Bayer, Samsung, Pepsi, Smartphones: Intellectual Property

Bayer AG (BAYN) plans to appeal a ruling by an Indian regulatory board that allows generic-drug maker Natco Pharma Ltd. (NTCPH) to make a low-priced copy of Bayer’s patented Nexavar cancer medicine.

India’s government last year allowed Natco to produce and sell cheaper copies of Nexavar, a decision that also pressures other brand-name manufacturers to lower prices. Bayer had appealed to the country’s Intellectual Property Appellate Board, and yesterday was told that it had lost, the Leverkusen, Germany-based company said in an e-mailed statement.

“We strongly disagree with the conclusions of the Intellectual Property Appellate Board,” the company said. “Bayer is committed to protecting its patent for Nexavar and will rigorously continue to defend our intellectual property rights within the Indian legal system. We will pursue the case in front of High Court in Mumbai with a writ petition.”

The government’s decision last year marked the first time that India allowed a generic-drug maker to manufacture copies of a medicine that is protected by patents in the country. Under a World Trade Organization agreement known as Trade-related aspects of intellectual property rights or TRIPS, member countries can use these compulsory licenses to ensure access to affordable medicines, according to Doctors Without Borders, which supports the government decision.

The appellate board ruling “weakens the international patent system and endangers pharmaceutical research,” Bayer said. “The limited period of marketing exclusivity made possible by patents ensures that the costs associated with the research and development of innovative medicines can be recovered.”

Since it began selling Nexavar in India in 2008, the company has had a program in place to ensure patients have access to the treatment, Bayer said. The cost of the product is reduced to about 10 percent of the regular price for 73 percent of all Nexavar patients, the company said.

Nexavar is used for the treatment of advanced kidney and liver cancer. The drug had sales of 792 million euros ($1.03 billion) in 2012.

Novartis AG (NOVN) of Basel, Switzerland, has brought a case before India’s Supreme Court over its cancer treatment Gleevec. The drugmaker is challenging laws that say new forms of existing medicines will only be granted a patent if they demonstrate significantly higher effectiveness.

Samsung to Seek Further Review as Apple Damages Cut About 45%

Samsung Electronics Co. (005930) said it will seek a further review of patent damages awarded to Apple Inc. even after winning a reduction of about 45 percent of the $1.05 billion amount.

U.S. District Judge Lucy Koh in San Jose, California, on March 1 cut the damages award after finding that the jury based its decision on an incorrect legal theory.

“We are pleased that the court decided to strike $450,514,650 from the jury’s award,” Nam Ki Yung, a spokesman at Suwon, South Korea-based Samsung, said in an e-mailed statement yesterday. “Samsung intends to seek further review as to the remaining award.”

Samsung and Apple have each scored victories in patent disputes fought over four continents since the iPad maker accused Asia’s biggest electronics producer in April 2011 of “slavishly copying” its devices. The companies continue to battle over patents as they seek dominance of a mobile-device market estimated by researcher Yankee Group at $346 billion in 2012, even as Apple remains one of Samsung’s biggest customers.

Koh, who previously rejected Cupertino, California-based Apple’s bid to ban U.S. sales of 26 Samsung devices, also denied the iPhone maker’s request to increase the jury’s award. The judge said the amount owed by the Galaxy maker was heavily disputed, and the jury wasn’t bound to accept either side’s damages estimate. The jury’s award for 14 other products stands at $598.9 million, she said.

Steve Dowling, a spokesman for Apple, had said the company had no comment on the ruling.

Koh ordered a new trial on damages for some Samsung products. The companies should consider appealing her ruling before the trial begins, the judge said.

A witness for Apple whose testimony the jury relied on “presented a theory that the court had ruled legally impermissible,” Koh said in her ruling. The judge said despite her explicit instruction that the theory couldn’t be used, “the amount of the award made plain that the jury had applied the impermissible theory anyway.”

The case is Apple Inc. (AAPL) v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).

For more patent news, click here.

Trademark

PepsiCo Unit’s Infringement Case Against Ralcorp Crumbles

PepsiCo Inc. (PEP)’s Frito-Lay unit, the maker of Cheetos and Ruffles potato chips, lost its intellectual property suit against Ralcorp Holdings Inc. and its Medallion Foods unit.

The suit, filed in February 2012 in federal court in Sherman, Texas, was related to Frito-Lay’s Tostitos Scoops! product, a small bowl-shaped corn chip that can be used to scoop up salsa, guacamole or other dips.

According to court papers, Frito-Lay has made Scoops! since 2001. The company registered the shape of the product as a trademark and said the product is covered by four U.S. patents, one of which covers the design.

Frito-Lay objected to Medallion’s Bowlz corn chips. The complaint featured a color photo of the two products laid out side by side on a plain background. It also contained color photos of the packaging for each product.

The Bowlz product was intended to trade off the goodwill of Frito-Lay’s Scoops! through its similar shape and packaging, Plano, Texas-based Frito-Lay said in its pleadings. The two products are sold on the same shelves in the same retail outlets, and consumers are likely to be confused by the apparent similarity, the company claims.

