Category Archives: Patent Licensing

Steering Towards Success, The Bishop’s Way

IP (Patent) Licensing and Commercialization Case Study: Bishop Steering

Intellectual Property can be understood as creations of the mind such as inventions, expressions in the form of literary, artistic or other works of expression, symbols, names and images, etc. used in commerce. It can further be divided into Industrial Property or Copyright.[1] Patent as a part of Industrial Property, is an exclusive right granted for an invention – a product or process that provides a new way of doing something, or that offers a new technical solution to a problem[2].

According to 7 USCS § 178a, the term “commercialization” means “the stage in the development or advancement of a technology at which point private enterprise is willing to invest in a full-scale production facility[3]. Even though the definition is derived from US Agriculture Laws, the still be applied constructively and harmoniously with the intellectual property laws under question.

The most common means to attain commercialisation of an asset after sale is either by an assignment or a license. An analogy between a real property and an intellectual property can be drawn for both licensing and agreement. An assignment is “An assignment is a transfer or setting over of property, or of some right or interest therein, from one person to another denoting not only the act of transfer, but also the instrument by which it is effected[4].” This implies that there will be a complete transfer of ownership which may not be favourable. License, on the other hand, is defined under Black’s Law dictionary as “A permission, usually revocable, to commit some act that would otherwise be unlawful[5].” Licence of an Intellectual property can be compared with lease of a real property as ownership rights can be retained while granting the other remaining rights. A license provides the owner a better control over the asset as compares to an assignment.

Intellectual property is useful only when it is suitably exploited in the form of commercialisation by means of licensing. In order to elaborate the impact of licencing of an intellectual property asset, a patent in particular, it is worth mentioning the seminal case of Bishop Steering.

Dr Arthur E. Bishop having both the engineering ingenuity to design breakthrough automotive systems as well as the requisite leadership skills to attract and inspire highly-specialised designers and engineers started what eventually became Bishop Steering Technology Pty Ltd. (Bishop) way back in 1957[6]. He adapted technology originally developed for power-steering systems for World War II aircraft for use in automobiles[7]. And in 2011 became a subsidiary of the German company GMH Stahlverarbeitung GmbH and continued operating under the name Bishop Steering Technology Pty Ltd[8].

One of the earliest patents that had been granted to Bishop Steering was in 1958 for perfection over rack – and – pinion power steering technology. Since then it had been an uphill trajectory as over the years Bishop Steering has filed for more than 500 patents, out of which more than 100 have been successfully registered[9].This generated at its peak almost around 7 million USD by means of royalties, out of which more than 90% are from oversees licensees.

But instead of venturing into materialise it into manufactured product and realising its sale thereafter, the company followed the strategy to go for licensing its patents and other intellectual property assets to other car and car component manufacturing companies, mostly small and medium enterprises and investing the revenue generated in further R&D purposes. The company has a dedicated protection policy regarding its intellectual property and defends it vigorously and prosecutes any infringer[10].

Its strategy to generate revenue and bring its products and related developments to market is actually quite simple, to first create an IP following its licensing[11]. This strategy proved to be favourable after Bishop steering secured its first license from a major Japanese automobile manufacturing firm[12]. Throughout the company’s history, it has strategically used licensing to grow its business, taking full advantage of such business partnerships and adapting contracts to suit the prevailing business environment. From starting with exclusive licenses to licensees, with time, is has positioned itself in the market in such a fashion that it was then able to negotiate for non – exclusive licenses and enter into joint ventures, thereby increasing its sources of income.At one point in time, almost a quarter of motor vehicles produced every year incorporated Bishop technology[13].

Bishop Steering Technology Inc. (Indianapolis/USA) along with Bishop Steering Technology GmbH (Cologne/Germany) were acquired by GMH Stahlverarbeitung GmbH, a subsidiary of Georgsmarienhütte Holding GmbH on 15 January 2011 and till this day belong to the Steering Systems business unit of the internationally-oriented GMH Gruppe. The success story of this company still stands strong today as it inspires numerous enterprises to consider and follow a similar business strategy of creation, protection and licensing of patents and other intellectual property with the aid, advice and counselling of expert patent attorneys.

Author: Madhur Tulsiani , Intern at  Khurana&Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at pratistha@iiprd.com.

References:

[1]http://www.wipo.int/edocs/pubdocs/en/intproperty/450/wipo_pub_450.pdf

[2] (ibid).

[3]https://www.gpo.gov/fdsys/pkg/USCODE-2011-title7/pdf/USCODE-2011-title7-chap8A-subchapII-sec178a.pdf

[4]http://www.republicsg.info/Dictionaries/2004_Black%27s-Law-Dictionary-Edition-8.pdf

[5] (ibid).

