Tag Archives: license

Patent Trolling

Introduction

A patent is an exclusive right that is granted to an inventor for a specified number of years to make, use, and sell an invention. Once the right s provided, no other person can use the invention without proper license from the patentee. This right is provided to protect such inventors legally from any harm. Later it is usually expected that the inventor will put it in the consumer market for use by licensing it to various other manufacturers.  But recently, many such inventors have been misusing such rights that are provided to them. Recently, many have been patenting items in the vaguest form that the legal system would allow, without the intention of using the patent in the future. Their aim is usually to get money by filing infringement suits against individuals or companies who are using products that is even remotely similar to their patented product. This practice is referred to as patent trolling. Thus, patent trolling can be defined as a practice of obtaining and using patents for licensing or litigation purposes rather than in production of one’s own goods or services; “its real business model is patent trolling.”

Analysis

These patent trollers are usually referred to as Non Performing Entities (NPE). These entities will not sell or produce their product but will rather just license money out of those who appear to have been infringing upon a patent that the NPE owns. Trolling had been becoming a very serious problem, where the small companies, enterprises and individuals had been facing most of the backlash due to the high number of cases being filed against them. Many companies settle as the risk of losing an infringement suit and paying millions of dollars is very risky, even if they don’t believe there is any sort of infringement. The act is more prevalent in USA than in Europe as Europe follows the policy ‘losers pay’ where the losing party has to bear the costs of both the sides. This deters people from filing false cases but this isn’t the case in USA. But in the recent case of TC Heartland LLC v. Kraft Foods Group Brands LLC the Supreme Court has given a very welcoming decision where the court said that patent case defendants could effectively be sued anywhere they do business. In the present case, the defendant weren’t allowed to shift the case to where its company was based but was not allowed by the lower courts, which were following a 1990 precedent from the U.S. Court of Appeals for the Federal Circuit. This decision brings a sigh of relief to many as many cases can now be moved away from ‘plaintiff-friendly’ districts to much more neutral districts where the defendants stand a chance of having a fairer outcome.

Strategies and Measures

The NPEs used a lot of different strategies to gain what they have been looking for. Some of the following measures are the most popular ones:

  1. They accumulate patents related to one area: The NPEs collect a number of patents related to one area which makes it nearly impossible and very expensive for the targeted company to come out of the infringement suit.
  2. They do not produce any product: The patent trollers never produce the product they have patented. This in turns makes it difficult to file a counter sue claim of infringement for the defendant. For example in a technological dispute.
  3. They sue a large number of defendants together: This strategy reduces their overall cost and given them the hope of a large payoff in the future.
  4. They claim a percent of the total revenue from the product:Even though their patent may cover a small aspect of the technology, the award granted can amount to millions for a successful product.

Thus, corporations have been asking for special laws or certain measures to be taken against such companies in order to avoid such suits and large amount of awards granted to them. Here are a few steps that companies can take against such troll patents:

  1. The Big Tent Coalition: The current laws allow even the users of a product, which is an infringement of a patent violation to be sued. The Bill will change that and later only legal action could be taken by the company or the individual who has created the product or service.
  2. How to prepare against such suits: One can always take certain precautionary measures to be safe against such frivolous suits. A company or an individual must always remember these thee simple steps before it opens its doors to others- be proactive, Insure, Ask an attorney.
  3. Giving proper Response: Response to a notice must always be made to the sender of the notice. Looking for ways to settle outside of courts could be a waste of time as the plaintiff already knows about such settlements.

Conclusion

Everyone is very much aware as to such troll patents but is still very far away from assessing them. The simple logic that everyone seems to follow is that everyone has a right to protect their patent even if they aren’t using them. It is simply seen as a way of doing business as it is a very common occurrence among big corporations. But the ones who are affected the most, the small companies and individuals need to be protected against such patent trollers as they face losses which takes years to overcome and even leaves them bankrupt. These NPEs target such companies who will very easily give into their demands looking at the vulnerable position that they are in and this is the reason that such vulnerable companies require protection.

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

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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

Smile, you are on camera!

Every celebrity would agree when we say that stardom comes at a price. Their right to privacy is always threatened with the constant paparazzi encroaching upon their personal lives. Unauthorized photography often results in tabloid and defamatory reports in the media, which can sometimes scar the celebrity’s life forever.  From sports persons to movie stars to politicians to Princes and Princesses- they are all celebrities.

