Patent Baristas

The IRS has released guidelines for applying for the new Therapeutic Discovery Tax Credit!

The tax credit targets projects that show significant potential to address unmet medical needs, produce new therapies, reduce the long-term increase of the cost of healthcare, and help cure cancer. Additional consideration will be given to projects that show the greatest potential to create and sustain high-paying, high-quality jobs in the U.S. and to advance U.S. competitiveness in biological and medical science.

The amount of the tax credit that a company can receive equals up to 50% of the cost of qualifying biotech research, up to a maximum of $5 million per company. The aggregate amount of credits to be awarded cannot exceed $1 billion, and only companies with 250 or fewer employees are eligible for the credit. Companies can receive a grant instead of a tax credit, thereby allowing start-up businesses that are not yet profitable to take advantage of the program.

See: IRS Form 8942 and Instructions

The new guidelines describe the process for applying to have research projects certified as eligible for the credit. Companies may submit applications for certification beginning June 21, 2010. The final deadline for submitting applications is July 21, 2010.

The Office of Extramural Research of the NIH, part of the Department of Health and Human Services, will evaluate each project’s potential to meet the goals of producing new therapies or reducing health care costs. Only projects that show a reasonable potential to meet these goals will be certified as eligible for the credit. The IRS will issue certifications by October 31, 2010, based on the determinations made by the Department of Health and Human Services.

To view the complete IRS guidelines concerning the tax credit, click here.

If you’d like to discuss the impact of the tax credit on your organization, please drop us an email.

Guidance For $1 Billion Tax Credit Under Affordable Care Act To Support Biomedical Research By Small Firms – (PDF – 122 KB)

Duncan Bucknell, over at the IP ThinkTank, discusses FIFA’s response to the women arrested after wearing orange miniskirts bearing the Bavaria beer company logo to a recent match. Duncan posits that FIFA was not on good legal footing but has sold a lot of beer for their sponsor’s competitor.

Bavarian Orange Miniskirt Girls

Barbara Castelein and Mirthe Nieuwpoort were charged with violating South Africa’s Merchandise Marks Act of 1941 and two sections of the Special Measures Regulation – the same law under which illegal ticket scalpers are prosecuted.

They were among a group of more than 30 Dutch women who attended last week’s Netherlands-Denmark game at the Soccer City stadium wearing orange mini-dresses paid for by brewing company Bavaria. Johannesburg Magistrate’s Court dropped the charges against on Tuesday. The women, who could have faced up to six months in prison.

“They’ve created what could turn out to be an international incident from something that could have been handled adroitly and strategically and turned around.”

Was this in fact Ambush Marketing? The South African Merchandise Marks Act states in sections 15 and 15A that the Minister may prohibit the use of any mark, word, letter or figure, or any arrangement or combination thereof in connection with any event.

FIFA officials took issue with a (very) small “Bavaria” tag on the side of the dresses, which they said infringed the rights of official partners and sponsors who paid millions of dollars to advertise exclusively at World Cup venues.  The dresses had been available free with a pack of beer at gas stations in Holland.  This raises the question:  How visible must the mark be in order to violate the Act?

Furthermore, the Gauteng Provincial Gazette, which defines Ambush Marketing, states:

…marketing, promotional advertising or public relations in words, sound or any other form, directly or indirectly relating to the Competition, and which claims or implies an association with the Competition and / or capitalises or is intended to capitalise on an association with or gains or is intended to gain a promotional benefit from it to the prejudice of any sponsor of, the Competition but which is undertaken by a person which has not been granted the right to promote an association with the Competition by FIFA and whose aforesaid activity has not been authorised by FIFA Competition.

The vague provisions of “directly or indirectly relating to the Competition, and which claims or implies an association with the Competition” would seem to include just about every article of clothing with a visible logo.

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*A special thanks to Duncan and the IP Think Tank team for inviting me to join them on the IP Think Tank podcast 27 May 2010, covering Shanghai woes, Indian oppositions and US patent extensions.

