Martin Medeiros, partner at Swider Medeiros Haver LLP will be reviewing the cases decided by state and federal courts that involved trade secrets and non-compete agreements for the Oregon State Bar Intellectual Property Section.  For more information, click here.

The Choose Your Own Adventures (In Intellectual Property) Series: (March through June 2010) at MercyCorps NW.

This 4-part series begins with a seminar on identifying intellectual property in a small business.  The first step in developing a strong intellectual property portfolio is to look at what you have and find the best way to protect it.  This seminar will cover each basic area of intellectual property beginning with the earliest stage – the idea.  Specific intellectual property topics will be covered in three subsequent seminars.  To register for the seminars please contact us at events@smhllaw.com.  Directions to Mercy Corps are here.

          Choose Your Own Adventure Part 1:  Identifying Your Intellectual Property, March 23, 2010.  Presented by Tichelle Sorensen.

           Choose Your Own Adventure Part 2:  Copyrights and Copyright   Registration, April 26, 2010.  Presented by Kohel Haver.

             Choose Your Own Adventure Part 3:   Introduction to Patents for Inventors and Entrepreneurs, May 17, 2010. Presented by Mike Moore.

           Choose Your Own Adventure Part 4:  Developing, Defending and Enforcing Your Brand, June 21, 2010.  Presented by Tichelle Sorensen

The Choose Your Own Adventures (In Intellectual Property) Series: (March through June 2010) at MercyCorps NW.

This 4-part series begins with a seminar on identifying intellectual property in a small business.  The first step in developing a strong intellectual property portfolio is to look at what you have and find the best way to protect it.  This seminar will cover each basic area of intellectual property beginning with the earliest stage – the idea.  Specific intellectual property topics will be covered in three subsequent seminars.  To register for the seminars please contact us at events@smhllaw.com.  Directions to Mercy Corps are here.

          Choose Your Own Adventure Part 1:  Identifying Your Intellectual Property, March 23, 2010.  Presented by Tichelle Sorensen.

           Choose Your Own Adventure Part 2:  Copyrights and Copyright   Registration, April 26, 2010.  Presented by Kohel Haver.

             Choose Your Own Adventure Part 3:   Introduction to Patents for Inventors and Entrepreneurs, May 17, 2010. Presented by Mike Moore.

           Choose Your Own Adventure Part 4:  Developing, Defending and Enforcing Your Brand, June 21, 2010.  Presented by Tichelle Sorensen.

The Choose Your Own Adventures (In Intellectual Property) Series: (March through June 2010) at MercyCorps NW.

This 4-part series begins with a seminar on identifying intellectual property in a small business.  The first step in developing a strong intellectual property portfolio is to look at what you have and find the best way to protect it.  This seminar will cover each basic area of intellectual property beginning with the earliest stage – the idea.  Specific intellectual property topics will be covered in three subsequent seminars.  To register for the seminars please contact us at events@smhllaw.com.  Directions to Mercy Corps are here.

          Choose Your Own Adventure Part 1:  Identifying Your Intellectual          Property, March 23, 2010.  Presented by Tichelle Sorensen.

          Choose Your Own Adventure Part 2:  Copyrights and Copyright   Registration, April 26, 2010.  Presented by Kohel Haver.

            Choose Your Own Adventure Part 3:   Introduction to Patents for Inventors and Entrepreneurs, May 17, 2010. Presented by Mike        Moore.

          Choose Your Own Adventure Part 4:  Developing, Defending and Enforcing Your Brand, June 21, 2010.  Presented by Tichelle      Sorensen.

This 4-part series begins with a seminar on identifying intellectual property in a small business.  The first step in developing a strong intellectual property portfolio is to look at what you have and find the best way to protect it.  This seminar will cover each basic area of intellectual property beginning with the earliest stage – the idea.  Specific intellectual property topics will be covered in three subsequent seminars.  To register for the seminars please contact us at events@smhllaw.com.  Directions to Mercy Corps are here.

          Choose Your Own Adventure Part 1:  Identifying Your Intellectual          Property, March 23, 2010.  Presented by Tichelle Sorensen.

