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“Turn and face the strange” – Patent values fall to earth; PIPCOs, too

Changes, or should we say “ch-ch-changes,” channeling David Bowie, who reinvented himself repeatedly, have decimated the performance of most publicly held patent licensing companies.

Public IP licensing companies (PIPCOs) are changing their names and restructuring in an attempt to reframe themselves. The move appears part of an effort to shed the past, given that many of these businesses have significantly under-performed the S&P 500 Index.

With patent values at historic lows, a fresh perspective is welcome. But can PIPCOs turn the corner and successfully adapt to changing times (and valuations) in the patent space? Only some are likely to succeed.

A fuller discussion of public IP companies, “PIPCOs adapt to ch-changing times,” can be found in my “Intangible Investor” column in the September IAM magazine, out today. Subscribers can find the piece here. It includes companies that have changed their name or issued reverse splits of their stock. or otherwise reinvented themselves as operating companies with product sales.

A Closer Look

A closer look at the IP CloseUp 30 reveals several significant developments. One trend which financial analysts tend to question is rebranding; another is a reverse split, where a $0.50 stock can suddenly become a $4 one when investors are provided with fewer shares at a higher price.

To casual observers, it can appear that performance has taken off, when in fact the weak stock price is merely being obscured by a diminished public float. Many PIPCOs were formed by a merging a private enterprise into a public shell, which while not disreputable, often comes with baggage.

While one can appreciate different patent strategies – the need to monetize good assets through different business models – the perils of public ownership are ill-suited for the majority of companies whose primary focus is licensing.

Still, there are public and private patent licensing company successes, including Finjan, which has successfully fended off multiple IPRs, Network-1, inventor-owned PMC (Personalized Media Communications), which continues to license, and colleges like Northwestern and NYU, which have scored big on pharmaceutical licensing.  

Stanford University’s patent licensing take in shares of Google are said to be worth more than $300 million.

Image source: wikipedia.org

New certificate program in IAM for non-IP professionals is being offered by the Illinois Institute of Technology

Lawyers are no longer the only people interested in intellectual property rights.

IP underlies practically everything that developed nations invent, author or manufacture. Professionals who are under increasing pressure to understand, help manage and maximize return of patents, copyrights and trade secrets include people like bankers, engineers, paralegals, marketing professionals, administrators, as well as those responsible for financial oversight.

Now, they can get the valuable skills they need to help businesses compete in an ideas-based economy.

Illinois Institute of Technology has announced that it is offering the Intellectual Asset Management (IAM) online certificate program to help to equip a wide-range of professionals to handle key aspects of the IP value life-cycle, including how to acquire Intellectual Property (IP), maximize value, and engage in patent analytics important for success.

Earned Credits

The IAM program’s three courses, which can be completed in twelve weeks, are derived from the IP Management and Markets (IPMM) master’s degree program offered through IIT in conjunction with Chicago-Kent College of Law. While the IAM certificate is an end in itself, those wishing to go on to the IPMM master’s degree program will receive twelve earned credits towards it. For student perspectives about the IPMM program, go here.

The faculty for the IAM program includes Mickie A. Piatt, Program Director, Associate Professor of Law and Deputy Director of the Program in Intellectual Property Law, at Chicago-Kent College of Law. Professor Piatt is a leading IP educator.

Jackie Leimer, who teaches Acquiring IP, was formerly Associate General Counsel, Global Intellectual Property for Kraft Foods, where she managed all aspects of the company’s trademarks and patents, including clearance, dispute resolution and portfolio management (65,000 registrations and 3000 patent families).

Professor Anthony Trippe is the instructor for “Patent Analytics and Landscape Reports for Decision Making.” This course is the first-of-its-kind in patent analysis, and is part of the IP Management and Markets Masters Degree program at IIT. Professor Trippe is an IAM 300 leading IP strategist.

