The Oxford Handbook of Intellectual Property Law 9780198758457, 0198758456

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THE OXFORD HANDBOOK OF

INTELLECTUAL PROPERTY LAW

THE OXFORD HANDBOOK OF

INTELLECTUAL PROPERTY LAW Edited by

R O C H E L L E C .  D R EY F U S S

Pauline Newman Professor of Law Co-​Director, Engelberg Center on Innovation Law & Policy, New York University

J U ST I N E  P I L A

Fellow, St Catherine’s College, Oxford Research Fellow, Institute of European and Comparative Law Faculty of Law, University of Oxford

1

3 Great Clarendon Street, Oxford, ox2 6dp, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © The several contributors 2018 The moral rights of the authors have been asserted First Edition published in 2018 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2018931029 ISBN 978–​0–​19–​875845–​7 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

Preface

In our current age, expressive, informational, and technological subject matter are often described as having increasing importance. The growing emphasis placed by states and businesses on the recognition and protection of intellectual property (IP) simultaneously reflects and supports this view. IP regimes–copyright, trademark, patent, and related rights—are the primary means by which jurisdictions seek to promote and regulate human expression, information, and technology. By enabling those responsible for the creation of intellectual products to exclude others from their benefits, these laws aim to encourage innovation and creativity, and thereby to support solutions to global environmental and health problems, in addition to promoting freedom of expression, culture, and democracy. They also seek to stimulate economic growth and competition—accounting for their centrality to US foreign trade strategies and European Union (EU) internal market trade and development policies—and they are of enormous importance to business. According to a 2014 report commissioned by the UK Intellectual Property Office, for example, in 2011 UK business invested £126.8 billion in knowledge assets, compared with £88 billion in tangible assets. Of this investment, approximately 50 percent (£63.5 billion) was protected by IP rights, including an estimated 10 percent in assets protected by patents, 47 percent in assets protected by copyright, 3 percent in assets protected by registered design rights, 22 percent in assets protected by trade marks, and 18 percent in assets protected by unregistered design rights.1 In recent decades, these factors have contributed to a substantial and growing interest in IP across all spheres of industry and social policy, including an interest in its legal principles, its social and normative foundations, and its place and operation in the political economy. It is in recognition of and response to this interest that we agreed to edit the current Handbook. Consistent with the focus of the other volumes in the Oxford Handbook series, our aim in doing so has been to provide a detailed entrée to the field suitable for a wide academic, practitioner, and general audience. Editing a comprehensive volume in the field of IP brought certain special challenges. One was identifying a framework; another was choosing the right contributors. The challenges of setting an appropriate framework arose largely from the dynamism of IP as a field, due in turn to the constantly changing landscape in which IP rights exist and operate. Above all, changes in technology and the political economy, and in the methods by which knowledge is produced and IP rights are exploited and enforced locally and internationally, might have made it tempting to focus the Handbook on current trends. However, and as previously

1  P Goodridge, J Haskel, and G Wallis, Estimating UK Investment in Intangible Assets and Intellectual Property Rights: Report Commissioned by the Intellectual Property Office (The Intellectual Property Office 2014) 4.

vi   Preface suggested, a central feature of IP law is its embeddedness in the social, economic, cultural, and political fabric of states and regions. That embeddedness creates a need to engage fully with its foundational theoretical and historical components as well. We thus chose to divide the Handbook into four substantive parts, focused on the social and normative foundations of IP law, its emergence and development in different jurisdictions and regions, its substantive rules and principles, and its political economy. The same factors of IP dynamism and embeddedness made our choice of authors for the book essential. This was particularly true given that review essays are not as common in law as in other disciplines, and that in addition to its technical and other complexities, compounded when one considers its interaction with other legal areas, IP is a field in which perspectives can vary considerably depending on the lens through which one is looking, including the specific IP regime and legal system one treats as paradigmatic. Of course, meeting these and other challenges has ultimately fallen less to us as the Handbook’s editors than to the individual authors of each of the chapters themselves. While it is not for us to judge how well they have met the challenges, we hope and trust that their rich and varied contributions will be enjoyable and instructive to a diverse readership. Inevitably for a volume of its size, the Handbook took longer than planned to come to fruition. As a result, some of our authors have had to wait longer than expected to see their chapters published, and we are grateful for their patience. Tragically, we lost one of our authors during the project. Catherine Seville was an outstanding historian and legal academic, as her chapter on the emergence and development of IP law in Western Europe reflects, and we are grateful to her father, Adrian Seville, for supporting its posthumous publication. Several others have also provided us with invaluable support and assistance, some of whom we would like to mention by name. Nicole Arzt of NYU managed the not insignificant feat of keeping us on top of the project administratively; Alex Flach, Imogen Hill, and the other members of our editorial team at OUP engaged fully with the project at each of its stages from conception to final production; and Tobias Endrich (Oxford MJur 2016) helped us to prepare its individual chapters for copyediting. We are very grateful to each of them. We also thank Michael Birnhack, the S Horowitz Institute for Intellectual Property, and the Engelberg Center on Innovation Law and Policy, for hosting and supporting a wonderful workshop in the Handbook’s honor at Tel Aviv University on 7 and 8 December 2015. And last but by no means least, we express sincere appreciation for the significant and varied contributions of Robert Dreyfuss and Jonathan Pila throughout the project, including their aesthetic input on candidate images for the cover in its final stage. Rochelle C. Dreyfuss and Justine Pila New York and Oxford March 2018

Table of Contents xi

List of Contributors 

PA RT I   I N T RODU C T ION 1. Intellectual Property Law: An Anatomical Overview  Rochelle C. Dreyfuss and Justine Pila

3

PA RT I I   S O C IA L A N D N OR M AT I V E F O U N DAT ION S  2. The Basic Structure of Intellectual Property Law  Richard A. Epstein

25

3. What Kind of Rights Are Intellectual Property Rights?  Robert P. Merges

57

4. Intellectual Property as a Public Interest Mechanism  Rebecca Tushnet

95

5. Intellectual Property and Human Rights: Mapping an Evolving and Contested Relationship  Laurence R. Helfer

117

6. Intellectual Property Incentives: Economics and Policy Implications  144 Stephen M. Maurer

PA RT I I I   E M E RG E N C E A N D DE V E L OP M E N T  7. The Emergence and Development of Intellectual Property Law in Western Europe  Catherine Seville

171

8. The Emergence and Development of the International Intellectual Property System  Sam Ricketson

198

viii   Table of Contents

9. The Emergence and Development of United States Intellectual Property Law  Oren Bracha

235

10. The Emergence and Development of Intellectual Property Law in Canada  Daniel Gervais

265

11. The Emergence and Development of Intellectual Property Law in Australia and New Zealand  Kimberlee Weatherall

291

12. The Emergence and Development of Intellectual Property Law in Central and Eastern Europe  Mihály Ficsor

315

13. Intellectual Property in Asia: ASEAN, East Asia, and India  Christoph Antons

348

14. The Emergence and Development of Intellectual Property Law in the Middle East  Michael Birnhack and Amir Khoury

378

15. Three Centuries and Counting: The Emergence and Development of Intellectual Property Law in Africa  Caroline B. Ncube

409

16. The Emergence and Development of Intellectual Property Law in South America  Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina

431

PA RT I V   R IG H T S 17. Patents and Related Rights: A Global Kaleidoscope  Dan L. Burk

461

18. Copyright  Jane C. Ginsburg

487

19. Trade Marks and Allied Rights  Dev Gangjee

517

Table of Contents    ix

20. Design Protection  Barton Beebe

572

21. Rights in Data and Information  Huw Beverley-​Smith

594

22. Overlapping Rights  Estelle Derclaye

618

23. Intellectual Property Licensing  Michael Kasdan

652

24. Remedies  Terence P. Ross

664

25. Cross-​Border Intellectual Property Enforcement  Eun-​Joo Min and Johannes Christian Wichard

687

PA RT V   T H E P OL I T IC A L E C ON OM Y OF I N T E L L E C T UA L P ROP E RT Y 26. Users, Patents, and Innovation Policy  Katherine J. Strandburg 27. Traditional Knowledge, Indigenous Peoples, and Local Communities  Susy Frankel 28. Intellectual Property, Development, and Access to Knowledge  Carolyn Deere Birkbeck 29. Workers in the “Groves of Academe”: The Claim of Academics to Copyright and Patents  Michael Spence

