ISDS and Intellectual Property

This is the story of something that happens all the time: Companies suing governments over invalidated/ rejected patents/ patent applications. However, this commonplace news snippet becomes not-so-commonplace because of the huge amount of money involved. Also because of the fact that this case has opened up a new way by which Multinational Companies can influence state policies.

Last year, Eli Lilly, a US Pharmaceutical company sued the government of Canada after two of its patents were invalidated by courts in Canada. If that sounds familiar that’s because you have read about Novartis v. Union of India & Others that was decided exactly two years ago, April 2013.

Now let’s take a look at the facts we have.

Sometime back, the supreme court of Canada invalidated two patents of Eli Lilly on the basis of a “promise doctrine” ie  if a patentee “explicitly and unequivocally” promises a use or result for an invention, the patentee is responsible to keep that promise. For example, in this case, Eli Lilly  had promised that its inventions, which were pharmaceutical drugs, were better than rest of the drugs in the market. But it was more of a guess, and the courts in Canada invalidated the patents in 2007 and then again in 2011.

According to Eli Lilly’s notice to Canada, this invalidation was simply “absurd”. Eli Lilly argues that that “The promise doctrine” was introduced way after the patent was granted in Canada, and its patents should not be invalidated using the promise doctrine.

Now if you know anything about patents, you would know that there is absolutely no point in arguing here. Patents are routinely invalidated when the law changes or in common law jurisdictions, when there is a new ruling. That’s part of the reason why a Bilsky Vs Kappos or an Alice vs CLS gains a lot of interest among patent lawyers.

The difference here is, not only has Eli Lilly sued Canada, it has demanded a hefty compensation of $500 million for lost potential profits. Now that is something that has been not heard of. To answer the question “How on earth could they do that!!”, allow me to introduce to a term that has been used time and again for several nefarious purposes: ISDS.

ISDS

ISDS or The Investor State Dispute Settlement, are a group of about 3000 agreements that have been implemented as early as the end of the second world war. There were a lot of newly formed independent nations after the second world war, and they were all hungry for foreign investments. These agreements promised foreign investors a set of minimum guarantees and they felt safe to invest in companies. Now one of the guarantees that the ISDS provided was that a state shall provide compensation for “expropriation” of investments. If that is a word too big for you, it means that the state shall provide compensation for investments stolen by the state. If the investors can prove that in a court of law, oh wait, there is no court of law here- ISDS disputes are solved in a tribunal of private lawyers chosen by the government and the investors. So if the investors are able to prove that in a tribunal of private lawyers that the government is liable to compensate them, the government is liable to pay them out. There are no binding precedents, or appellate reviews.

Now all of the above facts about ISDS have been in existence  for the past sixty five years.  So what’s new? What’s new is that, companies have started treating Intellectual Property as investments to the extent that a simple invalidation of a patent is treated as expropriation.  Likewise, inability to display a trademark is being counted as expropriation. To cite an example:

In 2011, the Australian Government  banned use of trademarks on cigarette packets. Name of the company was to be written in a generic manner, and the cigarette packet was to be labelled with messages like “Smoking Kills” “Smoking causes blindness” etc. Immediately, Phillip Morris, the tobacco company known for Malboro, sued the Australian country for a hefty sum. The lawsuit failed, but that did not stop them from sending notices to poorer countries like Togo and Uruguay when these countries came up with similar laws.

But that again, was about trademarks. Eli Lilly is probably the first company to sue a nation for invalidation of patents. That too for $500 million. The basis for the suit is that patents are investments and invalidating them using a new law is expropriation of the “investment”. Seemingly, Eli Lilly assumes that an issued patent should never be invalidated and also that a nation cannot modify its laws without violating the “ISDS gurantees”. Eli Lilly’s case is further strengthened because of the TRIPs agreement of 1994, that guaranteed a minimum level of IP protection in all the signing nations.

Here are a list of allegations put forth by Eli Lilly:

  1. NAFTA and TRIPS agreements refer to mandatory obligation to grant patents to inventions that are “useful” and have “industrial applicability”. Eli Lilly alleges that Canada has failed to enforce its patents, both of which being useful with industrial applicability
  2. Eli Lilly states that Canada cannot compel patentees to include evidence of utility in their patents.
  3. Lilly objects that the “Promise” doctrine is being improperly applied only to pharmaceutical patents.

All the above objections can be objected to because both the TRIPs and the NAFTA have provisions to provide flexibility to countries to define key terms like “new” and “patentable”. But Eli Lilly claims that Canada’s definition of the word “new” is unacceptable.

So the bottom line is, that should Eli Lilly’s allegations and claims are to succeed, several international norms that help countries to have different standards of IP protection would be destroyed.

Eli Lilly’s allegations could spell trouble to the international IP environment, particularly jurisdictionally isolated patent provisions like Compulsory licensing, provisions to prevent Evergreening of drugs, etc. Further, the ruling would also cause countries to have lesser control over their IP policies.

So unlike the commonplace Pharmaceutical IP lawsuits, this particular Lawsuit should be of major concern. Caution must be held while signing anymore ISDS agreements. Moreover, new provisions like fast track legislation of ISDS cases should be fiercely opposed.

Leo Paul Johnson is a senior patent engineer at IP ASTRA

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The Importance of Common Law Trademark Searches – Tata “Vistara” Trademark Case Study

The most common refusal at the Trademark office in an attempt to obtain a trademark registration is that of a ‘likelihood of confusion’ with another similar mark with similar goods and services. While most of us believe that we have coined a unique trademark as the brand name for our product or service, we cannot be sure that someone else is not already using such name. A ‘likelihood of confusion’ refusal after the trademark application is filed or an objection thereof from another user of the same or similar name, might result in the application being rejected outright.

Thus, a trademark search prior to applying for a trademark registration is essential if you want to avoid ‘likelihood of confusion refusals or objections from other users. Most trademark attorneys or even in house counsel will conduct a basic search on the Trademark Registry prior to filing the application but a common law search is also just as important and the ongoing issue with the Tatas attempted trademark registration of the name “Vistara” serves an example of just how much.