In this podcast, I joined Duncan Bucknell, Vandana Mamidanna, and Weijiang Si for an informative and entertaining discussion about:

• New appeal routes for Indian Oppositions;
• Patent Term Extensions in the US;
• Government IP woes at the Shanghai World Expo; and
• Independent experts in China and the United States.

Thanks for letting me be on the show!

It’s a subject that has been debated for a while now, and yet there seems to be no real solution in sight. Why is the cost of healthcare in the USA spiraling out of control and going further out of the reach of the average citizen? Why do people find themselves without insurance all of a sudden even though they’ve been paying all their premiums on time and in full? Why are premiums raised for no practical reason and without any real explanation? The answers to these companies from the insurance companies is that they’re forced to hike rates because the cost of healthcare has gone up – from medicines to doctor fees to hospital stays, they’ve all become much more expensive.

The rumblings are becoming louder now, about how the drug companies are making millions while the general public suffers without access to healthcare and essential drugs. The patents that protect drugs from being copied and mass produced by generic pharmaceutical manufacturers are being perceived as fronts for the drug companies to rake in the dough while the going is good. This prohibitive pricing is what is making healthcare expensive, according to certain sections of society.

Medical patents generally hold good for 20 years, but if you take into account the clinical trials and the testing period, they’re valid for about seven or eight years from the time the drug enters the market and is available for public consumption. It takes a year or two for doctors to prescribe it on a regular basis and people to begin trusting it. So in effect, a drug company has around five years to recoup the losses incurred in the research and development of a new drug.

It’s a vicious cycle that seems impossible to break out of – if big pharma companies gave up their patents, the cost of drugs would be much cheaper since the market would be flooded with generic equivalents. Insurance costs would come down, and most people could afford decent healthcare. But then, if the pharmaceutical companies cannot make enough money off the new drug and instead incur severe losses, would they be willing to sponsor and support new clinical trials and research that lead to the manufacture of live-saving and life-altering medications and procedures?

It’s a conundrum that the experts seem unwilling to answer; and even as blame is laid at the feet of the patents that protect the drugs and how drug companies exploit every loophole in the book to prolong their patent period, nothing concrete is being done by the government to fund new research and development initiatives in the field of medicine. Until such a day comes, patents are going to be valid, drug costs are going to soar until they run out, and the cost of healthcare is going to keep climbing with no respite in sight.

This guest post is contributed by Kathy Wilson, who writes on the topic of X-Ray Tech Schools . She welcomes your comments at her email id: kathywilson1983@gmail.com.

In Patents for Chemicals, Pharmaceuticals and Biotechnology: Fundamentals of Global Law, Practice and Strategy, Philip Grubb and Peter R. Thomsen provide a solid introduction to patent law topics in some of the largest countries, with an emphasis on Europe, Britain, and the USA. Given the importance of global trade and patent protection for products that cross borders, anyone interested in protecting, licensing, or using technology will have a need to understand the basics of patent laws of their home country as well as those abroad.

The book is divided into five parts, beginning with a background on the modern patent system which continues through to attempts to harmonize patent law between countries. While much of this matter is not critical to the main focus of the book, it provides context for how and why the patent systems look like they do today and speculates on the future.

The second part is a primer on patent law and procedure, and is the longest part of the book. It variously focuses on the laws in Europe, Britain, and the USA. While it covered all the basics of patentability, how to file a patent both nationally and through the PCT, prosecution, and enforcement, I felt that already having a good background in patent law was essential to really understanding the contents. Nonetheless, this section is extremely valuable to a patent practitioner because it provides a good understanding of the similarities and differences of other patent systems.

The third part focuses on inventions in chemical, pharmaceutical, and biotechnological fields. As an organic chemist I found this to be the most interesting part of the book. It explained the complexities of patent law as it relates to claims for chemical compounds, pharmaceuticals, and biotechnology. Given the name of the book, I would like to have seen even more information in these chapters.

The fourth part explains the practical aspects of drafting and prosecuting a patent. The last part covers commercial exploitation of patent rights. It compares ownership in different countries and methods to use patents in a commercial context, such as excluding competition, use as bargaining chips, and patent trolls. This part also generally describes how to catch an infringer, and also how not to get caught (from the standpoint of how not to infringe a valid patent not how to get away with infringement).