725

758 791

829

30. Intellectual Property Meets the Internet  Pamela Samuelson

845

31. Intellectual Property and Competition Law  C. Scott Hemphill

872

32. Intellectual Property and Private Ordering  Reto M. Hilty

898

x   Table of Contents

33. Intellectual Property and Public Health  Rebecca S. Eisenberg

931

34. Intellectual Property and Climate Change  Abbe E. L. Brown

958

Index 

991

List of Contributors

Christoph Antons is a Professor at Newcastle Law School, University of Newcastle, Australia. Barton Beebe  is the John M.  Desmarais Professor of Intellectual Property Law at NYU School of Law. Huw Beverley-​Smith  is a Partner at Faegre Baker Daniels in London. Carolyn Deere Birkbeck  is a Senior Researcher at the University of Oxford. Michael Birnhack  is Associate Dean for Research, and a Professor of Law at Tel Aviv University. Oren Bracha  is Howrey LLP and Arnold, White & Durkee Centennial Professor at the University of Texas at Austin. Abbe E L Brown  is Professor in Intellectual Property at the University of Aberdeen. Dan L Burk is Chancellor’s Professor of Law at the University of California, Irvine School of Law. Estelle Derclaye  is Professor of Intellectual Property Law at the University of Nottingham. Rochelle C Dreyfuss  is the Pauline Newman Professor of Law at New  York University School of Law and the co-​director of the Engelberg Center on Innovation Law and Policy. Rebecca S Eisenberg  is the Robert and Barbara Luciano Professor of Law at the University of Michigan. Richard A Epstein  is Laurence A. Tisch Professor of Law at NYU School of Law. Mihály Ficsor is President of the Hungarian Copyright Council and former Assistant Director General of WIPO. Susy Frankel  is Professor of Law, Chair in Intellectual Property and International Trade at Victoria University of Wellington. Dev Gangjee  is Associate Professor of Intellectual Property Law at the University of Oxford. Daniel Gervais  is Milton R. Underwood Chair in Law at Vanderbilt Law School. Jane C Ginsburg  is the Morton L. Janklow Professor of Literary and Artistic Property Law at Columbia Law School, and faculty director of its Kernochan Center for Law, Media and the Arts. Laurence R Helfer  is Harry R. Chadwick, Sr. Professor of Law at Duke University.

xii   List of contributors C Scott Hemphill  is Professor of Law at NYU School of Law. Reto M Hilty  is Director of the Max Planck Institute for Innovation & Competition and Professor of Intellectual Property Law at the University of Zürich. Michael Kasdan  is Adjunct Professor of Law at NYU School of Law and Partner at Wiggin and Dana LLP. Amir Khoury  is a Senior Lecturer at Tel Aviv University. Stephen M Maurer  is Full Adjunct Professor of Public Policy and Director of the Goldman School Project on Information Technology and Homeland Security ("ITHS"), Goldman School of Public Policy, University of California Berkeley. Robert P Merges  is Wilson Sonsini Goodrich & Rosati Professor of Law at the University of California, Berkeley. Eun-​Joo Min  is Senior Legal Counsellor, Building Respect for IP Division, WIPO. Caroline B Ncube  is a Professor at the University of Cape Town. Justine Pila  a Fellow of St Catherine’s College, Oxford, a Research Fellow of the Institute of European and Comparative Law, and a member of the Faculty of Law at the University of Oxford. Fabrício Bertini Pasquot Polido  is Founder and Scientific Advisor of the Institute for Research on Internet & Society and a Tenured Professor of Private International Law, International Intellectual Property Law, Internet Law and Comparative Law at the Federal University of Minas Gerais’ School of Law. Sam Ricketson  is Professor and Co-​Director of Studies, Intellectual Property Law at the University of Melbourne. Mônica Steffen Guise Rosina  is Law Professor at Fundação Getulio Vargas in São Paulo. Terence P Ross  is Partner at Katten Muchin Rosenman LLP. Pamela Samuelson is the Richard M.  Sherman Distinguished Professor of Law and Information at the University of California, Berkeley. Catherine Seville  was Fellow, Vice-​Principal and Director of Studies in Law, Newnham College and Reader in Law, Faculty of Law at the University of Cambridge. Michael Spence  is Vice-​Chancellor and Principal at the University of Sydney. Katherine J Strandburg  is Alfred B. Engelberg Professor of Law at NYU School of Law. Rebecca Tushnet  is Professor of Law at Georgetown University. Kimberlee Weatherall  is Professor of Law at the University of Sydney Law School. Johannes Christian Wichard  is Deputy Director General, Global Issues, of WIPO.

Pa rt  I

I N T RODU C T ION

Chapter 1

Intellect ua l Propert y L aw An Anatomical Overview

Rochelle C. Dreyfuss and Justine Pila * 1.  The Theory of Intellectual Property Before exploring the technical aspects of intellectual property (IP)  law, it is appropriate to consider briefly the reasons for its existence and the particular goals that it seeks to achieve. Doing so raises immediate difficulties for two reasons. The first is the lack of consensus over why (and if) we should have IP regimes, and the second is the variety of IP regimes that exist, and the need to distinguish them when considering their aims and theoretical bases. There are two main ways and traditions of thinking about IP. According to the first, which has its roots in continental European jurisprudence, IP laws recognize the special claims of creators to exclude others from their creations, either as a means of protecting their personhood or their financial and spiritual autonomy, or in recognition of their self-​ownership, and the entitlement this gives them to exclude others from the things they labor to create. According to this reasoning, recognizing and protecting IP is primarily a matter of morality. On the other side of the theory fence sit the instrumentalist accounts of IP, which are more commonly associated with common law systems. According to these accounts, the existence of IP rights is less a matter of morality than of expediency, and of the utility or convenience of IP rights as means of securing certain socially and economically desirable ends. While the envisaged ends vary among regimes, they include the creation of efficient markets for works and other creative subject matter that would otherwise be difficult to commercialize due to their intangibility, and thus, their non-​excludability; the provision of incentives to produce and disseminate those subject matter; and the promotion of competition among those engaged in such production and dissemination. If IP rights did not exist, the argument goes, there would be little to prevent third parties from copying and distributing the *  Rochelle C. Dreyfuss and Justine Pila have asserted their moral rights to be identified as the authors of this contribution. All websites were last accessed in February 2018, unless otherwise specified.

4    Rochelle C. Dreyfuss and Justine Pila intellectual products of others as soon as they enter the public realm, and thus little to motivate (or enable) authors and other creators to devote their time and resources to producing them. So too, it is said, by restricting access to IP subject matter, IP rights promote competition among those engaged in their production, thus increasing the number and variety of intellectual products that enter the public realm. Different again is the end said to be secured by the trademarks regime. Rather than (or in addition to) encouraging the creation of new trademarks and the development of goodwill in respect of them, recognizing the rights of traders to prevent others from using their marks in respect of identical or similar goods or services facilitates transparency in the marketplace, and thereby ensures the ability of consumers to make informed purchasing decisions, and the ability of traders to depend on fair treatment by their competitors. While these theoretical strands are different and militate in favor of divergent forms of legal protection, they can both be said to have emerged from similar historical imperatives: from the interest of states in improving productivity and social welfare, as well as from the difficulties that many creators face on account of their limited ability to exploit their work financially, and the dissatisfaction that they experience with other methods for supporting themselves and their families, such as teaching, patronage, and unrelated forms of employment. These theories are, of course, merely points on a landscape that includes many other theories of IP of more or less relevance for different regimes.

2.  Intellectual Property Subject Matter IP law as a field is generally regarded as having emerged in the nineteenth century:  before then, reference was more often confined to one or more of the distinct legal regimes associated with the recognition and protection of rights in respect of expressive, informational, and technological subject matter. Central among these were the patent regime, protecting methods of manufacture and other technical subject matter; the copyright regime, protecting literary and artistic works; the trademark regime, protecting signs of use in trade to indicate the commercial origin of goods and services; and the design regime, protecting aspects of product design. In the nineteenth century, these were organized by the European creators of the first multilateral systems of IP—​the 1883 Paris Convention for the Protection of Industrial Property1 and the 1886 Berne Convention for the Protection of Literary and Artistic Property2—​into the two broad categories of authorial and industrial property respectively. The continued existence and importance of these two Conventions, to which most countries around the world are parties today, has ensured the persistence of this basic taxonomical division in the field of IP, as well as encouraging treatment of the various regimes under the single umbrella of “intellectual property.” Whether the category distinction between industrial, and literary and artistic, property is useful or even appropriate is unclear. For example, copyright and patents seem more closely aligned than patents and trademarks, since unlike trademark systems, copyright and patent 1  Paris Convention for the Protection of Industrial Property (opened for signature 20 March 1883, entered into force 7 July 1884) 828 UNTS 305. 2  Berne Convention for the Protection of Literary and Artistic Works (adopted 9 September 1886, entered into force 5 December 1887) 828 UNTS 221.