The “Vistara” trademark

 

The Tatas and Singapore Airlines entered into a joint venture (Tata SIA Airlines Ltd) in 2003 to establish “Vistara Airlines” wherein the Tatas own the larger share of 51% and Singapore Airlines the remaining 49%.

On applying to register the trademark “Vistara” the Registrar of trademarks in January of this year has found other similar trademarks registered with the Trademark Registry for similar goods and services. In the examination report, the Registrar of Trademarks has said that the Vistara Trademark is open to objection on grounds of refusal because “same/similar marks are already on the record of the register for same/similar goods/services.

Further, the trademark “Vistara” has been objected to by a similar user “Vistara Voyages Pvt. Ltd.” The situation became public when Vistara Voyages filed a civil suit in the High Court of Karnataka to restrain Tata SIA Airlines Ltd. from using the mark “Vistara”.

Vistara Voyages owns the domain name ‘vistara.in’ at the time of its incorporation while Tata uses “vistara.co.in”. However, the proprietor of Vistara Voyages only applied to register its mark in September 2014 two months after Tata SIA Airlines applied for its registration. So the question here is what rights Vistara Voyages has over Tata SIA Airlines under current trademark law.

Rights of the Senior User

 

In India, the owner of the trademark with a better claim is usually the senior user.

For example, if an applicant applies for registration before anyone else commences use, it is the applicant who is first to file the application who would be considered the owner of the mark. However, if the applicant is the first to apply for trademark registration but there is a person who was already using the mark but has not yet applied for registration, it is user of the mark who first used it in commerce who will be considered the owner of the mark. This owner has the right to sue an infringer for ‘passing off’.

In this case Vistara Voyages claim to have been using the mark since 2008 and were incorporated five years prior to Tata SIA Airlines. Hence they can claim prior use and bring a suit of infringement against Tata SIA Airlines.

This is why common law trademark searches are just as important as searches on the Trademark database.  Tata SIA Airlines should have been aware that the Vistara mark was in commercial use for similar services and that Vistara Voyages owned the domain name ” vistara.in” prior to filing its trademark application

Conducting a Common Law Trademark search

 

A common law trademark search can be carried out by searching through directories and databases. This includes the Internet, market surveys, yellow pages, domain names etc. You can hire a law firm to conduct the search for you or you can do it yourself.

The search must be conducted for “similar” names for “similar goods and services”. A likelihood of confusion refusal arises for “similar” and not only “same”  or identical names. The main criteria is that your mark should not be likely to be confused with a similar mark in the eyes of the ordinary consumer. There need not be “actual” confusion but a “likelihood” would suffice for a rejection.

In order to avoid a situation like the Tata “Vistara” trademark case, it is critical that trademark searches be taken more seriously. Tata SIA Airlines have been given one month to respond to the Examiner’s rejection of the mark. The civil suit filed by Vistara Voyages is still pending.

Source: http://profit.ndtv.com/news/corporates/article-tatas-vistara-trademark-objected-739695

Author Lynn Bout Lazaro is an IP counsel

Provisions of the Indian Trademark Act declared unconstitutional

The Madras High Court (HC) on March 10, 2015 has declared certain provisions of the Indian Trademark Act 1999 as unconstitutional. In particular are the provisions that provide for the qualification criteria of the members of the Intellectual Property Appellate Board (IPAB). This ruling is the result of a writ petition filed by Prof. Shamnad Basheer in May 2011 contending that the entire selection procedure of the IPAB violates the separation of powers between the executive and the judiciary. Arvind Datar, senior lawyer representing Basheer, has said that the appointment process to the appellate board “was flawed” as a technical member could after a certain number of years become vice-chairman and subsequently a judicial member of the appellate board with no further qualification required. Further, the Act also allowed members of the Indian Legal Services or Indian Government Officers to become judicial members of IPAB.

For those of you who don’t know already, the IPAB has jurisdiction to hear all appeals from the order or decision of the Registrar with regard to cases relating to trademarks, patents and geographical indications. It also has the authority to provide an opinion on all cases pertaining to rectification of register. Thus, when the patent or trademark application that you had taken the trouble of preparing and filing gets rejected, the law gives you an opportunity to file an appeal with a board set up especially for handling such grievances.

However, in the recent years the IPAB has been riddled with several problems of its own. For example, once your appeal reaches the IPAB, your dispute would be examined by judicial members who have had little or no expertise in the field of Intellectual Property. That is, until a few days back.

 

The writ petition filed in 2011 basically stated that the judicial members of the highest technical dispute body in India, created to hear Intellectual Property disputes, were incompetent. The petitioner Prof. Shamnad Basheer stated, “There is not a single person on the IPAB who has any relevant IP expertise…..the IPAB has been functioning in contravention of the Constitution of India, which mandates all courts and tribunals to be independent and manned by competent people.

The Verdict

In light of this petition, the Madras HC comprising of Chief Justice Sanjay Kishan Kaul and Justice M M Sundresh has,

  1. Declared that the search and selection committee for the posts of the Judicial Member, Vice- Chairman and Technical member, headed by the secretary, department of industrial policy and promotion as its chairman, was loaded in favour of the executive, which is impermissible under law, as held by the Supreme Court,
  2. Recommended the Chief Justice of India to the post of IPAB Chairman be given due consideration by the Appointment Committee of the Cabinet,
  3. Directed the Secretary, Department of Industrial Policy and Promotion, Ministry of Industries and Commerce, to re-constitute the Committee, providing a predominant role in selection process to the judiciary for appointing members, both for the Vice-Chairman, Judicial Member and Technical Member. Source: Economic Times http://www.indiaeveryday.in/fullnews-certain-provisions-in-trademarks-act-unconstitutional-hc-1001-167555.htm

The petitioner Basheer after the verdict has said “Our stand has been vindicated. And I really hope the government begins to take tribunals more seriously and secure them on firmer legal moorings,”

How does this affect us?