Speed of Change

“The U.S. and other economies are increasingly innovation-based and content-driven,” said Professor Piatt. “Keeping up with the speed of change in intellectual property rights is a best practice not just for lawyers, but for anyone in business, management, finance and other disciplines. It is fundamental to maximizing return on investment. The online IAM program is designed to facilitate understanding of IP dynamics, and how best to participate in the upside of IP rights.”

Graduate degrees and certificate programs for non-lawyers have become increasingly popular. Outside of the U.S., they are being offered in such places as Singapore, Tokyo, Strasbourg, France, Sweden, and London. Some leading U.S. universities are now getting involved.

For more information about the Intellectual Asset Management program, including how to register for the Fall classes, which start on September 10, go here. Early application is August 11.

Image source: iam.iit.edu

 

BofA, JPMChase & Morgan Stanley are top banks for patent loans

Bank of America, JP Morgan Chase and Morgan Stanley are the currently leaders in patent-based lending, according to a recent update of a 2015 study.

Relecura, Inc., a California patent research and analysis company, reports that Bank of American had 60,093 transactions for a total market share of 16.87%. JP Morgan Chase had 45,304 transactions for a 12.72% market share. Morgan Stanley, which was number 11 on the 2015 list, came in at third in 2017 with 24,244 loans and 6.80% of all transactions.

The total number of transactions between 2011 to 2016 were 947,907, consisting of 356,287 applications.

Long History

There is along history of IP-backed bank financing. Businesses of all sizes and types have used it to raise money using patents, copyrights and trademarks as collateral. Distressed businesses tend to use it the most, perhaps when other sources of capital dry up.

In 2015, the key companies securing loans using patents include General Motors, Avago (now Broadcom Limited), Alcatel Lucent and Kodak.

JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Wilmington Trust, and Deutsche Bank were the top banks doing IP backed financing deals. GE Capital also was an active lender.

Several governments have been major IP lenders, including the China Development Bank, which in 2014 pledged the equivalent of $1.3 billion USD agains a portfolio of 134 patent and 34 trademarks. Korea and Singapore have also been active IP lenders.

Most Active Borrowers

Key sectors doing the borrowing include software and hardware companies. Other active sectors employing IP backed financing include digital data processing, digital communication, IT methods for management, telecommunication, semiconductors, and television & video transmission.

An excellent infographic summary of bank lending on patents can be found, here.

For the full May 2015 presentation, go here.

Image source: Relecura, Inc.

Qualcomm counter-offensive reminds NY Times readers who put the ‘smart’ in smartphone

Qualcomm is the first known patent licensor to tout its invention prowess in a New York Times ad directed at the business community. 

One of the world’s most successful licensing businesses reminded Times readers – in a sparsely worded, full-page ad that ran in the business section on July 17 – that it “invented the essential technologies that make your smartphone so indispensable.”

“”You know how you’re in love with your smartphone?,” ran the headline in big block letters. “That’s just the beginning.”

Fighting Back

The ad is a brilliant counter offensive move – one that has been much needed among patent licensors. It reminds diverse audiences, including the public, lawmakers and the courts, as well as its and other shareholders, that Qualcomm technology is ubiquitous.

Its inventions may currently appear most dramatically in smartphones but will soon be almost everywhere through IoT, as Qualcomm “leads the world to 5G [technology]”.

Qualcomm’s $23.5 billion in 2016 revenue was driven primarily by patent licensing.

This exercise in self-promotion, sadly, is necessary to remind audiences that inventions matter, and that Apple, Samsung, et al. simply do not have all of the innovation they need to sell products.

If licensees are not going to pay fairly for inventions that make their products special, licensors, like Qualcomm, will remind audiences about the technology that does.

Qualcomm can use the positive visibility. In January, the Federal Trade Commission filed a lawsuit against Qualcomm, accusing the company of using anticompetitive tactics to maintain its monopoly on a key semiconductor used in mobile phones.

“We put the ‘smart’ in smartphones.”