          Choose Your Own Adventure Part 2:  Copyrights and Copyright   Registration, April 26, 2010.  Presented by Kohel Haver.

            Choose Your Own Adventure Part 3:   Introduction to Patents for Inventors and Entrepreneurs, May 17, 2010. Presented by Mike        Moore.

          Choose Your Own Adventure Part 4:  Developing, Defending and Enforcing Your Brand, June 21, 2010.  Presented by Tichelle      Sorensen.

          Choose Your Own Adventure Part 1:  Identifying Your Intellectual          Property, March 23, 2010.  Presented by Tichelle Sorensen.

          Choose Your Own Adventure Part 2:  Copyrights and Copyright   Registration, April 26, 2010.  Presented by Kohel Haver.

            Choose Your Own Adventure Part 3:   Introduction to Patents for Inventors and Entrepreneurs, May 17, 2010. Presented by Mike        Moore.

          Choose Your Own Adventure Part 4:  Developing, Defending and Enforcing Your Brand, June 21, 2010.  Presented by Tichelle      Sorensen.

Research and Development generally occurs in areas in which there is a demand or where demand can be created.  Pharmaceutical development has traditionally followed this axiom with pharmaceutical companies pursuing development of drugs to treat common conditions such as high cholesterol, pulmonary embolism, arthritis, gastric reflux, hypertension and allergies.  Cholesterol lowering statins alone generated $16 billion in U.S. sales in 2005[1].  However, due to the increased presence of generics, the expiration of patents, advances in genomics and proteomics and the development of personalized medicine, the research and development focus is changing.  Pharmaceutical companies have become increasingly interested in a much smaller market, a market that is expected to reach an annual rate of $81.8 billion globally by 2011[2]. 

            Tax credits, government grants, market exclusivity and fee waivers have helped to drive this market.  Federal recognition of pharmaceuticals in this market has developed into an early-stage regulatory concurrence that can increase investor interest creating more funding opportunities, even in a down economy, and increasing the interest of big pharmaceutical companies in an area that for a long time received little interest and little funding.  In 2009, Pfizer, GlaxoSmithKline, and Novartis each either licensed or received approval for pharmaceuticals in this market, treatment of orphan diseases. 

An orphan disease is a condition affecting a small number of people.  In the U.S., it is defined as affecting fewer than 200,000 residents.  In the European Union, it is defined as affecting not more than 5 in 10,000 individuals in the Community and in Japan as affecting fewer than 4 in 10,000 individuals.  However, there are approximately 7,000 rare diseases affecting approximately 25 million people in the U.S. and 30 million people in the European Union[3] alone.   Global sales of orphan drugs reached 58.7 billion in 2006, up from $54.5 billion in 2005[4].  Several orphan drugs have reached blockbuster status, generating more than $1 billion in revenue annually.  Orphan drugs can also be re-introduced to treat non-orphan diseases, increasing their market potential.

Orphan drug designation requires that the drug be for the treatment of a disease that affects a small number of people and that there is more than theoretical rationale for belief that the drug has promise for treating the orphan disease.  In the 10 years prior to the passage of the Orphan Drug Act of 1983, ten drugs that fall under the definition of an orphan drug were approved for sale.  In the ten years following the passage of the Act, 612 drugs were designated orphan drugs and 99 received market approval.  In 2009, 159 drugs currently under development were designated orphan drugs and 17 received market approval.

The U.S. Orphan Drug Act of 1983 (P.L. 97-414, as amended) provides incentives for the development of these drugs including tax credits, marketing incentives, extended protection and grants.  The European Union has similar legislation under Regulation 141/2000/EC on orphan medicinal products (Orphan Regulation), which provides for fee waivers, community marketing authorization, extended protection and protocol assistance.   In an effort to reduce costs to manufacturers, the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMEA) agreed in 2007 to use a common application process for determination of orphan drug status. 

            There is also specialized funding earmarked for orphan disease research.  The NIH announced a second phase of funding for the Rare Diseases Clinical Research Network (RDCRN) in October of 2009.  Funds totaling more than $117 million are to be distributed over the next five years to 19 research consortia and a Data Management Coordinating Center.[5]  Grants are also available through the National Organization for Rare Diseases (NORD).  The NIH additionally provided $672 million in funding through its SBIR/STTR (Small Business Innovation Research/Small Business Technology Transfer) programs in 2009 and will again provide 2.7% of its extramural set-asides for R& D to the SBIR/STTR programs in 2010.

