgen's EPO patent is drafted very widely, it was obviously not wide enough to satisfy the Court of Appeal.

Anna Feros, Shepherd+ Wedderburn, London
© Shepherd & Wedderburn 2002

President's Diary

Welcome back to LES and to work following a summer that, for me, passes all too quickly. As President LES GB&I, I have just returned from attending the Pan European conference in Prague organised by LES Czech Republic.
Despite the recent floods in Prague, the conference was attended by approximately 200 participants and proved to be a success for all involved. It was sad to see how some areas of Prague had suffered from the floods but it was also astonishing to see how quickly people had worked to restore this beautiful city.

Next year, in place of the Pan European Conference, the LES International meetings will be hosted by LES Scandinavia and held in Oslo. The theme for these meetings will be "Licensing in a Changing World" and will focus on geopolitical and ethical issues in licensing. As a member of the LESI Healthcare committee, I have been involved in planning a workshop for Oslo to explore the ethical issues with regard to the licensing and patenting of DNA related technologies. The Oslo meetings will take place 15-18 June 2003.

On October 30 2002, we will be presenting the first European based LES International course covering the Fundamentals of Intellectual Asset Management. The venue will be the Royal Overseas League in London and the course tutors will be Chris Goodman and Stephen Powell. This is the first in a family of twelve seminars that we aim to run on a regular basis across Europe. These seminars have been presented for a number of years in the United States and delegates completing each course will be awarded a certificate.

The next Pan European conference will take place in Paris at the Hotel Sofitel Bercy, September 8-11 2004. Please remember that all LES members are welcome to attend and we really do want to hear your views regarding subjects to be covered in the workshops, plenary sessions and round table discussions.

Christi Mitchell,
President LES B&I

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Background

This case in the United States District Court concerned an allegation of infringement of claims 3, 5, 6 and 7 of US Patent No. 4873662 by BT Telecommunications Plc (BT) by Prodigy Communications Corporation (Prodigy) through its business activities as an Internet Service Provider (ISP). BT had also alleged that Prodigy induced and contributed to infringement by Prodigy subscribers who also infringed by accessing the Internet through the Prodigy service.

The patent had been granted in 1989 on an application filed in 1980 in the days of the (old) Post Office, based upon an application originally filed in the United Kingdom in 1976. The invention of the patent had been developed to overcome difficulties in VIEWDATA and similar systems in which information is obtained from a remote computer and transmitted to terminal apparatus though a public telephone network. Following the rapid development of the Internet in the 1990s, it seems that BT concluded that the claims of its patent could be interpreted to cover certain Internet activities. Despite the age of the invention, action was still possible in the US. Dollar signs therefore began to appear in great numbers. This was to be a battle of giants. In the UK, at least, BT needs no introduction. Prodigy may not be well known in the UK but its networks can provide dial-up access, using a local telephone call, to about 90% of households in the US.

The Court had previously given an opinion construing the claims of the patent and Prodigy moved for summary judgement of non-infringement under the Federal Rules of Civil Procedure. A not inconsiderable burden is placed upon the party seeking summary judgement, particularly as the Court must view the evidence in the light most favourable to the party against whom judgement is being sought, and must draw all reasonable inferences in its favour.

The Arguments

Determining patent infringement is a two stage process. First, the Court construes the claims of the patent to determine their scope and meaning. Then the alleged infringement is compared with each construed claim to see if it has all of the features of the claims. Where there is no literal infringement, it is also necessary to see if infringement can be found based upon the Doctrine of Equivalents.

Of the claims alleged to be infringed, claims 3 and 5 are independent claims and claims 6 and 7 are subsidiary claims appendant to claim 5. Claim 3 is directed to a digital information storage retrieval and display system and claims 5, 6 and 7 to a terminal apparatus for use in such a system. All of the claims recite several features, but the arguments concentrated on two in particular and it was the Court's view on these two features which was to lead ultimately to BT's downfall, and to the issue of a decision and order in Prodigy's favour. The two features are the presence or absence of a central computer and of two-part blocks of information where one of those parts contains the complete address for the information in the other part.