Days later, Apple, Qualcomm’s longtime partner, sued the company over what it said was $1 billion in withheld rebates. In the lawsuit, filed in Federal District Court for the Southern District of California, in San Diego (where Qualcomm’s HQ is located), Apple said the money had been promised in conjunction with an agreement not to buy chips from other suppliers or to divulge Qualcomm’s intellectual property licensing practices.

Invention Credit

The Times ad concludes with the url: qualcomm.com/weinvent. It leads to a thoughtful one-minute video that essentially says: “We’re not the name you think of when you think of smart phones, but we put the ‘smart’ in them.”

The Qualcomm ad reminds the world that Apple and other handset makers would not be what they are without Qualcomm inventions – which is true enough.

“Qualcomm – Why you love your smart phone.”

Go here to see a web version of the print ad.

Image source: qualcomm.com; nytimes.com

 

Apple is seeking to cut license royalties paid to record labels

While the share of revenue from streaming paid to record labels and recording artists is rising, Apple Inc., among the fairest licensees in on-line music, is now seeking to reduce record labels’ share of revenue from streaming.

Bloomberg reports that the record labels’ deal with Apple were expected to expire at the end of June, though they are likely to be extended if the parties can’t agree on new terms, according to the people who asked not to be identified.

“Part of negotiations is to revise the iPhone maker’s overall relationship with the music industry.”

The negotiations would bring number two Apple closer to the rate industry streaming leader Spotify Ltd. pays labels, and allow both sides to adjust to the new realities of the music industry. Streaming services have been a source of renewed hope following a decade of decline in the digital age.

Patent holders may believe there is an element of deja vu taking place in music content. Once rock solid copyrights are now subject to renegotiation and diminished revenue because of lost leverage due to lower valuations and easier access. A key will be finding what will make copyrights more relevant again, and creating more competition among streaming services for content.

More Optimistic

Record labels are now more optimistic about the future health of their industry, which grew 5.9 percent last year worldwide thanks to paid streaming services Spotify and Apple Music. They recently negotiated a new deal with Spotify further lowering their take from the service, provided Spotify’s growth continues.

“Apple initially overpaid to placate the labels,” says Bloomberg, “who were concerned Apple Music would cripple or cannibalize iTunes, a major source of revenue.”

For the full Bloomberg article, go here.

Sales vs. Streams 

Though online sales of music have plummeted over the past few years, they still account for 24 percent of sales in the U.S., according to the Recording Industry Association of America. Vinyl record sales also are up but they are still limited to a specialty audience, while CD sale are way down.

According to Billboard, streaming led the U.S. music industry to its first back-to-back yearly growth this millennium and in the first half of 2016 was the single ­highest source of revenue in the U.S. recorded-music industry, ­bringing in $1.61 billion. All three major labels — Universal, Sony and Warner — posted streaming-driven double-digit percent boosts in earnings throughout the year.

The Trichordist, a publication devoted to “Artists for an Ethical and Sustainable Internet,” reports that Spotify was paying .00521 back in 2014, two years later the aggregate net average per play has dropped to .00437 a reduction of 16%.

                     Apple Music generates 7% of all streams and 13% of revenue

YouTube now has their licensed, subscription service (formerly YouTube Red) represented in these numbers as opposed to the Artist Channel and Content ID numbers we used last time. Just looking at the new YouTube subscription service numbers isolated here, they generate over 21% of all licensed audio streams, but less than 4% of revenue! By comparison Apple Music generates 7% of all streams and 13% of revenue.

Apple sits in the sweet spot, generating the second largest amount of streaming revenue with a per stream rate .00735, nearly double what Spotify is paying. But, Spotify has a near monopoly on streaming market share dominating 63% of all streams and 69% of all streaming revenue.

The top 10 streamers account for 99% of all streaming revenue.

New Technology, New Values

IP rights holders, including those with patents and trademarks, need to think through where they fit in the current digital scheme of things, and how much should be expected in a world that finds not paying for others’ intellectual property increasingly acceptable.

For patent holders, the streaming/copyright battle could be the proverbial canary in the mine.

Image source: fortune.com

Gene-editing break-through: can a collision of science, ethics and (patent) ownership be avoided?

