From the monthly archives:

August 2009

IP ownership issues not just for Skype and eBay

by Andrew Watson on 27 August 2009

The recent Skype / eBay story around ownership flags up all sorts of things in what we see in our line of work around IP strategy: IP ownership issues as a rule are always present, and can be very, very costly to fix (but very cheap to fix if caught early).

A short Timeline

2001Kazaa, a p2p filesharing technology, released (which went on to some IP legal problems of its own).

2002 – Skype founded by Kazaa creators

2003 – initial release of Skype

2005 – eBay buys Skype in a $2.6bn deal (totaling 3.1bn through to today)

2009 – eBay announces that Skype will IPO and be valued at over $2bn. Joltid, a company set up by Skype founders claims that eBay/Skype only has a license to a core technology used by Skype to work. eBay must pay money for a continuing license or face rewriting its core code while keeping its millions of users happy (no small task).

The stakes

Skype has 480 million registered users its revenues in the last quarter were $170m. eBay was thought to be able to use Skype to produce gains with its auction site on high end items, but any added benefits to the eBay site have not materialized.

The Guardian states that the Joltid/eBay dispute is driven by Niklas Zennström – one of Skype’s creators and owner of Joltid – as a negotiation strategy in an effort to buy the company back.

The technology

Skype’s founders and key developers know p2p. They helped develop Kazaa before tackling VoIP with Skype and then went on to found Joost. The core piece of code at stake between Skype and Joltid is a product called Global Index:

Global Index™. Global Index is the world’s most technologically advanced, scalable and field-tested peer-to-peer technology. Global Index creates a self-organizing and self-healing distributed storage, transport and data object management system that does away with the costs of traditional datacenter solutions and enables a range of applications from communications to broadcasting and beyond.

The biggest implementation of Global Index to date has been Skype where Global Index enables peer-to-peer voice, video and chat communications.

They are also patent holders as well:

Joltid also holds a comprehensive portfolio of intellectual property including US patent 7,480,658, covering distributed database systems and co-ordinated decentralized peer-to-peer computing.

I did a quick search of esp@cenet and the USPTO website (including assignments database) but only found one Joltid patent, which is the 7,480,658 patent mentioned above. It was granted in January of 2009, and if that’s the core of their litigation on the patent side of things, they should hope it’s a good one.

The dispute

Joltid claim that they only licensed their technology to Skype, and that the license has terminated.  This means that eBay paid billions for Skype without sorting out the licensing issues or having any sort of strategy around re-writing the core Skype code. The funny thing is that this is not the first time that there has been an ownership dispute over this same technology.

The end result is that eBay is stuck litigating in the English courts while it scrambles around for a solution to this ownership problem. It is much like facing down a patent troll or a competitor when going to IPO. The immediate parallel that comes to mind is Wolfson.

Edinburgh based Wolfson Electronics was set to go for IPO in 2003 in the middle of a down market for tech stocks. The previous year it posted £20.2m in turnover, with £2.4m coming from the US and expected to float for £213 million. Only days before Wolfson prepared to go public with its CEO book-building across Europe, Wolfson’s competitor in the US, Cirrus Logic, files a patent infringement suit. The suit delays the IPO, but only slightly as a result of a quick response and a clear presentation of the IP risks by Wolfson. They achieve a high price despite a tough climate for tech stocks.

It seems to me that even if eBay found out they made a mistake after their initial purchase of Skype by not securing a formal license and ownership of the relevant IP, they should have at least been planning quite heavily for a dispute later on, particularly at IPO. Like Wolfson, they should have had an answer waiting.

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IP strategy at Northwestern

by Andrew Watson on 17 August 2009

I’ve got an email alert for “IP strategy”, and had an interesting hit come up related to our ongoing discussion of teaching the fundamentals of IP in a business context. This time, not in an MBA programme, but rather as part of training lawyers. The law school at Northwestern offers a concentration in “Business Enterprise” as part of their JD (the three year postgraduate US law degree), which is gained by taking a number of approved electives. The one that caught my eye (and my email alert) is naturally:

Intellectual Property Strategy: Domestic and Global Perspectives

What a cool course title!  At law school (and in my undergraduate) I always got excited reading through the course catalog — something about all the possibilities for learning new things, almost seemingly without limit.  This time, I didn’t see a full course description, but here’s what I would cover or expect to see in a course with this kind of scope:

  • The civil law / common law divide on copyright (copyright v author’s rights)
  • Human rights perspectives and IP
  • An overview of the various international IP institutions (WIPO, UNESCO, WTO, etc)
  • The various international IP systems we do have (PCT, Madrid, etc)
  • Regional IP systems (Benelux, EU, EPC, OAPI, etc)
  • Free Trade Agreements and WTO rules
  • Digital technology and the internet (particularly around jurisdictional issues and data havens)
  • International private law & IP issues

This is probably just for starters, as having been on both sides of the aisle in a university setting on international IP issues, I can see endless possibilities.  One particular angle for teaching the strategy side would be case studies, among which I like to use anime fansubs together with the RIAA, BSA, FAST, and Creative Commons as examples in the copyright space.  I can see lots of room for covering NPEs/trolls and why they are prevalent in certain jurisdictions (US) and not so in others (EU) as well.

They also have a number courses in this concentration that would be particularly good for preparing for an in-house IP counsel role, including Taxation of Intellectual Property.

This course and approach adds a further dimension to the ongoing discussion we’re having, partially captured in our article for Managing IP, about how to best approach the IP/Business role within an organisation (the CIPO). One point we’ve been discussing — the risk aversion (or just issue-spotting) approach that gets baked into the lawyer training process. Does it make it more difficult for lawyers to become IP/business leaders? I don’t know the answer, but I do think that courses and concentrations such as this one at Northwestern help to move the ball.

Any thoughts?  What would you teach law students about international IP strategy?

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IAM 250 UK dinner – some thoughts

August 10, 2009

I went to the IAM250 UK dinner organised by Simon Edwards of bStrategic on Wednesday 5th August. Thanks to Simon for organising it. I knew some of the people there already. Though even with those I didn’t know, there was a sense of meeting old friends, as we seemed all to share the same passion […]

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IPReader links for 4 August

August 4, 2009

New and noteworthy links from around the web: The Future of IP: Notes from the ICAP Ocean Tomo Summer 2009 Conference | IP P®OSPE©TIVE – Notes from the Ocean Tomo conference. Apparently “Germany is the new haven for the IP transaction market, especially for IP-based investing and securitization.” IP Advocate.org – Resource to help individual […]

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