LICENSING EXECUTIVES SOCIETY

Britain and Ireland

NEWS EXCHANGE
Issue 95: March 2004

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IP reporting in the wake of Sarbanes-Oxley - can you afford to ignore it?

Companies and their advisors are still in the early stages of working through the full implications of the 2002 Sarbanes-Oxley Act, but they are finding certain provisions have particular resonance for companies with significant IP rights.

It is a common misconception that the Act only relates to auditors. Not so! It has implications for in-house counsel and, from an IP perspective, those involved in managing a company's trademark or patent portfolios and licensing programmes.

The Act currently applies to all companies registered with the US Securities and Exchange Commission (SEC), and potential future registrants would be well advised to consider the early adoption of its provisions. It is also likely that tighter governance will follow outside the US in the near future and, in our experience, many European companies are relatively inexperienced in managing their IP rights. If they are not to be caught unprepared, their current IP management practices may need significant revision.

What do companies need to do?
For some of the Act's requirements, compliance will be a natural extension of a company's regular financial reporting cycle and submissions to the SEC. Others will require the careful documentation of existing controls and practices. Many others will require time to be invested in setting up new controls. In particular, companies will need to consider how they address the new requirements for:

  • The certification and documentation of internal controls.
    The ultimate responsibility for establishing and maintaining internal controls within a company lies with the CEO and CFO. Under the Act, they must certify that they have designed such controls to ensure that they are made aware of material information relating to the company (S302). Their auditors will have to attest to and report on management's assessments of internal controls (S404)

  • The certification of financial information.
    The Act requires companies to certify that the financial information contained in the company's annual and quarterly reports fairly presents the financial condition of the company in all material respects (S302)

How does this apply to intangibles?
For the CEO and CFO to be in a position to fulfil their obligations under the Act, IP awareness will have to escalate to board level. Companies will need a combination of internal controls designed to measure, manage and protect their intangibles:

  1. Measurement. Companies need to identify and document their portfolio of intangible assets, just as they already track their tangible fixed assets. Financial reporting standards have recently been implemented which require values to be attributed to certain intangibles acquired as part of a transaction, but such reporting requirements do not extend to internally generated intangibles. More often than not, the internal controls needed for the purposes of Sarbanes-Oxley compliance may also have to include items which do not show up in the financial statements. For those that do, values can be volatile and so controls may extend to monitoring changes in value and reviewing for impairment.
  2. 2. Management. Companies will not only need to consider controls in respect of intangibles, which are directly used in their business. Given the growing trend towards licensing as a means of indirectly exploiting valuable IP rights, it will be increasingly important for companies to be able to demonstrate the controls which they have in place over their licensing programmes. For example, a licensor needs to be confident that it is engaging with appropriate counter-parties. If necessary, the company should carry out due diligence on the legitimacy of its licensees' operations in order to minimise its exposure to legal risks. Similarly, in our experience, under-reporting of royalties is common. Implementing a programme of royalty investigations to enforce a company's licensing strategy will help communicate to shareholders that management is taking steps to extract and preserve shareholder value.
  3. 3. Protection. Companies already appreciate the need to be aware of any claims against their own IP rights. They also need to make sure that they are aware of any claims against IP rights held by others in their industry. As such, companies should consider the adequacy of their existing mechanisms for monitoring competitor activity and market developments. Companies also need to assess their vulnerability to industrial espionage or IP theft: for example, by using technology to monitor networks for the use of peer-to-peer software or the email leakage of confidential information.

All very interesting, but so what?
A $5 million fine, that's what. The penalties for non-compliance are substantial, one of:

  • Up to $5 million and 20 years imprisonment for wilful violations
  • Up to $1 million and 10 years imprisonment for knowing violations

Reporting and disclosure requirements are such that information which had previously been kept confidential (for example, focus of R&D spend, areas of research, pending litigation) may now have to be made public. Tensions may well arise between disclosure obligations and the desire to maintain confidentiality over R&D programmes or a particular source of competitive advantage.

Compliance just for the sake of it then?
The penalties outlined above mean that the consequences of non-compliance could be both financially and reputationally damaging. Compliance, on the other hand, should encourage systems and practices that will assist the company in its best use of its valuable intangibles.

Elizabeth Gutteridge is a senior manager at Deloitte, specialising in IP matters.
egutteridge@deloitte.co.uk


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President's Diary

Welcome to the first News Exchange of 2004, LES Council wishes all our members a successful and happy new year.

