By William New
Companies from the wealthiest nations continue to view a clampdown on theft of their intellectual property rights as key to improving their economic performance, and are targeting the largest developing countries in their effort. To their aid comes the World Intellectual Property Organization and others, with a conference next week in Geneva dedicated to stopping piracy and counterfeiting.

In addition, a separate recent intellectual property summit in Brussels showed that these issues are at the forefront of industry preoccupation.

Speakers at next week’s Global Congress on Combating Counterfeiting and Piracy include a mix of representatives from rights holder industries (including some from the largest developing countries), officials from WIPO and other international organizations, government officials, judges and lawyers. Non-governmental groups and consumer representatives are not readily evident on the 30-31 January agenda. Also convening the congress is Interpol and the World Customs Organization, supported by leading international industry groups.

The congress will be preceded by a unrelated panel of chief executives officers (perhaps fresh from the World Economic Forum on the other side of Switzerland), including the heads of Vivendi Universal, EMI Group, Nestlé, General Electric and NBC Universal, Sanofi Aventis, International Chamber of Commerce, and companies from India, Russia and the United Arab Emirates.

Brussels Summit Highlights Industry Issues

So what do industry representatives and their intellectual property lawyers talk about when they are alone with governmental officials? Perhaps the most recurrent theme across a separate, two-day, private-sector seminar in Brussels in December was concern about piracy and counterfeiting of patented, trademarked and copyrighted products. The most common target of complaint was China, but the list of problem countries was fairly long.

But ways to spark innovation, in Europe particularly as it was a Europe-centric conference, also dominated. Other steady topics were licensing and the value of intellectual property, harmonisation of global patent systems, and Belgian comic book character Tintin. This was, after all, Brussels, so it was interesting to hear from the holder of the rights to the Tintin characters about global licensing arrangements, and his negotiations with Steven Spielberg to bring about the films planned for next year.

The Pan European Brussels IP Summit staged by Premier Cercle was held on 7 and 8 December.

Several senior industry representatives, such as John Kennedy, chairman and CEO of the International Federation of Phonographic Industries (IFPI), and Beatrix de Russé, executive vice president for intellectual property at Thomson, encouraged companies with intellectual property to license as much as possible in order to maximize its value.

A topic of discussion at the meeting was the rise in intellectual property rights auctions, an inevitability in an age where companies and countries are racing to obtain rights to as many ideas as possible. Participants were provided with thick, glossy brochures from a recent auction.

But Marshall Phelps, corporate vice president for intellectual property at Microsoft, questioned the value of such auctions, where he said it appears a million dollar investment decision must be made on the basis of a blurb explaining the patent.

Intellectual property rights also are potentially tradable assets, participants said. Phelps noted that there is as yet no secondary market for intellectual property. Instead, there is a “vibrant” venture capital system for investing in new ideas. “We have a very imperfect market,” he said, adding that licensing is “very subjective.”

Dan McCurdy of Thinkfire, a US intellectual property services firm, said there is no “magic tool” for valuing intellectual property, but that one measure is whether it is being infringed upon by someone “making a gazillion dollars.” The trick, he said, is to find good technology by asking if it is valuable to you and then who else it is valuable to. “I don’t believe in Rembrandt in the attic,” McCurdy said. “If it is not valuable to you, it is not likely to be valuable to anybody else.”

Phelps also took a shot at consultants and lawyers. He said patent litigation is possibly worse than “anything but divorce.” He acknowledged that companies have a hard time proving they have done the appropriate research before filing for patents. “You don’t know what you don’t know,” he said. “You don’t know what the prior art is.” Companies only win patent litigation about half the time, he added.

Philippe Petit, deputy director general at WIPO, told the event he had just returned from India where he witnessed “a complete change of mindset” regarding intellectual property rights. Petit said a minister told him the country had moved from “IP consumers to IP producers.”

Petit also raised China’s rapid rise as a patent filer at WIPO, predicting, “A war on patents will take place sooner or later.” Finally, Petit noted that the idea of intellectual property itself was invented in Europe.

EU Patent Reform: ‘Stalemate, Stalemate, Stalemate’

Failed patent reform efforts in Europe also were discussed extensively in Brussels, the headquarters of the European Union.

Heinz Zourek, European Commission director general for enterprise and industry, cited the 4 December debate on harmonisation of the European Council of Ministers, and said “there is no progress whatsoever” on the issue. Instead, it is “stalemate, stalemate, stalemate.”

Zourek said change is imperative in order to “render IP rights more affordable and practical” especially to the majority of European entrepreneurs who are very small, with very small staff working on intellectual property issues. He also called for greater efforts to stimulate research and development in Europe as it is “lagging behind.” European companies do not gain as much from their innovations as they should, he said.

The Commission is about to undertake a survey of use of intellectual property by small and medium-sized businesses, and it provides some 150 support services for enterprises. But so far, it appears that smaller companies with intellectual property portfolios “are absolutely ignorant” or unwilling to license it, and so forego revenues. Zourek said they are “too scared” to lose their rights, and called it an “untapped resource.”