  1. Well, before we jump to any conclusions, the High Court is not saying that the IPAB itself is unconstitutional and neither is the Indian Trademark Act of 1999 as many online sites would leads us to believe. Certain provisions in the Act need to be struck down as the separation of powers of the executive and judiciary is of paramount importance to the functioning of a democracy and the selection process of judicial members of the IPAB crosses this line or is blurry at best.
  2. The positive verdict instills faith in the judiciary in its power to strike down unconstitutional laws and to direct clear steps and measures to be taken to enforce its verdict. However, it remains to be seen the length of time taken to enforcThe Madras High Court (HC) on March 10, 2015 has declared certain provisions of the Indian Trademark Act 1999 as unconstitutional. In particular are the provisions that provide for the qualification criteria of the members of the Intellectual Property Appellate Board (IPAB). This ruling is the result of a writ petition filed by Prof. Shamnad Basheer in May 2011 contending that the entire selection procedure of the IPAB violates the separation of powers between the executive and the judiciary. Arvind Datar, senior lawyer representing Basheer, has said that the appointment process to the appellate board “was flawed” as a technical member could after a certain number of years become vice-chairman and subsequently a judicial member of the appellate board with no further qualification required. Further, the Act also allowed members of the Indian Legal Services or Indian Government Officers to become judicial members of IPAB.For those of you who don’t know already, the IPAB has jurisdiction to hear all appeals from the order or decision of the Registrar with regard to cases relating to trademarks, patents and geographical indications. It also has the authority to provide an opinion on all cases pertaining to rectification of register. Thus, when the patent or trademark application that you had taken the trouble of preparing and filing gets rejected, the law gives you an opportunity to file an appeal with a board set up especially for handling such grievances.However, in the recent years the IPAB has been riddled with several problems of its own. For example, once your appeal reaches the IPAB, your dispute would be examined by judicial members who have had little or no expertise in the field of Intellectual Property. That is, until a few days back.

     

    The writ petition filed in 2011 basically stated that the judicial members of the highest technical dispute body in India, created to hear Intellectual Property disputes, were incompetent. The petitioner Prof. Shamnad Basheer stated, “There is not a single person on the IPAB who has any relevant IP expertise…..the IPAB has been functioning in contravention of the Constitution of India, which mandates all courts and tribunals to be independent and manned by competent people.

    The Verdict

    In light of this petition, the Madras HC comprising of Chief Justice Sanjay Kishan Kaul and Justice M M Sundresh has,

    1. Declared that the search and selection committee for the posts of the Judicial Member, Vice- Chairman and Technical member, headed by the secretary, department of industrial policy and promotion as its chairman, was loaded in favour of the executive, which is impermissible under law, as held by the Supreme Court,
    2. Recommended the Chief Justice of India to the post of IPAB Chairman be given due consideration by the Appointment Committee of the Cabinet,
    3. Directed the Secretary, Department of Industrial Policy and Promotion, Ministry of Industries and Commerce, to re-constitute the Committee, providing a predominant role in selection process to the judiciary for appointing members, both for the Vice-Chairman, Judicial Member and Technical Member. Source: Economic Times http://www.indiaeveryday.in/fullnews-certain-provisions-in-trademarks-act-unconstitutional-hc-1001-167555.htm

    The petitioner Basheer after the verdict has said “Our stand has been vindicated. And I really hope the government begins to take tribunals more seriously and secure them on firmer legal moorings,”

    How does this affect us?

    1. Well, before we jump to any conclusions, the High Court is not saying that the IPAB itself is unconstitutional and neither is the Indian Trademark Act of 1999 as many online sites would leads us to believe. Certain provisions in the Act need to be struck down as the separation of powers of the executive and judiciary is of paramount importance to the functioning of a democracy and the selection process of judicial members of the IPAB crosses this line or is blurry at best.
    2. The positive verdict instills faith in the judiciary in its power to strike down unconstitutional laws and to direct clear steps and measures to be taken to enforce its verdict. However, it remains to be seen the length of time taken to enforce this verdict and in the meantime the employment status of the current judicial members seated on the board is unclear, not to mention the status of preexisting disputes put before such members. But most importantly, this is only the first round and the matter is likely to be examined in the higher court. Let’s hope the SC can recognize the value of this petition and uphold the HC verdict.
    3. In any case, the verdict gives a voice to Basheer and many others who hope to strike down outdated and other illicit laws and provisions in India. Given the history and culture of our country, the list of such outdated and unconstitutional provisions is endless and we desperately need citizens like Basheer to advocate for us.

    e this verdict and in the meantime the employment status of the current judicial members seated on the board is unclear, not to mention the status of preexisting disputes put before such members. But most importantly, this is only the first round and the matter is likely to be examined in the higher court. Let’s hope the SC can recognize the value of this petition and uphold the HC verdict.

  3. In any case, the verdict gives a voice to Basheer and many others who hope to strike down outdated and other illicit laws and provisions in India. Given the history and culture of our country, the list of such outdated and unconstitutional provisions is endless and we desperately need citizens like Basheer to advocate for us.

Author Lynn Bout Lazaro is an IP Counsel

In And Out Of the looking glass- Alice V/s CLS

“But it is a pipe.” “No, it’s not,” I said. It’s a drawing of a pipe. Get it? All representations of a thing are inherently abstract. It’s very clever.”  

                                                                                                          -John Green, The Fault in Our Stars”

The Alice Vs CLS Case:

The words “software” and “patentability”, have always had issues with staying together. When they ever did, they have wrinkled many a patent examiner’s eyebrows. It makes sense, doesn’t it? SOFTWARE PATENTS ARE ABSTRACT IDEAS!!! ABSTRACT IDEAS DO NOT EXIST IN THE REAL WORLD!! You cannot patent something that doesn’t exist. What if someone patents a thought and sues you for thinking the same thought! So abstract ideas should never be allowed to be patented! Right? NO!! In a world where billions of dollars, business deals, and information related to almost everything under the sun is transacted in a virtual world, made up of technically “abstract ideas”, providing some kind of protection for these so called “abstract ideas” becomes an issue. “Hey!, we just wiped off all the balance in your Online bank account because we thought it to be a little too “ABSTRACT”. Now that’s something that you don’t want to hear from your banker. So lets all first agree to one thing, yes, we need a minimum level of protection for the so called “abstract ideas” that make up software patents.