Overall Grubb and Thomsen cover a huge number of topics, some in more detail than other. At times the book seemed to assume too much knowledge of patent law. Despite this, there are two extremely valuable and unique parts of the book. First is the explanation of patent laws in several countries and how they differ. The second is patent law as it relates to chemical, pharmaceutical, and biotechnological inventions. The authors have provided not just theoretical information but practical information that can be used by practitioners and inventors alike.

About the Authors

Philip Grubb is an Intellectual Property Consultant; formerly Intellectual Property Counsel, Novartis International AG; Adjunct professor, Franklin Pierce Law Center, Concord, NH.

Peter R. Thomsen is a European Patent Attorney and CEIPI (University of Strasbourg) tutor as well as a lecturer at ETH Zürich, and is currently working as Global Head IP-Policy and Sr Manager IP-Litigation at Novartis International AG.

Patents for Chemicals, Pharmaceuticals and Biotechnology: Fundamentals of Global Law, Practice and Strategy is available through Amazon.

Today’s post comes from Guest Barista Scott Conley, a registered patent agent in Frost Brown Todd’s Cincinnati office.

This is a reminder that some companies and individuals are sending out unsolicited mailings to patent applicants and owners of international patents, designs and trade marks asking them to apply for entry in various (sometimes official sounding) publications, databases and “registers” in return for payment of a fee.  These parties tend to make their offers in the form of invoices, which are usually sent out after the publication of the official patent, design, or trade mark application.

You should be aware that these companies are not linked to any Government or Community Institution and there is no obligation to pay them.

Recently, we received a new invitation identified as originating from “IPTD – International Patents & Trademarks Database”. To view an example of the invitation, see here:  IPTD Database Form.  Other examples which have been brought to the attention of WIPO are here.

The solicitation from IPTD, as well as many of the other invitations to PCT applicants and agents to pay fees, do not come from the International Bureau of WIPO and are unrelated to the processing of international applications under the PCT.  Whatever registration services might be offered in such invitations, they bear no connection to WIPO or to any of its official publications and have no effect on the legal status of the application and appear to have little to no value over the official publications.

The invitations often identify a particular PCT application by its international publication number (e.g., WO02 xxxxxx), publication date, title of the invention, international application number, priority information and IPC symbols – all information they can glean from the official application publication. The invitations typically refer to a payment, which is to be made in euro or US dollars, by check and/or money transfer to addresses in Austria, Germany, Hong Kong, Slovakia, Switzerland or the United States of America.

Patent applicants filing internationally under the PCT should note that the International Bureau of WIPO alone publishes all PCT applications promptly after the expiration of 18 months from the priority date (see PCT Article 21(2)(a)); there is no separate fee for such international publication, and the legal effects of international publication are set out in PCT Article 29.

These requests to pay fees are often sent in envelopes with official-looking wording and images including ones which appear to bear official seals, like the WIPO/OMPI logo and the address of the organization.

Please carefully review all such requests.

The Jackson Laboratory, a biomedical research institution and repository for laboratory mice, won a summary judgment of no patent infringement against The Central Institute for Experimental Animals (CIEA). CIEA, a non-profit Japanese corporation that develops animal models used for scientific research, alleged that Jackson had infringed U.S. Pat. No. No. 7,145,055 directed to the creation of transgenic immunodeficient mice by breeding particular progenitor mice, called the NSG mouse.  Central Institute for Experimental Animals v. Jackson Labs, No. C-08-05568.

The ‘055 Patent claims a method of producing an immunodeficient mouse by backcrossing two strains of mice as well as the mouse produced by this method and the use of the mouse. The method claimed in the ‘055 Patent involves backcrossing a NOD/Shi mouse with a C.B.-17-scid mouse to create a NOD/Shi-scid mouse and then backcrossing the NOD/Shi-scid mouse with an interleukin 2 receptor γ chain gene knockout mouse (“IL-2Rγ KO mouse”). Backcrossing is a process of mating two animals so that the offspring have a genetic identity that is closer to the genetic identity of a selected parent.