[6]https://www.bishopsteering.com.au/de-en/about-us/history/

[7]http://www.wipo.int/ipadvantage/en/details.jsp?id=4739

[8] (ibid).

[9](ibid).

[10]http://www.wipo.int/edocs/mdocs/sme/en/wipo_reg_ip_guz_02/wipo_reg_ip_guz_02_8_b-related1.pdf

[11]http://www.wipo.int/ipadvantage/en/articles/article_0112.html

[12]http://www.wipo.int/ipadvantage/en/articles/article_0112.html

[13] (ibid).

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Patent Commercialisation Via Licensing

Intellectual Property refers to creations of the mind such as inventions, expressions in the form of literary and artistic works, symbols, names and images, etc used in commerce. It can further be divided into Industrial Property or Copyright[1]. Patent as a part of Industrial Property is an exclusive right granted for an invention – a product or process that provides a new way of doing something, or that offers a new technical solution to a problem[2].

According to 7 USCS § 178a, the term “commercialization” means “the stage in the development or advancement of a technology at which point private enterprise is willing to invest in a full-scale production facility[3]. Even though the definition does not emerge from core intellectual property laws, it still sustains the bare minimum standards of the term.

An inventor places his invention[4], his creation in the highest of regards. The process of creation is highly intensive, both in terms of mental input along with investment of time and capital. As every investment, possession and every “real property” needs to be protected, the same concept goes with Patents as they are valuable to the inventor. After it is secured, the next stage of generation of returns can be considered. As every investment is made with a clear pre–intention for recovery of capital invested or profits, it is reasonable to find measures for optimum exploitation of Intellectual Property or in particular, Patents. The Indian Bayh – Doyle Act: Protection and Utilization of Public Funded Intellectual Property Bill, 2008[5] stands as an example of commitment by the country to provide protection and utilisation of Intellectual Property originating from public funded research[6].

Hence, commercialisation is important as it enables the inventor to seek its fair share from the society in exchange for disclosing his creation to the public at large. Commercialisation of a Patent that has been granted can be achieved in two major ways. It can either be assigned or licensed. Assignment of a Patent involves a complete transfer of ownership of Patent by virtue of a contract which is similar to sale of a “real property”. Analogy with lease of a real property can be drawn with licensing of Intellectual Property. By means of a license, ownership rights can be withheld while transfer of other rights can be precisely controlled. A greater degree of control that is conferred upon the licensor of the inventor by virtue of a licensing agreement, and hence it makes more sense as to why a licensor or an inventor must go for it in order to commercialise the patent.

In order to develop a license, it is necessary to determine the strategy followed. Patent licensing constituted following four major strategies:

  1. Carrot Licensing: When a patentee or the current holder(s) of Patent, proactively promotes and voluntarily makes an effort to license the Patent to potential parties who are under no compulsion to do so, such license is known as a carrot license[7].
  2. Stick Licensing: On the other hand, when a license is taken involuntarily, under a threat of suit for Patent infringement, by the infringer from the offended property owner, such license is classified as a stick license[8].
  3. Iron Fist in a Velvet Glove: Whereas, when a potential licensee undertakes a license under an impression that the owner might take a legal action, and such lawsuit will prove to be more expensive than taking out license, such licensing process is like “Iron fist in a Velvet Glove[9].
  4. Joint Venture: When two or more parties enter into an agreement by means of which each party would be entitled to its own rights and obligations towards the venture agreed upon, this is termed as a joint – venture strategy.

For instance, if A, the inventor enters into a joint venture with B, a business that has potential to exploit the patent, it is evident that A will contribute by means of license to exploit the patent[10] whereas B will contribute by generating revenue from the patent and sharing a part of it with A. Hence, both the parties will be better–off if such joint venture takes place.

Licenses can also be classified to be as exclusive or non–exclusive depending upon the nature of the agreement between the parties:

  1. Exclusive license: An exclusive license is the one in which a licensee prohibits the licensor from licensing the patent to any other party.
  2. Non – exclusive license: In such cases, the licensor undertakes a lot of risk by limiting its income – source from a sole licensee and hence prefers to enter into non – exclusive licenses, where there can be multiple licensees. A non – exclusive license can further be sub – licensed[11] by the licensee, thereby making the offer more lucrative.