Intellectual Property Law: An Anatomical Overview    5 systems protect intellectual creations in the form of authorial works and inventions, respectively. By contrast, trademarks protect, conventionally at least, the mental association between a particular mark as sign and the class of goods or services with reference to which it is used, and the goodwill attached to it, each of which is difficult to conceive as an intellectual creation in the manner of a work or invention. Similarly, too, several of the other species of right defined and regulated by the international community as forms of IP sit uncomfortably alongside copyright and patent law due to the different nature of the subject matter they protect. For example, plant variety rights protect previously non-​commercialized varieties of plants, defined precisely by their failure to constitute “intellectual creations” properly conceived, and thus by their failure to merit the protection conferred on inventors by patent law. So too the subject matter protected by copyright in common law countries—​and alongside copyright, by related rights in the EU and civil law countries—​extends to recordings, performances, and broadcast transmissions of authorial works, none of which is easily conceived as an intellectual creation. Finally, some subject matter arguably fit in more than one regime. Computer programs, for example, are both technical and creative in nature, and thus suitable for protection in principle at least as inventions and authorial works by patent and copyright law respectively. One thing to emerge from this discussion is the extent to which the distinction between different species of IP right and their associated legal regimes depends on the nature of the subject matter which they protect:  authorial works, in the case of copyright; inventions, in the case of patent law; plant varieties, in the case of plant variety rights; recordings and transmissions of authorial works, in the case of related rights; and signs of commercial origin, in the case of trademarks. Perhaps the most difficult categories of IP subject matter (and therefore the most difficult of IP rights) from a conceptual perspective are designs and confidential information, including trade secrets. The reason in the case of designs is their dual authorial and industrial nature: while a dress, chair, or kettle might plausibly be treated as a work of creative expression, its functional nature and industrial method of production distinguish it from paradigmatic authorial works. It is considerations such as these that have historically led countries to deny functional items the protection of copyright, preferring instead to offer their design features a more limited protection in the form of a sui generis design right. Designs are, however, not the only subject matter that can fall in more than one camp: trademarks, for example, are also both functional and expressive. Jurisdictions have worked out various ways to deal with these conceptual overlaps. Other types of information pose further conceptual challenges. Trade secrets are, in some ways, similar to patents in that they furnish innovators with a way to appropriate returns from their investments and thus create incentives to innovate. But few countries regard raw information as capable of supporting property rights as such. However, if the information is confidential or private in nature—​as, for example, with information relating to a person or to the client lists or product recipes of a trader—​its use by third parties might be restricted in order to protect such confidentially or privacy. In these cases, it is less the information itself than its quality of confidence or privacy that is the subject of the relevant IP right. So too in the case of the sui generis data exclusivity and database rights allied to patent and copyright law, the subject matter of the IP right is not the data specifically, but rather its exclusivity and—​for the database right—​the commercial investment expended in collecting, verifying, and presenting it in the form of a database. And finally, for geographical indications, the protected subject matter is a method of production specific to a particular region, and the beneficiaries of that protection are all of the producers within the region who follow

6    Rochelle C. Dreyfuss and Justine Pila the same production method. While geographical indications can therefore be conceptualized as collectively owned inventions, they tend to be protected as collectively owned trademarks or via a sui generis IP regime. The claims for protection for traditional technical knowledge, cultural expression, and genetic resources raise similar issues. Like geographical indications, the information generated by indigenous groups is said to be owned collectively. As with trade secrets, the claims often sound in confidentiality or privacy. And as with these other forms of knowledge, a regime of exclusivity can facilitate information exchange and promote socially beneficial use. In sum, IP law may be defined as the area(s) of law concerned with the recognition and protection of exclusionary rights in respect of each of the categories of subject matter discussed. Thus defined, the term is misleading in its suggestion that IP law is concerned exclusively with “intellectual creations,” as most people would understand that term at least. While the original forms of IP right—​copyright and patents—​are concerned with intellectual creations, other forms are not, or are less obviously. Given this, a better way to understand the categories of subject matter protected by IP might be with reference to their intangibility, and their informational, expressive, or technological nature specifically. It is this nature that differentiates the subject matter protected by IP from the subject matter protected by other exclusive rights, such as (real and personal) property rights, and that makes IP law so conceptually and philosophically challenging. A useful way of expressing this difference and its importance for IP is with reference to the philosophical concepts of “token” and “type.” Consider the case of a book or an ibuprofen capsule. An IP lawyer handed a copy of War and Peace is likely to perceive it as an abstract concept or type in the form of the novel by Leo Tolstoy, just as she would be likely to perceive an ibuprofen capsule as an abstract concept or type in the form of the pharmaceutical compound ibuprofen. By contrast, a personal property lawyer handed the same objects would be more likely to perceive them as concrete instantiations or tokens of these types in the form of a copy of War and Peace or a capsule of ibuprofen. As an ontological matter, each person perceives a different object. And consistent with this, recognizing and protecting the right of an individual to exclude others from using each object will produce vastly different consequences and implications. In general, excluding third parties from access to a copy of War and Peace or a capsule of ibuprofen can be expected to have a marginal effect on their freedoms or other interests, since they will ordinarily be able to acquire another identical copy or capsule from a local bookseller or pharmacy. By contrast, excluding third parties from access to War and Peace or ibuprofen as an abstract concept will affect very substantially their freedoms and interests; firstly, because there will almost certainly be no perfect substitute for the object, and secondly, because to deprive a person access to a novel or drug is to infringe universally recognized rights of freedom of expression and public health. It is largely for this reason that recognizing and protecting IP raises issues of such complexity and controversy throughout the world.

3.  Intellectual Property Rights When thinking about IP, it is important to distinguish the rights that IP confers from the legislation and other laws by which those rights are defined. At their simplest, IP rights are

Intellectual Property Law: An Anatomical Overview    7 private (horizontally enforceable) rights to exclude third parties from certain unauthorized uses of a protected subject matter, which rights may often, but not always, be assigned or otherwise transferred and exploited in the manner of real and personal property rights. Unlike more conventional property rights, however, IP rights are limited in scope. Thus, rather than excluding third parties from making any use of a literary work, literary copyright excludes third parties from copying and distributing copies/​communicating to the public a literary work. To be sure, the range of uses not prohibited by copyright has diminished since the earliest statutory copyright regimes, and continues to change to reflect developments in the technological, social, and commercial contexts in which authorial works are enjoyed and exploited. Nonetheless, the principle remains that neither copyright nor any other species of IP right confers a general right to exclude others from access to or use of the protected work or other subject matter. In addition to conferring limited exclusionary rights, IP confers rights that are limited in time. In the case of unregistered rights, such as copyright, IP rights come into existence automatically, upon creation of the work or other subject matter, without the need for formal application or registration. In the case of registered rights such as patents, by contrast, their existence depends on an administrative act of formal grant by the state, accompanying entry of the right in a public register, and backdating protection in some jurisdictions to the filing of the application for it. Different also is the term for which different species of IP right endure: in the case of copyright, this is now 50 or 70 years past the death of the author in most countries; in the case of patents, it is 20 years past the date of filing or grant; trademarks and geographical indications, by contrast, last as long as they are registered and/​or in use; and rights in confidential information end when the information loses its quality of confidence. The nature of the rights conferred by IP is no more similar, though more directly suggested by the protected subject matter. The central right conferred by copyright is the right to prevent others from reproducing the protected work. Since the emergence of digital technology, traditional reproduction and public performance rights have been supplemented by public communication and “making available” rights, in recognition of the increased scope for effecting and the economic value of controlling the communication of works via the Internet particularly. Different are the rights conferred by a patent, which (for product inventions at least) are focused on manufacture, import and supply or offering to supply the public with the product. Here the negative nature of IP rights becomes important, explaining why the grant of a patent for a pharmaceutical or other product does not entitle the patentee to use or otherwise exploit the product: to be authorized to do this, the patentee must first obtain regulatory approval from the state. So too in the field of confidentiality, IP has often been conceived less as a “right” to commercialize information, for example, than as a “duty” not to behave unconscionably, again reinforcing the negative nature of the rights that IP in general entails. Through the conferral of exclusionary rights in respect of intellectual creations and related subject matter, the law in effect gives individuals the ability to exclude others from instantiating those creations in concrete form, that is, from dealing with tokens of the relevant protected type. In the case of trademarks, by contrast, the law gives the owner of the right the ability to prevent third parties from potentially confusing consumers through use of the protected sign in respect of the same or similar types of goods or services with reference to which it is registered, thereby preserving to the owner the exclusive benefit from the association between the sign and the goods or services in question. In some jurisdictions,