Now, the reason why we are here talking about the patentability of software, is because of a fairly recent patent litigation between Alice corporation and CLS bank international. The Supreme Court concluded that Alice Corporation’s claims were directed at the abstract idea of intermediated settlement that merely required generic computer implementation, and thus ineligible subject matter under USC § 101”.

To throw a little light on the entire affair, Alice Corporation is an Australian firm that dabbles with the computerized trading of financial derivatives. The corporation holds patents dealing with computer trading of financial derivatives. CLS bank International sued Alice Corporation and sought a declaratory judgment of non-infringement and invalidity of three such patents of Alice Corporation on May 24, 2007. Later, a fourth patent was added to the list. All the four patents were deemed to be invalid by the Supreme Court. Yes, bad news for Alice Corporation. But what is that got to do with the rest of the companies with software patents? Well probably a great deal. One of a controversial opinion from the U.S. Court of Appeals for the Federal Circuit was that this decision could result in the death of software patents (Spoiler alert:  It doesn’t).

In light of the recent events, a memorandum dispatched by Commissioner of patents to patent examiners details some new instructions for the preliminary examination of patents. The memo, dated 25 June 2014, outlines a two part test to test the patent eligibility of software patent claims. The two part test, informally called the Mayo framework, was drafted by the US Supreme court in a 2012 suit Mayo Collaborative Servs. v. Prometheus Labs. The test goes on as follows:

Part 1

In this part of the test, the patent examiners test whether the claimed invention is in effect, an abstract idea. And why do they have a problem with abstract ideas? Let’s hear the answer to that question from the USPTO:

“Abstract ideas are excluded from eligibility based on a concern that monopolization of the basic tools of scientific and technological work might impede innovation more than it would promote it.”

Yes, true story. You would’ve had to do a lot of addition if someone had a patent for multiplication. So abstract ideas shouldn’t be patentable. Simple as that. However, the difficult part is determining what constitutes an abstract idea. For a lay person anything ranging from a thought, to programs, to financial instruments are abstract ideas. In fact, anything that is not tangible go straight into that class. But as we discussed earlier, sometimes we take some abstract ideas like bank account balances for example, a little more seriously. And we do need methods to protect them. Similarly, some inventions have aspects of abstraction that are essential to the invention. In fact, allow me to paraphrase what the commissioner for patents, USPTO had to say about patent eligibility of abstract ideas:

“At the same time, the courts have tread carefully in construing this exclusion [read exclusion of abstract ideas] because, at some level, all inventions embody, use, reflect, rest upon or apply abstract ideas and the other exceptions.”

Yes, be it your average bottle opener, or the Large Hadron Collider, all inventions are implementations of an abstract idea. So usually you have:

NOVEL, NON OBVIOUS ABSTRACT IDEA + its PHYSICAL IMPLEMENTATION = INVENTION

So now we have pretty much of an idea on when an abstract idea becomes patent eligible. It becomes eligible when it is given a physical implementation. But again there is a catch there. The physical implementation of that idea has to be novel. So in reality, it is:

NOVEL, NON OBVIOUS ABSTRACT IDEA + NOVEL PHYSICAL IMPLEMENTATION = INVENTION

An idea of using a lever to open a bottle cap became patentable when someone moulded a piece of iron into a bottle opener. An idea for taking a snake out for a walk became patentable when someone tied a leash around it. (I am not making this up, check out US 6490999).

Now you may ask, then why is there this problem with software patents? In a software patent, you have an abstract idea, which you make into a program, which you run in a physical processor.

Well, it is possible to look into it in this way: The programming code that implements the abstract idea, by itself, is an abstract idea. We load the code into the processor, and run it. We are merely “APPLYING” the particular code onto an existing processor. There isn’t anything innovative happening in the tangible world. We are not physically changing the processor in a way to implement the code. For example, in the case of a bottle opener, we are moulding a piece of iron in an innovative way in order to open the bottle cap with it.  Though the topic is still debatable, in Alice Vs CLS bank, the Supreme Court has come to the conclusion that such a software that is basically an abstract idea is not patentable. Now what constitutes an abstract idea is a different question. The Supreme Court used its decisions in previous cases to tackle this problem. Some examples of decisions that the Supreme Court referred to are:

  • In a decision for Benson v. Gottschalk., 1972, the court ruled that claims for an algorithm to convert binary coded decimal numerals into pure binary form constituted a patent-ineligible abstract idea.
  • In a decision for Parker v. Flook 1978, the court ruled that mathematical formula for computing “alarm limits” in a catalytic conversion process constituted a patent-ineligible abstract idea.
  • In a decision for Bilski v. Kappos 2012, the court ruled that method for hedging against the financial risk of price fluctuations is a fundamental concept in economic practice and therefore constitutes a patent-ineligible abstract idea.

Though Benson (1972) and Parker (1978) did not cause much of a problem for Alice Corporation, what really drove the last nail into the coffin of the case was Bilski (2012). The Supreme Court decided that similar to Bilski’s patent claims, the concepts mentioned in claims by Alice were fundamental concepts in economic practice and therefore constitutes a patent-ineligible abstract idea. However, The Supreme Court failed to provide a precise definition of what constitutes an abstract idea. The Supreme Court merely cited a few examples of abstract ideas.

Examples of abstract ideas quoted in the Alice Corp VS CLS include:

  • Fundamental Economic Practises
  • Methods of organising human activities
  • An idea in itself
  • Mathematical formulas

The above statements prove that analysing patent claims for abstraction shall continue to be a difficult terrain for both patent examiners and inventors. Especially because there is no definition for an abstract idea and neither does the court give one.

This brings us to the second part of the test. The second part of the test is performed only if there are abstract elements in the patent claim.

Part 2

In the second step the examiner checks whether the patent claims contain elements to make the abstract ideas more than mere abstract ideas. The claims should not be a mere instruction to apply the software code on a hardware device. The abstract idea must use something more than a generic computer to implement the code. Examples of such cases include:

  • Improvements to another technology or technical field
  • Improvements to functioning of the computer
  • Meaningful limitations beyond general linking of abstract ideas with processors.

