Saturday, December 22, 2012

The IP year in review

Cathedral Cove Sea Cave - Coromandel, New Zealand
Christmas is a big deal in New Zealand. For most of us the 25th of December marks the start of a two, three or even four week summer vacation. It is a chance to recharge our batteries, ready to return refreshed in the New Year.

I'll be taking a break for a few weeks and returning mid-January. I'll leave you all with a list of my ten most popular posts for the year.

The New Zealand Patents Bill has been a hot topic thanks to a campaign by the open source community to introduce a European-style exclusion for computer software. The patentability of software has also been the subject of a few decisions of the US Courts and the BPAI. Copyright enforcement news in both New Zealand and Australia has also been popular.

Alice and the Abstract Idea: When is a computer-implemented invention a mere "abstract idea”? Does the presence of a computer in a claim make an unpatentable "abstract idea" a patentable invention? Should it matter that a computer-implemented invention is claimed as a method, system, or storage medium? Is there any real difference between these types of claims? These are the questions that the United States Court of Appeals for the Federal Circuit is going to be considering over the next 12 months.

The show goes on: These are interesting times for copyright infringement actions. We have seen a conclusion to the long running dispute between Roadshow Films/AFACT and iiNet in Australia. We have also seen a couple of test cases emerge for New Zealand's three strikes law.

A forum on software patents: Fellow blogger Patentology comments on a recent IP Forum held by the IP Australia on the subject of 'software patents'.

KOHA - Better late than never: Another chapter closes on the KOHA trade mark saga. The New Zealand trade mark application is the subject of a kind of tug-of-war between two competing factions within the open source community that have fallen out with each other.

D. finds non-functional descriptive matter: The Board of Patent Appeals and Interferences considers a data structure for generating network data traffic utilizable in communication systems. The BPAI rejected the data structure claim as relating to non-functional descriptive material.

The embedded software conundrum: The New Zealand Patents Bill had a second reading in Parliament this year. On the table is a Supplementary Order Paper (SOP) setting out proposed amendments to the Bill. The SOP clarifies the extent to which computer programs will be patentable. It better reflects the intentions of the Parliamentary Commerce Select Committee who originally recommended changes to the Bill.

A public slap from Twitter: Laws can certainly be broken in 140 characters or less and Twitter is starting to take a more transparent approach to copyright infringement. It is a bad look for your company to be accused of copyright infringement. And even worse to be slapped so publicly.

Hu finds that storage is the key: The BPAI considered the patentability of a claim in the field of performing log-based recovery by allowing a plurality of worker processes to process in parallel a plurality of work items in a log. Each work item represented an ordered operation on a corresponding data object. The BPAI found that the term "computer-readable medium" is broad enough to cover intangible media. However, a computer-readable storage medium is confined to tangible media for storing data.

Edelson finds an abstract intangible asset: The BPAI looked at a claim for a way for creating financial instrument derivatives of rollups of recurrent yield monetary based assets. Whatever that means! The Board found that simply using some computer-implemented method in some undefined manner alone cannot confer patentability.

Patent party in the House: It's always good to try something new. I gathered some of my work colleagues together and we watched the Second Reading of the New Zealand Patents Bill on the tellie. I didn't quite know what to expect but I wasn't surprised at what I saw. It was certainly an interesting experience.

Photo courtesy of author Daniel Peckham under Creative Commons licence.

Monday, December 17, 2012

Productivity and Patents

The Australian and New Zealand Governments are looking at stronger economic relations between the two countries. The Productivity Commissions of each country have been asked to conduct a joint study on the options for further reforms that would increase ecomomic integration and improve economic outcomes.

The final report is now out. It identifies some initiatives that 'would extend trans-Tasman integration to the benefit of Australia and New Zealand'.

One of the recommendations coming out of the report is that the Australian and New Zealand Governments should proceed with the implementation of a single application and examination process for patents. I cover this in my post Implementation of a trans-Tasman patent examination model.

Under the proposed regime a patent applicant will make a single application to a trans-Tasman portal. The applicant will nominate New Zealand and/or Australia in the application. The trans-Tasman patent application will create a New Zealand application, an Australian application, or a pair of applications that is examined by the same examiner.

The Rationale

The Report notes that the 'single application and examination process for patents ... is intended to simplify the process for those seeking a patent in both Australia and New Zealand and to facilitate closer coordination between the Australian and the New Zealand Intellectual Property Offices'.

We are told that this initiative should have benefits for both countries. The Report notes that '[t]he patent examination process is complex, and it may be increasingly difficult for small countries to maintain the necessary capacity to conduct effective examinations'. I guess we are talking about New Zealand here rather than Australia.

Also mentioned is that '[c]loser cooperation between the Australian and New Zealand Intellectual Property Offices will offer knowledge transfer and greater specialisation which can improve the ability of both offices to respond to current and future demands'.

The Feedback

The New Zealand Institute of Patent Attorneys (NZIPA) submit that a single process would increase applications by overseas owners of intellectual property for patents in both countries (when previously they would have only applied in Australia), to the disadvantage of New Zealand innovators.

Smaller markets attract a correspondingly smaller bundle of patents covering the same overall field of technology. For example, any given electronics patent in the United States will have only a 1 in 100 chance of also being patented in NZ, and about a 1 in 10 chance of being patented in Australia.

The NZIPA feels that increased harmonisation with Australia will lead to an increase in filings from applicants outside Australia and New Zealand. The extent of the increase will depend on the nature and degree of harmonisation.

Common examination processes are most likely to cause a moderate increase (perhaps 50-100%) in patent filing in New Zealand as applicants tack a New Zealand patent application into a strategy that would previously have meant they only filed in Australia. A common patent would cause an increase in overall filings due to the increased market size covered by the patent. This would produce to a radical (500% or more) increase in patents covering New Zealand.

The Policy

IP Australia on the other hand accepts in its submission that the single examination process could increase patent filings in either country. However, there are two reasons why it expects any increase to be ‘modest'.

First, although the proposed reform is anticipated to reduce costs, the commercial viability of seeking patent protection in an additional jurisdiction depends on a range of other costs associated with prosecuting, maintaining and enforcing patent rights.

Second, Australia and New Zealand are both members of the Patent Cooperation Treaty, an international patent law treaty, which already provides a streamlined approach for filing applications in multiple jurisdictions. As such, the proposed changes merely present another option for applicants who wish to file in Australia and New Zealand.

What now?

I agree with the obervations in the Report that 'the impact of a joint application and examination process on the rate of patent filing is difficult to predict — particularly given that many other factors also influence the decision to seek patent protection'.

One of the interesting issues on the horizon is a proposed sharp increase in examination fees for Australian patent applications. This may result in more than a 'modest' increase in New Zealand as patent applicants rely on a cheaper New Zealand search to support their Australian applications.

Friday, December 14, 2012

New Zealand hosts TPP negotiations

handshake isolated on business backgroundNew Zealand has just hosted the 15th round of negotiations of the Trans-Pacific Partnership Agreement (TPP).

The TPP is a free trade agreement between Asia-Pacific countries (currently New Zealand, Australia, the US, Canada, Singapore, Chile, Brunei, Vietnam, Peru, Mexico and Malaysia).

Critics of the TPP in New Zealand are mostly academics, civil libertarians and SMEs with little or no export focus. There are suggestions from these folks that the TPP has provisions that interfere with areas unrelated to trade. While much of the process has been carried out behind closed doors, the intellectual property provisions have been under scrutiny following publication of leaked drafts of the US proposal for the agreement.

Changes to the patent framework

New Zealand proposals of interest include:
  • pharmaceutical patent term extensions;
  • data exclusivity;
  • patent linkage; and
  • patentable subject matter.