Claim 1:

1. A mouse produced by a method comprising backcrossing a mouse B with a mouse A, wherein said mouse A is a mouse obtained by backcrossing a C.B-17-scid mouse with an NOD/Shi mouse, and wherein said mouse B is an interleukin 2 receptor .gamma. chain gene knockout mouse, wherein said mouse produced by the method does not express the interleukin 2 receptor .gamma. chain, has an enhanced engraftment capacity of heterologous cells relative to a NOD/shi-scid mouse, has neither functional T-cells nor functional B-cells, exhibits reduced macrophage function relative to a NOD/shi-scid mouse, exhibits no NK cells or NK cell activity, and exhibits reduced dendritic function relative to a NOD/Shi-scid mouse.

Following a claim construction hearing, the court construed the term “NOD/Shi mouse” to mean a non-obese diabetic mouse that:

1. has not been reproductively separated from the NOD mouse colony created by Dr. Susumu Makino at Shionogi Research Laboratories or
2. has been reproductively separated from that colony by 20 or fewer generations.

The court construed “NOD/Shi-scid mouse” to mean a mouse strain produced by multiple backcross generations of a C.B.-17 scid mouse with a NOD/Shi mouse.

Jackson’s NSG mouse is created by backcrossing a NOD/LtSz-scid mouse. Because NOD/LtSz-scid mice are produced from NOD/LtSz mice, which have been reproductively separated from Dr. Makino’s NOD mouse colony for over 20 generations, a NOD/LtSz-scid mouse is not a NOD/Shi-scid mouse. Accordingly, CIEA concedes that under the court’s claim construction Jackson’s NSG mouse does not literally infringe the ‘055 Patent. The parties dispute whether Jackson’s NSG mouse infringes the ‘055 Patent under the doctrine of equivalents.

CIEA tried to claim infringement under the doctrine of equivalents based on its contention that use of the NOD/LtSz-scid mouse is equivalent to use of the NOD/Shi-scid mouse in the context of the invention. Jackson argued that CIEA is barred from asserting infringement under this theory because:

1. the ‘055 Patent discloses but fails to claim use of NOD/LtSz-scid mice, and
2. adopting CIEA’s position that any substrain of NOD mice are equivalent to the NOD/Shi mice would vitiate the NOD/Shi and NOD/Shi-scid claim limitation in its entirety.

The court found no claim infringement under the doctrine of equivalents based on the disclosure-dedication rule. That is, when a patent discloses but does not claim subject matter, the unclaimed subject matter is dedicated to the public and cannot be recaptured under the doctrine of equivalents. See Johnson & Johnston Assocs., Inc. v. R.E. Serv. Co., Inc., 285 F.3d 1046, 1054 (Fed. Cir. 2002). What is claimed is protected, and “what is not claimed is public property.”

The Federal Circuit considered how specific a disclosure in a written description must be to dedicate matter to the public and held that:

[I]f one of ordinary skill in the art can understand the unclaimed disclosed teaching upon reading the written description, the alternative matter disclosed has been dedicated to the public. This ‘disclosure-dedication’ rule does not mean that any generic reference in a written description necessarily dedicates all members of that particular genus to the public. The disclosure must be of such specificity that one of ordinary skill in the art could identify the subject matter that had been disclosed and not claimed. PSC Computer Prods., Inc. v. Foxconn Int’l, Inc., 335 F.3d 1353, 1360 (Fed. Cir. 2004).

In other words, the relevant test is whether one of ordinary skill in the art reading the patent could identify a specific, unclaimed alternative and understand that it could be used as a substitute for the claimed matter. This test is met when the patent mentions the alternative in a way that would be understood by one of ordinary skill in the art. The disclosure of unclaimed subject matter need not satisfy the written description requirement of 35 U.S.C. § 112.

The court said that the disclosure-dedication rule would preclude CIEA from asserting infringement under the doctrine of equivalents if the ‘055 Patent disclosed use of the NOD/LtSz-scid mouse as an alternative since it did not claim such use of the NOD/LtSz-scid mouse.