On the central computer issue, BT argued that each web server on the Internet is a "central computer" as defined in the claims of the patent. Prodigy, and more importantly the Court, did not agree, the Court commenting that because "the Internet is not a computer network consisting of a centralized computer that stores all of the data accessible by remote terminals, web servers on the Internet cannot literally infringe the patent". The Court also rejected the BT attempt to rely on the Doctrine of Equivalents commenting that "a central computer containing all of the data accessible by a remote terminal user operates in substantially different ways from the Internet". The Court further commented that " the Internet is the very antithesis of a digital information storage system having a central computer and that the opposite of a claim limitation cannot be considered its equivalent".

The Court also rejected BT's attempt to argue that claims 5, 6 and 7 were not limited by the phrase "central computer" commenting that such an argument was "without merit".

On the blocks of information issue the Court also rejected BT's arguments that Hypertext Markup Language (HTML) files provided on web servers on the Internet, provide or at least are equivalent to the blocks of information required by the claims of the patent. Unfortunately for BT, the Court did not agree commenting that "unlike the blocks of information required by the patent, HTML code, which is the primary language of the World Wide Web and of the Prodigy Internet service, does not use blocks. HTML code does not separate displayed information into a first sub-unit, and non-displayed information in a contiguous, separable second sub-unit. Rather, HTML code contains information to be displayed intermingled with other information concerning formatting and linking, such as URLs and anchors". The Court also dismissed BT's argument on equivalence, relying in so doing upon amendments made and arguments supplied to overcome cited prior art by the applicants themselves during the prosecution of the application on which the patent was granted.

BT's contention that claims 5, 6 and 7 were not limited by the "blocks of information" phrase was also rejected by the Court.

The Court did not address BT's arguments on inducement and contributory infringement in any detail in view of its conclusions on primary infringement.

Conclusion

Having considered all the arguments, the Court therefore concluded that "as a matter of law, no jury could find that Prodigy infringes the patent, nor that Prodigy contributes to infringement of the patent, nor actively induces others to infringe that patent", and therefore granted Prodigy's motion for summary judgement". This has been a bruising encounter for BT in the US Courts. It has been suggested BT stood little chance of success in this action and the decision would appear to bear that out. Given the potential rewards of a successful action, however, who would begrudge them their right to try?

Bill Downey, Partner
Wilson Gunn M'Caw

Successful Sports Licensing
the Commonwealth Games Experience

It is hard to believe that it is over six weeks since the climax of what were, by common consent, the most successful Commonwealth Games of all time. Manchester did the UK and Commonwealth proud, and has re-built the country's reputation as a venue for world class sporting events.

One of the major focuses for licensing involvement in the Commonwealth Games was to ensure that as much revenue as possible was contractually guaranteed; and that as much protection as possible was given to the various rights on which that revenue was based, both in the registration of the portfolio of rights and taking action against those who would misuse it.

Licensing of Intellectual Property and other assets

Addleshaw Booth worked very closely with Manchester 2002 Limited, the organising committee ("M2002") to design the packages of rights and benefits available to sponsors. The establishment of these rights is essentially the basis of commercial revenue for major sporting events - certainly in terms of media and sponsorship income.

A key early achievement was the advice on international trademark registration given to M2002. One of the vital tenets of the merchandising operation which would prove so successful was the protection of the official marks, words and devices of the Games: Spirit of Friendship, Manchester 2002 and the two mascots KIT and Mad Ferret.

To register trademark protection internationally for even some of these marks would have been costly. However, we highlighted that under the terms of the CGF constitution, M2002 was precluded from raising commercial revenues outside its own territory. This rendered trademark protection pointless. Moreover, had there been any violation of rights internationally, remedy would have been available under international copyright law.

The key point here is to focus on what is being licensed, where and how; in answering these questions you may well discover that different courses of action or protection are appropriate for different programmes within the same event.

Sponsorship agreements

There were 11 official sponsors of the Games and nine official partners. Cumulatively, the value of these contracts was in excess of £30 million, with some agreements incorporating both cash transactions and value in kind.

Part of the licensing conundrum was the spread of rights between the centre - the Commonwealth Games Federation - and the local games organisers, Manchester 2002. Under the terms of the host city agreement, the city is entitled to commercial rights in its own territory - in this case the UK. However, because the Commonwealth recognises each of the home nations as distinct territories, these national associations could have raised funds and granted rights in parts of the UK. Given that neither broadcasters nor blue chip brands make this distinction, one of our early achievements was to successfully negotiate agreements with each of the home nations allowing M2002 to grant sponsor rights across the whole of the UK.