Patent term extension

Pharmaceutical patent term extensions are common place internationally, but are not currently available in New Zealand. These provisions extend the time in which the patentee can profit from the protection afforded by the patent, when delays in gaining regulatory approval have shortened its effective life.

Data exclusivity

Data exclusivity is the period of time in which generic drug manufacturers cannot rely on the data provided by the holder of regulatory approval, in order to have their own versions of the drug approved. New Zealand currently provides 5 years of data exclusivity but the US proposal calls for increases to this, particularly for biological products.

Patent linkage

Patent linkage is a process in which regulatory approval of generic drugs is delayed until patents covering the drug have expired. New Zealand currently has no patent linkage provisions.

The effect on Pharmac

All of the above provisions strengthen patent protection for innovative pharmaceutical companies at the expense of generic manufacturers. While the practical effect of these provisions is not clear, there are concerns they will impact on the working of The Pharmaceutical Management Agency (Pharmac).

Pharmac decides which medicines are subsidised in New Zealand, favouring inexpensive, generic medicines where possible. Pharmac is generally credited with achieving good health outcomes from the money the Government spends on medicines.

Patentable subject matter

Other provisions sought by the US are contrary to provisions in the pending New Zealand Patents Bill.

Under the proposed law in New Zealand, computer programs "as such" will not be eligible for patent protection. This exclusion is intended to placate members of the open source community who asked that New Zealand follow the European lead in patent law and explicitly exclude software from being patentable. I cover this issue in my post The embedded software conundrum.

While the Bill limits the patentability of computer programs as such, the US proposal allows subject matter to be excluded from patentability only on the very narrow grounds that commercial exploitation of the invention must be prevented to protect "ordre public" or morality.

Copyright extensions

Another key area of intellectual property of interest is copyright law.

The TPP proposes extending the period of copyright protection for copyright works. In New Zealand the Copyright Act protects copyright for the life of the author plus 50 years. For certain works - for example films - the period is 50 years from when those works are made or published.

The leaked draft of the TPP chapter on intellectual property proposes extending those periods of protection to the life of the author plus 70 years and to 95 years for works like films. These are significant extensions.

Opponents of these changes claim that they will do little to benefit New Zealand or its creative industries. Those opponents argue that there is no economic benefit in extending these terms. They also claim that the extensions are no more than an attempt by powerful commercially lobby groups in the USA to protect their music and film industries.

Other proposals include strengthening the 'three strikes' and digital technical protection measures provisions of the Copyright Act. There are even rumours that there may be an attempt to limit or remove the right to parallel import goods under the TPP. That would have a significant effect on consumers.

New Zealand's stance

The New Zealand government does not appear to support all of these proposals. In addition, the proposals in the leaked document may have been superseded so may not necessarily reflect the current US position.

Whatever the actual provisions sought, the government has acknowledged that it is likely there will be 'horse trading' during the negotiations. The United States position is that weak intellectual property laws are trade barriers. If one benefit of the TPP is getting free access to markets in the United States then the trade-off may be that the New Zealand government agrees to stronger intellectual property protection.
Photo courtesy of author s_falkow under Creative Commons licence.

Wednesday, December 12, 2012

A public slap from Twitter

Slap!Laws can certainly be broken in 140 characters or less and Twitter is starting to take a more transparent approach to copyright infringement.

I decided a couple of years ago that I should probably get into this Twitter thing. Getting started was easy. I picked a twitter handle. I set up a Twitter profile. A pinched a mug shot off my firm's website for my profile photo. I even added a photo from our last family vacation as a header.

My main observation so far about Twitter is how open users are about their thoughts and feelings. Twitter really is a transparent platform. One of the benefits is the ability to reach a wide potential audience. One of the drawbacks is the potential to send something damaging to that same audience.

We are all limited to 140 characters per tweet. It's hard to think how you could infringe someone else's copyright with that sort of constraint. Defamation, harassment, breach of confidence, trade mark infringement, hate speech, and breach of employment contract can all be comfortably carried out within 140 characters, whether you are trying to do it or not. But not copyright infringement.

The copyright problem

What we have to remember is that tweets are not always 140 characters of plain text. Sometimes they contain photos. I've attached photos to some of my own tweets. In each case I was the one who took the photo, or I had permission from the person who did.

Sometimes tweets contain hyperlinks. A lot of my tweets have links to content I find interesting enough to share. These include articles published on my firm's website, news items on media websites and interesting blog posts. There is also shameless promotion of this blog. In each case there is very little risk of copyright infringement. The information is intended to be shared.

The way I use Twitter means that I haven't encountered any copyright issues. However, Twitter does need a policy on copyright infringement for those who use the platform. There is the potential to engage in unauthorized sharing of copyright works. This can be direct by attaching a copyright image. Or it can be indirect by including a hyperlink to a torrent file associated with a copyright work.

Copyright owners are able to contact Twitter and make allegations of copyright infringement. Up until quite recently it was Twitter's policy to quietly delete the tweets containing material that was the subject of copyright infringement allegations. I found an article that said Twitter deleted just over 5,000 tweets in the first six months of this year in response to copyright takedown notices.

The move to transparency

A recent change in policy will see Twitter publicly notify takedowns. The revised Copyright and DMCA Policy says that Twitter's response to takedown notices may include the removal or restriction of access to allegedly infringing material. The company will try and contact the affected account holder and let them know what is going on. That sounds fair enough.

However, Twitter is an open and transparent platform. In an effort to be as transparent as possible, Twitter will now clearly mark withheld tweets to indicate to absolutely everyone that content has been withheld. In the case of an image the message may be something like:

In other cases the tweet may be replaced by a notification like:

What's the problem?

There are the usual grumbles from the civil libertarians. A copyright complainant doesn't need to prove copyright infringement for Twitter to act on it. There is a balance to be struck between dealing with clear cases of copyright infringement on the one hand, and imposing another tool for censorship on the other.

The risk for most of us is of a more practical nature. Many of us tweet from a company twitter handle. It is a bad look for your company to be accused of copyright infringement. And even worse to be slapped so publicly.

In short: think twice, publish once. Be certain you post something that you are prepared to share with a potential audience of millions. You are responsible for what you post on your social media channel. So stay within the legal framework and be aware that defamation, copyright and privacy laws, among others, apply.

An edited version of this article appeared in NZ Marketing magazine.

Photo courtesy of author Vermin Inc under Creative Commons licence.

Monday, November 26, 2012

An adjustment for Patent Term Adjustment

Tape Measure-at-244-by-G.E.SattlerI recently came across an interesting alert from the Honigman firm regarding patent term adjustment. On 1 November 20120 the Eastern District of Virginia issued the first court decision involving the United States Patent and Trademark Office (USPTO) calculation of patent term adjustment.

Patent term adjustment

A patent cannot be enforced until it is issued. The usual term of a United States patent is 20 years from the filing date rather than the issue date. So if there is any delay in the examination process the patentee ends up with less than 20 years within which to enforce a patent.

By way of compromise, the USPTO is obliged to issue US patents within three years of filing. If the patent does not issue within this timeframe then the patentee is entitled to a patent term adjustment as a remedy.

There are three types of patent examination delays. These are:
  • "A Delays" where USPTO fails to comply with various statutory deadlines
  • "B Delays" where USPTO fails to grant a patent within three years of the patent application filing date
  • "C Delays" arising from administrative actions such as interferences, secrecy orders and appeals.
Patent term adjustment is calculated by adding the number of days for A delays, B delays and C delays. Deductions are made for overlaps and for applicant delay.