The USPTO decided in February that the rightful intellectual property owner of CRISPR in eukaryotes, a time-saving tool that makes it cheaper and easier to edit gene sequences, should be Feng Zhang, Ph.D., and The Broad Institute of MIT and Harvard, not Jennifer Doudna, Ph.D., and the University of California, Berkley, who had conducted the earlier research.

However, Doudna and her team, which included Emmanuelle Charpentier, now with Max Planck Institute in Berlin, are on track to obtain a European patent for CRISPR. They recently filed an appeal against the USPTO’s decision, setting the stage for a showdown.

CRISPR will allow an organism’s DNA to become “almost as editable as a simple piece of text.” Using CRISPR, scientists will have the capacity to alter, insert and delete genes in plants, animals and, even in humans.

The implications are very big indeed, both in terms of science and profits, and, especially, ethics. Universities and businesses stand to generate potentially billions of dollars. Medical research will never be the same.

[For a good description of how CRISPR-Cas9 works, go here. ]

The battle lines are being drawn to determine the rightful owner of aspects of the development: Berkeley and Dr. Charpentier vs. Broad Institute/MIT and Harvard. It could mean an eventual pay-out of billions of dollars.

World-Changing

In 2012, Cal biochemistry and molecular biology professor Jennifer Doudna and microbiologist Emmanuelle Charpentier, now of the Max Planck Institute, changed the world. They invented CRISPR-Cas9 (as opposed to eukaryotes, which is any organism with a nucleus enclosed in membranes), a gene editing tool that uses a protein found in Streptococcus bacteria to chop up and rearrange viral DNA with precision.

“The implications of the technology were immediately apparent, astonishing, and perhaps just a wee bit scary.” 

“The implications of the technology were immediately apparent, astonishing, and perhaps just a wee bit scary,” reports California Magazine. “Ultimately, CRISPR applications might be developed to wipe out genetic diseases, produce bespoke bacteria that could pump out everything from hormones to biofuels, and engineer exotic animal chimeras.”

It is one thing to use an editor to eliminate genetic mutations, such as those found in sickle-cell anemia, writes the Wall Street Journal, however, “it is quite another thing to edit the germ line—that is, to make changes that would be passed on to future offspring.

“Would it be permissible, Ms. Doudna asks, to lower an unborn child’s risk of Alzheimer’s disease? If so, would it also be permissible to edit for greater intelligence or athleticism or even, say, for a particular hair color? While all such uses would ultimately require regulatory and institutional review, it is the notion of building a social consensus that is particularly fraught.”

The three main researchers involved in these patent cases have developed their own companies that focus on CRISPR: Doudna developed Intellia Therapeutics, Zhang developed Editas Medicine and Charpentier, now at a Director at Max Planck’s Infection Biology, developed CRISPR Therapeutics. So, both universities and businesses stand to benefit.

These university-based cases often result in sharing through cross-licensing. Remicade, for example, a highly successful biologic for treating auto-immune responses like Crohn’s disease which has generated over a $1 billion so far, has multiple university participants, but is primarily owned by NYU.

Who Benefits?

Yet another question that is raised: Is it right for highly endowed universities like Harvard to get richer as a result of government-funded research? Almost 70% of university research is provided by the U.S. government. Harvard’s 2016 endowment was $36.4 billion.

With the potential impact on society so great, patents may play much more than a financial role. They depending who controls them, they may turn out to be the lynch-pin for ethical application of advanced gene-editing.

In the most interesting chapters of her new book, “A Crack in Creation,” Ms. Doudna wrestles with her ambivalence about the tool she has helped create. She concludes that she no longer feels comfortable operating inside her “familiar scientific bubble”: She must take on a role as a public citizen and address not just the power of gene editing but the ethics of it. At stake, she believes, is “nothing less than the future of our world.”

Image source: bloomberg.com; rsb.org.uk

Drops (& gains) in patent grants to top holders reflect changing times

Every picture tells a story. So does each increase or decrease in the number of U.S. patents major businesses receive over the prior year.