8    Rochelle C. Dreyfuss and Justine Pila the value of a sign is also safeguarded by a right to protect it against uses that are likely to dilute (tarnish or blur) its cognitive impact and cachet within the market. The distinction between IP rights and legislation is further underlined by the range of exceptions that exist and are statutorily recognized for each species of IP right. These exceptions have one of two immediate purposes: either they exclude certain subject matter from protection, or they deem certain acts to be non-​infringing of that protection, on public interest or morality grounds. The nature and aim of the exceptions range among regimes and jurisdictions. For the most part, however, they reflect a concern on the part of the legislature to ensure that each species of IP right is confined to subject matter of a type for which it was intended, and otherwise defined having regard to the aims of the IP regime in question. Thus, several of the exclusions from patent protection cover subject matter that lack the technical and artifactual qualities of inventions, such as mathematical methods and products of nature. For example, in the United States (US) and Australia, in contrast to the position in Europe, isolated natural gene sequences are not considered patentable, even though they are the result of a technical process (of isolation) and depend for their existence on human agency; and nor in the US are insufficiently transformative methods of applying a breakthrough discovery to diagnose an illness or achieve some other socially beneficial end. The remaining exclusions cover advances that share the essential characteristics of subject matter protected by the species of IP right, but the protection of which is nonetheless prohibited on public policy or morality (ie, public interest) grounds. For example, in Europe and many other jurisdictions around the world, any sign or invention the commercial use of which would endanger the public or upset a substantial number of people with a normal level of sensitivity and tolerance must be denied trademark or patent protection on morality or public policy grounds. Examples include inventions the reproduction of which requires the destruction of a human embryo, which are regarded as offending human dignity, and signs containing racial slurs, which are regarded as undermining the fight against discrimination. Similarly, in some countries, patent rights over biological products are denied if there is a failure to disclose the geographic source of the inventions, and copyright is denied to works that offend accepted moral codes or otherwise endanger the public interest. Similar considerations of protecting third party rights and the public interest, and of restricting protection to reflect the subject matter and aims of the IP regime in question, inform the acts deemed non-​infringing of IP rights. One example is Australia’s tobacco packaging legislation, which is designed to promote public health. Another is furnished by copyright protection in the US. Because copyright is conceived there primarily as an economic right aimed at encouraging creation and facilitating the efficient exploitation of its results by enabling authors to prevent free-​riders from undermining their markets, a general fair use exception deems transformative and (certain other) non-​commercial uses of a work that do not undermine a copyright owner’s market through substitution of her work to be non-​infringing. Similarly, in the EU, where copyright is conceived more as a means of balancing competing fundamental rights and interests, a more limited exception deems certain uses of a work that are necessary to protect third party freedom of expression and educational rights and interests—​such as uses to report news or engage in private study or parody—​to be non-​infringing. Such explicit concern to reconcile IP rights with third party (fundamental or constitutional) rights and to reason IP disputes accordingly, including, in the EU, through the use of proportionality, has answered the longstanding argument by some theorists that the “public good” nature of IP subject matter and the impact of excluding

Intellectual Property Law: An Anatomical Overview    9 third parties from those subject matter require that IP rights be defined and their exploitation regulated within a clear human rights paradigm. The growing impact of human rights jurisprudence on IP is a central modern theme of the field, and challenges the view of IP as a specialist, technical area requiring specialist, technical adjudication by IP courts and experts. This, however, is an area particularly fraught with difficult line drawing. Creators are said to enjoy a human right to benefit from their work. At the same time, everyone has a fundamental right to free expression, to science, and to culture. Difficult questions thus arise: should, for example, derogatory trademarks be rejected in the name of protecting the derogated or must they issue to further the expressive interests of would-​be trademark holders and others? When is and what makes a trademark “derogatory”? Resolving these questions and reconciling the interests they engage has attracted the attention of theorists, practitioners, nongovernmental organizations (NGOs), and agencies of the United Nations (UN). In sum, IP rights are rights to exclude third parties from the benefits of certain subject matter: the informational, expressive, or technical subject matter that, without legal intervention, could be readily shared and exploited. IP legislation is, however, important not only because it creates rights to exclude, but also because of the limitations it imposes and protections it secures for third parties. These include limitations on the scope and duration of different IP rights, exclusions of certain subject matter from the reach of IP rights, and the protection of certain acts from liability for infringing IP rights. When thinking about the nature and aims of IP specifically, it is important to bear this duality of IP legislation in mind.

4.  Intellectual Property Laws The first general IP laws were created by the City States of Italy in the Middle Ages. From the fifteenth until the nineteenth centuries, technological developments such as the invention of print ushered in a new industrial and social climate that increased the value for states of rights in respect of printed materials and manufacturing methods. During this period, IP law was a distinctly local affair: local cultural and economic interests supported rights for individual creators and importers of works and inventions, and/​or for the various intermediaries (such as printers) on whom creators depended to exploit their subject matter. Grants were often conditional upon the protected subject matter being made available to the public and fulfilment of other formal criteria, such as application for and registration of the IP. The rights conferred by such grants enabled their beneficiaries to restrict third party uses of the protected subject matter for a limited period within the territory of the rights-​conferring state. Consistent with this, the sources of most IP law were domestic. Even in common law jurisdictions such as Britain and the US, copyright and patent laws were also, from the outset, predominantly legislative. This distinguished them from other private rights, such as contract or personal property, and from trademark law, which were defined and regulated by the courts as an aspect of common law rather than by the legislature. That most IP rights were not similarly left to the courts may be seen as recognition of their complexity and of the careful balancing of interests which their recognition and protection has always entailed.

10    Rochelle C. Dreyfuss and Justine Pila To a large extent, IP laws continue to take the same basic form today as they have taken historically. Thus, they confer limited and territorially defined rights in respect of specific subject matter on the creators or producers of those subject matter or on associated third parties, and are defined in the domestic legislation of individual states and the associated jurisprudence of each state’s courts and other public (including rights-​granting) authorities. However, in contrast to the position in and before the nineteenth century, there now exists a tightly woven international network of IP laws that comprises a large number of multilateral conventions and treaties covering the full spectrum of IP rights, and that is supplemented by many bilateral and regional (mainly trade) agreements between pairs and groups of countries. Principal among the conventions and treaties are the Paris and Berne Conventions referred to already, which are two of a growing number of instruments administered by the World Intellectual Property Organization (WIPO), now a specialized agency of the UN. The Paris and Berne Conventions each rest on two foundational organizational principles: the recognition by Member States of certain minimum standards of IP protection, and national treatment–​the commitment to applying those standards in a non-​discriminatory fashion for the benefit of citizens of all other Member States. Also important, but established much later under the aegis of the very differently oriented World Trade Organization (WTO), is the 1994 Agreement on Trade-​Related Aspects of Intellectual Property (TRIPS).3 Compliance with TRIPS is a condition of entry to the WTO, and national compliance can be enforced via the WTO’s general dispute resolution machinery. In terms of its provisions, TRIPS entrenches the core obligations of the Paris and Berne Conventions while also providing an overlay to those other WIPO conventions and treaties. Its effect on developing countries—​including many with limited experience of recognizing and protecting IP—​has been profound. By requiring their adherence to a set of IP laws developed to suit the particular needs and interests of developed countries, TRIPS has created significant economic and political challenges for nations with limited industrial infrastructure and social or political commitment to IP. Between the domestic IP systems of individual countries, and the international system of IP instruments under which they exist (and with which they must comply), there exist a range of further regional IP laws and systems of varied degrees of importance in different parts of the world. In Europe, these include the harmonized and unified IP systems of the EU  and its 28 (for the moment) Member States, as well as the harmonized European patent system created by the non-​EU European Patent Convention (EPC)4 for its (currently) 38 contracting parties. The unified EU IP systems deserve special mention because they create titles of trademark,5 design,6 and (if the unitary patent system takes effect) patent7 rights that have uniform and unitary effect throughout the territories of some or all EU Member States. 3  Agreement on Trade-​Related Aspects of Intellectual Property Rights (opened for signature 15 December 1993, entered into force 1 January 1995) 1869 UNTS 299. 4  Convention on the Grant of European Patents (opened for signature 5 October 1973, entered into force 1 January 1977) 1065 UNTS 199, as amended. 5  Council Regulation (EC) No 207/​2009 of 26 February 2009 on the EU trademark, , as amended. 6  Council Regulation (EC) No 6/​2002 of 12 December 2001 on Community Designs [2002] OJ L 3/​1, as amended. 7  Regulation (EU) No 1257/​2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection [2012] OJ L 361/​1.

Intellectual Property Law: An Anatomical Overview    11 They coexist alongside domestic trademark, design, and patent rights, and are supported by a network of specialist and generalist EU courts and other public (administrative and legislative) authorities, supported by their domestic counterparts. So too in other parts of the world, such as South America and Africa, there exist many regional instruments through which countries have sought over a century or more to pool their resources and strengthen their economic and political ties. In recent years, investment agreements have also begun to play a role in shaping national IP laws. These agreements, either bilateral investment treaties (BITs) or separate chapters of trade agreements, as in the North American Free Trade Agreement (NAFTA),8 protect investors from direct and indirect appropriation of their investments and from the deprivation of fair and equitable treatment. The agreements typically consider IP rights to be one of the forms that investments may take. While modern agreements consider compliance with TRIPS to be a defence to expropriation, dispute resolution is through a different arbitral system from the one used by the WTO. Thus, TRIPS obligations can be interpreted differently in the two regimes. Furthermore, the complainants are investors, rather than Member States, as in the WTO. While states may be reticent about challenging flexibilities that they may wish to utilize themselves, investors have no such compunctions. Finally, whereas a loss in the WTO requires a state to change its law, a loss in investor–​state dispute settlement requires the state to compensate the investor—​often to the tune of very considerable sums of money. Because states may thus be warier of violating investment agreements, if investment disputes become popular in the IP context, they could easily become an important source of IP law making.