In effect, this is where the examiner checks whether the implementation of the abstract idea is a novel physical implementation.

If the patent claims are found to fail the test, the claims are rejected under USC. § 101. And thus, the patent in question would not be granted.

Conclusion

Hence, the number of USC 101 rejections can be expected to be on the rise. Such rejections can hopefully be prevented by keeping in mind the new framework for preliminary examination and drafting the claims to be significantly more than the abstract ideas.

The only question that remains now is, “Is software patentable?”. The answer is simple. It is, if it passes part 1 and part 2. The only problem: The test is notorious for being as slippery as it is simple.

 

Author, Leo Paul Johnson, is a Senior Patent Engineer at IP ASTRA

Why accelerators should look into IP

Why accelerators should look into IP

Recent years have seen a surge of entrepreneur activity all over the world. Introduction of a number of early stage companies has spawned a number of entities which facilitate such companies, examples of such entities being venture capitalists, angel investors, incubators, and accelerators. Each type of entity caters to a different problem faced by start-up companies.

India is going through a phase where there is lot of traction and buzz on start-ups. Several multinational funding agencies have set their foot in India, let alone the scores of domestic funding agencies. One needs to be extra cautious in categorizing the domestic funding agencies as VC’s or accelerators or angel investors as the lines that differentiate them from one another are rather bleak. Added to that, India being multi-lingual and multi-cultural, regionally there exists hordes of funding agencies which are associated with various terminologies colloquially.

Venture capitalists, angel investors, and incubators are nothing new. In fact, they were in existence in one form or another as early as mankind has known to do business. However, a new breed of start-up supporting entities has been introduced in the market in the recent years: The accelerators. The accelerator, or seed accelerator as it is popularly known, is an entity that provides financial support, counselling and infrastructure for start-up companies at early stages of formation. The accelerators make significant effort to market themselves to potential candidates resulting in a large number of applicants vying for small number of seats. The accelerators not only look into the ideas; they look into the talent working in pursuit of the idea as well. The companies are chosen on the basis of both the applicability of the idea as well as the people constituting the team of the company. The funding varies, sometimes in small tranches of few thousand dollars and at times in hundreds of thousand dollars.

It is critical to understand the importance of Intellectual Property protection for start-ups by accelerators. Intellectual property protection which was considered as a nuisance in the past amongst Indian corporates has started getting attention in the last 10 years. More and more corporates have initiated several in house strategies in protecting IP. The various IP forums, associations, and conferences all add fuel to the IP eco system in India. Earlier, during an M&A deal in India, IP was associated only to brand equity and good will. Today, things have evolved and people have started recognizing IP during deals, especially patents. There are several factors that accelerators need to look into before inducing a company into their programs. Not just among the start-up companies, but in among any group of tech-based companies, the risk of patent litigation is very real. So even if the start-up does have patents, and even if you have an exit strategy in place, it is imperative for the investors to play the devil’s advocate and do a thorough prior art search to avoid any future litigation.

The trouble with the start-up companies today is that though they are encouraged by the wide array of VCs, accelerators, incubators, and such, they are also targeted. They are targeted by patent trolls who sniff out the deals occurring between start-ups companies and their funding agencies and target those start-ups for million dollar settlements. As a result, unless the start-up does find a way out of the troll litigation, it would not be viable for the accelerators to invest in such companies. Hence, it is important that accelerators ensure there is a good IP strategy in place before they invest in start-ups.

Trolled!!!

Well picture this. You discover an idea. An idea that you know that it would change your life. An idea you know will make better of the world around you, or well, atleast your finances. Well, its good, not many people get stricken by great ideas, but still, there are just a few.

Let’s picture this idea as a sapling. You have just found a sapling for yourself.

Now here comes the best part. You are not satisfied with just getting an idea. You decide to implement this idea. You get this idea to work, to make you money, or whatever that is you are after. You invest time, money, your intelligence, intuition, and luck to get this idea into fruition. You want to start a company, the tree which your sapling becomes.

So, the sapling grows into a tree. A tree laden with fruits. Fruits that make you rich and famous, your life inspirational, and what you do valuable. So you are liking the scene. You got an idea, a dream, you nurtured it, protected it, the future generations would praise you for your entrepreuneural instincts, your intuition and perseverance. And then suddenly BAM! a hitherto unseen force start  clobbering your beloved tree. You try to find out who it is and see that it’s a giant green troll. The troll keeps on hitting on the tree trunk and to jerk fruits of your tree. Your young tree could not bear the brunt of its attack. All its fruits, leaves fall down, its trunk gets crushed, its totally done…..all your dreams, hardwork, everything. Poof. Into smoke.

Now let me tell you a thing or two about our troll friend. He’s cunning, smart, and lazy. He’s the one who has the necessary proofs to claim that the idea, or (sapling in this case) is his. He knew it all along. And he has been watching you nurture that sapling of yours, watching it grow, waiting to strike just at the right time, when he could gobble up as much amount of your investment and success as possible. Every story needs a villain. And this is as villainous, disgusting and cowardly a character could get in your story.

So back in the real world, where ideas aren’t saplings or startup companies aren’t trees, these trolls have a very special term: Non practicing entities (NPEs) or in the popular word, patent trolls. They have patents to prove their right to your idea. They could threaten you with lawsuits or make hefty settlements that could just rip your company to pieces.

Patent trolls really are a pain. They increase the amount of redtape one has to go through for being creative. They increase the transactional costs incurred while developing technology, they make a mockery of the patent law and judicial system of a country. When the patent law of a country becomes efficient, patent trolls thrive. So really, it’s the good things, policies meant to reward the innovators and inventors, that is backfiring here.

The menace of patent troll vary with jurisdictions. This is an article in the national law review that elaborates on the varying amounts of patent troll activity across the globe. According to the article, patent troll activity is quite limited in India. So if you are a startup in India, chances are that you won’t be sued by a patent troll.