This has benefited both the organising committee, which has been able to offer far greater reach benefits to its partners, and the other home nations who were guaranteed sponsorship sums over four years in advance of the Games. Various existing agreements with key sponsors - like the Bank of Scotland north of the border - were also maintained.

Value in kind agreements present particular technical challenges for sponsorship contracts, with the ascription of VAT a particularly thorny issue. The agreements were structured so that M2002's VAT liability was maintained at a minimum when "value in kind" agreements were negotiated, including one instance where a £50,000 VAT liability was avoided. This is a particularly important note for these types of event - for example the Olympics, where sponsors will be of a global nature, with EU and non-EU countries having very different ideas about what their tax liabilities will be.

Particular care was taken to ensure that partners and sponsors were proactive, leveraging their position with the use of marketing campaigns using the trademarks and building the Manchester Games brand, which also, in turn, benefited the Games. Agreements were designed to contractually guarantee this type of activity.

Finally, Addleshaw Booth worked with M2002 on creating the innovative sponsor upgrade strategy, which offered individual sponsors the opportunity to increase their presence in particular sports. We believe that this will become the prevalent way of doing business for world class sporting events, and I'm sure we will see further developments in this area for Athens.

Broadcast Agreements

Addleshaw Booth negotiated the key host broadcaster agreement with the BBC, encompassing both the host broadcast itself and transmission rights (essentially copyright exploitation) for television and radio in the UK. Following on from this agreement were client arrangements with broadcasters from all around the world, utilising the copyright audio and video feeds produced by the BBC.

Technical details included parent company guarantees to restrict M2002's exposure to media market volatility, and innovative payment structures where certain payments were held in escrow on behalf of the Games where the broadcasters were unhappy at making full advance payments. Similar arrangements were used in jurisdictions where debt recovery could have proved problematic post-Games, dramatically reducing M2002's level of exposure to risk.

One of the key aspects of an undertaking as large as the Commonwealth games is to ensure that each of these contracts talks to the others - so broadcast contracts need to protect sponsors against ambush marketing and so on, rather than just leaving this to the sponsorship contracts. From the rights holder's perspective, this also spreads the risk around, with potentially some of the liability passing to the broadcaster in the event of a rival brand managing to gain extensive on-screen exposure.

Ticketing

A major revenue stream for the Games - over 90 percent of tickets were sold across all sports - ticketing is also an increasingly important legal area in the world of sport. Ticket conditions - the small print on the back - are a key element in the rights holder's armoury to protect its own interests and the interests of its sponsors and partners.

For example, ticket conditions were used in the Games to prevent against entry of unaccredited broadcast equipment; to ensure that all photographic equipment was solely for non-commercial use; to prevent against 'live' commentaries being distributed via mobile phones or laptops to the Internet or any other medium; and to prevent against 'ambushing' of sponsors by third party companies providing high visibility branded apparel to large groups of spectators.

For future Games, it is interesting to note that over 80 percent of tickets were sold online through a dedicated website. Ticketing was outsourced to Ticketmaster, whose specialist expertise ensured not just that M2002's commercial interests were protected, but also that adequate provision was made on behalf of the ticket-buying public: set procedures were out in place to handle returns, complaints and so on; fortunately use of these was minimal.

Ambush Marketing

Proactive steps were taken to ensure that the Games were largely free from the kind of ambush marketing activity that we have seen at other recent major sporting events. Where isolated instances did occur - for example a national newspaper using the Spirit of Friendship logo in contravention not only of an M2002 mark but also against the interest of an official sponsor which was a direct competitor of theirs - prompt action ensured that breaches 'ceased and desisted'. Even in the case of ticket touts, it has not been necessary to issue proceedings on behalf of the Games' commercial department.

The advice, which we would give to any event organiser is to ensure that you have the appropriate protection for your marks - considering changing logos if there is doubt as to the origin and therefore ownership of what you currently use. Having done this, use the mark as widely as possible - on everything from merchandise to tickets to uniforms to promotional materials. Instantly, anybody trying to muscle in on these areas is competing with an 'official' product - which may not make sense commercially, let alone legally.