5.  Intellectual Property Actors and Institutions As the foregoing suggests, IP law is shaped by a variety of actors and institutions. Historically, the law was framed to protect the creative industries—​that is, those responsible for creating IP subject matter, including their employers and other financial supporters. Accordingly, legislation and international agreements are generally composed of positivist measures elaborating on the rights to exclude. And because the relevant industrial players are easily identified, well-​heeled, and generally aligned in interest, proposals for new legislation and

The fate of the unitary patent system is in doubt following the UK’s decision to leave the EU. The reason is the restriction of the system to EU Member States on the one hand, and the necessity for its ratification by the UK to take effect on the other, as well as the envisaged location of a section of the central division of the system’s unified patent court in London under the Agreement on a Unified Patent Court [2013] OJ C 175/​1. Despite this, the UK Government has recently confirmed its intention to proceed with ratification on the basis that as long as the UK remains within the EU, it “will continue to play a full and active role”: . 8  North American Free Trade Agreement Between the Government of the United States of America, the Government of Canada, and the Government of the United Mexican States (signed 17 December 1992, entered into force 1 January 1994) 32 ILM 289.

12    Rochelle C. Dreyfuss and Justine Pila new international obligations also tend to concern increases in the level of protection, often to respond to new technological opportunities. An example is the “making available to the public right” demanded by holders of copyright interested in control over Internet distributions. In contrast, user interests are generally protected, in both domestic legislation and international law, by exceptions and limitations. These are often interpreted narrowly, as, perhaps, befits derogations to the prerogatives of “right” holders. From a political economy perspective, this is to be expected: user groups are widely dispersed and unfunded. Thus, they are rarely as well positioned as right holders to articulate and safeguard their interests. This explains not only the narrow approach to statutory and treaty interpretation, but also the general experience that IP rights are continually expanding and enforcement is becoming ever more stringent. Thus, the aforementioned bilateral and regional trade agreements generally include so-​called “TRIPS-​plus” commitments. The Australia–​United States Free Trade Agreement (AUSFTA),9 for example, requires trademark protection for sounds and scents, even though TRIPS obligates countries to protect only visually perceptible marks. AUSFTA also limits the compulsory licensing of patents in ways that TRIPS does not, and narrows the ability of both countries to parallel import patented products. The United States–​Korea Free Trade Agreement (KORUS)10 has a lower trigger for criminal penalties in counterfeiting and piracy cases than does TRIPS, and requires both signatories to give competent authorities the power to stop counterfeit and pirated goods that are in transit. But the political economy is changing. In addition to creating new methods of distribution, the Internet has also given rise to new stakeholders, such as Google and Wikipedia, with strong business interests in the free flow of information and public access to creative works. The industrial associations that have long performed crucial roles in negotiating new laws and treaties have also watched as various NGOs such as Médecins Sans Frontières, Oxfam, and Knowledge Ecology International (KEI) have joined in both national and international debates over such matters as Internet use and access to medicine. These firms and organizations were important in preventing the adoption of the Anti-​Counterfeiting Trade Agreement (ACTA),11 which would have heightened enforcement of copyright and trademark rights from going into effect. In the US, some were key to defeating domestic legislation that would similarly have increased the measures available to ensure enforcement of IP on the Internet. These new actors were also instrumental in the adoption of the first ever user-​oriented international agreement, the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled (Marrakesh VIP Treaty).12 Like Berne and Paris, the Marrakesh VIP Treaty was negotiated under the auspices of WIPO.

9 

Australia–​United States Free Trade Agreement (signed 18 May 2004, entered into force 1 January 2005) 43 ILM 1248. 10  United States–​Korea Free Trade Agreement (signed 30 June 2007, entered into force 15 March 2012) . 11  Anti-​Counterfeiting Trade Agreement (opened for signature 1 October 2011, not in force) . 12  Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled (opened for signature 28 June 2013, entered into force 30 September 2016) TRT/​MARRAKESH/​001 .

Intellectual Property Law: An Anatomical Overview    13 Along similar lines, WIPO and the WTO are no longer the only international organizations involved in international IP law making. As IP rights have expanded, other international organizations have begun to appreciate the role that IP can play in the economy, development, and culture, and they, too, have sought to influence the shape and implementation of international obligations. The World Health Organization (WHO) has devoted considerable effort to identifying flexibilities in TRIPS that facilitate access to medicine and to developing norms of sharing. Similarly, the UN Conference on Trade and Development (UNCTAD) has issued guidelines to help less-​developed countries meet their TRIPS obligations in a manner that is also responsive to their national interest in preserving access to creative works. The UN Educational, Scientific and Culture Organization (UNESCO) has likewise taken an interest in access to cultural works. Additionally, many international organizations and NGOs have begun to recognize the relationship between IP and human rights, particularly rights to health, education, and free expression. For example, the UN Human Rights Council and its Special Rapporteur on the Right of Everyone to the Enjoyment of the Highest Attainable Standard of Physical and Mental Health have issued Human Rights Guidelines for Pharmaceutical Companies in Relation to Access to Medicines.13 By the same token, the UN Special Rapporteur in the field of cultural rights has issued two reports, one on copyright14 and the other on patents,15 that attempt to reconcile the recognition that the Universal Declaration of Human Rights (UDHR) accords to the rights of authors and inventors with the right that the UDHR recognizes of everyone to freely participate in the cultural life and the community and to enjoy the arts and share in scientific advancement and its benefits.16 Paradoxically, in some cases the involvement of new actors and institutions has taken matters in the opposite direction, to the recognition of new rights. The Convention on Biological Diversity (CBD),17 for example, no longer considers genetic resources, such as plants with medicinal properties, to be the common heritage of mankind. It now regards these resources and local information about them as the property of the sovereigns of the lands where these resources are found. Under the CBD and its Nagoya protocol,18 such countries enjoy the right to make these resources accessible under principles of prior informed consent and benefit sharing.19 Several countries have implemented these principles by making source disclosure a requirement for patent protection. By the same token, WIPO 13  UN General Assembly, Human Rights Council, Report of the Special Rapporteur on the right of everyone to the enjoyment of the highest attainable standard of physical and mental health, Dainius Pūras, A/​HRC/​29/​33 (2 April 2015). 14  UN General Assembly, Human Rights Council, Report of the Special Rapporteur in the field of cultural rights, Farida Shaheed: Copyright policy and the right to science and culture, A/​HRC/​28/​57 (24 December 2014). 15  UN General Assembly, Human Rights Council, Report of the Special Rapporteur in the field of cultural rights, Farida Shaheed: Patent Policy and the right to science and culture, A/​70/​279 (4 August 2015). 16  Universal Declaration of Human Rights (10 December 1948) UN Doc A/​810, art 27. 17  Convention on Biological Diversity (opened for signature 5 June 1992, entered into force 29 December 1993) 1760 UNTS 79. 18  The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising From Their Utilitzation to the Convention on Biological Diversity (opened for signature 29 October 2010, entered into force 12 October 2014) . 19  CBD (n 17) art 15.

14    Rochelle C. Dreyfuss and Justine Pila has been holding a series of negotiations over agreements to protect traditional knowledge and cultural expression, as well as genetic resources. These developments are also a sign that developing countries, which once had a fairly limited role in international negotiations, have begun more proactively to protect their interests. These countries are, however, hampered by the need to ensure market access for the commodities and goods they produce. As a result, they are frequently co-​opted into regional trade agreements, where their interests in IP are sacrificed to their interests in agriculture and manufacturing. The pan-​Asian Regional Comprehensive Economic Partnership (RCEP),20 for example, is being negotiated by a range of countries with different levels of development and IP policies, including developed countries with protectionist IP policies (such as Australia, New Zealand, Japan, South Korea, and Singapore), less developed countries with less protectionist views (such as Indonesia, Brunei, Vietnam, and the Philippines), and countries in transition (such as China and India). Despite their varied economic profiles and interests, all of these countries are apparently committed to negotiating a trade agreement with significant TRIPS-​plus obligations. Within national borders, there are also new institutional players, as well as old players with increasing international influence. Every country has offices to administer IP rights. In the patent realm, in particular, these offices have exerted considerable sway over the law. Since patents must be examined and individually awarded, the agencies are the core expositors of patent jurisprudence. While they do not make the law, they have the final authority over patentability decisions in prosecutions that are not challenged. Additionally, national agencies have relationships with one another that can spread their views outside their own borders. Under the Patent Cooperation Treaty,21 preliminary examination takes place in only one country. Furthermore, the Patent Prosecution Highway speeds prosecution though a system of deference to the earlier decisions of other participating agencies. Some jurisdictions have banded together to offer a single examination that results in a bundle of national patent rights. The European Patent Convention exemplifies this approach. The Trilateral, an association of the Japan Patent Office (JPO), the US Patent Office (USPTO), and the European Patent Office (EPO), seeks to harmonize examination, including through the practice of bringing to the attention of each government places where their laws differ. The JPO, EPO, and USPTO offer training to personnel in developing countries, thereby extending the influence of their national laws and practices. In some countries, the personnel of these IP offices are also involved in negotiating new international agreements. The US additionally has established the Office of the United States Trade Representative (USTR) to represent its international interests, including through annual Special 301 Reports that identify countries that, in the US view, are not offering sufficient protection to IP. Because the remedy for failure to adhere to Special 301 admonitions can be the loss of trade preferences, the US has been successful in persuading other countries to increase the level of IP protection, even when not clearly required by international law. Finally, as the previous section noted, at the behest of right holders, many countries are establishing specialized courts to adjudicate all IP matters, or only patent disputes, at the trial level, on appeal, or both. While it may be hoped that these specialized courts will be adept 20 

For details see . Patent Cooperation Treaty (opened for signature, entered into force 24 January 1978) 1160 UNTS 231. 21 

Intellectual Property Law: An Anatomical Overview    15 at weighing proprietary and access interests, the experience in the US and with the EPO has been that specialized tribunals are in danger of capture by repeat players and of giving too much weight to the interests underlying the statutes for which they are primarily responsible, often at the expense of other national interests. In short, patent offices and specialized courts can mirror the distorted political economy that was responsible for their creation.