A license agreement basically undergoes two major steps for its completion:

  1. Documentation: Under Section 68 of The Patents Act, 1970, a license in a patent shall be valid when it is in writing and the agreement between the parties concerned is reduced to the form of a document embodying all the terms and conditions governing their rights and obligations and such agreement is duly executed[12].
  2. Registration: After the agreement takes place, the party that had acquired the license has to register the title or interest in the concerned patent within six months from the date of agreement. This registration process has to take place by the licensee by submitting application Form – 16[13], under section 69(1), 69(2)[14] read with rule 90(1) and 90(2)[15] in writing and has to be signed by both the parties[16].

There are, however, some restrictions that cannot be imposed upon the licensee by means of a license agreement or contract under section 140[17].

After various aspects of intellectual property, including patents, have been understood, the next stage is that of negotiation. The art of negotiation involves three major phases:

  1. Preparation phase: The first and the most important phase of license negotiation is the preparation phase. A lot of questions are required to be answered during this phase, such as: business aspect of license, best outcome for all parties, corresponding leverage for each party, stand on key issues, range and intention of compromise[18].
  2. Discussion phase: All the questions are then framed into issues the endures multiple rounds of discussion, until the parties are on the same page and begin to understand the contract in the same sense.
  3. Proposing and bargaining phase: Following the discussion phase, in the proposing phase, a final agreement is proposed by the licensor to the licensee, who in the bargaining phase puts forward a counter – offer.

Licensing is one of the most lucrative options for commercialisation of Intellectual Property, particularly with regard to patents. However, the art of licensing is tricky and consideration must be given to develop various aspects of license along with licensing strategies to be followed before drafting a final agreement.

Author: Madhur Tulsiani , Intern at  Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at swapnils@khuranaandkhurana.com.

References:

[1] http://www.wipo.int/edocs/pubdocs/en/intproperty/450/wipo_pub_450.pdf

[2] (ibid).

[3]https://www.gpo.gov/fdsys/pkg/USCODE-2011-title7/pdf/USCODE-2011-title7-chap8A-subchapII-sec178a.pdf

[4] “Invention” under Section 2(j), The Patents Act, 1970, is stated as “a new product or process involving an inventive step and capable of industrial application”.

[5]http://www.prsindia.org/uploads/media/1229425658/LB_Protection%20and%20

Utilisation%20of%20Public%20Funded%20Intellectual%20Property%20Bill.pdf

[6] http://iica.in/images/Technology%20Transfer%20and%20IP%20

Commercialization.pdf

[7] http://s1.downloadmienphi.net/file/downloadfile4/206/1391165.pdf

[8](ibid)

[9](ibid)

[10] (ibid)

[11] The right to sub – license is a privilege accorded upon the licensee. The licensee acts as a sub – licensor. As a result, the licensee becomes responsible for effective and full compliance of the license by the sub – licensee and in case of default on the part of sub – licensee, the licensee shall stand responsible. Also, all sub – licenses granted stand terminated if the main license is brought to an end unless other conditions exist.

[12]http://www.ipindia.gov.in/writereaddata/Portal/IPOAct/1_113_1_The_Patents_

Act_1970_-_Updated_till_23_June_2017.pdf

[13] http://www.ipindia.gov.in/writereaddata/Portal/IPOFormUpload/1_28_1/form-16.pdf

[14] (ibid)

[15]http://www.ipindia.gov.in/writereaddata/Portal/IPORule/1_70_1_The-Patents-Rules-2003-Updated-till-23-June-2017.pdf

[16] http://www.invntree.com/blogs/indian-perspective-licensing-or-sale-patents

[17] (ibid)

[18] http://www.wipo.int/edocs/mdocs/aspac/en/wipo_ip_han_11/wipo_ip_han_11_

ref_t7b.pdf

Samsung Patent Licensing Agreement with Personalized Media Communications

Texas-based Personalized Media communications, which is having a seminal intellectual property portfolio, has successfully signed a patent licensing agreement with Samsung Corporation and its affiliates.

PMC patent portfolio includes around 100 issued patents and pending applications that cover the use of control and information signals to control automated systems for generating and delivering electronic content to a display that is relevant to a user. Over the years, PMC is consistently pursuing a license-first approach to commercializing its intellectual property.

In November 2015 PMC filed suit against Samsung in the Eastern District of Texas, claiming the electronics maker had infringed patents related to signal processing. Specifically targeting Samsung digital televisions and its Android smartphones. In its complaint, PMC said it had months of discussions in the year 2014-15 about potential license but failed to reach a deal.

Samsung denied infringement and sought a judgment that the patents were invalid. Samsung said the patents arose from technology that dated back to the 1980’s and now PMC was “stretching its patents to cover modern-day smartphones and TVs, devices and technologies that were science fiction at the time of PMC’s purportedly inventive work.” But Samsung failed to prove the claims it had made.