At the time of writing we are looking forward to our Annual Lunch at The Savoy on February 12th, where our guest speaker, Baroness Susan Greenfield, will be talking about "Spinning out from universities, the thrills and spills". We also have a morning meeting arranged entitled "Juggling your IP potential: valuing and managing your most valuable assets" with a great speaker lineup. This is always a popular event and we urge you to book at the earliest opportunity, as places are limited.

We are in the process of organising the Annual Conference, and this year it will be held in the West Country at Bristol University. Bristol is a beautiful place teeming with history and the University has an excellent technology transfer and business development group known as RED; Research & Enterprise Development. This group was started by Tom Hockaday (now CE, Isis Innovation in Oxford) in the 90s and is currently headed up by Neil Bradshaw. They have created many licensing deals and spin out companies and we look forward to hearing far more about the success of RED during the Annual Conference.

At the end of January I will be attending the LESI Presidents meeting in Rome where we will discuss how best to enhance the LES societies world wide and bring new opportunities for networking and learning about licensing to our members. If you have any specific views or requests, please let me know.

As many of you will be aware, we have recently been trying out new venues for our London evening meetings. For the most recent, an excellent talk on the new approach to Intellectual Property being taken by Government from David Hughes, Director General, DTI, Innovation Group, we held the meeting in the Apothecaries Hall, Blackfriars Lane. This is a truly incredible building, especially for those of us with a pharmaceutical background. It is one of the few buildings in the city of London to survive unscathed by the bombing in the 2nd World War. Please come and join us there for the next London evening meeting on March 11th.

Christi Mitchell,
President LES B&I


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Personality Rights - 118 118

David Bedford claims he is entitled to compensation because he alleges 118 118, The Numbers have falsely represented him as endorsing their telephone service.

In the USA it is accepted that a person's name, voice and likeness are protected at law. Similarly Canada, Germany and France also have accepted the existence of a "personality right". An individual has the exclusive right to authorise how his name, voice, signature, photograph or likeness may be used. If anyone uses the image without their consent, it is an infringement of the right and may be subject to a penalty. This applies whether the use is for profit or not and continues beyond death - the estate of the late American runner that 118 118, The Numbers say the image is based on then may have a claim!

In the UK law, however, the position is not so clear and celebrities have had to rely upon traditional intellectual property law to try and establish their rights. A celebrity can protect their image as a trademark - Damon Hill and Jacques Villeneuve have been successful. There may be pitfalls, however, as it may not be sufficient to prevent all pictures or photos appearing on T-shirts or mugs - such use may be merely decorative and not use as a trademark. Ironically, the better known a celebrity, the harder it can be to register a trademark. Recently, the Princess of Wales Memorial Fund brought an action based on false advertising and endorsement, trademark dilution and infringement of California's statutory right of publicity and unfair competition. The action was thrown out and criticised as Diana had no legal right to protect her image in England, so it was unlikely she would have been able to in California. In English law, the only available action would have been passing off, but there would likely have been difficulty in showing the necessary element of confusion.

The Eddie Irvine case has helped to clarify the position in the UK. This involved Eddie Irvine suing Talksport who had used a manipulated picture of Eddie Irvine holding a Talk Radio radio. Irvine claimed compensation for passing off because it was a false or unauthorised endorsement. In a case of false endorsement the claimant has to prove:

  • at the time of the acts complained of he had a significant reputation or goodwill;
  • the actions of the defendant gave rise to a false message which would be understood by a not insignificant section of the market that the goods had been endorsed by the claimant.

The Judge specifically acknowledged that celebrities exploit their name and image through endorsement of products and services. The ingredients needed, as things stand, appear to be a current reputation with the public and a false endorsement message to the public such that a not insignificant number of them would understand the advertisement or representation to mean that the celebrity concerned had endorsed the product/services in question.

Whether David Bedford's situation will fit that test seems rather doubtful. There is no doubt that he was very famous in the 1970s and such a claim brought then would likely have had higher prospects of success. Whether a not insignificant proportion of the public would view the 118 118 advert as demonstrating his endorsement of the service will be key to the case's success. There is also the issue of whether the advert was based on Bedford or simply on a 1970s style retro image of a runner and also of whether, even if it was based on Bedford, the public would recognise it as being such.

With an increasing number of these cases coming to the fore, it will only be a matter of time before we have clear UK case law on the requirements to be successful and the David Bedford case should assist in this process.