6. This Book The diverse actors and institutions, rights and interests, laws and lores discussed in this Introduction play out in many ways throughout the book. Part II, on Social and Normative Foundations, takes a theoretical approach to IP and thus views these rights though a variety of lenses: IP as property (Richard Epstein), and IP rights as rights of property in the classic, Hohfeldian sense (Rob Merges); IP as a public interest mechanism (Rebecca Tushnet); IP in its relationship to codified international norms of human rights (Laurence Helfer); and IP as an economic tool (Stephen Maurer). In his chapter on IP and property, Richard Epstein studies the two main commitments that inform IP jurisprudence:  the first to ensuring strong property rights for IP subject matter, and the second to limiting the impact of IP rights on the public domain to prevent the development of patent and other IP thickets that might block technological innovation, competition, and creativity. He argues for an approach to IP that begins with a comparison of the ownership of IP rights with the ownership of natural resources, including particularly land, air, water, chattels, and animals, before asking how each IP regime ought to be modified to take into account its distinctive nature. Rob Merges also views IP through the lens of property. Beginning with a conception of IP rights as really rights and as really rights of property, he goes on to consider what kind of rights they are specifically. Drawing on Hohfeld’s taxonomy of legal rights as claim rights, liberty rights, powers, and immunities, Merges offers a “common sense” understanding of the nature and structure of IP that challenges the tendency to equate proprietary conceptions of IP with absolutist entitlement. He then considers three common objections to conceiving IP as property—​the need to follow government-​mandated procedures to acquire it, the absence of any automatic entitlement to injunctive relief for its infringement, and its role in regulating entry to economic markets—​and demonstrates why each ought to be rejected. The result is a defense of conceptions of IP rights as rights of property, with an emphasis also on their limited nature. In the following chapter, Rebecca Tushnet takes a very different approach by focusing on IP not as a private right, but rather as a means primarily for promoting the public interest. Noting the absence of reliable empirical evidence about the impact of different levels of IP protection, she advocates reliance by law  makers and decision  makers instead on broad principles aimed at ensuring distributive justice and maximizing output. The premise of her approach is a realist sensitivity to the ways in which people are affected by IP rights, and to the function of IP rights in a broader social and political context. Laurence Helfer continues this discussion of IP as a means of promoting public interest values in his chapter on IP and human rights. He focuses on international commitments to human rights, and describes how the coevolution of fundamental rights instruments and

16    Rochelle C. Dreyfuss and Justine Pila IP agreements has created a framework for defining public interest values, and a doctrinal mechanism for national and international courts to make these values more precise and enforceable. That some of those rights are now being incorporated into IP instruments themselves reflects the success of early scholarly attempts to have the IP system internalize public interest values. IP can also be conceptualized as an economic tool. In his chapter, Stephen Maurer takes that perspective to review the conflict between public and private interests and among successive generations of innovators. Based in part on the pioneering work of his partner Suzanne Scotchmer, he describes the models that modern economists use to think about IP rights and about the impact those rights have on technological progress and cultural evolution. The theoretical discussion of Part II suggests further possible conceptions of IP that are also apparent in other parts of the volume. One is a conception of IP as an instrument of trade, supported by the early recognition of EU competence in IP, the WTO’s establishment of TRIPS, and the prominence of IP clauses in international investment instruments. This conception of IP is reflected in several of the chapters that follow, including Sam Ricketson’s chapter on the international IP system, Rebecca Eisenberg’s chapter on IP and public health, and Carolyn Deere Birkbeck’s chapter on IP, development, and access to knowledge. Its premise is a view of IP rights as promoting the smooth functioning of international (and domestic) markets, including by facilitating access to markets by developing countries and small and medium-​sized enterprises. Another way of conceiving some IP rights at least derives from their historical evolution from claims sounding in the fundamental rights of human creators. Much of this history can be gleaned from the separate chapters in Part III on the emergence of IP rights around the globe, and in Part IV on specific IP rights. While capable of taking several forms, views of IP rights as fundamental rights of a creator typically proceed from a Hegelian conception of IP subject matter as external manifestations of the personality of their creators, a Lockean conception of self-​ownership as entailing rights of property in respect of one’s creations, or a libertarian or Kantian conception of IP as necessary to secure external freedoms. Such conceptions are closely related to property perspectives of IP, as made clear in the chapters by Merges and Epstein. Moving on from theoretical accounts of IP, the chapters in Section III consider the emergence and development of IP regimes in different jurisdictions and regions throughout the world. These chapters can be broadly divided into three groups. The first contains the chapters by Catherine Seville and Sam Ricketson on the earliest domestic IP laws of Western Europe and the international IP system respectively, which in combination provide the foundations of all IP systems today. The second contains the chapters by Oren Bracha, Daniel Gervais, and Kimberlee Weatherall on four former British colonies—​the US, Canada, Australia, and New Zealand—​and the challenges they have faced in adapting their colonial IP regimes to reflect their local identities and needs. And the third contains the chapters by Mihály Ficsor, Christoph Antons, Michael Birnhack and Amir Khoury, Caroline Ncube, and Mônica Steffen Guise Rosina and Fabrício Polido on the emergence and development of IP law in different regions—​Central and Eastern Europe, Asia, the Middle East, Africa, and South America, respectively—​in which we see repeated on a larger scale the complexity of social, political, economic, ideological, and legal factors that have shaped and continue to shape IP laws and systems around the world, and the ways in which those laws and systems

Intellectual Property Law: An Anatomical Overview    17 in turn shape the social, political, economic, ideological, and legal identity of different countries and regions. In her foundational chapter on Western Europe, Catherine Seville traces the long histories and diverse sources of what we now know as “intellectual property.” She shows the myriad ways in which different IP laws and systems have been introduced and developed in response to particular social problems and in reflection of the political and economic thinking of different times and countries, and reveals the balance between private and public interests to have been as important historically in IP as it is today. The growing concern by the nineteenth century of Western European states to protect domestic IP rights abroad led to the emergence and development of an international IP system. In his chapter, Sam Ricketson considers the organizing principles of this system, as well as its principal actors and components. He emphasizes the difference between national and international IP systems, including the comparative complexity of the latter due to the many gaps and inconsistencies in its coverage and content, and the variety of internal and external pressures to which it is subject. The development of the international IP system reflects the emergence of the US as a key player in the intellectual property IP  field. In his chapter on US IP law, Oren Bracha emphasizes the multi-​constitutive role of technological, economic, political, and ideological factors in shaping the modern US IP system, and vice versa, from its modest British and colonial origins to its much expanded form today. Among the themes emphasized by his discussion is the self-​perpetuating nature of IP rights and systems, and their non-​deterministic growth and development. The Canadian IP system is discussed by Daniel Gervais, who considers the unique factors that have influenced it. These include Canada’s mixed common and civil law system, and the rich comparative legal methodology it has engendered, as well as the country’s geographical proximity to the US. The challenge of using IP laws to promote Canadian innovation and creativity while supporting trade in IP subject matter from across the border is discussed, as is the influence on Canadian domestic law of international treaties and harmonization initiatives. From Canada we move to two further Commonwealth countries:  Australia and New Zealand. Described by Kimberlee Weatherall in her chapter as “siblings rather than twins,” these two neighboring states and former British colonies have also faced the challenge of developing and maintaining IP systems that reflect their local circumstances, including their different relationships with their local indigenous communities, while meeting the requirements of international treaties and trade relations. That brings us to the third group of chapters in this section. Mihály Ficsor begins with his study of the emergence and development of IP law in the 28 former socialist countries of the Central and Eastern European bloc during their period of transition to capitalist political economies. He also emphasizes the range of factors that have helped to shape each country’s IP laws, from its social and legal traditions and level of development, to its governing ideology and membership of international communities and IP treaties, and demonstrates that, while not all of the Central and Eastern European countries have completed their transition to free market economies, their IP laws nonetheless reflect broad consistency with international standards. At the same time, he shows that work is still needed in some to meet the challenges of IP rights management and enforcement.