The effect of filing an RCE

In Exelixis, Inc v Kappos the patentee sought review and correction of patent term adjustment granted by the USPTO. Exelixis filed a national phase entry application on 15 January 2008. They received a final Office Action and filed a Request for Continued Examination (RCE) on 11 April 2011.

The USPTO issued a patent with a PTA award of 368 days. This was made up of 344 days of A Delays plus 85 days of B Delay minus 61 days of applicant delay. The USPTO reckoned that accrual of B Delay terminated upon the filing of the RCE. So they awarded the applicant 85 days of B Delay instead of 199 days.

Exelixis argued that if an RCE is filed after the three-year period commenced on the application filing date, the UPSTO should extend the patent term one day for each day of delay until the patent issues.

The Court found for Exelixis and awarded the patentee the patent term adjustment they were asking for. In a nutshell this means that an RCE will have no impact on patent term adjustment after the three year deadline has passed. We are still within the appeal period. It will be interesting to see whether the USPTO challenges this one.

Photo courtesy of author G & A Sattler under Creative Commons licence.

Sunday, November 25, 2012

Callaghan Innovation takes another step

Science and Innovation Minister Steven Joyce recently announced that Callaghan Innovation will be the name of the new Advanced Technology Institute. The ATI is being set up by the Government to help firms in the high-tech manufacturing and services sectors. The new organisation will have operations in the Auckland, Wellington (including Hutt Valley) and Canterbury regions.

The legislation that will establish Callaghan Innovation is passing through the legislative process at the speed of light. It's only been a couple of months since the First Reading. It is clearly high on the Government's agenda. I wonder how we can get similar treatment for the New Zealand Patents Bill?

Select Committee report

The Education and Science Committee recently reported back on the Advanced Technology Institute Bill. The committee had the Bill referred to it on 13 September 2012. The closing date for submissions was 1 October 2012. They received and considered 23 submissions from interested groups and individuals. Seven of these submitters presented oral submissions.


There is a change recommended to the operating principles. Clause 14(1)(b) now requires Callaghan Innovation to "proactively engage and collaborate with businesses, other [Research Science & Technology] providers, and other persons that ATI considers relevant to the performance of its functions". This amendment is to ensure that Callaghan Innovation works cooperatively with existing research facilities in order to avoid unnecessary duplication.

One of the functions of Callaghan Innovation is to provide services to businesses that contribute to its main objective. Clause 13(3)(a) is amended to include RS&T providers. An example of the way in which Callaghan Innovation can provide services to businesses now includes "undertaking research and development in collaboration with, or on behalf of, businesses or RS&T providers (or both).

Net benefit

Clause 14(1)(a) requires that Callaghan Innovation "aim to ensure that any activities it undertakes are for the net benefit of New Zealand". The word "net" is being taken out so that Callaghan Innovation is aligned with other entities such as Crown Research Institutes.

The term "benefit" is understood to be wide enough to include a range of benefits, such as economic, environmental, social, and cultural.

Conflict of interest

Clause 13(1)(f) states that one of the functions of Callaghan Innovation is to allocate and administer RS&T funding. Some submitters raised the potential conflict of Callaghan Innovation being both a funder and service provider.

Clause 14(2) is believed to address this issue. When allocating and administering RS&T funding, Callaghan Innovation must—
  • act fairly and transparently
  • implement systems and procedures to enable it to give effect to this principle
  • make information about those systems and procedures available on its Internet site
  • include in its annual report a report on its implementation of those systems and procedures.

Stakeholder advisory group

Clause 10 requires that, as far as practicable, the stakeholder advisory group's membership is broadly representative of the manufacturing sector, services sector, and RS&T providers. Furthermore, the members collectively should have sufficient experience and knowledge of the manufacturing sector, services sector, and as RS&T providers to give appropriate advice to the board.

One of the minority views is that clause 10 should make more explicit the need for strong industry representation on the stakeholder advisory group, and empower industry groups to have a say in their representation on this group. It was felt that union representation should be added to the clause.

However, this suggested change is not reflected in the Bill as reported back to the House.

The Second Reading

The Bill had a Second Reading on 8 November 2012. From the Hansard record the debate looks like a rehash of the views expressed in the Select Committee report discussed above.

One of the minor parties wants to see a further amendment to the clause dealing with operating principles. Clause 14(1)(b) as already amended by the Committee requires Callaghan Innovation to "proactively engage and collaborate with businesses, other [Research Science & Technology] providers, and other persons that ATI considers relevant to the performance of its functions".

The further amendment would require Callaghan Innovation to "proactively identify, engage, and collaborate". The idea behind this amendment would be to ensure that one of the things Callaghan Innovation must do is first of all find out who is in the market, so that it can then go and engage and collaborate.

This amendment is now formally tabled in Supplementary Order Paper No 149. Its author sees the role of Callaghan Innovation as 80 percent relationship building between business and research entities and 20 percent funding facilitation of research. There should be a requirement, according to the author, for Callaghan Innovation to know who is providing this service while not necessarily engaging with them in an attempt to address inadvertent duplication or competition.

Next steps

Now that the Second Reading is over it is time for the Committee of the whole House to consider the Bill part by part. It is high on the latest Order Paper. I think we can expect the legislation to be through the Parliamentary process before the Christmas break. That way all the legislation will be in place ready for a proposed launch date of 1 February 2013.

Friday, November 16, 2012

The Deemed Export - keeping a secret

Shhh...Can you keep a secret?The AIPLA annual meeting this year included a fascinating panel session on emerging IP issues in emerging markets. There were tips and tricks from lawyers on the ground in Israel, Brazil, South Africa and Russia. There was a session on Corporate Strategies for Foreign Filing. But the presenter that fielded all the questions was Roszel C Thomsen II from Thomsen and Burke LLP. He talked about Export Control Issues.

He hit a nerve, as one of my Antipodean colleagues put it. There seemed to be a few law firms in the audience who either hire foreign nationals, or have clients who do.

What is a deemed export?

Release of technology within the United States to a "foreign national" is a "deemed export". In general, exporting from the United States is a privilege and not a protected Constitutional right. It is subject to export control laws and regulations. A licence is required for exports in the same way as you need a licence to drive a car or own a gun.

The laws and regulations are there to stop bad stuff getting into the hands of bad people that can then use the information or technology to do bad things to the United States or her citizens.

A "foreign national" is a person who is not a United States Citizen or a "protected individual". A Green Card holder is a protected individual under the Immigration and Naturalization Act. Anybody with any type of temporary visa is a "foreign national".

Some practical examples

It all depends on how the technology or computer program source code is classified for export. There are a whole bunch of Export Control Classification Numbers (ECCNs) specifying ten categories of hardware, software and technology that are subject to controls.

Encryption is technology for the development, production or use of information security hardware and software. Commonly assigned ECCNs are 5E002 and 5E992. An export licence is required for foreign national employees from Cuba, Iran, North Korea, Sudan and Syria.

A biotech example involves technology for the development or production of the Japanese encephalitis virus. The ECCN is 1E001. No licence is required for foreign national employees from Canada. A Licence Exception is available for a foreign national employee from India. An Export Licence is required for a foreign employee from Russia.

What's the big deal?

Some of the penalties under the Export Administration Act of 1979 and Export Administration Regulations (EAR) are eye-watering. They are certainly a lot more serious than the export controls placed on New Zealand nationals. I talk about these controls in The darker side of patent protection.

In November 2008 Maxim was stung with a civil penalty of US$192,000. The Commerce Department's Bureau of Industry and Security (BIS) accused Maxim of unlawfully exporting integrated circuits and related components to China, Estonia, Russia and the Ukraine. They were also alleged to have released related technical data to Iranian and Chinese foreign national employees within the United States. Maxim had applied for a licence but didn't restrict access before the licence was issued.