The recently published IPO Top 300 patent recipients for 2016 encourages scrutiny. While overall grants were up 1.6% over 2015, there were several unexpected swings, and a number of notable gainers and losers.

Only four of the top ten U.S. patent recipients in 2016 were foreign-based companies, down from 2011, when eight out of the top ten recipients were non-U.S. It is difficult to tell if that change reflects more filing on the part of U.S. companies or less interest on the part of foreign filers. Probably, the latter.

Those receiving fewer patents in 2016 over 2015 include Toshiba, -33.3%, GM Global Technology, -14.8%, Johnson & Johnson, -14.1%. Broadcom, -24.3%, Blackberry, -28.1%, and DuPont, -35.5%. ABB Ltd., down 142%, was still granted 317 patents. NXP Semiconductor, which was acquired by Qualcomm in the fourth quarter, was down 70.3% in U.S. patents received.

Multiple Factors

Depending on the company and industry the grant losses can be attributed to several factors, including reduced R&D budgets; a lower regard for the value of patents due to changes in the law and decisions in the courts; reduced concern over patent counts; and the desire on the part of more companies to obtain fewer, better quality patents.

“It is difficult to attribute reasons or trends as to why a company may have had more or less patents issued from one year to the next,” Brian Hinman, Chief IP Officer for Philips told IP CloseUp. “Patents issuing in 2015 may still be reflecting the impact of the patent application filing surge just prior to enactment of the AIA hence the decline in 2016.  

“We also may be seeing the impact of more companies deciding to maintain their innovation as trade secrets especially in light of enactment of the DTSA [Defend Trade Secrets Act].”

It should be noted that some companies choose to spread their patent grants among multiple entities, obscuring the actual number received. Companies which had been actively filing software and business method patents in previous years, are likely to be doing less of that, now that those types of patents are more difficult to obtain and uphold.

Notable Increases

On the upside, among the top 21 recipients, Intel was up 30.1%, Taiwan Semiconductor & Manufacturing, 28.6% and Ford Global Technologies, 27.6%.  Amazon, 15th on the overall patent recipient list for 2016 with 1,662 grants, was up 46.3 % over 2015. This may reflect a new seriousness about entering or acquiring other businesses.

Other notable gainers include Nokia, up 73.8%, GlobalFoundries, up 136.5% and Hyundai Motor Co., up 39.1%. (GlobalFoundries acquired IBM Microelectronics in 2015.)

Among financial institutions, Bank of America was up 20.8%, having received 279 patents.  Perennial annual U.S. patent leader IBM, was up 7.8%, receiving 8,023 patents, the most of any company.

For the complete list of top 300 patent recipients, go here 

For an interactive list of top 50 assignees, go here.

Image source: statista.com; wikepedia.com; public.tableau.com

Up to $600 billion in U.S. IP is stolen annually by foreigners, says report

An IP Commission study finds that foreign sources, especially China, are responsible for the bulk U.S. theft.

Counterfeit goods, pirated software, and theft of trade secrets together represent a “systematic threat” to the US economy of between $225 billion and $600 billion annually, according to the findings of a 2017 research report from the bi-partisan IP Commission, The Theft of American Intellectual Property: Reassessments of the Challenge and United States Policy.

The massive theft of American IP—from companies and universities across the country, from U.S. labs to defense contractors, from banks to software companies—threatens the nation’s security, says the report.

The research, and update of a 2013 report, is the work of the bi-partisan IP Commission and was published by the National Bureau of Asian Research (NBR) NBR conducts advanced independent research on strategic, political, economic and other issues affecting U.S. relations with Asia, including China and Russia.

The Intangible Investor in June’s IAM features a full perspective on the report, “Foreign sources responsible for most IP theft.” Subscribers can find a copy here.

Pioneering Research

Kudos to the IP Commission for establishing a beachhead in the global war to combat IP theft and cyber crime. Its pioneering research provides American and other lawmakers, businesses, investors and the public, with data about IP infringement that are cannot be ignored.