18    Rochelle C. Dreyfuss and Justine Pila In his following chapter, Christoph Antons uses a range of topical case studies to sketch the complex and diverse stories of IP law’s emergence and development in Asia. The focus of these studies are: Japan, described by Antons as a trailblazer in adapting to Western post-​ industrialization IP laws due to its unique technological opportunities in the nineteenth century; South Korea and Singapore, which he casts as representing Asia’s first generation of newly industrialized economies, and providing strong IP protection motivated by different industrial aims; China and India, which, as large and developmentally diverse countries, are shown to have experimented with their IP systems to cater to different interests, using their influence to challenge the standard international IP models and norms that exist; and the former British and European colonies that with Singapore make up the ASEAN region, which have only recently begun to accede to international IP treaties and modernize their colonial IP systems accordingly, often in response to pressure from the US. Even more diverse are the countries considered by Michael Birnhack and Amir Khoury in their chapter on the Middle East. Emphasizing the need to take a broad perspective of IP law that considers fully the legal, political, cultural, and economic context in which it operates, these authors trace the emergence and development of IP in the Middle East from the Ottoman Empire, based on Islamic, Sultanic, and customary law, to the increasingly secularized age of the nineteenth and twentieth centuries. The first country discussed is Israel: a democratic Jewish state with a secular IP system derived from the British, increasingly influenced by the US, compliant with international treaties, and routinely enforced, sometimes at the expense of local Israeli cultural needs. More complex is the situation in the four Arab countries that the authors study—​Egypt, Jordan, Saudi Arabia, and the United Arab Emirates—​due to a range of cultural, political, and economic factors, including the limited civil and political freedoms that people in these countries tend to enjoy, and the challenges they have faced in enforcing those aspects of their IP laws imposed from abroad. In her following chapter, Caroline Ncube considers the vast and diverse African continent from its pre-​colonial origins in the fifteenth century, with a particular focus on more recent regional IP arrangements. Her discussion reveals how a rush to implement international IP treaties has led to the adoption of IP standards that are not necessarily appropriate for African states at different levels of development, and to a complex and fragmented institutional landscape. She concludes by questioning the degree to which IP can be said to have served African interests. Mônica Steffen Guise Rosina and Fabrício Polido conclude this section with their study of IP law in South America since the nineteenth century. They show the different IP models that took root before the late twentieth century, the regional attempts at legal harmonization and institutional coordination that have taken place since then, and the recent norm setting that has occurred in South America through trade agreements with the US and EU particularly. The final picture they present is of a fragmented region that combines high aspirations in the IP field with only limited success in the creation of regional IP systems to date. The focus in Part IV shifts more squarely to the individual IP rights themselves. First are chapters on the core rights (Dan Burk on patent law, Jane Ginsburg on copyright, Dev Gangjee on trademarks and geographical indications, Barton Beebe on design rights, Huw Beverley-​Smith on rights in data and information, and Estelle Derclaye on overlaps among these rights). Then come three chapters on issues regarding exploitation (Michael Kasdan on licensing, Terence Ross on remedies, and Eun-​Joo Min and Christian Wichard on cross-​ border enforcement). Dan Burk begins with a chapter on the patent regime that emphasizes

Intellectual Property Law: An Anatomical Overview    19 its close association with technological innovation and consequential dynamism. He offers a series of vignettes in multiple jurisdictions that reveal the constant evolution of patent doctrine, institutions, and means of exploitation. His study underlines the range of theoretical and practical issues endemic to the patent system, and ties those issues to ongoing controversies that have attracted widespread public attention. Jane Ginsburg follows with her chapter on the copyright regime, moving us from the technological to the creative realm. Taking each of the major doctrinal challenges in copyright law in turn, she shows how copyright and droit d’auteur approaches have each sought to advance the public interest by promoting an ecosystem of authorship that encourages people to create works and draw on the ideas, and sometimes even the expression, of others. Lastly is Dev Gangjee’s chapter on the trademark and allied rights regimes. By considering a selection of issues related to the purpose, subject matter, and scope of trademark protection, he shows how the law’s traditional focus on protecting the communicative content of commercial signs has shifted alongside developments in product marketing and changing social conceptions of brands. He also discusses the related forms of protection afforded by the unfair competition, passing off, publicity rights, geographical indications, and domain names regimes to offer a full picture of those areas of IP concerned less with technology or creativity than with marketing. After this discussion of the main IP rights, Barton Beebe follows with a chapter on the design regime, which protects the appearance of products. He describes a complex regime based both historically and conceptually on a mix of copyright, patent, and trademark laws and ideas, and the difficulty of ensuring adequate incentives to designers while also confining design law to its proper realm. Huw Beverley-​Smith considers the problem of protecting raw information and data by exclusionary rights and duties. He looks at the various approaches that have been taken by the EU, as a leader in this field, to protecting databases, trade secrets, private information, and raw data. As in the other areas of IP, he finds economic and fundamental rights values to be important drivers of protection, and frequently in conflict. A challenge noted in many of the chapters is that of keeping each regime to its proper realm. The potential for protection of a single subject matter by different IP rights gives rise to the issue of IP overlaps referred to previously, which is the focus of Estelle Derclaye’s chapter. She studies the scope under existing law for IP rights to cumulate, and the problems these overlaps can create for creators as well as for the public interest. Michael Kasdan leads off the final three chapters of Part IV on exploitation. In his chapter on IP licensing, Kasdan proceeds from the recognition that not all creators are positioned to exploit their work (or all of the possibilities for their work) themselves. He thus discusses the important role that licensing plays in extracting value from the subject matter to which IP rights attach. Taking patent rights as his focus, Kasdan considers the many complex decisions that IP owners and licensees must make in developing and maintaining their relationships. When such relationships break down, disputes will arise. In his chapter, Terence Ross considers the range of monetary and non-​monetary remedies that are available for IP infringements, and the circumstances in which they are available. How those disputes are resolved, including the outcome of any litigation that they involve, has an important impact on the perception of IP rights and their value to creators and society. His discussion is followed by the final chapter of this part by Eun-​Joo Min and Christian Wichard on the enforcement of IP rights across borders. This chapter acknowledges the global scope of IP development and exploitation, and the particular challenges that the multinational

20    Rochelle C. Dreyfuss and Justine Pila environment poses for the enforcement of IP rights. These include the questions of national adjudicatory authority over foreign parties, which laws to apply in cross-​border cases, and if and when courts should enforce the judgments of tribunals from other jurisdictions. Part V on the political economy tackles the ways in which the emerging importance of IP rights has impinged on a series of particular communities and distinctive interests. The “communities” chapters considers open innovators (Katherine Strandburg), traditional societies (Susy Frankel), developing countries (Carolyn Deere Birkbeck), academia (Michael Spence), and the growing social order organized around the Internet (Pamela Samuelson). The “interests” chapters cover the impact of IP on competition (Scott Hemphill), autonomy (Reto Hilty), health (Rebecca Eisenberg), and the environment (Abbe Brown). Katherine Sandburg opens the discussion of communities with a description of a community whose creative efforts challenge the assumption that IP rights are essential to technological progress. She describes user innovators, a group that invents primarily to benefit directly from the advances they create and “freely reveals” (discloses) those advances for reasons such as altruism, to garner reputational advances, or to spur others to build upon their work and improve it. IP rights affect user innovators in several contrasting ways. They may be helpful at the point where the work is commercialized, but their availability could undermine free exchange by luring some to protect information they might otherwise have freely shared. Further, the availability of IP rights could expose user innovators to infringement liability. Strandburg ends with suggestions for altering patent law in light of the recognition of this important form of innovation. Susy Frankel suggests a need for other modifications in IP law. Her chapter covers different sorts of user innovators:  traditional (indigenous) groups that communally and incrementally produce creative expression and knowledge (songs, music, and technical information, including knowledge about genetic resources) for their own enjoyment and use. Because, as previously described by Seville, western conceptions of IP focus on “the” author or “the” inventor, and can require high degrees of inventiveness, current IP regimes provide poor protection for the valuable contributions made by these groups. That, Frankel argues, creates an injustice, for the fruits of their knowledge can often be owned and exploited by others. Frankel describes the approaches under consideration for providing traditional communities with recognition of, control over, and credit and remuneration for, their intellectual work and products. The claims of traditional communities are particularly poignant because even though they are not receiving payment for their works, they must still pay the high costs associated with protected works, including modern medicines and cultural products. Developing countries are in a somewhat similar plight. They were required to adopt IP protection as the price of entering the WTO. Although they benefit from the ability to trade with other WTO members, and may in the future benefit from the incentive effects of IP protection, at present they are net importers of knowledge products. As a result, IP profits largely extract a tax from local populations and transfer it to foreigners. Further, the protection utilizes significant local resources for examination, registration, and the like. Carolyn Deere Birkbeck traces the efforts of developing countries, NGOs, and certain international organizations to include flexibilities within international agreements and to make IP work for development. The scholarly community represents another group that has come somewhat involuntarily to IP protection. Michael Spence recounts the clash between commitments to academic freedom and Mertonian norms, on the one hand, and the desire of universities to