This is because that Indian patent law has made it impossible for trolls to survive in the country. Thanks to amendments like patent amendment act 2005, the patent troll business model does not work in India.  First of all, acquiring patents would take time. That’s not just in India, anywhere, building a patent portfolio is not easy. It takes a lot of thought and knowledge.

Now coming to the second part. Patent system in India is completely transfixed on the idea that patented inventions must be used for the growth of industries in India, generate jobs, develop the economy. To ensure this, it has brought a few good measures too. I could name three, compulsory licenses, revocation due to non-working, and form 27.

If a person has a patent for an invention, and if the invention isn’t worked within 3 years of filing, any person can file for a compulsory license and snatch away the rights from the person to practise the invention more. Patent trolls need lots of time to work. Three years is too small a time for trolls to lay low waiting for a chance to strike some flourishing company. The presence  of such clever laws in India keep trolls from building huge patent portfolios solely for the purpose of suing and not implementing.

After 2 years, if the invention has not been put to work even after compulsory licenses, the patent is revoked for non-working.

In spite of all this, the inventors are encouraged to submit a statement of working (form 27) after every financial year.

The Indian courts aren’t ideal places for patent trolls to survive. So if you are a troll suing a company in an Indian court, chances are that you might find a great deal of bias against you. Indian courts do not grant injunctions easily. It is quite true that an interlocutory injunction against the product can be obtained soon if the patent infringement is found. But to actually gain money as damages, it takes a great deal of time. And it simply is not profitable for a patent troll to spend that amount of time for litigation.

 

Author, Leo Paul Johnson is a patent engineer at IP ASTRA

Don’t get Rich, Famous, or Successful!

Yes, I know you’ve worked very hard for your company and made so many sacrifices. You and your team have worked days and nights together and made the impossible happen. You couldn’t have been prouder of the things you’ve accomplished as a team. You’ve gained loyal customers, your cash register is full, the demand for your awesome new product seems to grow, and you’re adding a lot more customers each month. You’re on the brink of going viral. Yes, you’ve achieved great things already and I’m sure you deserve to get rich, famous, and successful.

But here’s my advice – Don’t get Rich, Famous, or Successful!

You might lose it all or well, most of it, soon.

Why?

    1. Chances are that you might have been negligent.
    2. Chances are that you’ve been spied upon all this while by a smart, cunning and lazy opportunist. There’s a better word for this guy “A Troll”. This Troll could be a fake/shell company or a twisted individual. I just like to call him “Dracula”.

But, how? What do you mean?

Yes, you know that thing about law and legal stuff? It’s actually very important. You might have executed your idea to perfection, you might have profited from your idea too, but did you protect your idea? That is the question. If you haven’t, left it for later, or ignored it completely, then you have been negligent and might I add, stupid.

You see, this guy, this Troll, knows his Legal stuff very well. He protects random innovative ideas for fun (money mostly), gets a legally granted patent/trademark/copyright for his ideas and guess what he does it with it? NOTHING. He won’t develop or build on his ideas, won’t try to license or sell his ideas either. There’s a term for it too, He’s a “Non-practicing entity”.

He’ll just wait for YOU, the hardworking entrepreneur, to unknowingly work on one of his “protected” ideas. He’ll wait till you’ve become popular and made a LOT of money. And then He’ll strike when the iron is hot. He’ll threaten to sue you for stealing/infringing on his “protected” ideas and will demand huge royalties running up to millions. He’ll also threaten to take you to court if you fail to oblige to all the unreasonable demands that he’s put across.

I know some of you have been through this ordeal for real and if you have, you know how harrowing it is, to fend off and fight these trolling mosquitoes. Litigation and lawyer fees will shoot through the roof and drain all your resources until you have nothing left. There’s no way you’ll come out victorious. The system is somehow designed for you to lose.

If you do manage to win (which takes a very long time and highly unlikely) then it’s taken that you’ve already bled enough and what you actually win, is your freedom, freedom from this Troll, that’s all, no money, no bone. If, however, you lose the battle, it simply adds more insult to the injury you’ve already suffered. If, on the contrary, you decide not to challenge this Troll, avoid the conflict, and agree to all his demands, you’d be spoon feeding big chunks of YOUR hard earned money to this Piña colada sipping Troll who wouldn’t have to lift a finger to earn it.

I’m not making this up, you know.

Here’s a random story I found.

Here’s a story closer back home in India.

These are just some of the thousands of cases where hard working entrepreneurs have been targeted and taken advantage of by these Trolls.

So what can you do to avoid being attacked and sucked dry by this Troll Dracula?

    1. First things first, ALWAYS get you legal stuff in order. Protect your idea legally first before you go on to build that awesome startup or business of yours. File that patent, trademark your logo, and copyright your creative work! It costs nothing compared to what you’ll end up losing out on if you do nothing at all!
    2. Keep innovating, keep filing patents. You can’t just rely on one single idea (patented) to see you through the years. Trolls have a knack of working around your ideas and file for related patents that might literally cripple you from innovating on your own inventions!

(This is why Apple, Samsung, IBM, and others are in the news for filing those innumerable patent applications each year. To protect themselves from Trolls and maybe to threaten competition too!)

    1. If you have the monetary resources, buy patent portfolios from smaller companies and independent inventors to protect yourself.
    2. Know what your rights are and always be prepared to fight off trolls. Know what laws are out there to help protect your rights in case of trouble (New Anti-Troll rules are already coming into force in the US). Don’t simply give in to troll demands without your own due diligence. Also check who else has been targeted by this Troll. Maybe you can join hands with other victims and fight the Troll together!
    3. Last but not the least, make your struggle public on all forums, blog posts, and garner support (Rackspace did this). This is sort of like an expose of the scamster and should be fun.

When you have all these points covered and you’ve done your homework, then you have my permission to get obscenely Rich, outrageously Famous, and insanely Successful!

Good Luck!

About the Author
The author, Chethan Kamath advises Startups on all IP related matters.

STARTUP FOUNDERS NEED A SMACKDOWN!!