However, the report falls short. Identifying and stopping infringement, including cyber-espionage, should not be restricted to sources outside of the U.S.  The IP Commission’s research zeros in on foreign counterfeit, trade secret and copyright violations. It does not account for increasing domestic patent infringement and copyright abuses, which have profoundly affected the software, recording and other industries, and impacted U.S. jobs.

To be fair, this IP Commission’s focus is foreign IP threats, and it is a daunting task to estimate the financial impact of domestic invention theft on U.S. businesses – not just what gets reported in the press about settlements and licenses.

But speaking to a range of IP attorneys and holders, it becomes clear that much IP abuse comes from domestic IT businesses, Internet providers, streaming services, individuals and others that know they are unlikely to be caught infringing rights or will have to pay for a license. By the IP Commissions own admission, IP theft is less benign than it might appear.

The theft of American IP is not just the ‘greatest transfer of wealth in human history,’ as General Keith Alexander put it; IP theft undercuts the primary competitive advantage of American business—the capacity for innovation.

Inspiration and a Challenge

The IP Commission’s timely report is a challenge to IP holders, and lawmakers alike who are concerned about innovation and commerce. It is a call to examine the source, type, and level of domestic IP rights theft, including patents, on SMEs, inventors, and universities, and how they affect the economy now and are likely to in the future.

The full 24-page update, The Theft of American Intellectual Property: Reassessments of the Challenge of the United States Policy, is well worth reading. Visit  www.ipcommission.org.

The original 2013 report, Report of the Commission on the Theft of American Intellectual Property, is also available and useful for comparison. 

Image source: ipcommission.org; linkedin.com

Startup mentored by Brody/Berman and Center for IP Understanding (CIPU) is LES Business Plan Winner

Takachar, a small business working with farmers in Kenya to develop an inexpensive, ecologic method for turning biomass (waste) into fuel, is the Global Winner of the 2017 Licensing Executives Society (LES) Business Plan Competition.

The company, led by Kevin S. Kung, an MIT doctoral student, was mentored in the Business Plan Competition by Bruce Berman, CEO of Brody Berman Associates and President of the Center for Intellectual Property Understanding (CIPU), an independent, non-profit.

Takachar’s unique IP strategy provides farmers free open-source technology, followed by patents licensed to the company exclusively by MIT, trade secrets and trademarks. The goal is to provide affordable franchises in Africa, India and other parts of the world, where economical sources of fuel are crucial to the success of small farms and disposing biomass is a challenge.

The Global LES Business Plan winner receives a $5,000 cash award and in-kind IP support. For more information about Takachar, go here.

Second Global Winner

Berman also mentored the 2016 LES Business Plan global winner, Fruti-Cycle Project, an Ugandan start-up that provides affordable, portable refrigeration for delivering produce to market faster and with less spoilage. For more information about Fruti-Cycle, go here.

“It is a privilege to work with innovative and ambitious young people, like Kevin and Nelson,” said Berman, who has 25 years of IP consulting experience. “They have the right combination of vision, technical skill and tenacity to turn original ideas into businesses that provide timely products and solutions. Takachar and Fruti-Cycle Project are good examples of utilizing integrated IP rights strategies in diverse parts of the world.”

Takachar Strategy

Image source: Takachar

“NPEs generate higher damages awards,” 2017 litigation study finds

The disparity in patent damages awards between non-practicing and practicing entities favors NPEs and is growing wider. 

These findings, counter-intuitive to some, are part of the useful, just-published report from PwC, 2017 Patent Litigation Study – Change on the Horizon.

PwC’s analysis shows the continuation of a trend that began in the early 2000s: significantly higher damages awarded to NPEs relative to practicing entities.

The median damages award for NPEs was significantly higher than PEs in the last 15 years. While this disparity had narrowed to about 1.6x in the 2007–2011 period, in the most recent five-year period, the NPE median damages award climbed to 3.8x the median for practicing entities.