One area where litigation can usually be avoided is cyber-squatting. We managed to dissuade large numbers of individuals and organisations from trying to exploit the Games' identity online. This is a particularly live issue for sporting events, because their recurrent nature means that there is inexhaustible potential to combine the name of the event, the host city, the date and any one of a plethora of domain names to create a relevant URL. In general we would advise protecting the ".com", ".co.uk", ".org", ".net", ".info" and ".tv" - as well as the relevant national extension if an event is taking place outside the UK.

A watching process was used with a team of personnel from the organising committee, the city and other areas' trading standards officers and our solicitors to monitor activity, and to send warning letters, which worked to stop activity infringing the Games marks. A balance was struck between allowing businesses to support the Games and join in the party and taking action where activity was prejudicing investments made in the event by sponsors or other partners - whose involvement, after all, had made the event possible.

The Legacy

The Games were a great occasion and we as sponsors are proud to have played a part in the event. The legacy continues in Manchester where urban regeneration around the stadium site in Eastlands - where Manchester City will play from next season - was always a centrepiece of the event planning. The exploitation of intangible rights made all those very real achievements and performances possible.

James Whittaker, Addleshaw Booth & Co, Manchester

Licensing Update - ipr in business

• Law Commission issued consultation paper (8 August) relating to proposal to replace the Unfair Contract Terms Act (UCTA) and the Unfair terms in Consumer Contracts Regulations (UTCCR) with single unified regime. See www.lawcom.gov.uk

• As part of the Government commitment to broadband Britain there will be an auction for 15 regional licences for the 4GHz waveband band. See www.radio.gov.uk

• Summary of responses to OFT consultation draft guideline on IPR available shortly on www.oft.gov.uk

• European Commission has published submissions received on the Transfer of Technology Block Exemption Review Report. See www.europa.eu.int/comm/competition/antitrust/technology_transfer/#020719

• Firepond (UK) Ltd v Stubbs and another (QBD) 15 August 2002. A non-compete clause preventing working for a competitor unreasonable. Confidentiality provisions provided adequate protection

• Scheiber v Dolby laboratories Inc. US Court of Appeals for the 7th Circuit held that a patent licence requiring royalty payments to be made after expiration of the patent term illegal and unenforceable

• British Concert Promoters have referred PRS licensing scheme to Copyright Tribunal (CT77/02) under section 119 of the Copyright Designs and Patents Act 1988

• Ferring Arzneimittel GmbH v Eurim-Pharm Arzneimittel GmbH (Case C-172/00). Court of Justice of the European Communities ruled that article 28 EC precluded national legislation under which withdrawal of a marketing authorisation for a medicinal product on application by the holder meant that the parallel import licence for that product automatically ceased to be valid

• The Commission on Intellectual Property Rights final report on integrating intellectual property rights and development policy is available on www.iprcommission.org

Monitored by Dr Hayley French,
Taylor Wessing

"Edinburgh" Stem Cell Patent

On 24 July 2002 after a three day hearing, the Opposition Division of the European Patent Office ("EPO") held the "Edinburgh" Patent to be valid but in an amended form. The Edinburgh patent is a European patent for the "isolation, selection and propagation of animal transgenic stem cells" which was granted by the EPO to the University of Edinburgh in December 1999. As stem cells are quite difficult to culture in isolation, this patent represented a breakthrough in stem cell and transgenic technology. The granting of this patent generated much protest on the issue of stem cell technology and the patent was formally opposed by 14 parties including the governments of Germany, Italy and the Netherlands, and the German branch of Greenpeace.

The Edinburgh patent covers a method of using genetic engineering to isolate stem cells (including embryonic stem cells) in order to obtain pure stem cell lines. As the patent claims were not limited to particular types of animal stem cells, it potentially allowed for the isolation and propagation of animal and human stem cells (including embryonic stem cells). The opponents were concerned that the patent could cover human cloning and the creation of transgenic animals including humans. The opponents' claim included that the patent contravened Article 53(a) of the European Patent Convention, which prohibits the patenting of inventions which would be contrary to "ordre public" or morality.

The University of Edinburgh maintained that it never intended the patent to cover the cloning of humans or the creation of transgenic humans and, before the end of the opposition period, voluntarily requested that the patent be amended.