In September 2004 Lattice Semiconductor Corporation was pinged for US$560,000 as a civil penalty. BIS alleged that they unlawfully exported certain semi-conductor microchips and related technical data to China and to Chinese national employees in the United States.

There was even a criminal conviction in July 2005. SunTek Microwave pleaded guilty to violating the EAR. There was a criminal penalty of US$339,000. The former president of the company was sentenced to 12 months and one day imprisonment and two years' supervised release.

Photo courtesy of author Jαγ under Creative Commons licence.

Thursday, November 15, 2012

New Zealand set to join Madrid Protocol

Madrid _Gran Vía-Montera
New Zealand is about to align its trade mark system with that of our major trading partners Australia, United Kingdom, China, United States, Japan and the Republic of Korea.

How it works

The Madrid Protocol system will come into force in New Zealand on 10 December 2012. We expect it will benefit New Zealand businesses with a strong export focus.

At the moment Kiwi businesses wanting to protect a trade mark internationally have to file separate national trade mark applications for each country or territory of interest. They must also comply with each country's specific requirements, which include appointing agents in each country, filing in foreign languages and dealing with local trade mark offices.

Under the Madrid Protocol system, trade mark owners will be able to file a single international trade mark application in English, through the Intellectual Property Office of New Zealand (IPONZ), and select the countries they want trade mark protection in, as long as those countries are also members of the Madrid system.

If no objections are raised by the trade mark offices of the countries in which protection is sought, there will be no need to appoint local agents. After a specific period of time, the trade mark will simply be deemed registered in these countries.

At this stage 87 countries have signed up to the Madrid Protocol. Several new countries are expected to join over the next 12-18 months, opening up even further possibilities for New Zealand exporters.

Tidying up the register

The new system will establish a conversion process for old trade mark registrations not classified under the Nice Classification system. Under this process the Commissioner will be able to initiate conversion of these registrations to the current edition of the Nice Classification system.

The conversion process will commence with the Commissioner writing to the owners of the registrations informing them of an intention to convert and the proposed form of conversion. The Commissioner's letter will set a deadline for response of one month from the date of the letter.

The owner of the registration will then have the option of accepting the conversion or proposing an alternative form of conversion. If there is no response from the owner, the registration will be converted as proposed. If the owner proposes an alternative form, the commissioner will determine the form of conversion. If the owner disagrees with the form of conversion, they will have the option of requesting a hearing.

The online angle

In almost all circumstances communication with IPONZ is going to be made electronically through their online case management facility. However, the regulations also allow a mechanism for the Commissioner to approve alternative filing methods in certain exceptional situations. IPONZ has indicated they intend to publish a practice note which will give further guidance on the situations this might cover.

It's good to see that there will be exceptions in some circumstances. Stakeholders will not always be able to use the online case management facility. There will be times when the IPONZ system is not available and so it is important to have a manual process as a fallback position.

Photo courtesy of author ferlomu under Creative Commons licence.

Sunday, November 11, 2012

Out of Africa

Congo RiverNext week there is a meeting of science and technology ministers of the African Union. One of the items on the table in Brazzaville, Democratic Republic of Congo is a Pan-African Intellectual Property Organization (PAIPO).

Existing systems

There are already two regional intellectual property offices in Africa. These are the African Regional Intellectual Property Organization (ARIPO) and the Organisation Africaine de la Propriété Intellectuelle (OAPI).

Many of us downunder don't have a lot of professional dealings with either of these organisations. We tend to learn about them for our patent attorney qualification exams. Then we quietly forget about ARIPO and OAPI until it is our turn to tutor exam candidates.

Last year I did actually have some business dealings with Kenya which is a member state of ARIPO. Mrs PatentBuff was detained at one of the Kenyan regional airports as a suspected drug mule. I guess it is not really an IP matter. But it is definitely a good story.

The case for PAIPO

The draft text for PAIPO is available here. In 2007 the heads of state gave the African Union Scientific, Technical and Research Commission the task of coming up with a draft legal instrument. The Commission apparently consulted with African Union member states, existing regional IP offices and collective management organisations.

I say 'apparently' because on the other hand there is criticism in some quarters of a lack of consultation and transparency in the process leading up to the production of the Draft Statute.

The stated objectives of PAIPO are set out in Article 5 as follows:

  • promotion of harmonisation of intellectual property laws of its [African Union] member states;
  • common administration and management services of intellectual property; and
  • vehicle for addressing political issues and developing African common positions relating to intellectual property matters.

The case against PAIPO

Every new proposal has its critics. Public interest observers are concerned that the PAIPO initiative seeks to adopt "first-world" standards of protection. It appears to pander to the demands of foreign intellectual property rights holders. It fails to appreciate or address the needs of the least-developed countries in Africa.

There is a petition circulating that urges the delay of the PAIPO proposal. It seeks a more open discussion and wants to see the proposal, if it goes ahead at all, to be more tailored to local African needs. At the time of writing this blog there are less than 400 signatures. This doesn't sound like a lot of signatures to me. The petition does not even appear to originate from within Africa.

The main question is whether or not this system is needed at all. It will require a lot of resources to set up an African centralized registration system. Wouldn't those resources be better spent on improving the existing systems of ARIPO and OAPI? Or assisting individual member states with accession to the PCT treaty?

Watch this space

I really don't have a strong view on PAIPO. There doesn't seem to be a lot of support for the establishment of the new system. There also doesn't seem to be a lot of local opposition to it either. It should be an interesting meeting.

Photo courtesy of author CIFOR under Creative Commons licence.

Tuesday, November 6, 2012

In which countries should I file my patents?

galvanized bucketsI spend a lot of my time working with clients building strategic patent portfolios. I think of patents as business tools. If they are created and used strategically they can help a patent owner achieve strategic and tactical business objectives. This of course means that the patent portfolio needs to be aligned with global business objectives.

Tough choices

It is not cost-effective to patent every invention in every country. We need to make tough decisions in order to allocate available resources. Some people compare these decisions to drowning puppies. Hard to do at the time, but a necessary thing to do long term.

There are tough decisions to be made all the time. Should you file a patent application at all for that new invention? In which countries should you file patent applications? Which patent applications should you abandon? Which issued patents should you maintain?

What we are trying to do here is simple. We want to put in place the right patents in the right places. Getting there is the tricky part.

Three buckets

One way of developing a good patenting strategy is to think like a global business leader thinks. Patents in a global portfolio are a series of CAPEX investments in countries where patent rights are pursued, obtained and maintained. The goal is to maximize the return on those investments in terms of value to the business.

Country selections can be viewed as a set of buckets that are grouped to define the different business approaches to the countries in each bucket.

The first bucket typically includes developed countries and regions such as the United States, the EPO and Japan. The business strategy here might be to drive innovation.

Next there are the BRIC countries. BRIC refers to Brazil, Russia, India and China. They are all thought to be at a similar stage of newly-advanced economic development. The expectation is that business interests in these countries are likely to expand during the patent term. The business strategy here is to accelerate penetration and localization.

The third bucket includes developing countries with high growth potential. Here the business strategy might be to build strength. There are a few ways to identify these countries. Some people refer to the Next Eleven (N-11) countries - Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam. Others prefer to think of Global Growth Generators (3G) countries - Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam.

A targeted approach

It's one thing to work out which countries you are going to include in each of your buckets. It's quite a another to work out which inventions to cover where.

I recently attended the AIPLA annual meeting at which the Chief Intellectual Property Counsel of a multinational outlined a possible patenting strategy for each bucket.