Indeed, CIEA contended in its claim construction brief and at the Markman hearing that a person of ordinary skill in the art reading the patent would understand that any NOD-scid mouse, including a NOD/LtSz-scid mouse, could be used to achieve the patent’s stated objective of creating an immunodeficient mouse with engraftment capacity.

As discussed above, the ‘055 Patent clearly disclosed use of the NOD/LtSz-scid mouse in the prior art. Indeed, the ‘055 Patent’s discussion of how the NOD/LtSz-scid mouse had been used in the prior art is far more extensive than the brief mention of plastic parts in the PSC patent. Accordingly, the ‘055 Patent placed the public on notice that NOD/LtSz-scid mice had been used as an alternative to NOD/Shi-scid mice in the prior art, and future use of NOD/LtSz-scid mice would therefore not infringe.

Because the ‘055 Patent discloses but does not claim use of the NOD/LtSz-scid mouse, this unclaimed subject matter is dedicated to the public and cannot be recaptured under the doctrine of equivalents. See Johnson & Johnston, 285 F.3d at 1054. Even if the patentee did not intend to dedicate this subject matter to the public, “[t]he patentee, rather than the public, must bear the burden of inadvertent errors in the patent – including inadvertent dedications.” PSC, 355 F.3d at 1361. Since the disclosure-dedication rule bars CIEA from asserting infringement under the doctrine of equivalents, the court need not reach Jackson’s alternative argument that CIEA’s doctrine of equivalents position would vitiate the NOD/Shi and NOD/Shi-scid claim limitation in its entirety.

The Innovation Economy:  Unleashing Intellectual Property to Fuel Growth and Create Jobs

Under Secretary Kappos

June 2, 2010

Thank you, Sarah, for that kind introduction.  I would like to thank the Center for American Progress for having me in today to speak with you about intellectual property’s critical role in today’s innovation economy.

America stands at a critical juncture in our economic evolution, and intellectual property will certainly play a key role in driving our economic growth and renewal.

As technological advances bring great change to the speed and complexity of American innovation, strong intellectual property protection and its effective enforcement will fuel innovation and jump-start our economy.

Today, I’ll speak about the critical role of IP in spurring innovation – and in increasing America’s competitiveness in the global economy.  The fact is that a dynamic and efficient patent system is essential to our economic well-being.

I’ll address the ways in which the USPTO can better ensure a well-functioning patent system; a patent system that enables small and medium sized businesses to secure the investment capital they need to bring their goods and services to market; and a patent system that helps create value and ensure cutting edge research gets funded at our universities.  Finally, I’ll discuss the imperative for government leaders – the Executive branch, the Congress and the courts – to nurture an IP eco-system that will promote innovation, and ensure America’s economic well-being.

The economic success of the United States is deeply rooted in the history of American innovation.  This country was founded by pioneers who developed new ways to cope with an unfamiliar environment, who cured disease and connected a country, and who led the world into the age of flight.  American innovators discovered the power of information technology and digital communication that brought unprecedented commerce, economic growth, and prosperity.

So, our history has been driven by innovation. And our economic security continues to depend upon our ability to innovate – and to compete in an innovation economy.   The key to economic success lies increasingly in innovative product and service development, and in intellectual property protection, which creates value for innovation.

IP is – in effect — the global currency of innovation.

Today, as a share of gross economic value, the United States invests more in intangible assets than any of our major trading partners, and our intangible investments now exceed those in tangible assets by more than 20%.

And it is patent-reliant industries, specifically, that make up the most dynamic parts of the economy—from nanotechnology to pharmaceuticals, from computers to bio-tech, and from fiber optics to green technology.

Timely and high-quality patents are critical to small businesses, which create two out of every three American jobs.   They are needed to foster research and development, which requires capital and investment.

And they are essential to attracting the capital needed to bring innovation to market.

Let’s take the example of a company called Xencor—outside Los Angeles—which creates cutting-edge biotherapeutics to treat cancer, inflammation, and autoimmune disease.  Xencor uses patents to protect its proprietary design automation technology.