Zourek said the Commission tries to avoid a “religious debate” about whether innovation is good or not, but said there is a “clear correlation” between the innovation performance of an economy and its patents.

In his speech, EU Internal Market and Services Commissioner Charles McCreevy said the Community trademark has been a success, while the effort for a Community Patent has not. The public consultation held in early 2006 showed consensus on the need for a “simpler, more cost-effective system” with the highest standards for patent examination.

But he said continued disagreements among EU members led him to postpone the issuance of ideas for a way forward by the end of 2006. Instead, McCreevy said, the German government, in the rotating EU presidency until July, and the Commission will continue discussing with members on a way to “bridge the various opinions that have been expressed.”

If this does not yield progress, then attention should be directed elsewhere, he said. McCreevy highlighted intellectual property-related areas of focus for the Commission: patent trolls (holding of patents by non-producing entities in order to collect rents); patent quality; patent litigation insurance; alternative dispute resolution; awareness-raising; patent use, including licensing; patent management and financial reporting; and international enforcement. McCreevy speech here.

Wubbo de Boer, president of the office for harmonisation in the internal market at the European Community Trademark Office in Alicante, Spain, offered the harmonised trademark system as an example for patents. There are far more trademark applications at the European Union level than internationally, and industrial design applications are high too, he said. “It shows there is a market for a community-wide [instrument],” de Boer said. “I cannot see why the same would not apply in the patent field.”

Other issues

Meanwhile, Geraldine Barry, head of unit at the European Commission Joint Research Centre, described efforts to stimulate research. Early next year guidelines will be published on knowledge transfer between public research organisations and industry, she said. The centre assists in finding industrial partners, and focuses on the “importance of intellectual property protection,” Barry said. The centre only files 10 to 15 patents per year.

Cecilio Madero Villarejo, director of services at the EU Competition directorate, said the Commission views the market economy as “key to promoting innovation,” but said consumers must be protected. “Intellectual property rights should not be used as a pretext to stifle competition and by extension innovation,” he said. European courts have been guided by the principles of consumer protection and innovation promotion, he said.

Hogarth Andall, head of intellectual property at Sony Computer Entertainment Europe, said his company is a relatively new entrant into intellectual property rights and licenses its technology to some 400 software developers and publishers in Europe.

The company looks for a “collaborative” approach on IP issues, he said, but found Europe does not have a structure for addressing issues such as in the United States, which has the International Intellectual Property Association (IIPA), representing all of the major rights holder industries. Europe also does not have a process such as the Special 301 where the US Trade Representative’s office takes input from industry (especially IIPA) and takes action against other governments which are seen as insufficiently protecting US intellectual property rights, he said. But he said there has been “notable progress” in Europe, such as with the copyright and enforcement directives.

Andall said the number of seizures of pirated games has declined in Europe but might be the result of increased broadband high-speed Internet which has enabled pirated copies to circulate more easily. “Even organised crime can’t deal with people getting the product for free,” he said.

Fighting Negative Perceptions

Thaddeus Burns, General Electric senior corporate IP Counsel for Europe, said the value of the existing patent system needs to be better conveyed to policymakers and civil society, rather than calling for change to it. He said intellectual property has become “of great economic importance to the world” and GE is moving beyond its traditionally more technical view of intellectual property to a “much more external view.” The focus on the patent system should be on quality and structure such as reducing the backlog of patent applications, not on substance such as what is patentable, he said.

Mats Parup, head of corporate intellectual property at Novartis, said in the past 5 or so years, patent laws have become politicised. Technical patent experts have been drawn into a political discussion based on perception. Companies are in battle for the very survival of the IP system as it is known, he said.

Parup challenged the allegation that pharmaceutical companies are engaged in biopiracy instead of bioprospecting in developing countries, calling the assertion “out of this world.” He said efforts to put value on genetic resources are “just another way of putting a tax on what we do,” and an added burden.

Both Parup and Burns, whose company also is involved biotechnology, argued that contracts are the best way to handle compensation for genetic resources. Finally, Parup criticised the use of compulsory licenses by developing countries, arguing that they do not increase access to medicines as partnerships do.

Also under criticism from the patent-holding crowd were patent pools. “We are not very happy with this trend as patent owners, as you can imagine,” Beatrix de Russé, executive vice president for intellectual property at Thomson electronics company, told the meeting. She said they lead to price erosion and the inability to enforce patents.

Several speakers urged countries to adopt the London Agreement, which is aimed at reducing costs of patent filing by changing translation requirements.

A Dissenting View

Perhaps the one speaker questioning the companies’ views at the event Pieter Hintjens, president of the Federation for a Free Information Infrastructure, which represents small businesses. He posited the question of whether there would be a patent system in ten years time, saying that public distrust “will bring down the patent system in my lifetime.”

Hintjens reminded the audience that “the purpose of the patent system is not to make patent owners wealthy but to record innovations for future generations,” and said the argument that the patent system makes economies work better is “simplistic.” He charged that patents, especially related to software, are written purposely to be difficult to understand, and called litigation “an evil” as it destroys companies and wastes resources. Mediation is better, he said.

William New may be reached at wnew@ip-watch.ch.