It is not clear if the findings are a result of NPEs owning better quality, more highly infringed patents than PEs, or that NPEs are simply more adept at enforcing them.

“The disparity has perplexed us for some time,” stated Chris Barry, one of the 2017 Litigation Study’s authors and a partner in PwC’s Forensics Practice. “Operating business that asserts patents typically are more interested injunctive relieve – halting a competitor’s product sales – than in generating revenue. Most patent cases are dismissed on summary judgment or settled.”

Higher Success Rate

Over a 20 year period from 1997 to 2016, PE’s have a higher success rate at trial than NPEs at trial, 36% vs. 25%, but a significantly lower recovery rate, $4.9 million vs. $11.5 million. For the 2012-2016 period, NPEs out generated PEs in damages by almost 4 to 1 (see above infograph). 

Among NPEs, universities fare best at trial with median damages awards of $16.3M, as opposed to $13M for NPEs and just $6.7M for individual inventors who enforce.

No information on trial costs was provided, although AIPLA tracks them by the size of the case. There also was no tracking of PTAB results or influence on patent litigation. Many law firms address this, as does Unified Patents.

Despite a handful of large, headline-grabbing patent damages awards – most of which are never paid – patent trials have been flat for almost three decades, with a little more than 100 disputes going to trial annually.

There are an estimated two million plus active U.S. patents.

For the full 2017 patent litigation report, go here.

 

Image source: PwC

 

New book: tech elites’ disregard for privacy & IP must be managed

Can Internet monopolies – adept at providing at providing information – be prevented from violating the rights of individuals, businesses and IP holders, and impeding innovation?

They can if they are regulated like utilities, says Jonathan Taplin in his new book, Move Fast and Break Things.

In 2009, Mark Zuckerberg told Business Insider publisher and former Wall Street analyst Henry Bloget, “Move fast and break things is Facebook’s prime directive to developers. Unless you are breaking stuff,” Zuckerberg said, “you are not moving fast enough.”

Eight years later, this Facebook mantra has taken on a darker meaning. A new book by Hollywood producer and former USC Annenberg Innovation Lab director, Taplin (Mean Streets, The Last Waltz), offers a portrait of technology giants without restraints, routinely violating the rights of creatives, consumers and innovators, and propping up their own shares at the expense of investing in the future.

Subtitled How Facebook, Google and Amazon Cornered Culture and Under-mined Democracy, Move Fast and Break Things dissects the inordinate power of a handful of the popular companies and their founders, and what it means for culture, innovation, and personal freedom.

What Taplin does best is connect the dots by distinguishing between true break-through ideas and the ability to provide and mine data, especially personal information, for profit and dominate markets. The confluence of vision, ego, and wealth is for Taplin a dangerous mix that needs to be carefully watched if not closely monitored. Copyright and patent holders need to be especially wary.

Don’t Ask Permission

“The co-founder of YouTube, Chad Hurley, was a PayPal alumnus, schooled in Peter Thiel’s philosophy,” writes Taplin. “He built his company on the same ‘don’t ask permission’ ethic the Larry Page had embraced… ‘Who will stop me?’ [A phrase which can be found in Ayn Rand’s controversial novel, The Fountainhead.] This became the center tenet of Internet disrupters, from Thiel’s PayPal right up to Travis Kalanick’s Uber.”

Taplin writes that Google, who championed the tagline for its corporate code of conduct, “Do no evil,” controls 88% of online searches and search advertising, while Facebook has 77% market share in social media and Amazon a 70% share of e-book sales. He does not consider Apple a monopoly because its main hardware business has many competitors.

“The tech elites jealous guarding of its own monopoly platforms,” says Taplin, “is built upon a blatant disregard for the artist’s intellectual property.”

“More people than ever are listening to music, reading books, and watching movies, but the revenue flowing to the creators of that content is decreasing while the revenue flowing to the big four platforms is increasing. Each of these platforms presents a different challenge for creators. Google and YouTube are ad-supported ‘free-riders’ driven by a permission-less philosophy.”