Later, Samsung filed a series of petitions seeking Patent Trial and Appeal Board review of the patents. PTAB petition and district court case ended after the two sides reached an agreement.

With this licensing agreement, Samsung joins other like Sony, Panasonic, Cisco, DirecTV etc., who also have taken PMC patent license.

About the Author: Gaurav Giri, Sr. Executive Licensing at IIPRD and can be reached at: gaurav@iiprd.com

Meizu – Qualcomm License Agreement Deal

Qualcomm and the Chinese consumer electronics company Meizu recently announced that they had signed a licensing deal with each other. With this deal, they ended a yearlong infringement suit which was filed by Qualcomm against the Chinese company.

In the October of 2016, we came to know that Qualcomm (the largest chipmaker in the world) has filed patent infringement suits against the Chinese smartphone maker Meizu in the US International Trade Commission, the Mannheim regional Court in Germany and in France. The two went under a tiff when Qualcomm claimed that Meizu is refusing to negotiate the patent licensing deals for the chipmaker’s 3G and LTE technologies.

Qualcomm’s technology licensing (QTL) business owns a massive portfolio of wireless technologies and generates a lion’s share of its operating profits also. This portfolio allows it to generate a 3-5% profit over the wholesale price of every smartphone which is sold worldwide. This deal was widely accepted when the smartphone sales were booming but as the prices fell down, smartphone makers complained that the royalties were impacting the already small margins. In response to Qualcomm’s licensing fees, many companies in china started underreporting their shipments to pay the less licensing fee to Qualcomm. The Chinese government in return also slapped Qualcomm with a $975 million antitrust fine and forced it to lower its licensing rates.  Due to this, Qualcomm had to renegotiate new licensing agreements with the companies on its own. Most of the major Chinese companies negotiated new terms with the chipset maker but Meizu was not ready to do this as they said they are not using Qualcomm’s chips in its lower segment phones and mainly puts MediaTek chips in them and Samsung’s Exynos chips in higher end devices.

After all this tussle, the two recently signed a patent licensing deal with each other. Under this deal, Qualcomm is granting Meizu, a worldwide royalty-bearing patent license for developing, manufacturing and selling certain 3G and 4G smartphones following the terms that the royalties produced by Meizu in China should adhere to the terms and conditions of the rectification plan which Qualcomm has submitted to the country’s National Development and reform Commission.

About the Author: Gaurav Giri, Sr. Executive Licensing at IIPRD and can be reached at: gaurav@iiprd.com

BlackBerry and India’s Optiemus Infracom sign’s licensing agreement to capture Asian smartphone market

BlackBerry once a phone innovator, was considered a game changer in 1999 when its mobile phone allowed on-the-go business people to access email wirelessly. BlackBerry devices were popular for a long time almost a decade. But with the introduction of the iPhone in 2007 and Google’s android in 2008 BlackBerry lost its market as a consequence of errors in its strategy and vision.

Blackberry is striving to get back into the smartphone market for which it is strategically using third parties to manufacture and market the Blackberry smartphones. India being the fastest-growing smartphone market in the world, everybody is looking at India as a huge landing ground. Trying to capture Asian smartphone market BlackBerry has signed a long term licensing deal with Delhi based Optiemus Infracom to manufacture and market smartphones in the South Asian countries like India, Bangladesh, Sri Lanka and Nepal.

Optiemus will focus on BlackBerry handsets priced between Rs 12,000 to Rs 20,000, which is the fastest growing segment in India. Under this aggrement Optiemus Infracom will perform all the services for Blackberry starting from manufacturing to selling the Blackberry smartphones in South Asia. Optiemus will provide all the customer support needed for the users. The Delhi-based firm is expecting to sell two million handsets in one year.

BlackBerry will also license its security software and service suite to Optiemus whereby it will launch BlackBerry smartphones running on Google Android operating system and position them as “secured” handsets. The handsets will also receive security updates directly from BlackBerry.

The agreement between BlackBerry and Optiemus also supports the Indian Government’s “Make in India” initiative, which aims to create local manufacturing and job opportunities. As per the agreement, Optiemus will follow BlackBerry’s recent global licensing agreement with TCL Communication and PT BlackBerry.

With this, BlackBerry now have licensees all over the world, in all markets to manufacture BlackBerry branded devices, proving the firm is delivering on its licensing strategy and accelerating its transition to be a ‘future-proof’ security software and services company.

About the Author: Gaurav Giri, Sr. Executive Licensing at IIPRD and can be reached at: gaurav@iiprd.com