IP on the block
OUT-LAW Radio, 26/10/2006
A groundbreaking auction of intellectual property in New York
will try to put a price on ideas; hear from the man with the
hammer. Plus: the British Library gets tough on copyright.
A text transcription follows.
This transcript is for anyone with a hearing impairment or who
for any other reason cannot listen to the MP3 audio file.
The following is the text spoken by OUT-LAW journalist Matthew
Magee.
Hello and welcome to OUT-LAW Radio, the weekly podcast that
keeps you up-to-date on all the twists and turns in the world of
technology law.
Every week we bring you the latest news and in-depth features
that help you to make sense of the ever-changing laws that govern
technology today.
My name is Matthew Magee, and coming up on this week's show we
hear from the man behind a ground-breaking auction of intellectual
property taking place today in New York and we talk to the British
Library about its copyright manifesto.
But first, the news.
- IBM sues Amazon over patents;
- US publishers say Child Online Protection Act should be struck
down; and
- Youtube takes down 30,000 videos under Japanese pressure.
IBM is suing Amazon.com in a US Court alleging that the online
retailer infringes its patents. Two lawsuits have been filed in two
different Texas Courts, IBM said.
The company says that Amazon's system is built on technology
patented by it as long ago as 1990. It says that it has tried to
negotiate licensing deals with Amazon over a four-year period, but
that Amazon rejected its attempts to license the technology to
it.
Five IBM patents are in dispute, including ones that cover
electronic catalogues and online advertising.
A group of US online publishers and a lobby group is taking the
US Government to Court to challenge an eight-year-old law which it
says amounts to censorship of the internet. The challenge is to the
Child Online Protection Act (COPA), which became law in 1998.
Designed to protect children from viewing pornographic and
harmful content on the internet, the law makes allowing the
possibility of children seeing material which could be "harmful to
minors" a criminal act punishable by six-month prison terms and
$50,000 fines.
The law has never been used and its constitutionality has been
questioned by the Courts in the US. The current case is being taken
by the American Civil Liberties Union (ACLU) and is backed by a
variety of online publishers who argue that it breaches their first
constitutional amendment rights to freedom of expression.
A Japanese entertainment lobby group has succeeded in making
video sharing company Youtube delete 30,000 videos from its
website. The group may press further to attempt to make Youtube
pre-emptively block its material.
The Japan society for rights of authors, composers and
publishers searched Youtube, which was bought this month by Google
in a share deal worth $1.65 billion, and found nearly 30,000 files
which infringed the rights of its members.
The files included television shows, music videos and films
posted without the permission of 23 rights-holding companies. The
group demanded that the files be taken down, a demand which Youtube
met.
That was this week's OUT-LAW news
It is said that everything has its price, but the business of
putting a price tag on ideas has usually been an opaque one carried
out in the plush backrooms of corporate life where horse trading
and hard bargaining can be carried out in comfortable
seclusion.
The world of intellectual property deal making is a secret one,
but one company will later today attempt to let the light of
publicity transform the market in intellectual property.
In New York an IP auction will take place in the full glare of
the public eye in a move which could create a whole new market for
ideas that has never existed before.
The auctions are the brainchild of merchant bank Ocean Tomo's
auctions division. Andrew Ramer will be the man with the hammer
later today, and he explains that it all started with collecting
cars.
"The live auction idea actually came about through both the Vice
Chairman of Ocean Tomo whose name is Dean Becker and the CL of
Ocean Tomo James Malcowski, both of whom are avid car buyers and
they used to collect cars and one of the problems is that they
recognise that in selling intellectual property that there is a
huge issue with regard to the amount of time it takes to close a
transaction and so what they did was come up with the concept of
the auction which was a form that really would deliver a sense of
urgency and closure to the process."
The auction idea is so unusual because the world of patents and
IP and trade marks is such a private one. Companies usually try to
profit from their IP without ever actually selling it. But there is
a market for ideas, and all Ocean Tomo is doing is bringing it to
the surface. There are problems because usually conservatively
conducted deals end in a long period of due diligence, but Ramer is
confident he has found a way around that.
"The auction of IP and especially patents is the reverse of the
typical transaction, which is the typical transaction you might
come to agreement saying we ok we'll pay X amount for these set of
patents and then we are going to come in 60 days of due diligence
get everything finished and then we are ultimately you know going
to wire the funds. This is actually the reverse process, but
all that work has to be done up front so what we've done is we've
actually put in place entire without call diligence platform so
that all that can be cleaned up up front and if there are things
like chain of title issues that come up or other issues from the
file history, those are addressed prior to the action so that way,
the second the hammer comes down at auction, the transaction is
closed and we don't have to deal with kind of a latency and I guess
you know the taking of time that a lot of major companies do, the
lack of flow in some of the transactions."
