AS-IS: Ecommerce, Internet, Software & Technology Law and Contracts

Imagine working in an industry with no intellectual property protection at all.  Unlike the book, music, and high tech industries, you couldn't use the law to shut down an infringer who was ripping off your products.

How would you stay in business?

Ask the fashion design business.  That's what BusinessWeek did.  According to BW, garment designs are not copyrightable (but "counterfeit garments ... right down to the label ... are illegal").

BW found these strategies:

1. Protect what you can under existing intellectual property law - at the edge of IP, so to speak.  Diane Von Furstenberg has begun protecting her copyrights to fabric patterns (as opposed to the entire garment itself), as art.  Shoe designer Stuart Weitzman patented a shoe's buckle and ornamentation.  Both Von Furstenberg and Weizman have sued to enforce their intellectual property rights.  (Similarly, blue jeans companies have for years registered and sued to protect their trademarks in the ornamental stitching on the back pockets of their jeans.  For example, see Levi Strauss's U.S. trademark registration number 1,139,254.)

2. Use time to market to your advantage.  According to BusinessWeek, Designer Halston now makes its fashions available quickly at Net-a-Porter.com, to speed ahead of the inevitable copycats. Many industries have used this strategy successfully over the years, even the U.S. media industries in the late 19th century.  (See Stephen Breyer, "The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs," 84 Harvard Law Review 281 (1970).

3. Use "natural intellectual property" -- materials or processes that others simply can't copy, or that would be too expensive to knock-off cheaply.  For example, Weitzman is making shoe heels out of steel and titanium, which are too costly for low-price imitators.  When imitators try to use cheaper wooden materials, "the heels will snap."

4. Change the law.  The designers are supporting a proposed Design Piracy Prohibition Act.  But Congress is deliberative, and that path is slow and risky.  

Posted by Harry at 01:03 PM | Permalink

Intellectual property (such as patents, copyrights, trademarks, and domain names, or “IP”) is becoming recognized as a new and separate asset class.  At the same time, a new group of intermediaries and brokers has emerged to facilitate deals.  Most of these companies focus on patents, because that’s where the money is, thanks to a series of rulings from the Federal Circuit upholding patent rights.

Some of the players include:

IP bankers.  These include Ocean Tomo, which introduced live public auctions of patent portfolios.  According to its web site, Ocean Tomo’s April 2006 auction resulted in over $8.5 million of transactions and a follow-on auction in October 2006 resulted in over $23 million of transactions.  Its next auction is scheduled in April 2007 in Chicago.  Inflexion Point Strategy is a more private shop run by Ron Laurie, an industry veteran and former intellectual property partner at the large law firm, Skadden Arps.

Online exchanges.  These include yet2.com in Massachusetts, Tynax  and 2xfr  by PatentCafe in California.  My understanding is that the transactions are too large and complex to be completed fully online, and that the online exchanges serve more as a meeting ground for deals that get documented and completed offline.  Other exchanges are listed here.

Some online exchanges focus instead on incentivizing new research efforts, rather than on transactions for existing intellectual property, .  These include Innocentive and Ninesigma.

Some IP transactions are even completed over eBay for patents, domain names and entire websites.  Dedicated exchanges exist for domain name resales, such as Sedo.com  and The Domain Name Aftermarket (offered by one of the leading domain name registrars, GoDaddy.com).

IP brokers.  These include IMC Licensing, a sell-side broker of consumer brand (trademark) rights for licensing, and Gordon Brothers Group on both the buy and sell side.  Another broker, breedersrights.com, specializes in plant patents and plant breeding rights.

IP brokers generally focus on IP assets, as compared to traditional investment banks and business brokers (such as brokers who are members of the International Business Brokers Association or the California Association of Business Brokers) who handle sales of stock or the entire spectrum of assets of a business or company.

Of course, literary, motion picture and sports agents (such as International Creative Management, Inc. (ICM)  and Creative Artists Agency) have operated for years as brokers of copyrights to books, movies, songs, music and other entertainment and sports content. The movie Jerry Maguire, with its famous line “Show me the money,” is the story of a frenetic sports agent.

Brokers for patents should be distinguished from  “inventor agents,” “invention developers” or “invention promoters,” which are regulated under the laws of several states, including California (see California Business and Professions Code Section 22370 and following), due to consumer issues faced by individual inventors for invention marketing services.  (Articles for individual inventors seeking to protect themselves are available from Inventor’s Digest magazine and the United Inventors Association.) 

IP Lenders / IP Securitization.  Other companies, such as Licent Capital and Copient Capital, arrange for loans based on intellectual property or a royalty stream from a license agreement.  On a more sophisticated level, IP portfolios and their royalties (e.g., from music catalogs) have been securitized as collateral for publicly traded debt.  For more, see Securitization News.  This site  offers older articles specifically about IP securitization.

Valuation and Escrow Consultants.  As with real estate, many firms offer valuation and escrow services.  IP auctioneer Ocean Tomo also provides due diligence and valuation services, as well as “patent ratings,” a statistical measure of patent portfolio quality.  Some of the domain name exchanges include a basic escrow as part of the transaction. Royaltystat.com  offers a subscription-based database of royalty rates and license agreements compiled from the U.S. Securities and Exchange Commission (SEC) Edgar Archive.

Buyers.  There are many new buyers too.  Some of the new buyers have been labeled as “patent trolls” because they purchase or create patent rights solely for the purpose of licensing them to third parties, often threatening or pursuing litigation to extract licensing royalties from operating companies.  Recently, some buyers have been purchasing rights to older music and seeking royalties for its use in sampled music; they’ve been termed “sample trolls.”

The companies and resources listed above are for information only, not endorsement.

Posted by Harry at 01:38 PM | Permalink

Welcome to the AS-IS blog, where I plan to discuss ecommerce, internet, software and technology contracts and licenses, as well as the laws affecting internet and software companies, both large and small.  My focus is on California law and Silicon Valley.

 This blog is sponsored by the Boadwee Law Office.  Please visit that site to learn more about me (attorney Harry Boadwee).

Posted by Harry at 10:53 PM | Permalink