The strategy of innovation in the 'developed countries' bucket may require targeted filings of patents on fundamental technology in those countries. This might mean less coverage of product-based applications of those technologies in developed countries, in order to save resources better deployed in one of the other two country buckets.

For the 'BRIC' bucket it may be prudent to seek more targeted, narrow, product-focused patent claims to protect the products customised for local markets in the BRIC countries. There may be an emphasis on obtaining quick issuance of “picture claims” directed to your products. You may also have a portfolio of utility models to bolster the strategy of product-focused intellectual property protection.

The 'developing countries' bucket may require a different approach again. Business in those countries may still be a way off, so widespread attempts to obtain patents in those countries would be premature. There may be some countries within the bucket where it is time to begin a modest effort at patent portfolio building with an eye to future, longer-term business protection or enforcement opportunities.


There is no holy grail. There is no secret sauce. The main point is that the patent portfolio must remain aligned with the business strategy. Only then can it serve as an effective and valued tool that materially supports and advances business objectives in the markets of interest.

Photo courtesy of author Maker Mama under Creative Commons licence.

Monday, November 5, 2012

A copyright tale of RIANZ and Rihanna

Rihanna Loud TourWhat do Rihanna, Taio Cruz and Muse have in common? Their music is popular. Apparently. Their music costs NZ$2.39 per track if you buy it on iTunes. And NZ$215.10 in lost sales if you download it illegally.

Calculation of damages

There's quite a lot of difference between $2.39 and $215.10 when you are talking about a single music track. In my earlier blog post Three Strikes and Not Out I talk about a student who was in the gun for unlawful downloading carried out by her or her flatmates. The Recording Industry Association of New Zealand (RIANZ) produced evidence suggesting that each copied music track meant $215.50 in lost sales.

The folks at TechLiberty have very kindly published the submission that RIANZ prepared for its appearance before the Copyright Tribunal. You can download a copy here.

The Uploading problem

An award of $2.39 per track might be appropriate where a sound recording has been downloaded once by the account holder. The reasonable cost of purchasing the work is what the account holder would have paid if he or she had purchased the work legally.

But uploading is an entirely different story. Uploading, said RIANZ, is more harmful as it enables multiple potential unauthorised downloads by third parties. There probably needs to be some sort of downward adjustment to reflect the reality that not every illegal download represents an actual lost sale. But uploading is still bad.

The empirical data

The problem is that RIANZ doesn't know how many illegal downloads of Dynamite or Only Girl (In the World) were made from the music uploaded by the account holder or her flatmates. Current internet detection services don't provide this information to RIANZ. So it was time for an educated guess.

RIANZ says that in late 2007 the International Federation of the Phonographic Industry (IFPI) commissioned a report from UK Internet intelligence agency Envisional Limited. IFPI wanted to know how many copies of an album would be made from a single installed client on the BitTorrent network by other persons on the same network during a one month period.

A total of 17 albums were chosen to model a typical uploader. The content was balanced between recent releases, current and classical albums.

The research showed that, on average, each album was downloaded the equivalent of 90 times in a month. In a real life situation this figure may be even higher. Those 90 downloads may each seed a further 90 downloads.

The conclusion

RIANZ detected the unlawful activities of the account holder over successive monthly periods. It was therefore reasonable, argued RIANZ, for the Copyright Tribunal to adopt a baseline figure of 90 downloads for each infringement identified. In other words, each uploaded track.

As I have said before, RIANZ withdrew the case. It didn't make it to the Copyright Tribunal so this calculation of damages was never tested. It was a great outcome for the account holder. Not so great for RIANZ. And not so great for those of us left wondering whether this calculation of damages is fair and reasonable.

Photo courtesy of author Lauren Fritts under Creative Commons licence.

Tuesday, October 23, 2012

Three strikes and not out

Close-up of painted musical note on woodThe Citizens Advice Bureau has been providing access to legal information, assistance and advice to New Zealanders for many years. I expect that a few of these New Zealanders are students.

Speaking from experience, there are many opportunities for disputes to arise between students living in shared accommodation. There is the person who signs the tenancy agreement. The one who is responsible for the shared bank account. The person who has to pay those unclaimed long distance phone calls because they are the account holder. All of these scenarios rely on the other flatmates keeping up their end of the bargain. Sometimes that is too much to ask.

The Citizens Advice Bureau has now encountered (probably for the first time) a student who is in the gun for unlawful downloading carried out by one or more of her flatmates. I guess it was only a matter of time.

The background

According to TechLiberty post RIANZ withdraw one of first cases to Copyright Tribunal, a student was flatting with a few others. She was the account holder for the flat's shared internet account. She claims that she has never used file sharing software. The unlawful downloading must have been carried out by one of her flatmates.

This is the second most common excuse identified by RIANZ. I cover this in my earlier post No change to copyright notice fee. I cover the main features of the system in an earlier post The show goes on.

The Recording Industry Association of New Zealand (RIANZ) claims to have sent a detection notice under New Zealand's three notice regime. The flatmates claim not to have received the detection notice. Then the warning notice arrived. The defendant showed it her flatmates who denied any wrongdoing. She checked the password  on the wireless network to make sure that others outside the flat were not using it. Then came the enforcement notice and the prospect of a Copyright Tribunal Hearing.

The outcome

RIANZ appears to have withdrawn the case and did not proceed to the Copyright Tribunal. This is a great result for the defendant. She would have been the first defendant to appear before the Copyright Tribunal under the new law.  Publication of her name would have assured her a kind of notoriety. This would probably have affected her job prospects, at least in the private sector.

There are some lessons for us here. And some questions still left hanging.


RIANZ claims that 5 songs were unlawfully downloaded and that an award of $2669.25 is appropriate. So how was this amount calculated? Here's how they worked out the amount:
  • $1075.50 in lost sales of the music
  • $373.75 to reimburse RIANZ for cost of the notices and tribunal fee
  • $1250 as a deterrent

The lost sales component is interesting. The cost of each track on the iTunes store is NZ$2.39. Ordinarily the damages would be the lost sales of those five tracks. If the defendant (or her flatmates) had not downloaded the music unlawfully then they would have paid $11.95 for the music. So the rights owner missed out on $11.95.

However, peer-to-peer file sharing networks being what they are, the music was shared with others during and after the downloading process. So the rights owner missed out on more than just one sale of each track. RIANZ apparently produced evidence suggesting that each track had probably been downloaded 90 times and therefore the cost should be multiplied by 90. Hence the total of $1075.50 rather than $11.95.

The case didn't make it to the Copyright Tribunal so this calculation of damages was never tested.


So what can we learn out of all this?

The obvious one is don't be the account holder. If you are a student living in shared accommodation - don't provide a wireless network for your flatmates. Let them organise their own internet access with an internet service provider.

This case also serves as a further reminder that the account holder is liable for unlawful downloading carried out on the network they signed up for. It's not an excuse to say it was someone else's fault. A landlord, bank or telco wouldn't buy that one. Why would a rights holder be any different?

Photo courtesy of author The-Lane-Team under Creative Commons licence.

Friday, October 19, 2012

Megabox: an opportunity or a risk for New Zealand artists?

Kim Dotcom, painted portrait by Cart'1 DDC_7614Earlier this year police swooped on Megaupload founder Kim Dotcom and his buddies in a sleepy suburb north of Auckland. The high profile raid elevated Dotcom from obscurity to a celebrity status within New Zealand normally reserved for professional athletes, teleprompted news readers and reality television personalities.

Kim Dotcom and his cohorts were operating what they called a "cyberlocker" site, a private data storage provider. What they were actually doing is a little unclear. His legal team would say he's operating some sort of safety deposit box. Prosecutors would say he's operating a digital crack house. The truth is probably somewhere in between.