© Maclay Murray & Spens 2003


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Ensuring Success - Preventing Failure in Technology Ventures

The high failure rate of technology ventures is linked to the high levels of risk involved and is often quoted as the reason for demanding high rates of return by investors. With increasing numbers of technology companies being spun out of universities and public research organisations, it is pertinent to look at the reasons for failure and determine whether lessons emerge that can be used to improve the chances of success.

The primary reasons for failure are, I believe, fourfold: the technology itself, the management of the invention, market acceptance and the process of establishing new technology companies.

What Constitutes Success?
Success and failure can mean different things to different people. For example, demonstrating a working model as proof-of-principle can be regarded as success by the inventor but is no more than a starting point for the investor, where success is measured solely in terms of return on investment.

From a financial perspective, I would propose that an invention that is licensed and thereby pays for all its development costs, including patenting, constitutes success. Similarly, an invention which forms the basis of a new company that also pays back all its development costs, likewise, can be considered successful.

Reasons for Failure
Having defined what constitutes success, let us now look at the reasons for failure.

  • Technology - I have decided to use the term technology rather than science in order to get a broader feel for what constitutes the inputs needed to drive an invention to market. Technology encompasses all those extra pieces of science, engineering and know-how that are required for an invention to achieve product status. If an invention fails to clear the proof-of-principle hurdle, then the idea has indeed failed. This go/no go decision point is ideally reached before a company is formed.

    Biological products, especially those designed as pharmaceuticals, have multiple hurdles to jump in the course of their lengthy development phase but the same principles apply to all inventions that go through a development process. Only those inventions that pass all the relevant industry tests can be considered successes. Manufacturing provides its own series of problems and biological products often fail at this late point because a satisfactory method of production proves elusive.

  • Management - In my experience, lack of management expertise is one of the most common reasons for failure of technology. The specific reasons can be many: the wrong balance between research and commercial imperatives, the product champion is too dominant, wrong turns are taken at an early stage, or the time and cost to get to market is underestimated.

    Spinouts from universities face acute problems of management competence, especially when the driving force is an academic with little or no industrial management experience. Such inventors often believe that getting the invention right is of far higher importance than the management of the business overall. In reality, there needs to be a dynamic balance between the two from the outset and striking this balance is difficult.

    Ceding control to an outsider, as a drafted in CEO is often viewed, can be a major problem for an inventor when the technology is seen as a piece of 'personal science'. The issue of control can be impossible to reconcile and has, itself, resulted in many failures. While a brilliant intellect is no bar to becoming a good manager, achieving the required level of management experience within an academic environment is almost impossible.

    Ensuring the balance of decisions turn out to be more right than wrong is a key function of management at any time, but particularly so in the early years. Recognising that both technology development and sound commercial decisions go hand-in-hand is vital. Good management teams look upon these decisions as joint and involve themselves in all aspects, generating consensus wherever possible. Poor management teams, for whatever reason, don't.

    It is not too strong to state that good management teams make all the difference between success and failure. Generating such teams from part-time, experienced managers usually working on a time-limited contractual basis, in conjunction with key scientists, is increasingly being seen as one of the most effective ways to tackle this problem.

  • The market - The ultimate test of new technology is the market place. Even the best inventions aren't always accepted by the market, often for a number of different reasons. The timing can be wrong - too early or too late, the invention does not offer a big enough leap for the market to change its way of operating, the strategic imperatives of the market are not aligned to benefits the invention might bring, product positioning is wrong or, quite simply, the solution offered is not one the market wants solved.

    All of these problems emphasise the need to have a good understanding of the market place from the outset. It is worth noting that US companies invest heavily in business development skills trying to answer market-led questions, even at the earliest phase of company formation. In the UK, it appears there is a reluctance to engage with market-related problems until the technology is proven. Business development is often seen as a luxury, not an investment. Until this perception changes, UK technology will struggle to realise its full potential.

  • Process of forming new companies - The majority of inventions produce incremental improvements and do not fit into the 'eureka' category. Incremental inventions are generally more suitable for licensing but, because of the pressures now exerted on research organisations to maximise value, many such inventions are being used to form the basis of spin out companies rather than being licensed. Seeking complimentary technology, to ensure the technology package is strong enough to guarantee long-term competitive advantage, again emphasizes the need for good business development even at the earliest stage of company development. Not understanding these imperatives will increase the risk of failure.