Now it’s understandable that you are a staunch believer in the Lean Methodology. You want to consolidate your core team, quickly build your MVP (Minimum Viable Product), and ship it as soon as possible. Once shipped you learn from your mistakes, review, iterate, rinse, and repeat till you’ve optimized your product offering. Your approach is surely wise and admirable.

In all this, you’ve also been advised by all to keep your running costs low and be very frugal when it comes to your expenses. You’ve been told to invest only in what is necessary and an absolute must. Again, this is sound advice for anyone planning to startup.

And I’m wishing you’ll even find some customers/users and some decent initial success if you’ve followed all these guidelines to the T. BUT, NO ONE EVER TELLS YOU HOW IMPORTANT YOUR IDEA IS. Execution, they say, is everything.

Yes, execution matters, but your idea matters too.

Do you want to build something that anyone with basic technical skills could mockup over a weekend? Do you want those smart asses to simply take your work and call it their own? Worse, what would happen if their stolen work becomes more successful than your own? Would that make you happy?

Nope, absolutely not.

So before you decide to buy a dedicated server, machinery or whatever that it is, decide to invest in your idea first. It doesn’t cost “that” much to protect the one thing that matters most to your startup – your big idea.

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Time and again, we’ve seen startup Founders complain about how expensive and difficult it is to protect their idea here. Yet, it’s surprising that they have enough money to incorporate their company in the US, buy a yearly subscription for a dedicated server, hire employees at random, and throw money at sales/marketing. For this alone, Startup Founders – You need a SMACK ON YOUR HEAD! Phat!

You’ve got all your priorities screwed up. Protect your idea first. You don’t want some hillbilly with a Legal Patent/Copyright/Trademark to come up later (when /if you become super successful) to sue you for millions or worse stop you from doing what you love the most. The best way to protect your idea is by filing for a Patent.

Patents: If your idea is technical, hasn’t been done before, uses software tied to machine components, is manufacturable, and exhibits significant improvement over any existing solutions, then you file a patent application.

Since you’re a startup with cost limitations, consider filing a Provisional Patent Application first.

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A Provisional Patent Application is like saying “Okay, we’ve come with this awesome idea first. If you try doing something similar or if this idea struck you much later, tough luck! We own this now!”

The application itself doesn’t have to be too fancy. You need to write about your idea in detail, fill some basic forms, and file it at the Patent Office, that’s all. Of course, a Patent Lawyer can cover a whole lot of information about your invention/idea (including some you’ve hadn’t even thought about) and add whole new dimension to your idea. We are gifted that way and we aren’t boasting.

Pay your lawyer well. Get the Provisional Application filed. You’ll be glad you did. You don’t have to be frugal here. It’s YOUR IDEA we’re talking about.

Once your Provisional Application is filed, forget about it for 9 months. Build your startup, grow your startup, and start seeking investments for your startup. Interestingly, most investors are keen to know if you have any Intellectual property of your own. If you’ve filed a Patent Application, it’s half the battle won! 9 months is also good enough time to gauge if your idea is profitable and shows promise. Your idea might even change 180 degree during this time.

With investments and thorough validation of your idea, you can then consider filing a more comprehensive Complete/Non provisional Patent Application with the Patent Office for your idea. You’ll surely need the help of a Patent Lawyer this time to formalize your previously filed Provisional Application, add legal jargons, and refine your application with added claims, drawings, and detailed description.

However, if you feel that your idea is no longer viable or profitable, you can simply choose to abandon your previously filed Provisional Patent Application. Not much lost but a lot gained.

Since filing your patent application, you can officially call yourself an INVENTOR. We know that’s who you really are, but the patent application only gives you a Legal badge to say so. So Invent and Patent. Don’t be stingy here, Uncle Scrooge!

 

About the Author

The author, Chethan Kamath advises Startups on all IP related matters.

Startups and Intellectual Property

So you want to start a start-up. You believe that you have the next big idea in you. The idea that would take you into the leagues of other legendary men who had brilliant ideas like Steve Jobs, Mark Zuckerberg and Sergey Brin. So what next?

The most important step you take at this stage towards sustainable development would be keeping your idea sealed unless it is protected by an efficient non-disclosure agreement. That’s right, that one big idea should stay in your head before you protect it. Do not disclose it to anyone.

There are chiefly three types of intellectual property that you should consider before getting into your business:

  • Trademarks
  • Copyrights
  • Patents

Trademarks:

       Trademark is often regarded as the oldest and yet most ambiguous form of intellectual property and quite rightly so. For example trademark issues could potentially arise between a company named “bar space” and a company named “space bar” because of their names, though they sound differently. So it is highly advised to consult a professional with expertise in the field of trademarks before trademarking your product.

        Trademarks include crucial aspects of your company like company name, brand name, logo design, taglines, among other things.

Copyrights:

         Copyrighting your content is also a nice way to ensure that your work won’t be blatantly copied by others. As much as copyrights help you, they could prove a hazard unless you are careful not to infringe others copyrights. Cases of start-ups made to pay penalties for infringing copyrights occur occasionally.

         Your website design, content in your brochure, layout, etc all come under the domain of copyrights.

Patents:

         A right to stop anyone from making, using, and selling your invention, sometimes patents don the role of the game-changer, sometimes of an expensive wallflower. Depending on the practise areas covered by your start-up, patents could well be the most critical factor in achieving market success.

         The sum total of all the intellectual property rights make up the IP portfolio of your company. A good IP portfolio is critical for success in today’s IP driven economy. The foundation for a good IP portfolio is laid during the earliest stages of a start-up company. The first few patents and trademarks filed for a company goes a long way. Take for example, US patent US6285999, or more famously, the first patent by google. The patent “Method for node ranking in a linked database” lists Google co-founder Lawrence Page as inventor. However, the patent was assigned to Stanford University. Google licensed the patent from Stanford for a 2% stake in the company. In 2004, Stanford University cashed its stake in the company for a sum of 337 million dollars. The single patent served as the cornerstone for what was to become Google’s mighty IP portfolio.