The Indian Copyright Act, 1957 defines a ‘performer’ in Section 2(qq). It includes ‘an actor, singer, musician, dancer, acrobat, juggler, conjurer, snake charmer, a person delivering a lecture or any other person who makes a performance’.

A celebrity is licensable for commercial benefits, since his public image is a monetary asset for himself.  But how are his rights protected? The first resort a celebrity would take would be a passing off (in case of an unregistered trademark) or an infringement action (in case of a registered trademark).  With respect to performer’s rights, on June 8, 2012, an amendment was passed in the Indian Copyright Act. Section 38 provides rights of the performers.  A performer who appears in any performance has a right over such a performance until fifty years from the beginning of the calendar year next following the year in which the performance is made. Further, a person would be deemed to have infringed the performer’s rights if he makes a sound/visual recording with his consent or broadcasts it without permission. Hence, the performer has a right to restrain or claim damages in respect of any distortion, mutilation or other modification of his performance that would be prejudicial to his reputation. Sadly, the rights of the extras in films cannot be protected since they are not covered under the definition of a performer.

Once a performer gives valid consent for the incorporation of his performance in a film, he cannot be able to object to the enjoyment by the film’s Producer of his performer’s right in it. But there are two important limitations here though. One is that there is no statue that prohibits a performer from entering into an agreement which states that he could object to the producer enjoying his performer’s rights in the film. Next, the Producer’s enjoyment of the performer’s right in the film is limited to the film, so the Producer would not be able to have the benefit of the performer’s right for the purpose of out-film use such as in ring tones or public performances, which is used for the promotion of his film. Section 13 (4) provides that separate creative components within a film are copyrightable.

In Milder v Ford Motor Co & Others (1988) 849 F.2d 460 (9th Cir), the advertising company wanted to use a song by Bette Milder in a commercial for Ford cars. The license for the song itself was accepted but Milder turned down the request for permission to use the song in her version. The Agency then contacted Ula Hedwig, a singer who had been a back-up vocalist for Milder and asked her to sing the song under the instructions ‘to sound as much as possible like the Bette Milder record’. Milder sued when the commercial was aired on television.  The defendants argued that this was in accordance with Section 3344 of the Civil Code since they had not used the ‘name, voice, signature, photograph or likeness’ of Milder rather they had used the voice of Ula Hedwig. The court held that the defendants were liable since by using a sound alike, they had clearly sought a commercial association with an attribute of Milder’s identity. This was held as the right of publicity,that grants entertainers or public figures exclusive control over the commercial exploitation of their names and other aspects relating to them.

In India, there is a need for such legislation in order to protect rights of a performer and his different shades. With the advent of technology, now any film star’s image can be created by animation and be reproduced in unauthorized usage in film footages. Another burning question left unanswered in India is whether the author has copyright protection over digitally made graphics or cartoons. If the digital image is of a well-known personality, is there a conflict between the author’s right in his creation and the actor’s right in his image.

In India, it is only through litigation that the celebrity’s rights are protected. Heavy amount of damages have been awarded to the celebrities who have won such suits. But there is an urgent need for the legislature to recognize the astounding gaps in the Copyright Act and recognize the commercial and moral rights needed to protect the image of the celebrities.

About the Author: Ms. Madhuri Iyer, Trade Mark Attorney at Khurana & Khurana and can be reached at: Madhuri@khuranaandkhurana.com

NATCO FILES INDIA’S FIRST COMPULSORY LICENSING APPLICATION

Natco Pharma has filed India’s first Compulsory Licensing (CL) Application (in accordance with Section 84(1) of the Indian Patents Act) against one of the Bayer’s patented drug Sorafenib, marketed by Bayer as Nexavar for treating Kidney and Liver Cancer. Patent on Sorafenib is granted in India on 03.03.2008 having number IN 215758. This will be a landmark development of such licensing in India and being a test case would set a precedent for the forthcoming similar cases. The CL Application is published in the Official Journal of the Indian Patent Office and can be seen here.

Section 84(1) of the Indian Patent’s Act allows any interested person to make an application to the Controller for grant of compulsory license after the expiry of three years from the date of grant of patent on any of the following grounds:

a. that the reasonable requirements of public with respect to the patented invention have not been satisfied

b. that the patented invention is not available to the public at reasonably affordable price,

c. that the patented invention is not worked in India.