The annual budget under the Federal Orphan Grants program is currently $14 million.  Grants are for up to $200,000 or up to $400,000 in total (direct plus indirect) costs per year for up to 4 years.  A fourth year of funding is available for phase 2 or 3 clinical studies.  For fiscal year 2011, the application receipt date for Federal Orphan Grants is February 3, 2010[6]. 

Orphan drug designations will continue to fuel new drug development, licensing, acquisitions and mergers leading to increased opportunities in a previously neglected area of drug development.  Candidate funding is available at multiple levels, from seed money for academic scientists to grants for clinical testing.  Application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product.  To help with the application process, the FDA is launching an orphan drug workshop series for those who have developed at least one candidate drug.  The workshop will be in Claremont, CA in February 2010 and Minneapolis, MN in August 2010.  For more information on the FDA application process, protecting or licensing your product, please contact Swider Medeiros Haver LLP for further information.

[1] Steven Findlay. The Statin Drugs, Prescription and Price Trends October 2005 to December 2006, Consumer Reports Best Buy Drugs (February 2007).

[2] Syamala Ariyanchira Global Markets for Orphan Drugs, BCC Research Report ID:PHM038B (September 2007), available at http://www.bccresearch.com/report/PHM038B.html. 

[3] Eurodis Rare Diseases: understanding this Public Health Priority, ” citing Background Paper on Orphan Diseases for “WHO Report on Priority Medicines for Europe and the World,” (7 October 2004), Eurordis, November 2005 available at http://www.eurordis.org/IMG/pdf/princeps_document-EN.pdf. 

[4] Syamala Ariyanchira Global Markets for Orphan Drugs, BCC Research Report ID:PHM038B, Published: September 2007, available at http://www.bccresearch.com/report/PHM038B.html.

[5] http://www.nih.gov/news/health/oct2009/od-05.htm

[6] http://www.fda.gov/ForIndustry/DevelopingProductsforRareDiseasesConditions/default.htm

 1.0  INTRODUCTION

 Online sales of music will likely surpass physical sales in the next few years, if not much sooner.  There are a variety of royalties that may be associated with online music distribution.  Online music distribution involves multiple rights, and the type(s) (and amount) of royalties that are typically payable necessarily depend on which rights are invoked by applicable online use.

As a starting point, the Copyright Act distinguishes the copyright in a sound recording from the copyright in a musical composition.  It is important to keep this distinction in mind in analyzing the various types of royalties that may be payable for online uses of music.  It is entirely possible for the copyright in a sound recording to be owned by a person or entity that differs from the person or entity owning the copyright in the underlying musical composition.  For example, for major releases, the sound recording copyrights are typically owned by the record label, while the copyrights to the underlying musical compositions are typically owned by a music publishing company.  However, as online distribution has given artists the tools for self-publication, many artists retain ownership of both their sound recordings and their musical compositions, choosing to use a digital distributor (such as IODA or CD Baby) to administrate the digital rights to their content.

 2.0   SOUND RECORDINGS

             The Copyright Act provides a limited public performance right in sound recordings. [1]  This means that the sound recording copyright holder has the exclusive right to public perform their sound recordings online.  One exception to this exclusivity, however, is the statutory (or “compulsory”) license for certain qualifying non-interactive streaming transmissions. [2]  Where a statutory license is available, the potential licensee need not ask for permission from the applicable copyright holder (though the licensee would need to comply with the statutory requirements and restrictions for the use of the music).  The statutory license for non-interactive streaming is commonly used by webcasters/internet radio service providers, who pay sound recording performance royalties to SoundExchange, a performance rights organization that collects royalties for statutory non-interactive streaming.  For other online performances (e.g., “on demand” streaming), sound recording performance licenses must be obtained from the copyright holder or their agent (such as a digital distributor), and royalties are paid directly to the copyright holder (or the agent).  Sound recording copyright holders are also entitled to royalties for digital copies (e.g., downloads) of their recordings.  These royalties are usually paid to the copyright holder, though for many independent artists, they often first flow through a digital distributor. 