In summary, the difficulty of generating value from inventions is something we are all familiar with, often from a close perspective. Success ultimately demands that the technology pays back all its costs and generates a surplus, that it works to defined standards and is controlled through its development by a management team with a mixture of commercial and scientific skills. At an early stage, failure is most probably associated with the technology itself, but is more likely to be associated with lack of management skill as time moves on. Failure to meet precise market needs is a major contributor to late failure.

What can to be done to improve the chances of success? Firstly, providing access to greater numbers of managers with commercial experience gained within technology development environments will help. This should happen as more trained managers fall out of large companies and interim management organisations appreciate the needs of the start up market sector.

Secondly, those forming new companies should look to invest more in market information and business development from the outset. This will require a change in mindset and greater access to funds. Populating technology transfer offices of universities and research organisations with commercial/technology managers familiar with all of the problems outlined above may help address both problems.

Dr Trevor J Langley, BioMedical Business Partners Ltd, January 2004


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License to Large Company Can Threaten Enforceability of Small Company's US Patents

A recent decision of the United States Court of Appeals for the Federal Circuit serves as a reminder of the importance of monitoring attentively all filings and all business or license transactions concerning a United States patent application, or issued patent, and updating relevant information throughout the life of the application and patent. The alternative, as the Federal Circuit makes clear, may be loss of the right to enforce the patent if any material and intentional omission or misrepresentation was made by the applicant or patentee, or his counsel.

In Ulead Systems, Inc. v. Lex Computer & Mgt. Corp., 351 F.3d 1139 (Fed. Cir. 2003) (an unpaginated copy is available at http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=Fed&navby=case&no=011320), the Federal Circuit held that a patentee's payment of a periodic maintenance fee (that is, an annuity required at intervals of roughly four years to keep a U.S. patent in force) which claimed small entity status (and thus the right to make payment at half the normal maintenance fee level) could be the basis for a holding that the patentee's patent was unenforceable, because the patentee had, prior to submitting - and affirmatively claiming entitlement to use - the reduced maintenance fee, licensed the patented invention to a large entity.

Patentee Lex Computer (defendant in a declaratory action in which Ulead sought a declaration that Lex's U.S. Patent No. 4,538,188, drawn to video editing system, was non-infringed, invalid, and unenforceable) was at all relevant times a small entity under the U.S. Patent Office rules governing the reduced fee small entity scheme (37 C.F.R. §§ 1.27, 1.28 (1983)) - that is, Lex had far fewer than the 500 employees that serve as the cutoff separating "small" from "large" entities and entitling small entities to pay at half rate (non-profit organizations may also avail of the reduced fee provisions). But Lex fell foul of language in the rules providing that small entity status was unavailable to patentees or applicants or patent-holders who, even though themselves "small", "ha[ve] . . . assigned, granted, conveyed, or licensed . . . any rights in the invention . . . to any concern which would not qualify as a small business concern." 37 C.F.R. § 1.9(d).

Lex had, after issuance of its patent and payment of the first maintenance fee, granted non-exclusive licenses under its patent to Adobe Systems Inc. and two other companies, each of which had more than 500 employees. When paying the second maintenance fee, Lex and its counsel neglected to update their status to reflect that Lex was, under the rules, a de facto "large" entity (by virtue of Lex's license to Adobe and other large entities), and affirmatively continued to represent (and pay reduced fees on the basis of) "small" status.

The trial court ruled by summary judgment that Lex's patent was unenforceable, based on its unfounded and repeated claims of small entity status. Ulead Sys., 351 F.3d at 1143. The Federal Circuit reversed the trial court's ruling as a procedural matter, finding that there were sufficient disputed factual issues to make summary disposition premature on the issue of whether Lex's conduct had unequivocally met the legal standard for inequitable conduct so as to justify rendering the patent unenforceable.

Under applicable U.S. law, unenforceability results from an "affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive." Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1362 (Fed. Cir. 2003) (an unpaginated copy is available at http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=fed&navby=case&no=021497).

The Federal Circuit agreed with the trial court that Lex's erroneous statements to the Patent Office were clearly material (thus resolving prior uncertainty as to whether payment of a post-issuance fee should be classed with more traditional conceptions of "fraud on the patent office" - as inequitable conduct was previously known - such as concealment of adverse prior art during prosecution, which clearly would taint the substantive legitimacy of a patent). Thus, it appears clear for the first time that even purely administrative or fee-related misrepresentations or violations of the patent statutes and rules will, as long as they would affect the issuance or "survival of the patent," be deemed material. Ulead Sys., 351 F.3d at 1146.