This is not Ocean Tomo's first stab at an IP auction. That was
in spring in San Francisco, where the company sold $10million worth
of IP. That, says Ramer, proved the concept
"The goal of the first action really was more to prove that it
was a viable form and really you know true market place for
transferring IP."
Ramer now has 60 direct sellers compared to Spring's 27, 13
fortune 500 companies rather than six. Lined up to sell are
AT&T, Boeing, IBM, Motorola, Dow Chemical and 3com. So why are
these major blue chip companies adopting such a new approach to
their IP? Ramer says that it's because they can, because there has
never been an opportunity to sell intellectual property this
openly.
The sale is not just of patents, trade marks and web addresses.
Adding a paisley-patterned hatful of glamour – not to mention
controversy – is the sale of master recordings and rights to Jimi
Hendrix's music. The rights claimed by the estate of his manager
Michael Frank Jeffery are for sale. The only trouble is that some
of those rights are also claimed by Hendrix's own estate.
Ramer is going ahead with the sale, but says that special
conditions will apply.
"To the ones in the Hendrix transaction at least the main
catalogue will be held in escrow for up to a year. The buyer's
funds will be held in escrow and the buyer has up to a year to back
out of this transaction."
There is no doubt that the idea of the auctions is radical, and
that it looks as though it is taking off. The implications might be
wide ranging. Ramer might well be inventing a whole new market,
encouraging deals by providing a public benchmark of IP values.
"One of the problems with IP especially patents is because the
transactions are private and because they are behind closed doors,
no-one really knows what things are going for and so the fact that
these sales has now become much more public with 400 people in a
room including the press, can take notes on what was sold and for
how much, sure it absolutely is really setting kind of a price on
the sealing. In my opinion it will take about two or three
more auctions to become, you know I won't say the perfect gauge,
but much closer to the perfect gauge. The reason being the
market can tell you what it's worth but it only is 100% the right
number if you have all the appropriate buyers in that room or the
appropriate buyers have done their diligence and sometimes you do
and sometimes you don't."
And of course, with Hendrix material up for sale, with a heady
mix of controversy and the splashing of hard cash, who wouldn't be
attracted to the idea of an IP auction?
"You know if you really want to create the sense of urgency and
closure, having the excitement of the action here in the room and
400 or 500 of the World's leading IP professionals in the room,
that brings a certain dynamic – the market likes this. They like
the certainty of the transactions, they like the fact that you know
money wires within 20 days of the hammer coming down, and it really
has taken a transaction which normally might have taken 6, 9, 12,
18 months and it's made it really into days."
The British Library has a problem. As a coypright library it
recieves a copy of everything published in the UK it is
finding that increasingly the material it is charged with storing
is in digital form. Easy enough to store you might think? Well, not
if every piece of content comes with its own contract and
instructions for use. And not if some of those contracts stop the
library making copies for the use of disabled or virsually impaired
users or for archiving.
Ben White is the library's intellectual property manager. He
explains why copyright law needs to change to catch up.
"The last major round of copyright legislation is Copyright
Designs and Patents Act 1988 and since then we have had the web and
the internet has blown apart many of the understandings that there
have been around access to information."
The library wants to be able to store and process digital
artefacts for the same purposes as it does analogue ones. The
trouble is that the suppliers can, effectively, write their own
rules.
"In UK law for copyright works contracts take precidence over
copyright law. Whatever you sign in the contract actually
takes precidence over the Copyright Designs & Patents Act then
the digital age the large body of material that the British Library
for example is taking, this all comes with contracts. We have
looked at 30 licences which have been randomly selected, and 28
were more restrictive than the current copyright law would allow
for."
The British Library now wants the law to change so that it can
carry out its duties without breaking either copyright law or
disability legislation which demands fair access to material; it
also thinks the law needs to take more account of users' needs as
well as producers'.
"The kind of restrictions that you're seeing that come with
contracts are that you must allow them to archive the material,
there will be limitations around copying, particularly sort of fair
dealing copying or copying by the disabled and visually impaired so
we definitely see contracts as undermining the balance that exists
within copyright law. You know we have something like 17,500
electronic titles on 600 plus database which means that we cannot
negotiate licences on issues of around preservation and access on a
case by case basis. The only practical way that that can
happen is by an up-date in the law."
Ben White there.
That's all we have time for this week, thanks for listening.
Why not get in touch with OUT-LAW Radio? Do you have a legal
problem you would like us to discuss on air? Do you know of a
technology law story? We'd love to hear from you on radio@out-law.com.
Make sure you tune in next week; for now, goodbye
OUT-LAW Radio was produced and presented by Matthew Magee for
international law firm Pinsent Masons.