Medallion, based in Newport, Arkansas, was accused of causing financial and reputation damage to Frito-Lay.

In its March 1 verdict, the jury found that there was no infringement of the design of the packaging or the chip itself. It also rejected claims that Medallion had misappropriated Frito-Lay trade secrets and infringed patent 6,610,344, which covers the manufacturing process for the Scoops! product.

The case is Frito-Lay North America Inc. v. Medallion Foods Inc., 12-cv-00074, U.S. District Court, Eastern District of Texas (Sherman).

For more trademark news, click here.

Copyright

Obama Backs Changing Rules to Let Consumers Unlock Smartphones

The Obama administration said consumers should be allowed to unlock smartphones and tablet computers without risking criminal penalties, siding with critics of a ruling from the U.S. Library of Congress.

More than 114,000 people endorsed an Internet petition to rescind a decision by the library that took effect in January. “The White House agrees,” R. David Edelman, senior adviser for Internet, innovation, and privacy, said in a blog posting yesterday entitled, “It’s Time to Legalize Cell Phone Unlocking.”

“If you have paid for your mobile device, and aren’t bound by a service agreement or other obligation, you should be able to use it on another network,” Edelman wrote. “It’s common sense.”

The Federal Communications Commission and the National Telecommunications & Information Administration, a Commerce Department branch that advises President Barack Obama on airwaves policy, will deal with the issue, Edelman said.

The FCC will look into “into whether the agency, wireless providers, or others should take action,” FCC Chairman Julius Genachowski said in a statement posted yesterday on the agency’s website.

The Obama administration wants it to be clear that neither criminal law nor technological locks should prevent consumers from switching carriers when they are no longer bound by a service agreement or other obligation, Edelman said.

Carriers led by Verizon Wireless, the largest U.S. mobile carrier, and No. 2 AT&T Inc. (T) backed the library’s ruling. Under the decision made under U.S. copyright law, consumers aren’t allowed to unlock new mobile phones purchased from wireless providers.

The Library of Congress’s Copyright Office, as part of a periodic review, said altering software to let one carrier’s phones work on other networks wasn’t among activities expressly permitted under copyright law.

CTIA-The Wireless Association, with members including the four largest U.S. mobile carriers -- Verizon, AT&T, Sprint Nextel Corp. (S) and T-Mobile USA Inc. -- had argued that “locking cell phones is an essential part of the wireless industry’s dominant business model” involving handset subsidies and contracts, Librarian of Congress James Billington said in the notice.

CTIA said in a filing last year with the Library of Congress that subsidies “depend on ensuring that the handset will be used, as contemplated, with the carrier’s service.”

Circumventing barriers to unauthorized use “will have significant adverse effects on the wireless industry and on the public,” the Washington-based trade group said in its February 2012 filing.

Kim Dotcom Seeks CFO for File-Sharing Site Ahead of Share Sale

Kim Dotcom, the businessman accused of the biggest U.S. copyright infringement, is seeking a chief financial officer for his new venture Mega ahead of a potential initial public offering.

The venture, started a year after his Megaupload.com file- sharing site was shut down, is seeking a New Zealand-based CFO, Dotcom said on Twitter Inc.’s website, linking to an advertisement. The site has “aggressive growth plans” and will pursue an IPO within 18 months, according to the job posting on the Trade Me Ltd. (TME) website.

Dotcom announced Mega in January and began accepting registrations for the site, which lets users upload, download and share files including music and video. The website, similar to Megaupload.com, competes with services such as Dropbox.com and Google Inc.’s YouTube, Dotcom said.

Dotcom, 39, is fighting extradition to the U.S., where he was indicted by prosecutors who said his file-sharing website generated more than $175 million in criminal proceeds from the exchanges of film, music, book and software files. The site accounted for 4 percent of Internet traffic, U.S. prosecutors said in court filings.

New Zealand police raided Dotcom’s rented mansion in Auckland on Jan. 20, 2012, and Megaupload sites were shut down worldwide by the U.S. Department of Justice. The businessman had his bank accounts frozen in Hong Kong and spent four weeks in jail before winning his release on bail.

Dotcom, who changed his name legally from Kim Schmitz, said in January the 220 workers at Megaupload will be offered jobs with the new project. Mega will allow file encryption through an Internet browser with the user having the only key to unlock the file, preventing governments and storage providers from viewing the contents, he said in January.

For more copyright news, click here.

Trade Secrets/Industrial Espionage

Empire State Development Says Tax Credit Information Is Secret

Empire State Development, New York state’s economic development office, has refused a request from the Post-Standard newspaper to release specific tax credit amounts it has given to film and television production companies that made just one film that features New York, the newspaper reported.

Lawyers for Empire State Development said that information is a trade secret and that the production companies would be damaged if the amounts were revealed, the Post-Standard reported.

The development office said it asked the companies if it was acceptable to disclose the information, and that the responses overwhelmingly opposed its release, according to the newspaper.

Robert Freeman, executive director of the state’s Committee on Open Government, told the Post-Standard he wasn’t impressed with this argument and that speculation about the possibility of harm isn’t a good enough reason to deny public access to the information.

To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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