Xencor CEO Dr. Bassil Dahiyat put it simply: “without patents, you cannot get funding, and without funding, you cannot grow and create jobs.”

In Southeast Michigan, one of the areas hardest hit by the recession, the company Axletech International is a global manufacturer of machine hardware, with a significant patent portfolio upon which it depends heavily.  Since it began as a spin-off in 2002, Axletech has more than doubled its workforce and now employs more than 1,000 people.

And while IP protection fuels investment and growth, astute innovators and entrepreneurs see IP as even more fundamental to value creation.  They recognize that patents also serve as vehicles for the transfer and diffusion of innovation.

We are beginning to talk about “markets for technology” and “markets for knowledge,” and patents serve a critical function in these markets.  They act as markers.  They guide technologists on both sides of the IP transfer equation to the know-how and trade secrets required to ensure a successful transaction and subsequent introduction of products and services into the marketplace.

Patents will continue to foster the movement of ideas to manufacture in the coming years and decades, and we at the USPTO are keenly aware of our responsibility in this regard.

Last month, the United States Patent and Trademark Office was described in Harvard Business Review as the “biggest job creator you never heard of.”

As our country seeks to regain the 8 million jobs lost during the recent recession, the USPTO is a great place to start.  Countless inventions that can spark new businesses are right there—sitting in the backlog.  And reducing that backlog is one of Secretary Locke’s and my highest priorities.

Why?  Because, the backlog of over 700,000 patent applications stands as a barrier to innovation and economic growth.  Recent reports conclude that the backlog could ultimately cost the US economy billions of dollars annually in “foregone innovation.”

The next laser, the next energy breakthrough, or the next cure for a disease, is buried in the files of the USPTO—and that is simply unacceptable.

So what are we doing about it?   First, we’re working to improve how we measure and track the quality of patent application review at the USPTO.  Quality patent issuances create certainty in the market.  Market certainty, in turn, facilitates growth.

Second, we are reforming the USPTO to reflect its criticality to our economy—and transforming the agency to match the fast pace of technology and innovation, and ensure the highest possible quality of review for all applications.

And we’re off to a credible start.  We’ve re-engineered the way we motivate and monitor our corps of examiners; redefined performance plans to reflect the importance of high quality patent examination and backlog reduction; fostered more communication between applicants and examiners to improve quality and efficiency; and we’re working to build a new IT infrastructure that will speed patent application processing and improve search quality.

But—most critically—to decrease pendency while improving the quality of our work product, we have begun to recognize what companies in the shipping business figured out some time ago—that all packages don’t have to get to their destination at the same rate.  Some require next day service while others can take a week.

It is clearly time for the USPTO—our nation’s Innovation Agency—to adopt private sector business practices and offer market-driven services.

We all know that patent applications, like the inventions they protect, vary significantly, and that some patents need to be issued more quickly than others.  Different firms and even individual applications have varying needs for different products and services when it comes to processing speeds.

So, the USPTO has been experimenting with various ways of enabling applicants to receive accelerated review of technologies in areas that are priorities for the Obama Administration – like green technology that is essential to battling climate change.

And we will be considering accelerated review in other categories of innovation that are vital to our national interest.

We’ve also implemented a program that allows applicants to decide what work needs to be prioritized at the USPTO.  Our recently announced expansion of Project Exchange gives all applicants with multiple filings greater control over the priority in which their applications are examined, enabling priority applications to be examined on an expedited basis.

By providing incentives for applicants to withdraw unexamined applications that are no longer important to them, Project Exchange will also help the USPTO reduce the application backlog.

Tomorrow, we’ll be announcing a request for public comment on our next initiative—a comprehensive, flexible, patent application processing model offering different processing options more responsive to the real-world needs of our applicants.  Please look for that announcement tomorrow.

Clearly, we do plan to continue empowering our applicants to prioritize their applications—and our workload—to meet the demands of the marketplace.

So, through programs like these, and through the tireless work of our examining corps, we will focus our efforts more effectively, reduce pendency, bring the backlog down, and foster innovation critical to the economic and social well-being of the United States.