A Grand Jury indictment filed in February claims that the Megaupload site had 66.6 million registered users as of January 2012. Just under ten percent of these users had ever uploaded a single file. This suggests that most people used the site only to download material.

Current media headlines on this case appear to be dominated by an inquiry into unlawful surveillance by the Government Communications Security Bureau (GCSB) and the legal twists and turns inherent in extraditing Dotcom to the United States to face the music there.

Mega rumour

There are rumours of yet another file sharing site that will allow content owners to monetise digital content. In an article on weblog TorrentFreak last year, Kim Dotcom referred to his new music venture “, a site that will soon allow artists to sell their creations direct to consumers and allowing artists to keep 90 percent of earnings”.

Details of the new service are still a little sketchy. Will it provide the benefits to New Zealand artists that the hype would suggest? Will it face the same legal challenges as Megaupload? There are a few issues artists need to consider before signing up for the service.

Putting the dinosaurs out of business

This model claims to take a different approach to major record labels like Universal Music Group (UMG), Sony Music Entertainment, Warner Music Group and EMI Group.

According to Dotcom associate Swizz Beatz, the “[music] labels wouldn’t be taking the lion’s share of the revenue as they do now – Megabox would take ten percent and the remaining 90 percent would go to the artists. That leaves zero percent for the suited middle men and as the theory goes, they were very unhappy about that.”

The plan is to give consumers free access to music, financed through the use of an advertising browser plug-in. Dotcom spoke of a “Megakey that will allow artists to earn income from users who download music for free. Yes that’s right, we will pay artists even for free downloads.”

Revenue will come from the Megakey application that users have to install. The Megakey will work like an advertisement blocker. Instead of blocking ads it will replace some of these ads with advertising content selected by Megabox. Some users will not want to download the Megakey application. It is anticipated that those users will have the option to buy the music instead.

This year we have seen many announcements about Dotcom and his associates. Megabox appears to have taken a backseat. Its would-be founder has had almost all his assets frozen while he defends extradition to the United States to face copyright infringement, racketeering and money laundering charges.

Despite all the events that have occurred this year, there still seems to be a plan to bring Megabox to life. Earlier this year, Megaupload founder Kim Dotcom announced that "The major Record Labels thought Megabox is dead. Artists rejoice. It is coming and it will unchain you".

Back to basics

The property rights involved in these transactions are fairly straightforward. Copyright is a property right that exists in original works. A typical music file in a WAV, AIFF or MP3 file format will include not one but three different copyright works. The New Zealand Copyright Act 1994 recognises the music as a musical work, the lyrics as a literary work and the recording itself as a sound recording.

It is generally up to the copyright owner (the artist or the record label) to take action against unauthorised copying, issuing of works to the public or performance in public.

Learning from others

It is good to learn from your own mistakes. It is perhaps even better to learn from the mistakes of others. There are many file sharing sites that allow content owners to monetise digital content. These include SoundCloud, Spotify, Rhapsody and Pandora. Without exception they come with terms of use. With few exceptions, these terms of use are not read by their users.

Artists signing up for a file sharing site like MegaBox should look carefully at the rights they are giving up. For example, the Terms of Use for SoundCloud have the artist granting a worldwide, non-exclusive and royalty free licence to SoundCloud and other users of SoundCloud. The licence also extends to users of any other websites, apps and/or platforms to which the artist’s content has been shared or embedded.

There is a risk that it is the owners of the file sharing site themselves that are carrying out unauthorised acts. In the case of Megaupload for example, a Grand Jury Indictment filed Jan 5, 2012, alleges that members of the "Mega Conspiracy" themselves wilfully reproduced and distributed infringing copies of copyrighted works using computer servers controlled by the Conspiracy. Artists should be aware of this before authorising such activity.

Another trap for the unwary is to place too much reliance on a file sharing site keeping content safe. There are legitimate users who have lost content that did not infringe copyright. There is the case of the high school sports reporter and Megaupload customer who is taking court action to get his content back. Honest users are sometimes penalised for the actions of other users.

While court action is always available, it is more prudent for artists to keep backups of their content. It is certainly more cost-effective, particularly when a New Zealand artist is faced with the prospect of litigation in the United States to retrieve content.

File sharing sites are best treated as file sharing sites rather than archives. SoundCloud in its Terms and Conditions warns that the content of users whose account has been terminated or cancelled will be deleted. In fact, SoundCloud reserves the right to block, remove or delete content at any time for any reason and without liability.

Watch this space

New Zealand artists may welcome another platform on which to promote their work. Let’s hope that those signing up for the service are better off for the experience. Time will tell. Or rather, as Swizz Beatz puts it: “But my thing is like, time will tell everything, you know what I’m saying? People will see what’s what, who’s who.”

Photo courtesy of author Abode of Chaos under Creative Commons licence.

Tuesday, October 16, 2012

An early Christmas for Samsung

Galaxy Nexus_013It looks like Samsung's Christmas elves will be delivering Galaxy Nexus smartphones after all. It was looking a bit 'iffy' there for a while. Earlier this year Apple filed a motion for a preliminary injunction in a United States district court. The court granted the request based on infringement of US Patent 8,086,604 (the '604 patent).

Last week the United States Court of Appeals for the Federal Circuit overturned that decision.

Unified search

So what did the '604 patent cover exactly?

Claim 6 of the patent covered an apparatus for a unified search that uses heuristic modules to search multiple data storage locations. When we talk about a unified search, we mean the ability to access information on more than one data storage through a single interface. A device equipped with unified search allows a user to search the local memory of the device as well as the Internet by entering a single search query.

Apple reckoned that the Quick Search Box (QSB) on Samsung's Galaxy Nexus infringed claim 6.

Getting a preliminary injunction

A preliminary injunction is a pretty serious matter with pretty serious consequences. A plaintiff must establish that:
  • he is likely to succeed on the merits,
  • he is likely to suffer irreparable harm in the absence of preliminary relief,
  • the balance of equities tips in his favour, and
  • an injunction is in the public interest.
The district court found all four of these factors satisfied. It granted an injunction that prevented Samsung selling Galaxy Nexus smartphones in the United States.

In the appeal the parties argued over the district court's analysis of two of those factors.

Irreparable Harm

This was a case, according to the Federal Circuit, where the accused product includes many features of which only one (or a small minority) infringe. It's not enough for the patentee to show irreparable harm. The patentee also has to show a 'sufficiently strong causal nexus relates the alleged harm to the alleged infringement'.

Putting this another way, the patentee must show that the infringing feature drives consumer demand for the accused product. The Federal Circuit was not convinced that the Quick Search Box (QSB) feature drove consumer demand.

Even if there was the potential for harm, Apple couldn't show that the harm flows from Samsung's alleged infringement.

Likelihood of Success

Given its finding above, there was no need for the Court to go on and consider the likelihood of success factor. But they did anyway. And found another reason to chuck out the injunction.

Claim 6 required "a plurality of modules ... wherein ... each heuristic module corresponds to a respective area of search and employs a different, predetermined heuristic algorithm". The district court found that the term "plurality" means "at least two," or "simply the state of being plural."

So what does "each" of "a plurality of heuristic modules" mean? Does it mean "each of at least two modules"? Or does it mean "each of every module"? It's quite an important distinction.

Apple argued that the claim limitation is satisfied as long as the Quick Search Box (QSB) contains at least two modules that use different heuristic algorithms. Apple pointed to three heuristic modules within the QSB that use different heuristic algorithms. These are Google which searches the internet, Browser which searches the Internet browsing history, and People which searches the user's contacts list.

Samsung argued that claim 6 requires every heuristic module within the accused device use a unique heuristic algorithm. The QSB, said Samsung, contains other search modules besides the three picked out by Apple. Some of those other search modules might share the same heuristic algorithm.