         As far as semiconductor and bio-technology start-ups are concerned, the IP portfolio, especially the patent portfolio of the company is of vital importance, and not without reason:

                  1. Strategically placed patents ensures competitive advantage for the company. A strategic patent is one which ensures that the competition cannot operate within the market space without infringement.

                  2. A good patent portfolio convinces the customers and prospective investors that you take matters related to your technology seriously.  It convinces them that you invest in your technology and your company is strong from the inside.

                  3.  It garners respect for your organization from the big corporates. Patents enable you to compete with people who have deeper pockets. Good, strategically placed patents inhibit others from operating in your space and as a result, add value to your business.

                  4.  It provides venture capitalists confidence to fund you. Especially, because of the potential revenue stream received through licensing. The venture capitalists have the confidence that even if your company fails, they can make the leased amount by licensing the patent. Some even go to the extent of seeking the help of patent trolls to gain back the money leased.

                  5.  Patents also enhance the bargaining power of your company, especially in cases where your company is in the process of cross licensing patents with another company. A good patent portfolio provides leverage in such circumstances.

                  6. The number of potential revenue sources has increased in the past decade. Patents are monetised in a number of ways such as securitization and auctions.

         Building an efficient patent portfolio requires vision. Necessity for vision arises from the fact that there is no such thing as a global patent. Patents are subject to jurisdictions, and as a result, the first step towards building a patent portfolio would be to decide the number of jurisdictions you would want to practise the invention. In any case, to file a patent abroad, you would require filing a domestic patent first. So naturally, the next step would be to file a domestic patent in your respective jurisdiction.

         Filing a domestic patent would provide you the exclusive right to practise the invention within your jurisdiction, and would further provide you with a limited period of time to file the patent in other countries.

         Filing a patent in another country, in the case it has already been filed domestically is called national phase entry. Depending on the mode for performing national phase entry, the time and expense varies. Moreover, various nuances of the patent law are different in different counties. So you are advised to select the countries where you would like to file the patent carefully.

         The first step towards patenting an invention should be to consider the following questions:

  1.  Is my invention patentable?
  2.  How much could I afford to patent the invention?

         The first question, about patentability, can be answered by understanding the four concepts for patentability:

  1.  Novelty
  2.  Non-obviousness
  3.  Usefulness
  4. Patentability issues that are subject to jurisdictions.

        Novelty and obviousness of an invention can be determined by searching in various paid and public databases. Patent consultancies offer prior art searches that serve the same purpose.

        Usefulness of an invention generally refers to industrial applicability, as in the invention can be made or used in an industry for commercial purposes.

         Patentability largely refers to whether the inventions that is deemed to be patentable according to the patent law of the jurisdiction. For example, inventions relating to atomic energy, food materials and agricultural practises are non-patentable in India.

         The answer to the second question determines the number of patents you will be filing and the patent attorney you will be hiring for the purpose. Selecting a patent attorney is a tricky process. One of the most common mistakes that start-ups make is that they overvalue their patents and overspend for patent drafting. Always remember that your chief concern must be executing your idea rather than protecting it. Moreover, spending money for a patent makes sense only if you make more money from the patent than what you have spent for it.

            So, money spent for the patents should be kept at an optimal level. Ideally, the selected patent attorney must charge well within the budget allocated yet should be able to deliver with required amount of correctness. So you are advised to do a lot of groundwork before selecting your patent attorney. One method of reducing the cost would be to outsource to places which are reputed to perform, yet are affordable.

             Once after the patent attorney has been selected, the patent attorney most likely would take an invention disclosure interview with you. After a few days after the invention disclosure, the patent attorney sends you the first draft of the drafted patent. The patent attorney files your patent after he considers all your opinions about the first draft.

             If you want to buy more time before filing the patent, you are advised to file a provisional and then file the complete specification at least one year later.

             Once the patent has been filed, comes the long and arduous process of patent prosecution. In India, the specification is published after eighteen months of filing the patent. After this, the patent office accepts opposition to the grant of patents. Further, the applicant should request the examiner to examine the application.

              On average, a patent takes 2 to 5 years to get granted based on the jurisdiction. Once granted, the patent provides the owners 20 years of monopoly for practising the invention. The twenty years of monopoly is a fitting reward for the strenuous effort of coming up with the patentable idea and further, patenting the idea.

              It is significant that the patent right is a negative right. Patent right is a sword, not a shield. It does not protect you from infringement. However, it does provide you with the right to take legal action against people who infringe your product. The patent right helps you to stop others from making, using or selling your invention. Moreover, it enables you to obtain an injunction against other people who are already using your invention and even acquire money from infringers as compensation.

            Inventions result from investments of considerable amount of time, energy and money. Patents provide a channel for the inventors and the enterprises backing them to obtain high returns for the time, energy and money invested on their part. Intellectual property rights is what keeps world innovating. As Abraham Lincoln rightly said, ”Intellectual property feeds fuel of interest to the fire of genius.”

Author, Leo Paul Johnson is a patent engineer at IP ASTRA
 

Patenting process in the wake of the Government shutdown

So the US government has partially shut down for the first time in seventeen years, in a spate of recent events regarding the Affordable Care Act. Several government funded organizations have had to cease operations because of lack of funds. These are hard times indeed for the myriad government employees who have been furloughed in the wake of the shutdown. However, the United States Patent and Trademark Office (USPTO) has confirmed its decision to function normally using reserve funds from prior fee collections.

The reserve fund shall last for another four weeks, after which a majority of USPTO workers will have to be furloughed. Even then, USPTO shall function with a skeletal staff and accept new patent filings and patent maintenance payments.

In the case of Federal Courts, Federal courts shall be up and running off reserve funds. Parties are still allowed to make electronic filing. However, the patent litigation cases might witness some rescheduling. The US Supreme Court continues to operate as normal.

The US International Trade Commission is putting all investigations on hold during the shutdown. All near-term filing deadlines, for example, deadlines to file requests for review of preliminary rulings et cetera, shall be extended by the length of the shutdown and all hearings shall be postponed.

Author, Leo Paul Johnson, is a patent  engineer at  IP ASTRA