The Federal Circuit, however, vacated the trial court's finding that there was no material factual issue as to inequitable conduct, because it determined that there were genuine issues of material fact as to whether Lex's and its counsel's misrepresentations had taken place with the intent to deceive. The court seems as much as anything to have been influenced by its incredulity at the prospect that a technology company and its registered patent counsel could have intended to risk their entire patent right in order to save a sum of money (about $2,500) that was "minuscule in comparison to the value of the [] patent" (which garnered several millions of dollars in licensing revenues before being held unenforceable). Ulead Sys., 351 F.3d at 1148 & n.5.

Nonetheless, the Federal Circuit's decision, which remanded the case to the trial court for a full factual determination, does make clear that if the requisite showing of intent to deceive could be made at a full trial upon remand, the Lex patent could (and might still) be deemed wholly unenforceable for just such a "minuscule" omission.

The lesson seems to be that both licensors and licensees (at least those dealing with U.S. patents) should be attentive at every stage of a patent application or patent's lifecycle to factors (or changes in circumstances) affecting the posture of the application or issued patent. It is conceivable that Lex's counsel honestly did not, indeed, realize that the grant of a non-exclusive license to Adobe rendered Lex a de facto large entity in the eyes of the Patent Office (or, equally likely, counsel simply was not accustomed to thinking of ongoing duties of disclosure as to an issued patent, when most practitioners focus on the duty of disclosure during the pre-issuance application process). Similar oversights are easy to imagine as to, say, a small entity having 400 employees when it files an application, but which neglects to update its status two years later in responding to an Office Action, at a time when the thriving company has passed the 500 employee mark.

Because the sanctions for inequitable conduct are so Draconian - leading to unenforceability of the entire patent - accused infringers will always look for the slightest irregularity in the prosecution and maintenance of an asserted U.S. patent. If there is an even arguable basis for showing inequitable conduct, it represents the nuclear option among an accused infringer's defenses, because it obviates the need for claim-by-claim showings of non-infringement or invalidity. Cost-benefit considerations thus make it pretty clearly advisable for patentees and any licensees to consider closely, and revisit periodically, the status of their applications and patents, and the effect, if any, of changes in the ownership and licensing status relating to these assets.

Such careful and periodic consideration can, in addition to averting the type of dire peril that Lex still faces, bolster the overall strength and sustainability of the patent by ensuring that, for instance, prior art of which the applicant becomes aware during the application process is periodically assessed and reported to the Patent Office, or by serving as an additional backstop to avoid missing any fee or response deadlines.

By Jeffrey D. Sullivan
Baker Botts, L.L.P.
30 Rockefeller Plaza, 44th Floor
New York, New York 10112
jsullivan@bakerbotts.com
+ 1 (212) 408-2589


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News from the Regions

The Irish section of the LES had a very enjoyable and successful meeting on Thursday 11 December on the occasion of their Christmas drinks.

The location for the Christmas drinks in an art gallery turned the mind to arty things and the much controverted "droit de suite". The committee invited Thomas Ryan, eminent Irish artist and past president of the Royal Hibernian Academy, and Brian Coyle, fine arts dealer and chairman of Dublin auction house, James Adam Salerooms, to contribute their thoughts on the droit de suite. Yvonne McNamara, the chairperson of the Irish section of LES, gave a short introduction.

Members of the legal profession, both solicitors and patent and trademark attorneys, representatives of government authorities and owners and users of intellectual property attended the event. The audience was reminded by the speakers of the history and beginnings of the droit de suite in France - the discovery of Jean-Francois Millet's widow living in penury even as the worth of her late husband's paintings sky-rocketed. The appeal of the droit de suite as a just measure for the benefit of artists was discussed but also the fears of art dealers in the European countries who have been free of the droit to date, some London dealers going so far as to predict the slump of the London art business into "the sclerotic decrepitude of Paris". Brian Coyle was very interesting on the causes for the waning of the art market in Paris in the 19th century, the concomitant pre-eminence of London and the factors that contributed to that, apart altogether from the droit de suite. Tom Ryan gave a heartfelt and eloquent speech in relation to the practicalities and morality of the droit de suite. He brought along and showed his painting of the judgment of King Diarmuid that is hailed, in Ireland at least, as the first copyright judgement in the world. The matter at issue was the copying by Saint Colmcille of a psalter from Saint Finian in the year 561 A.D. The case resulted in a judgement in favour of Finian with the words "Le gach bain a bainín, le gach leabhar a leabhrán, or in translation "To every cow its calf, to every book its copy."