But, America’s innovation success will require more than an effective USPTO.  It will be a function of many complex and overlapping innovation variables, including the promotion of best practices in disciplines where American innovation occurs.

Perhaps the most critical of these disciplines is university research.

Research conducted at American universities is vital to fostering innovation, ensuring economic opportunity, and creating American jobs.

For instance, the original patents on Recombinant DNA, the fountainhead for the biotechnology industry, came from university research.  Finding ways to ensure that important new technologies like this are taken from university lab to marketplace is a critical factor in our economic success.

And, universities are becoming more nuanced and strategic in their role as pillars of technology diffusion.

As a threshold matter, universities have begun, and must continue working cooperatively with their funding partners, to adopt best practices for capturing IP.  Because if universities and their funding partners don’t capture IP, the innovation it protects and jobs it creates become royalty free donations to our nation’s biggest economic competitors.  So while protecting IP is key, the purpose for protection has shifted—it is not to control the activities of funding partners.  It is to prevent appropriation into the low-cost labor market.

Once IP is protected, the second issue of paramount priority is the transfer of technology from university laboratory to marketplace.  The methodologies universities use to facilitate IP transfer are currently in flux, as traditional models evolve and new best practices emerge.

Universities on the cutting edge of this field realize that the long accepted choice between maximum diffusion of innovation and maximum revenue capture is a false choice.  Put simply, universities need not sacrifice their societal obligation to disseminate knowledge in exchange for research funding.

In fact, when executed well, diffusion-focused technology transfer generates more net aggregate funding, not less.

Now, royalty generation from university innovation will continue to play a role in the commercialization life cycle.  But it will synergize with diffusion-focused tech transfer.  And we will see less conflict between the models, because astute university innovators realize that when royalty generation comes into conflict with diffusion, it inhibits the fundamental mission of educating researchers and conducting research to produce breakthroughs that create American jobs and economic opportunity.  Astute university innovators are already working to a better end.

The net result of a focus on diffusion-based tech transfer is not only better technology diffusion, but increased revenue and funding through sponsored research that will help create new products and services and secure an innovation-driven future for the US economy.

In the proud history of the United States—innovation led development—IP led development—has created economic vitality and good jobs.

In fact, technological innovation is linked to three quarters of the Nation’s post WWII growth rate.  And between 1990 and 2007, compensation for jobs in innovation-intensive sectors increased by two and a half times the national average.

The US government has always played a critical role in ensuring innovation-driven growth.

During the deep recession of the 1970’s—innovation slowed dramatically and the manufacturing sector declined significantly.   In response, the US government launched a Domestic Policy Review aimed at reviving American industrial innovation.  This study, and others like it, led to the creation of the Court of Appeals for the Federal Circuit, which brought clarity to the law and improved certainty around IP rights—increasing their value.

At the same time, Congress realized the critical role of patents in innovation through university research and development.  So the Bayh-Dole Act, which encourages university patenting, was passed.

The increase in patent value and R & D that resulted from the patent system improvements of the late 1970’s and early 1980’s paved the way for a new era of economic growth and opportunity that lasted for the better part of two decades.

Now, as in the 1970’s and 1980’s, the United States stands at a crossroads of innovation.  Today we are presented with another innovation opportunity – and we again need sound IP policy and enforcement to increase the value of innovation.

We surely have not realized the full potential of IP.  In fact, the IP system has been characterized as the “sleeping beauty” of highly developed economies.  And it really is a “sleeping beauty” because our IP system has layed relatively dormant while the complexity and volume of technological innovation have grown exponentially.

If we don’t wake up, fast-developing competitors will continue to appropriate American ideas, products, and services.  American technology – and with it American jobs – will devolve to countries with cheap labor and inadequate IP protection.

To put it plainly, both appropriation and misappropriation of American IP mean the loss of American jobs in our most innovative fields—high-paying, high-skilled, high-value jobs.  And the flight of these kinds of jobs—and the flight of technology and production to our overseas competitors—poses a grave threat to our economic security.

We simply must do better to protect America’s competitive advantage in innovation before it is too late.  And that means faster and higher quality patents.  And it also means sound IP policy and the effective enforcement of IP rights.

