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More than three-fourths of intellectual property executives and consultants reported that their companies’ total legal or business budget stayed flat or decreased in 2010, according to Foley & Lardner‘s inaugural IP Leadership Survey. The survey, which was released on Oct. 5, is based on August responses from 75 intellectual property executives, advisers and consultants. Nearly half, or 46 percent, said their companies’ legal or business budgets stayed the same. About one-third, or 32 percent, reported a dip in these budgets. More than one-fifth, or 22 percent, of respondents said the amounts climbed this year compared with 2009. Although many companies in the intellectual property space have the same or higher legal spending, the rest are simply doing more with less, said Jeanne Gills, vice-chairwoman of Foley & Lardner’s national intellectual property department. Companies are increasingly strategic about their intellectual property spending, particularly about foreign patent application filings, Gills said. Years ago, companies would automatically file in a set group of other countries every time they filed a U.S. patent application, Gills said. Now they consider the risks of not filing and how to measure the risks against the investment. “There is more deliberate discussion [about these questions] than ever before,” Gills said. The survey respondents report that the economic downturn hasn’t dampened their companies’ focus on protecting their intellectual property. Most, or 93 percent, view intellectual property as equally important or more important than it was before the downturn. “Companies are seeing innovation as a way to maintain and increase their competitive advantage,” Gills said. Another finding reveals that companies believe counterfeit high-volume commodities are more financially draining than luxury good knockoffs. Forty-seven percent of respondents reported that high-volume commodity knockoffs are the most financially damaging of intellectual property crimes. That compares with lower percentages for the separate categories of premium goods, luxury products and other items, such as industrial products and medicine. For companies battling IP theft of commodity products, “trying to battle counterfeiting across multiple countries and multiple demographics does become a challenge,” Gills said. “If it’s a high volume product for your company, it’s not something you could let slide.” Outside counsel can help clients with commodity products at the front end, by helping them draft and file rock-solid patent applications, Gills said. Seventy-five percent of the survey’s respondents said they’re strategically filing patent, trademark and copyright applications to fight global intellectual property theft, but 28% are using or adding an unusual strategy. Companies competing in the Third World are experimenting with offering goods and services at a lower cost or testing different business models such as allowing multiple parties to share one license to patent, Gills said. “If you’re [selling] in a Third World country where the poverty level is much higher and the average consumer can’t afford your products, you have to offer the legitimate, authentic product to that same consumer that you do in the U.S.,” Gills said. For Gills, one surprising finding of the survey is that the two types of plaintiffs most feared in the intellectual property world hadn’t threatened or sued 54% of the respondents during the past year. One category of feared plaintiffs consists of nonpracticing entities, disparagingly referred to as “patent trolls,” which typically use patents to file infringement lawsuits and collect royalties or damages. The other category consists of false patent marking whistleblowers who sue companies for falsely labeling their products as covered by patents. “Fewer companies than I thought had any type of encounter with a nonpracticing entity,” Gills said. Gills also noted that while hundreds of false marking suits have been filed this year, that’s only a fraction of the total number of U.S. companies. Plaintiffs rushed to file about 360 false marking cases between the time of a notable December 2009 ruling by the U.S. Court of Appeals for the Federal Circuit and the end of August. In that ruling, the Federal Circuit held that fines in “false marking” cases could be up to $500 for each item sold, rather than $500 total for each offense. According to the survey results, the nonpracticing entities and whistleblowers tend to gravitate towards companies with higher intellectual property budgets, which also tend to be the largest U.S. companies. According to the survey, 54 percent of respondents with an intellectual property budget of $1 million or more have been threatened and/or sued by one of those two types of plaintiffs in the past year. The number climbs to 67 percent for respondents with an intellectual property budget between $5 million and $10 million, and 100 percent for those with a budget of more than $10 million.

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