There was much discussion after the talks in relation to the manner in which the right should be implemented, doubtless a discussion that will continue for the next two years until implementation is due.

The evening was enjoyed by all and thanks go to Naoise Gordon of the Irish Committee for organising the event.

Yvonne McNamara

Scotland Region

Scotland Region will be making "The Earth Move with Dynamic Burns" at their Annual Burns Supper (with a difference) on 4th February to be held at Dynamic Earth in Edinburgh!

The first speaker to be served up for the intellectual stimulation and entertainment of the assembled diners will be Dr Mike Cox, Technology Transfer Manager, Herriot Watt University. As a starter, he will discuss some exciting and lucrative examples of commercialisation in earth sciences.

After the main course Dr Stuart Monro, Scientific Adviser at Dynamic Earth, will present a highly illustrative talk on science and commercialisation at Dynamic Earth itself. Given the success (and hilarity) of last year's interactive session, we are looking forward to your participation in a post dinner dialogue entitled "If you can't get a lunch get a sandwich!" delivered by our raconteur Norman Trotter, of Norman Trotter Consultants, well known to many of you as a senior licensing executive and former Chair of LES (Scotland Region).

Caroline Sincock
For details about the Burns Supper please contact:
Email: cathy.rooney@snbts.csa.scot.nhs.uk


North West Region

The first event for LES NE Region in 2004 promises to be a very interesting meeting entitled "Enforcement of IPR in China - Reactive and Proactive Measures to Protect IP in China" and will be held on 9th February at the Marriott Hotel in Leeds at 18:00.

Our speaker, Elliot Papageorgiou, has had a very interesting career. At present Elliot is a senior manager with the international property consultancy Rouse & Co International and a solicitor with its associated law firm Willoughby & Partners. He is a member of Rouse & Co's International Group and Commercial Intellectual Property Group. He is also the China-Europe liaison for Rouse and Co. He has lectured widely throughout Europe on enforcement of intellectual property rights in China and other far-eastern countries. Elliot is admitted to practice as a barrister and solicitor in Australia, as a solicitor in England and Wales and was admitted to the New York Bar in 2002. He speaks fluent Serbian, Croatian, Hungarian and German and has spent several years living in Germany and the former Yugoslavia. He is also a member of LES B&I Council.

This is clearly an event not to be missed!

Non- LES members are welcome to attend this meeting.
(Solicitors please note: 1 hour CPD - Law Society CPD reference CBL/LESO)

For further information please contact Liz Ward.
Email: elizabethward@keeblehawson.co.uk


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Intellectual Property Rights and Customs & Excise

With effect from 1 July 2004, the protection afforded to intellectual property right-holders/brand owners will be strengthened with the implementation of a new European Council Regulation (No. 1383/2003). This sets out the actions that Customs can take in relation to goods suspected (either by Customs or, more usually, by the brand owner having put Customs on notice) of being counterfeit or pirated.

In addition to the existing protection for copyright, trademark rights, design rights and patents, the new regulation extends the scope of protection to include new types of intellectual property such as, for example, geographical designations, such as Scotch whisky.

Generally, to try to get as much protection as possible brand owners should register their intellectual property rights with Customs in the relevant member states where they believe suspicious goods may be received in order for Customs to monitor and intercept such goods. The UK has already partially implemented the new regulation by abolishing the previous £1200 registration fee, which right-holders had to pay. As it is free (!) now would appear to be a good time to register if this has not already been done. If a right-holder has not registered with Customs, they may still be notified of any goods which Customs suspect are counterfeit or pirated and given three days in which to apply to Customs for action to be taken.

Customs authorities will also be able to help the brand owners facilitate legal proceedings in the EU country where the goods have been seized against unauthorised suppliers or traders. Upon a request by the right-holder, Customs may supply certain information such as the names and addresses of the intended recipient, the party which is the source of the goods, the declarant or the holder of the goods and the initial origin of the goods.

Individual EU member states may also introduce a simplified procedure for the destruction of infringing goods, without the need to initiate separate legal action. The goods would be destroyed under Customs control, although samples would be kept by the Customs authorities in case of any future legal proceedings. However, the destruction would take place at the right-holder's expense and the written agreement of the declarant, holder or owner of the goods would be required - depending upon the goods in question, this could be significantly quicker and cheaper than litigation.