Permission-less free-riding, or “efficient infringement” in has also come to dominate other parts of the IP workplace, rendering simple patent licenses more arduous than ever.

Consent Decree

How does Taplin propose we prevent Internet monopolies from violating the rights of individuals, businesses and IP holders, and impeding innovation? You regulate them like utilities.

It would be very difficult for many people and businesses to live without Amazon, Google, YouTube and Facebook, but it is becoming impossible for many who produce intellectual property to live with them.

This is not something that their founders and shareholders want to hear, but it may be inevitable. Europe is more apt to regulate BigTech than the U.S. – and it is not mere jealousy. If Google, for example, is indeed a monopoly, Taplin, a former tour manager for Bob Dylan, asks, would a consent decree like the one that the government made Bell Labs enter into in 1956 work? He believes it would.

Easy Ride is Over

The Guardian, the British daily, said “Move Fast and Break Things is a timely and useful book because it provides an antidote to the self-serving narrative energetically cultivated by the digital monopolies. They have had an easy ride for too long and democracies will, sooner or later, have to rein them in.”

It would be very difficult for many people and businesses to live without Amazon, Google, YouTube and Facebook, but it is becoming virtually impossible for many who produce intellectual property to live with them.

My full review of Jonathan Taplin’s new book can be found here, on IP Watchdog.

For more information or to buy Move Fast and Break Things, go here.

For a free preview chapter (via Google), go here.

Image source: jontaplin.com

 

97% of Europeans regard IP rights favorably; 41% ages 15-24 believe it is sometimes OK to buy counterfeits

When it comes to intellectual property rights Europeans are highly respectful, except among the young, where buying counterfeits has gown.

That is the primary take-away of an extensive European Community survey of attitudes toward IP rights delivered recently. The findings show that 97% of Europeans believe that IP should be respected, and that inventors, creators, and performing artists need to be paid for their work.

In contrast to the overall positive regard for IP rights, however, 41 per cent of young Europeans, ages 15 to 24, said they believed it was acceptable to buy counterfeits if the original product was too expensive. 15% of those surveyed in that age group said that they had intentionally purchased a counterfeit product in the past 12 months, 9% higher than in a similar 2013 study conducted by the European Union Intellectual Property Office (EUIPO).

“European Citizens and Intellectual Property: Perception, Awareness and Behavior,” a 205-page research report, updates the first EUIPO provides further evidence of how IP rights are regarded by EU citizens at a time when encouraging innovation and creativity is increasingly the focus of economic policy.

“In line with the 2013 results, people do not always act in line with their stated position,” said EUIPO Executive Director, Antonio Campinos, in summarizing the findings. “The key 15-24 age group seems to have become less convinced that fake goods are damaging and is buying more counterfeit goods, mainly for price reasons.”

Significant Sample

“European Citizens and Intellectual Property” surveyed people across all 28 EU Member States about their perceptions of intellectual property survey. It consolidates results of more than 26,000 interviews and confirms the global picture assessed in the EUIPO’s 2013 research.

“Even during a period of economic crisis when household budgets have come under pressure,” the report concluded, “the vast majority of respondents agree that it is important that inventors, creators, and performing artists can protect their rights and be paid for their work.”

Eighty-three percent said they prefer to access digital content through legal or authorized services whenever there is an affordable option available, and 71 percent of those admitting to using illegal sources say they would stop, if they could access affordable alternative options.

Confusion is growing about what constitutes a legal source. In 2016, 24 percent of respondents, five percentage points more than in 2013, wondered if an online source was legal, rising to 41 percent among young people.

Half of the Europeans queried believe that strict protection of IP rights may, in fact, curb innovation, and more than half feel that IP principles are not adapted to the Internet.

Neither the 2017 survey and previous study focused on counterfeits and copyrighted content, or examine attitudes towards patents or trade secrets.

An executive summary for “European Citizens and Intellectual Property” can be found here.

For the full 2017 EUIPO IP perception study, go here.

Image source: euipo.europa.eu

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