The district court agreed with Apple that the claim wording means "each of at least two modules". It didn't agree on the Google module, but agreed that the modules Browser and People each use different heuristic algorithms.

The Federal Circuit didn't like that construction. The district court, said the Federal Circuit, has construed "plurality" to mean "at least two" without any indication that the term refers to a hand-picked selection of a larger set.

The plain language of the claim, the patent specification, and the prosecution history all point to a claim construction where each of every module within the claimed apparatus must use a different heuristic algorithm.

Apple couldn't show that it was likely to succeed in its infringement claim, therefore providing another reason for the Federal Circuit to chuck out the injunction.

What now?

A preliminary injunction would have presented Apple with an easy win over Samsung. It would have been a bit hard for Samsung to compete with Apple if Samsung could not sell its Galaxy Nexus at all. Apple has some hard graft ahead of it if it still wants to challenge Samsung's use of the Quick Search Box.

Photo courtesy of author TAKA@P.P.R.S under Creative Commons licence.

Thursday, October 11, 2012

Alice and the Abstract Idea

Looking Glass When is a computer-implemented invention a mere "abstract idea”? Does the presence of a computer in a claim make an unpatentable "abstract idea" a patentable invention? Should it matter that a computer-implemented invention is claimed as a method, system, or storage medium? Is there any real difference between these types of claims?

These are the questions that the United States Court of Appeals for the Federal Circuit is going to be considering over the next 12 months.

CLS meets Alice

On 9 October 2012 the Federal Circuit granted en banc review of CLS Bank International v. Alice Corp., Fed. Cir., No. 11-1301, 10/9/2012.

The patents under consideration involve a computerised trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate “settlement risk.” The district court thought the claims were not patentable because they are directed to an abstract idea. On appeal the Federal Circuit panel reversed, concluding that the system, method, and media claims are directed to practical applications of patent eligible subject matter.

The Federal Circuit has asked the parties to file new briefs addressing my opening questions. The court has asked for the United States Patent and Trademark Office (USPTO) to file a brief as amicus curiae. Other briefs of amici curiae may be filed without consent of the parties or leave of the court. All the court asks is that the briefs comply with Federal Rules of Appellate Procedure and Federal Circuit Rules.

I guess it's time to study Alice Through the Looking-Glass. I wonder what we will find there?

Legislative intervention

Back in New Zealand we await the next chapter of our own fairy tale. Parliament resumes its Sitting Programme next week after a two week recess. The Patents Bill has passed its Second Reading on 12 September amidst much parliamentary debate. I cover the Second Reading in an earlier post Patent party in the House.

The Bill contains an exclusion for computer programs, added in response to submissions received from the open source movement. There doesn't appear to be a problem in New Zealand with the current Patents Act and the jurisprudence around it. The exclusion seems to be a preemptive strike against a harm that might eventuate. It is possible that there may be a patent troll under every bridge unless our lawmakers intervene. Just ask Alice. She found that anything is possible in Wonderland.

The exclusion, as set out in a Government Supplementary Order Paper, reads as follows:
10A Computer programs
(1) A computer program is not an invention for the purposes of this Act.
(2) Subsection (1) prevents anything from being an invention for the purposes of this Act only to the extent that a patent or an application relates to a computer program as such.
There is still the Committee of the whole House stage and the Third Reading ahead of us. We are getting there slowly. But at least we are getting there.

Photo courtesy of author Elena Kalis under Creative Commons licence.

Wednesday, October 10, 2012

ATI - the new kid on the science block

Block Party 2007It's funny how some people will always find something to argue about even when they agree with each other. The subject of the argument this time was the new kid on the block, the Advanced Technology Institute. The forum for the argument was the First Reading of the Advanced Technology Institute Bill.

According to the Explanatory note, the Bill:
'establishes a new statutory Crown entity, the Advanced Technology Institute (ATI), with the purpose of supporting businesses, primarily in the manufacturing sector and services sector, to improve their competitiveness and growth through science and technology-based innovation and its commercialisation'.
First Reading

The Hansard record of the First reading last month sees Hon Steven Joyce introducing a legislative framework for establishing a new high-tech HQ for innovative New Zealand businesses. The intention is to help get New Zealand's best ideas out of the lab and into the marketplace more quickly. Kiwis are apparently great at coming up with smart ideas but we need to get better at translating those ideas into commercially successful products.

The Advanced Technology Institute (ATI) will focus on industries with high growth potential. These include food and beverage manufacturing, agritechnologies, digital technologies, health technologies, therapeutics and high-value wood products.

Despite mainly cross-party support for setting up the Advanced Technology Institute, the opposition parties still found something to complain about. The proposed Board members are not scientists. The funding model is wrong. The brief is too wide. The implementation timeframe is too short. And so on and so forth.

The Bill was eventually read a first time following a party vote. It was referred to the Education and Science Committee for public submissions.

Select Committee submissions

Last week stakeholders put forward written submissions to the Education and Science Committee. Submitters were generally supportive of the establishment of the ATI as a Crown Entity.

BusinessNZ noted that businesses tend to do lots of development but not so much research. The ATI has the potential to plug a gap in the innovative sector. In written submissions BusinessNZ supported the focus of the ATI as being directed by business needs rather than science led. There is a need to solve R&D problems, challenges and/or opportunities identified by business rather than finding a market for "good ideas". It will be important to get good business talent on the stakeholder advisory group from the various sectors to ensure the continuing relevance of effort and direction.

Clause 14 of the Bill says that the ATI must 'aim to ensure that any activities it undertakes are for the net benefit of New Zealand'. The University of Waikato in written submissions said that the ATI will not achieve a 'net benefit' for New Zealand unless the Board includes representatives from the Waikato and Bay of Plenty regions. Clause 8 should be amended so that Board member appointments 'reflect geographical representation from across New Zealand where centres of economic growth and potential exist'.

The ATI must concentrate on facilitating creative partnerships, according to the University of Auckland's written submissions. The University's experience over the last 20 years is that the majority of its research and innovation for business is driven by the unmet needs of the market. However, their long-standing commercial research partners always want more than that. The best research and innovation partnerships are multi-directional - market pull and science push. The University sees the ATI as an 'honest broker', introducing interested parties to each other and then leaving them to it.

Crown Research Entity Scion submits that New Zealand needs to broaden its innovation base, protect its current economic base and increase the extent to which value is added. Increasing both volume and value are critical. While Scion supports the objective of supporting science and technology based innovation, the organisation suggests that the ATI adopts a Statement of Core Purpose to achieve "additionality and complementarity" and avoid duplication.

The Institute of Professional Engineers of New Zealand (IPENZ) says that the ATI must be focused on building capacity within New Zealand, not doing research itself. Their expectation is that the ATI will develop and foster innovation within industry, be driven by industry R&D needs, and be an ongoing source of commercially-focussed research personnel.

The Economic Development Agencies of New Zealand Inc (EDANZ) recommends that the existing network of Economic Development Agencies (EDAs) and the relationships they have established are not duplicated. The organisation also wants to ensure that the complementary role of the EDA network is recognised and utilised.

Kiwi Innovation Network Limited (KiwiNet) supports the establishment of the ATI as long as it promotes greater collaboration and does not duplicate existing services. In written submissions the company is concerned that the Bill does not acknowledge that there are other organisations that are already doing good work in the areas in which the ATI will be focussed. The ATI must be built on a core culture of collaboration.

Further steps

The Education and Science Committee is due to report back to the House on 6 November 2012. I don't expect there to be too many changes proposed to the Advanced Technology Institute Bill. Most stakeholders are in favour of the new organisation.