Although the impact of the new regulation remains to be seen, it adds another valuable string to the brand owner's bow in the ongoing fight against piracy.

Gill Grassie, Maclay Murray & Spens


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Jim Cain - An Obituary

As reported in October /November issue of "Newsxchange" Dr Jim Cain died suddenly but peacefully on Tuesday 9th September 2003. His funeral took place on 22nd September at Croydon crematorium. He was 80. He had suffered from diabetes for many years.

Jim was a founder member of LES in the UK and in 1973 a member of the first Council of LES Ltd, along with other LES luminaries Dr Basil Bard, John Gay, Dr Ray Cass and John Bowler. Jim continued his active involvement with LES into the 1980s when he retired.

Born on the Isle of Man, Jim attended a local Grammar School and then read chemistry at Manchester University. Following wartime service in the RAF, he gained a PhD at Liverpool University for his work on the extraction of Vitamin B12 from liver. He entered industry and spent most of this period with Glaxo. In 1955, he joined the National Research Development Corporation, NRDC, an independent public corporation set up in 1949 to secure the development and exploitation of inventions, now BTG International Ltd, part of BTG plc, the publicly quoted company. Jim was involved in life science technology, especially the management and licensing of the IPR portfolios associated with the Cephalosporin series of antibiotics from Prof. Abrahams at Oxford University and later the synthetic Pyrethroid Insecticides from Rothamsted Experimental Station. These were licensed to companies in the USA and Japan as well as in the UK, and, in the case of the Cephalosporins, the overseas licences gave NRDC advantageous rights to know-how and inventions arising from these companies' own R and D programmes. Jim maintained close personal oversight of this portfolio, which earned over $500m in aggregate in today's values, until their expiry. The close relationships which he had built up with the top people in the relevant companies was highly beneficial in resolving the typical issues which can arise late in the life of patent licences. At the same time, however, he maintained a tough negotiating stance and ensured that BTG's rights and interests were firmly exercised and defended. Jim also played a key role in the early management of MRI technology from Nottingham and Aberdeen Universities. This was the subject of successful litigation and global licensing which lead to very significant licence income.

Jim's tall stature and confident friendly manner together with his intellect earned him respect and contributed substantially to his successful career. An imposing figure with enormous presence and style, he enjoyed the trappings and the role of a man of high office, one, which he played, mostly, with a mischievous sense of humour rather than in any tyrannical way. He paid great attention to detail in the preparation for meetings and could be very demanding of colleagues. Any shortcomings, however, were met simply with extended sessions, rather than any unpleasantness. These often resulted in burning of the midnight oil and late, late searches for all night diners on account of his diabetes. Despite all this, he was an excellent travelling companion with boundless energy and enthusiasm at a level often taxing to younger colleagues. The latter would, however, observe the same courtesies extended to the humblest of servants as to the highest officers encountered en route. Similarly, in the office at home he was much respected for his knowledge of, and many kindnesses extended to, individuals throughout the organisation. He took the job seriously, himself not too seriously, and the essential element of fun was nearly always present. As mentor, leader and role model, he played, as a colleague recently remarked,"a big part in many of our lives".

Jim's position at NRDC grew with the organisation. Promoted initially to Deputy Chief Executive of the Applied Science Department with responsibility under Dr Basil Bard for three groups of executives handling the development, protection and licensing of industrial chemistry, scientific instruments and bioscience technologies, he then moved to Chief Executive of that Department. He became Managing Director of NRDC in 1980, thus following a line of distinguished predecessors Lord Halsbury, Mr John Duckworth, Dr Basil Bard and Mr Bill Makinson. On formation of BTG in 1981, he became its Deputy CEO.

Jim's professional career was crowned in 1985 by being awarded the OBE for services to industry.

In BTG's Annual Report for 1985 , the year in which Jim retired, Sir Colin Barker, then Chairman of BTG, wrote of him, "His personal contribution to the (chemistry and bioscience) successes has been substantial. However, he would be the first person to insist that many colleagues and other associates were involved in the team efforts needed to bring them to fruition. It is, however, clear to me that his patient and determined leadership was a vital factor."

Jim leaves a widow, Esmé, two sons Howard and Stuart, and a daughter Judith.

David Veasey, Peter Hawkes and Dr Peter Bailey
and with help from Judith Ghosley, Jim's daughter.


