New Jersey Law Journal

VOL. 210 - NO 7                                                                      NOVEMBER 12, 2012                                          ESTABLISHED 1878

INTERNET LAW

The Maturing Nature of e-Intellectual Property Legal Services

An evolving Internet causes users to seek a new kind of help from attorneys

By Jonathan Bick Bick is of counsel at Brach Eichler LLC in Roseland. He is also an adjunct professor at Pace and Rutgers law schools, and the author of 101 Things You Need to Know About Internet Law (Random House 2000).

As the Internet matures, so does the nature of intellectual property legal services required by Internet users.

Initially, intellectual property legal ser­vices were primarily demanded to facil­itate Internet startups. As e-commerce matured, the demand for legal services related to licensing Internet intellectual property overshadowed requests for legal services for Internet startups. Most recent­ly, requests for enforcement of Internet intellectual property rights appears to be overtaking calls for legal services related to licensing Internet intellectual property.

Fifteen years ago, services which resulted in either a patent issuance or a trademark or copyright registration was the leading form of Internet intellectual property legal work. Such intellectual property prosecution facilitated funding of Internet startups by allowing investors to receive intellectual property col­lateral in exchange for cash.

Those prosecution services for patents, trademarks and copyrights related to Internet intellectual property includ­ed rendering patentability, validity and non-infringement opinions, preparing and prosecuting Internet intellectual property applications; analyzing owner­ship issues, making ownership determi­nations and creating disclosure forms; resolving ownership disputes; managing interferences and oppositions and audit­ing Internet intellectual property portfo­lios. Each of these activities helped to create and maintain intellectual property collateral in Internet-related assets.

Five years ago, Internet intellectual property prosecution legal work was eclipsed by legal services which resulted in either a license for the use of Internet-related patents, trademarks and copyrights. Such Internet intellectual property licensing made possible the monetization of Internet intellectual property by allowing Internet firms that owned intellectual property to charge others who used them in commerce.

Licensing Internet intellectual property has many elements, and each is related to allowing Internet firms that own intellectual property to make money from their intellectual property. Such licensing legal services began with documenting the ownership of the Internet intellectual property, which facilitated licensing transactions by making it easier for potential licensees to conduct their due diligence.

Once the ownership of the Internet intellectual property was established, the next most requested service was pre­paring licensing agreements for Internet intellectual property. Since Internet intellectual property was novel, so were the licensing agreements for Internet intellectual property. Because the Internet was new, the issue of exclusivity regularly created a need for legal services. In particular, Internet startup companies tended to develop something new, and hence potential customers who wanted to incorporate the novel item into their products usually asked for exclusivity.

As the Internet intellectual property licensing matures, the novel issues have been resolved. Standard Internet intel­lectual property licensing clauses and agreements have been adopted, such as the “look and feel” clause.

Prior to regular Internet intellectual property licensing, Internet licensing agreements attempted to detail the subject of licenses involving computers in computer terms, because a computer is normally required to deliver the Internet licensed material. Thus, website license agreements were described in terms of what computer language was used, how many lines of code were necessary to transfer the licensed Internet intellectual property and so on.

The “look and feel” clause includes a term which states that the licensee will get Internet intellectual property with the same look and feel as the Internet intellectual property that the licensor demonstrated at a particular time and place. Such a clause dramatically reduces the work necessary to prepare an Internet intellectual property licensing agreement because a detailed, written description of both what the website will look like and how the website will function and per­form is no longer necessary.

In addition, the regular use of paid-up licenses (when the licensee paid a one-time lump sum payment in lieu of future royalties) for Internet intellectual property has resulted in standard clauses that address the event of the licensee’s in­solvency or filing for bankruptcy.

Today, enforcement legal services, including infringement litigation, ap­pear to be on track to become the most demanded legal services associated with Internet intellectual property. Requests for such services are fueled by the in­creasing number of Internet intellectual property licenses and the nature of the Internet patents.

As the number of intellectual property licenses has increased, so has the number of legal difficulties associated with those licenses. This has resulted in an increased need for enforcement legal services.

Furthermore, questions as to whether the United States Patent and Trademark Office has improvidently granted patents on Internet processes that appear, at first glance, to be obvious, has emboldened entities to test the validity of issued patents. Initially, the court applied the busi­ness processes test to determine whether Internet implementation resulted in pat­entability. See State Street Bank v. Sig­nature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998). Subsequently, in Bilskiv. Kappos, 130 S. Ct. 3218 (2010), the Supreme Court agreed that there was no patentability exclusion for such process­es. Most importantly, the court disagreed with the legal standard employed by the Federal Circuit in State Street, but upheld the absence of a patentability exclusion.

Additionally, there has been conspicuous growth in both the cost and number associated with Internet intellectual property infringement. This is particularly true of method patents related to methods of doing business on the Internet, which has resulted in an increased need for Internet intellectual property enforcement legal services.

A 2001 survey by the American Intellectual Property Law Association reported that the median cost per party through the end of discovery in Internet patent cases was $1.5 million. A 2009 survey by the same association reported that the median cost per party through the end of discovery in Internet patent cases was $3 million.

A comparison of the results of those two surveys also shows a 59 percent growth in the number of patent infringement litigations with stakes exceeding $25 million. While the survey did not break out Internet patent infringement cases, due to the growth of the Internet industry, it may well be assumed that this growth is related to the increasing value of Internet intellectual property.

Finally, economic factors may have resulted in an increased need for enforcement legal services for Internet intellectual property. In particular, as Internet businesses fail, investors have tried to monetize their intellectual property col­lateral by initiating legal actions against their successful competitors for allegedly infringing their intellectual property. Alternatively, investors in failed Internet businesses, regularly sell their intellectual property collateral to others who initiate litigation against those who may have infringed the acquired intellectual property.