As documentary evidence, Natco has presented a number of facts in support of a prima facie case of reasonable requirements of public not being satisfied.

Natco has stated in its CL Application that Sorafenib is not manufactured in India but is being imported and sold by Bayer at an exorbitant price in India. The average price of the treatment with Sorafenib per month per patient is Rs. 2, 80, 428/- and almost out of reach of the public. Round Natco has stressed that they will be able to sell the drug for Rs. 8,880/- per month! Natco has showed that at least 30,000 patients are diagnosed of Liver or Kidney cancer every year in India and out of these 99% of patients are unable to afford the drug and die every year.

Further Natco stated that there is a limited availability of the drug and is available only in metros cities, for example, Delhi, Mumbai, Chennai and Kolkata with an exclusion of second tier and smaller cities. Also the distributors of Sorafenib are only in Delhi, UP, Punjab, Gujarat, West Bengal, Bihar, Kerala and Tamil Nadu. Natco points that it has the distribution network in all almost every city and district of India.

Natco earlier requested Bayer to receive Voluntary License to manufacture and sell the drug in India by writing to them on 06.12.2010. The letter which was submitted along with the Application as an annexure is not available for its analysis. However, it would interesting to note whom the letter was addressed to and by whom was the same replied as the concerned stakeholder to whom a request Voluntary License (VL) was sent could play a role in deciding the reasonable efforts taken by the Applicant to obtain the VL. We believe that the person being contacted should be a person having due authority to take decisions on such matters, be it in the business development team or the Sr. Management team. Contacting any person not having the necessary authority would not add value and would not be construed as making appropriate efforts to obtain a license from the patentee. This however is a general issue and not pertaining to the case in context. Also, as a practice, the request for VL should disclose the proposed terms and conditions by the party trying to obtain the CL, in absence of which, the offer would not be held explicit.

Further, Natco stated in its Application that Bayer refused on 27.12.2010 without any further discussion whatsoever. According to S. 84(6) (iv) which says that one of the factors which Controller will take into account while considering a CL Application is whether the applicant has made efforts to obtain a license from the patentee on reasonable terms and conditions and such efforts have not been successful within six months. Natco’s CL Application was filed on 28th July 2011.

Another important factor which the Controller will take into account while considering a CL Application is the ability and capability of Natco to manufacture and cater to the needs of the entire public. Nacto has stated in the Application that it can manufacture 20,00,000 tablets  a day when there is need of 4,80,000 tablets a month. Natco has asserted that it can manufacture the drug by employing existing facilities without requirement of any additional investment/plant etc. as Natco has been already manufacturing other anti-cancer products for the last 20 years.

Earlier this year, Natco has also sought for a voluntary license from Pfizer to manufacture and sell Pfizer’s HIV drug maraviroc (marketed as Celsentri), the application is still pending. It is much expected that Pfizer will decline to give such license owing to high R&D investments incurred and it is quite likely that another CL Application might be coming from Natco soon.

This application by Natco has already started motivating the pharma companies in India in preparing to file CL Applications against patented drugs by Foreign players in manufacturing and selling their generic versions in India. A few of these drugs might not yet even have been marketed and might be in the clinical phase, wherein  S. 84 (a) (iii) could be a ground of filing CL in those cases namely the non-working of the patent in India. However, how strong such an application would be on grounds of S. 84 (a) (iii) is debatable as the drug itself is in the clinical phase and cannot anyways be worked upon by any company till the time it is registered with the regulatory authority.

A key point being stressed here is that the first CL Application has not even been granted by the Controller as yet and there is a feeling of urgency that is being felt right away in the Indian Pharma community to file multiple CL’s as possible. I wonder how Natco’c victory in this case could motivate the Indian generic industry to go ahead with the compulsory licensing. However, it is foreseen that the outcome and the ultimate result of this CL will be long awaited owing to the expected court battle between the two as the losing party is likely to challenge the decision. One thing is for sure, grant of the CL to Natco will motivate a large number of Indian pharma players to apply for the same against costly patented drugs (being sold by big Foreign players) mainly on price affordability ground as the Government in many of Indian pharma patent battles has already seemed to be inclined in favor of the generic companies selling cheaper drugs in public interest.

About the Author: Ms. Meenakshi Khurana, Patent Specialist at Khurana & Khurana and can be reached at: meenakshi@khuranaandkhurana.com