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Sticking the Boot In!

(Or the legal ownership of copyright in logo design)

In an interesting little case decided in December 2003, Mr Peter Prescott QC sitting as a Deputy of the High Court had to decide who was the legal owner of the copyright in the design of a logo used in relation to DR MARTENS boots and shoes. This may well be an instructive case for those involved in the design and creative industries.

Griggs, a British business, used the trademark DR MARTENS (a registered trademark) under licence from its German owners. They also used a trademark all of their own, AIRWAIR. In 1998, Griggs commissioned the design of a logo which combined the two trademarks, but in an entirely new logo design. They instructed a local advertising agency which passed the work on to a designer (Mr Evans). Crucially, Mr Evans was not an employee of theirs but a free-lancer whose services were commissioned and usually charged at an hourly rate. The logo design was duly produced and then used by Griggs. Neither Griggs, the advertising agency, nor Mr Evans ever expressly considered the question of who would own the copyright in the logo design. Ownership of the registered trademarks, on the other hand, was quite clear.

In a curious twist Mr Evans, who became convinced that he had been underpaid for his design work (and after offering to sell it to Griggs for a one-off lump sum payment) then purported to sell the copyright to Raben, an Australian company which the judge described as an enemy (Griggs had previously had a bitter and unconnected commercial dispute with Raben).

Who Owned the Copyright?

Ownership actually splits into two parts. The Copyright Patents and Designs Act 1998 tells us that the author of a work is the first owner and therefore legal title to the copyright remained with the designer. This is not so if the designer is an employee, but Mr Evans wasn't, he was free-lance. On the face of it, he was entitled to sell it to anyone, even an enemy, and that is what Mr Evans did.

The case ended well for Griggs, it had paid the agency for the design and the agency had paid Mr Evans. The Judge found that Griggs owned the beneficial rights to the copyright and was entitled to call for a transfer of the legal title. So why should it concern any of us who work in or advise the creative and design industries?

  1. The issue of ownership of the copyright could have been dealt with at the start in a very straightforward way and the whole litigation (and the expense) avoided by agreeing with the free-lancer who owned what.
  2. It may not always end well for the client, who may end up with a licence which he can enforce against third parties but not against the designer who might have his own plans for the design (and which might include assignment to a competitor or as the Judge said, an "enemy").
  3. As copyright in a logo comes into existence as soon as the logo is created, it gives immediate rights in foreign jurisdictions, where there may otherwise be no trademark registered nor any trading reputation capable of protection.
  4. It gave the designer the opportunity to demand additional fees to assign the copyright. Mr Evans claimed his charges were only based on use of the logo on point of sales material and not as part of a worldwide advertising campaign.

Perhaps Griggs were always destined to win, but a failure at the beginning of the story to sort the matter out led to a battle, which could easily have been avoided.

© Berg & Co
January 2004



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New Members

Council has been please to welcome the following new members to the Society:

  • Anita Roberts, Licence Administrator, BTG;
  • Kate Szell, TM Attorney, Lloyd Wise;
  • Jill Bainbridge, Solicitor, Blake Lapthorne Linnell;
  • Simon Haslam, Patent Attorney, Abel & Imray;
  • Abbe Brown, Solicitor, AHRB Centre for IP, Edinburgh;
  • Simon Heywood, Due Diligence Service, Zianetti Ltd;
  • John Bannerman, Solicitor, Mitsui Babcock Energy;
  • Egle Cesnaviciene, Head of IP, Fermentas UAB, Vilnius, Lithuania;
  • Gordon Lovis, Licensing Director, IPX Europe Ltd;
  • Fiona Campbell, Solicitor, Dundas & Wilson; Amanda Lyne, Consultant, Burgundy Gold;
  • James Hunt, Solicitor, Brookstreet des Roches;
  • Brian Hargreaves, Venture Capitalist, 3i;
  • Kerena Green, Head of IP Services, Bath University;
  • Laura Scott, Solicitor, McCann Fitzgerald;
  • Yvonne Cunnane, Solicitor, Matheson Ormsby Prouce;
  • Simon Kerr, Commercial Director, CENES;
  • John King, Licensing Manager, Advanced SEL Technology Ltd;
  • Peter Ratcliffe, Solicitor, BT; Anthony Dolan, Patent Attorney, BTG



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Editor: The Kudos Partnership Ltd,
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email:s.ireland@kudos-uk.com


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