 3.0.  MUSICIAL COMPOSITIONS

             For online uses that implicate the public performance right, a separate performance license is also required for the musical composition embodied in the applicable recording.  Performance rights (other than so-called “dramatic” or “grand” rights) in musical compositions are typically administered by performing rights organizations. [3]  For the public performance of musical compositions online (e.g., streaming), licenses are typically be obtained from (and corresponding royalties are paid to) the applicable performing rights organization. 

          The sale of permanent downloads implicates reproduction and distribution (“mechanical”) rights.  These rights may be obtained via (a) a direct license with the music publisher, (b) a statutory license (where available) pursuant to 17 USC § 115, or (c) a mechanical license issued by the Harry Fox Agency[4].  This type of license is also required for certain other online uses of musical compositions (e.g., ringtones, limited downloads, and on-demand streams).  Mechanical royalties are paid to the copyright holder or their agent, depending on the relevant arrangement. 

 4.0  CONCLUSION

             While there are a variety of specific types of online royalties, these royalties may be also be lumped together in a single payment.  For example, if an artist receives a payment from their digital distributor in respect of download sales, then, pursuant to the artist’s digital distribution agreement, the royalty payment would typically be inclusive of “record royalties” for the recording and “mechanical” royalties for the applicable musical composition. However, for certain online uses the artist may also be entitled to other royalties from third parties.  For this reason, artists should consider affiliating with SoundExchange as well as a PRO. 

[2] 17 U.S.C. § 114(d)(2)

[3] The Performing Rights Organizations that represent performance rights for musical compositions in the  United States are ASCAP, BMI, and SESAC.  These organizations also have reciprocal arrangements with PROs in other territories that allow for the collection of performance royalties for uses abroad.

[4] Note that Harry Fox mechanical licenses are a “variation” on the compulsory license (and, accordingly, are not private contracts).

     Patently-O, a leading patent law blog written by Professor Dennis Crouch from the University of Missouri, has recently posted the results of two studies regarding design patents.  Taken together, it appears that design patents are becoming both easier and quicker to obtain than ever before. 

                A design patent protects the ornamental characteristics of a functional item.  This is similar to trade dress, however the elements of infringement are different.  In order for a court to find trade dress infringement, there must be likelihood of confusion.  In other words, an average consumer must mistake the design and markings of one company for another.  By contrast, a design patent is infringed if something looks, to the ordinary observer, like the patented object.  A design patent is also different from the more common utility patent in a number of important ways.  First, there are no maintenance fees for a design patent.  After the patent issues, the patentee does not need to pay extra to keep the patent alive.  Additionally, a design patent lasts 14 years from the date of issuance.  Finally, a design patent is generally much easier to draft than a utility patent, and the majority of the cost of drafting is usually draftsperson fees for quality drawings.

                The first study performed by Professor Crouch involved the average pendency of a design patent application.  In other words, how many months elapsed between filing and issuance?  He found that the average pendency has been decreasing sharply.  Recently, almost half of the design patents issued have been issued within a year of their filing date.  Almost all have been issued within two years of their filing date.  The reason for this, this author suspects, has to do with the second study by Prof. Crouch.  He found that a whopping 81.6% of filed design patents issue with no rejections from the USPTO.  In other words, the design patent is filed and issues with no further arguments required.  Of the rejections, the vast majority (71.6%) involve informalities in the actual application.  These statistics do not take into account the number of design patents that are filed and later abandoned for one reason or another, but Prof. Crouch points out that the USPTO does release those statistics separately and only about 10% of design patents are abandoned for one reason or another.  Therefore, a well-drafted filed design patent has a little under a 75% chance of simply issuing. 

Combined with the relatively low cost of filing, which is further halved for certain small inventors, a design patent begins to look like a very attractive prospect for a company that desires to protect the look and feel of their product to the maximum extent possible.  If you are interested in discussing further how a design patent may be useful for your products, please do not hesitate to contact us here at Swider Medeiros Haver LLP.  We would be happy to discuss the ramifications with you.