President Obama released his Strategy for American Innovation last Fall, and identified innovation as the foundation of sustainable growth and quality jobs.  In it he identified three roles for the public sector.

First, the Government must invest in the building blocks of innovation such as human capital, infrastructure and fundamental research.  Second, it must nurture the right environment for private-sector investment and competitive markets by protecting IP rights. Third, the government must serve as a catalyst for breakthroughs related to our national priorities like clean energy and health care.

Ladies and gentlemen, it is incumbent upon us to develop a comprehensive and robust national IP policy.   America’s economic security depends on it.  The Commerce Department and the USPTO stand ready to provide leadership in formulating and executing that policy.   American business and enterprise must also play an active role in formulating this policy, based on sound business practices.

As I’ve outlined today, we must provide an environment that allows small businesses to protect their IP and attract capital based on their ideas. For these businesses to flourish, we must provide timely and high quality access to IP rights.  And we must ensure that universities press forward the frontiers of science, while working with the private sector to ensure that the value they create is both protected and diffused quickly for the benefit of the communities they serve.

All parts of the US innovation value chain must remain vibrant.  And if amplified by good government policy, the current re-aligning trends can support one another to preserve American leadership in the decades to come.

A sound national IP policy will lead to the creation and success of more innovative companies like Xencor and Axletech.  And it will ensure that we can leverage IP to safeguard our economic well-being.

If we act to meet these challenges, we can fuel decades of American economic growth.  The simple prerequisite:  a national focus on intellectual property as the currency of innovation.

Thank you.

Speech given by U.S. Patent and Trademark Office (PTO) Director David Kappos yesterday at the Center for American Progress on the importance of strong IP protection.

Evalueserve, a global research and analytics firm, conducted a study on the state of the Legal Process Offshore outsourcing (LPO) industry, forecasting the industry’s revenue and growth potential in its white paper titled “Legal Process Outsourcing – Hype vs. Reality”.  They now have an update on the current landscape and the potential of the LPO industry, especially in light of the recent developments mentioned above.

The key findings of the present study are as follows:

• The LPO industry is growing fast, and it is already the fastest growing sub-sector in the Knowledge Process Outsourcing (KPO) domain. Even during the Great Recession, the LPO sector grew by 40% each year. Revenue growth between 2010 and 2015 is expected to be approximately 26%. Currently, there are over 5,200 professionals in the LPO industry in India and the Philippines, contributing an annual revenue of USD 300 million, and this is expected to reach 18,000 professionals with an annual revenue of USD 960 million by December 2015.
• Almost all of the offshore outsourcing work is being sent from the U.S. and the U.K. More than 90% of the LPO work is either being directly outsourced by Corporate Counsels or on behalf of Corporate Counsels (by their preferred law firms). So far, law firms have been hesitant to offshore outsourcing.
• Due to the impact of the Great Recession, there will be pressure on law firms to reduce their overheads related to marketing and sales, general administration, Information Technology, accounting, clerical, paralegal, and knowledge management. These overhead expenses account for about 17% of the total overhead expenses (of approximately 41%) that a typical law firm with 20 or more lawyers incurs in the U.S. By moving most of this work, which is non billable, offshore, these firms can reduce this cost to approximately 7%. Currently, almost no law firm in the U.S. is considering this option.
• The implementation of Clementi proposals in the UK is expected to boost the LPO industry because law firms are likely to be more efficient. In fact, many law firms have started implementing new models for pricing, designing, and managing better legal work processes; modifying and re-using existing work products and templates; partnering with other legal service providers to provide the entire array of services; and beginning to outsource functions (offshore) that include creating marketing and sales brochures, accounting, Information Technology, clerical, paralegal, knowledge management, secondary research, and legal and library information research.
• Knowledge management (KM) will be a growth area for the LPO industry through which LPO firms can help their clients grow better and faster. In particular, LPO firms can help the in-house KM teams of law firms—especially those with dispersed offices—to consolidate and manage all the available resources into an electronic repository to save cost and increase efficiency.

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