European patents may be opposed within a statutory opposition period of nine months following grant. Once opposed, the Opposition Division of the EPO may either uphold the patent, revoke the patent or uphold it in an amended form. The Opposition Division of the EPO found that the Edinburgh patent would be valid provided it was amended to limit its scope to exclude any human or animal embryonic stem cells, but other human and animal stem cells (including the more publicly acceptable adult stem cells cultivated from adult tissues) generated using the patented methodology were to remain within the scope of the patent claims.

It is assumed that the University will now go on to enter the national phases of its European patent and pursue patent applications in various nominated European countries including the UK. How this patented technology will be applied in the UK will be governed by the Human Fertilisation and Embryology Act 1990 and the Human Fertilisation (Research Purposes) Regulations 2001 which means that applications for licences will need to be made to the Human Fertilisation and Embryology Authority ("HFEA") in due course. Therefore, any stem cell research using this patented technology will generally be subject to HFEA approval which should provide some comfort (along with the recent Human Reproductive Cloning Act 2001) to those who have concerns about possible human cloning research.

Anna Feros,
Shepherd+ Wedderburn, London

People and Company News

On September 1st 2002 the Uk based law firm Taylor Joynson Garrett (TJG) and German based law firm Wessing joined forces to launch Taylor Wessing, a powerful source of support for companies doing business in or with Europe. Taylor Wessing has offices located in London, Cambridge, Berlin, Dusseldorf, Frankfurt, Hamburg, Munich, Brussels, with representitive offices in Alicante and Shanghai.

TJG and Wessing had been individually reviewing their national strategy for some time with a view to developing a pan-European network. TJG and Wessing will provide a full range of legal services to major corporations and growing enterprises, with a particularly strong track record in serving knowledge-based businesses in sectors such as technology, life science and financial services.

Council member Hayley French has recently been seconded for six months to the corporate department of the Cambridge office of Taylor Wessing. The Cambridge office specialises in the IP-rich sectors and focuses on advising technology based companies (IT and Biotech) and those investing in such technology. Hayley will focus on the corporate and IP work for such companies and especially university spin-outs.

People News

Chris Barrett, formaly with BTG and Madge Networks, has moved on after after two and a half years with BT's corporate legal department in London where he was BT's first full-time'patent licensing executive. Members who attended the recent London evening presentation by Lawrence Bickers, Head of IP Exploitation at BTexact Technologies, Ipswich, will have seen a flavour of Chris' work at BT, where his primary remit was licensing of the photonics patents portfolio.

Whilst contemplating his next move, Chris hopes to get more involved with LES activities, and is working on a book. He could not be induced to reveal the subject matter, other than to say that it may just possibly make mention of IPR!

Chris can be reached at cdb@talk21 .corm

News from the Regions

LES Scotland

Dear Colleagues

It is September and the sun is remembering to shine. However, the nights are drawing in (and there's STILL nothing on the TV!) so it is time to widen your network and improve your awareness of IP protection, management and exploitation. What better way than attending your local LES event?

The next LES Scottish Branch event is on 'The Future of Technology' on 20th NOvember 2002 in Glasgow. This will be followed by our popular Burns Night Supper event on 6th February 2003 and in May 2003 we plan to hold a half-day event on commercialisation. So dust off your personal development plans and ink in your local LES events.

We look forward to welcomming you to LES Scottish Branch events whether you are from Scotland or further afield.

LES Midlands

The autumn meeting for LES East Midlands Branch will take place on Thursday 24 October in the World Service Restaurant, Newdigate House, Nottingham.

We are pleased to welcome Gary Assim, of Shoosmiths, as our speaker. Gary joined Shoosmiths in 1997 where he is now a partner and head of the national IP/IT Group. Gary has acted for parallel importers and brand owners alike, specialising in the retail, automotive and pharmaceutical sectors. Last year Legal Business ranked him as one of the top IP lawyers outside London.

Gary will run through the history relating to repackaging of pharmaceutical, products and the extent to which repackaging, can be considered to be trademark infringement, particularly in light of the recent ECJ cases.

The cost of the meeting and dinner is £35.00. All welcome.

Ray Charig, email: rcharig@eric-potter.com

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