Of course the ATI's main objective, functions and operating principles will be under the microscope for a while. You would expect that with any new kid on the block. The key to its success will be attracting an effective board and a good stakeholder advisory group. They will be saddled with redundant staff from MBIE and NZTE as well as a 'special advisor' tasked with aligning ATI's strategies and objectives with government policy.

Photo courtesy of author kpwerker under Creative Commons licence.

Sunday, October 7, 2012

Bumble bees and business growth

Bumble BeePoliticians are like bumble bees, going from flower to flower. These were the opening comments from Hon Steven Joyce in his speech at the recent Software Summit 2012 organised by the Canterbury Software Cluster. He was speaking in his roles as Minister for Economic Development and Minister of Science and Innovation. He is also acting Minister of Finance although he joked that there was no money left to play with.

The event was a half day conference and networking event with the theme "from Startup to Global". It promised something for everyone - from innovators and entrepreneurs to managers and developers. It certainly delivered that. There were three concurrent streams of top quality presentations. I didn't have a Time-Turner so could not attend all the sessions. I'll let others comment on the content.

There were no surprises in Joyce's speech. It's a tough world economic environment right now. Europe and the United States are in financial trouble. The Asian market presents a huge opportunity. Having a presence in Silicon Valley is good for marketing, but it is better to do your development here in New Zealand. The EPIC initiative to cluster businesses together in Christchurch is a good one.

Joyce outlined the Government's Business Growth Agenda, focussed on access to markets, capital, innovation, skilled people and infrastructure. He took us through a progress report released in August by the Ministry of Business, Innovation and Employment (MBIE).

The report outlines the Government's approach to building innovation. There are seven key areas:
  • encouraging business innovation
  • strengthening research institutions
  • boosting public science investment
  • developing innovation infrastructure
  • improving intellectual property settings
  • growing the innovation workforce
  • building international linkages

The steps to improve intellectual property settings are known to most of us. The report notes that
'[i]ntellectual property rights are essential in incentivising and enabling firms to innovate. Intellectual property rights grant innovators a monopoly on their innovation for a limited period. New Zealand is among the upper tier of OECD countries on the strength of its intellectual property protection and the effectiveness of this, but scores very low on the number of patents registered relative to our population. The Government is committed to further improving how intellectual property is created, managed, and utilised in New Zealand'.
The actions underway and proposed include:
  • completing the passage of the Patents Bill to more closely align New Zealand's patent settings with its trading partners;
  • creating a single trans-Tasman patents examination regime with Australia to simplify patent applications;
  • reviewing trade mark regulations and implementation of the Madrid protocol
  • investigating whether the intellectual property settings of public institutions are optimal for technology transfer; and
  • exploring opportunities for Government to improve the environment for firms' use of intellectual property.

The Minister answered a few questions from the audience. One dissident asked whether the Minister was going to fix the mess his colleague Hon Craig Foss was making of patent law reform. I cover patent law reform in my earlier post Patent party in the House.

Minister Joyce was crystal clear. Minister Foss is not making a mess of patent law reform. The Government's preference is to follow international precedent. Joyce has seen the 'evidence' referred to by the questioner. And no, a possible takeover of New Zealand company Fisher & Paykel Appliances by Chinese company Haier does not affect New Zealand patent policy. I mean really, why should it?

Photo courtesy of author Tobyotter under Creative Commons licence.

Wednesday, October 3, 2012

No change to copyright notice fee

Money"Not too big - not too small - just right". That was the message last month from lawmakers. They were considering the level of fee payable under New Zealand's three notice regime that came into force September 2011. The regime is aimed at deterring file sharing that infringes copyright.

Under the new regime rights owners send prescribed notices to Internet Protocol Address Providers (IPAPs). Each IPAP is then required to validate the notice and send up to three infringement notices to the infringing account holder. An IPAP is allowed to charge a rights owner up to NZ$25 for processing a rights owner notice.

Back in March this year the Ministry of Economic Development (now Ministry of Business, Innovation and Employment) issued a Fee Review discussion document. MED was particularly seeking submissions from Internet Protocol Address Providers (IPAPs) and rights holders. The list of submissions is now public. There are some good quality submissions from IPAPs and rights holders.

The case for status quo

The decision to keep the fee the same came as no surprise. The majority of IPAPs submitted that the maximum fee they are allowed to charge be raised. Rights holders submitted that the maximum fee they have to pay be lowered.

The reasoning set out in the Cabinet Economic Growth and Infrastructure Committee paper is interesting. IPAPs say that they are processing notices from rights owners manually due to "low and varying volumes of rights owner notices". They could reduce the per notice cost to their businesses by automating the process. However, with current volumes they say it is unreasonable to invest in any level of automation.

Rights owners on the other hand say they would send more notices if the fee was lower. Lowering the fee would result in a higher volume of notices being processed under the regime. This in turn would mean that IPAPs would invest in automation. But then IPAPs would be paying the bulk of costs of operating the regime.

The Committee felt that rights owners bear the majority of the responsibility for enforcement of their rights, so they should bear a good proportion of the cost.

The submissions also highlighted some interesting aspects of the new regime.

It wasn't me

As of 26 April 2012 the Recording Industry Association of New Zealand (RIANZ) had sent 2,766 rights holder notices, which is 395 per month. Sixty of those notices had been challenged within the prescribed timeframes. Out of those 60 challenges filed in time, RIANZ accepted two of them and declined 58.

The most common reasons set out in the 60 challenges by account holders were (in order):
  1. it was not me
  2. it was not me, but probably was another household member/flatmate/guest
  3. it was not me, it was likely someone else as my wireless internet connection did not have a password
  4. it was not me, it was likely someone else as we provide internet access to the public as part of a business
RIANZ points out in its submission that none of these excuses hold water. The responsibility lies with the account holder to ensure that his/her internet connection is properly served and not used for unauthorised purposes.

The two successful challenges involved an account holder or account holders that had been proactive in indentifying where the infringement came from and had taken measures to stop future infringement.

Changing behaviours

There appears to have been a reduction in the amount of illegal file sharing that has occurred in New Zealand since implementation of the new regime.

The New Zealand Federation Against Copyright Theft (NZFACT) refers in its submission to a study of the volume of traffic measured from within the core network of an unidentified New Zealand ISP from residential DSL users. The study found a reduction in levels of P2P, Newsgroups and Encrypted traffic. The study also found an increase in levels of Remote, Tunnelling (eg VPN) and Files traffic. Both findings coincided with the September 2011 commencement date of the new notice regime.

RIANZ points to a noticeable decline in P2P usage in September 2011, when the media coverage of the new law was at its highest. This effect has been maintained. RIANZ sees a risk that the initial gains will be eroded as the organisation is unable to send enough notices to maintain a long-term effect.

NZFACT estimates that there were about 110,000 infringing downloads of major US movies in August 2011. From September 2011 the number of infringing downloads dropped to between 40,000 and 60,000 per month.

What now

From here it is anticipated that MBIE officials will continue to monitor the operation of the regime. If notice volumes rise significantly (ie if NZFACT starts sending notices) then IPAPs may be able to implement more efficient systems and therefore there may be scope to review the fee again.

Furthermore if we see a rise in infringing activity there may also be scope for review. We have yet to see the new Copyright Tribunal issue a decision. It will be interesting to see if that would set a deterrent precedent.

Also on the horizon is the implementation of New Zealand's Ultra-Fast Broadband Initiative. Will it increase the level of infringing activity? Or will it expand the offering of legal digital content which may in turn contribute to a decline in illegal file sharing?

Photo courtesy of author 401K under Creative Commons licence.
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