Intellectual Property Law: An Anatomical Overview    21 use IP rights to extract value from their faculties’ creative output, on the other. His chapter questions the wisdom of the US Bayh–​Dole Act,22 which is based on a determination that knowledge products are more efficiently transferred to the public by administrators than by those who create the advances. He suggests that distinctive rules are required to balance the special claims that academics have to steward the use of their work against the economic needs of the university communities to which academics belong. Pamela Samuelson ends the examination of communities with her study of the community that created and maintains the Internet. Like user innovators, their creative efforts did not require IP-​based incentives and, like the scholarly community, they see the imposition of governance through an IP mechanism as potentially destructive of a free-​wheeling ethos of sharing. But unlike the other groups on whose interests IP impinges, Samuelson describes a society of sophisticated tech-​savvy users who have (so far) managed to join together to defeat overregulation that could undermine the social value of the Internet. Throughout the book, it is evident that IP rights, and the moral and economic interests they protect, are in significant tension with culture, science, and free expression. Balancing these interests specifically is discussed by Laurence Helfer and Rebecca Tushnet at the outset; in its final section, the book addresses the four other important societal issues identified previously: competition, autonomy, health, and the environment. Scott Hemphill begins this section by investigating the relationship between the interests of IP holders and the public from the perspective of antitrust (competition) law and economic policy. He notes that, in a sense, the two bodies of law are the opposite sides of the same coin: IP law views exclusivity as the promoter of innovation while antitrust law sees competition, as Joseph Schumpeter put it, as the engine of “creative destruction.”23 Hemphill considers how the state’s interest in creating exclusive rights influences antitrust doctrine and then turns the analysis around to look at how an interest in competition affects the structure of IP regimes. He observes that at the intersection of these interests, states have produced a distinctive body of law. Reto Hilty’s chapter closely follows this discussion. He considers the clash between a commitment to party autonomy and the balance struck within IP law between the interests of producers and the public, noting that the contractual relationships that largely form the focus of antitrust law are not the only self-​help method creators can use to create de facto exclusivity; that technological protection measures (for example, the encryption of e-​books) can supplement and complement contracts. As he shows, the effects of these practices are ambiguous in terms of public welfare, for they can enable right holders to develop new business models and better control unauthorized uses, but can also be used to protect works that should be in the public domain because, for instance, they are not protectable or the IP rights protecting them have expired. He suggests directions for new legislation and, given the dynamic nature of the problem, the desirability of industry self-​regulation. In her chapter, Rebecca Eisenberg considers the relationship between IP and public health. The obvious problem, as mentioned in several other chapters, is that IP rights increase the cost of accessing medicine and medical technologies. Here, Eisenberg points out that there is also a subtler concern. Looking at vaccines, anti-​infectives, neglected diseases,

22  23 

Pub L No 96-517, 94 Stat 3015 (1980) (codified as amended at 35 USC §§ 200–211 (2014)). See JA Schumpeter, Capitalism, Socialism and Democracy (3rd edn, Harper and Brothers 1950) 83.

22    Rochelle C. Dreyfuss and Justine Pila and non-​excludable innovations, she shows that IP law does not always create adequate incentives to innovate. She argues that the social cost of delaying access to treatments until rights expire, along with the possibility that some important problems will never be addressed, provide reason to give governments considerable flexibility in the implementation of exclusionary rights. Abbe Brown concludes the Handbook with an examination of the pressing issue of climate change. She traces the evolution of international climate change instruments, culminating in the Paris Convention, and notes that even in this stylized environment, the usual clash between incentivizing innovation and providing access to the resulting technologies is evident. She discusses the ways in which policymakers, including the drafters of successive generations of climate-​change agreements, have approached this tension and considered the human rights aspect of protecting the environment. Harking back to Strandburg’s chapter, Brown also assesses the possibilities for developing climate-​change technologies through systems of open innovation. Together the chapters in this book offer a snapshot of the IP landscape at a particular point in time. As technology evolves, new forms of creativity emerge, business models change, and nations develop, the need for intellectual protection is sure to alter, as will the structures of the individual regimes that safeguard the interests of innovators, users, and the wider public in pushing forward the frontiers of knowledge.

Pa rt  I I

S O C IA L A N D N OR M AT I V E F OU N DAT ION S

Chapter 2

T he Basic Stru c t u re of Intellec t ua l Propert y L aw Richard A. Epstein * 1.  Introduction: A Map of the Intellectual Property Universe Intellectual property (IP) law contains at least six major branches: patents, copyright, trademarks (including trade names), rights of publicity, misappropriation, and trade secrets. Each branch has its own separate history that rests on a complex mixture of common law principles augmented by statutory and administrative materials. Each embodies delicate trade-offs on what materials should be treated as private property and what materials belong in the public domain. Scholars of IP law today fall into two main camps: those who accept the model of strong property rights,1 and those who prefer a larger public domain out of concern that patent and other IP “thickets” will develop and inhibit technological innovation,

*  Richard A Epstein has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  See, eg, Jonathan M Barnett, “From Patent Thickets to Patent Networks: The Legal Infrastructure of the Digital Economy” (2014) 55 Jurimetrics Journal 1 (using the field of information and community technology to demonstrate that strong property rights do not inhibit innovation); F Scott Kieff, “Property Rights and Property Rules for Commercializing Inventions” (2001) 85 Minnesota Law Review 697 (arguing that strong property rights are essential to avoid underusing technology); Richard A Epstein, F Scott Kieff, and Daniel F Spulber, “The FTC, IP and SSOs: Government Hold-​Up Replacing Private Coordination” (2012) 8 Journal of Competition Law and Economics 1 (2012) (demonstrating the benefits of strong property rights through the lens of standard-​setting organizations); Richard A Epstein and Bruce N Kuhlik, “Is There a Biomedical Anticommons?” (2004) 27 Regulation 54 (arguing that strong property rights promote innovation in the biomedical field); Richard A Epstein, “Heller’s Gridlock Economy in Perspective: Why There is Too Little, Not Too Much, Private Property” (2011) 53 Arizona Law Review 51.

26   Richard A. Epstein competition, and creativity.2 This wide-​ranging conflict manifests itself in discussions of both the scope of IP protection and the choice of remedies in the event of infringement. For example, property-​oriented theorists tend to prefer stronger injunctions and stiffer measures of damages than public domain theorists.3 Any account of the basic architecture of IP law must address these manifold conflicts and complexities. This task is best done by comparing and contrasting IP rules with the rules governing the ownership of natural resources, most notably land, air, water, chattels, and animals. Most IP experts treat IP as a self-​contained system, separate from these other property systems.4 That distinction makes some scholars reluctant to apply the word “property” to various IP rights. However, these comparisons offer the best way to integrate the divergent threads of IP rights (IPRs).5 In order to drive the comparison home, this chapter offers a thumbnail outline of property rights in natural resources as a template for IP law. The law governing both starts by asking why some resources are held in common, that is, with universal access, and some are made the subject of private (exclusionary) rights. In equilibrium, both common ownership and private rights are needed: rightly understood, common ownership does not leave a rights vacuum that private rights must fill.6 For those things, however, that can support private rights, it is necessary to trace out the rules governing the acquisition of those things, by occupation or creation of the individual subject matter to which they attach or by transfer (eg, sale, lease, or license). It is also necessary to determine the protection these rights confer and the consequences (eg, damages and injunctions) of their trespass or infringement. Once these rules are in place, the next step is determining how the state may take or regulate both physical property and IP in civil and common law systems.

2 

Michael A Heller, The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives (Basic Books 2008) (arguing that strong IP protections lead to the “tragedy of the anticommons”); Michael A Heller, “The Tragedy of the Anticommons: Property in the Transition from Marx to Markets” (1998) 111 Harvard Law Review 621. For the most widely discussed contribution, see Michael A Heller and Rebecca S Eisenberg, “Can Patents Deter Innovation? The Anticommons in Biomedical Research” (1998) 280 Science 698. 3  For a discussion of available remedies, see (n 33). 4  See, eg, Mark A Lemley and Carl Shapiro, “Patent Holdup and Royalty Stacking” (2007) 85 Texas Law Review 1991; Tom W Bell, Intellectual Privilege: Copyright, Common Law, and the Common Good (Mercatus George Mason 2014); James Bessen and Michael J Meurer, Patent Failure: How Judges, Bureaucrats and Lawyers Put Innovators at Risk (Princeton University Press 2008). For a powerful dissection, see David L Schwartz and Jay P Kesan, “Analyzing the Role of Non-​Practicing Entities in the Patent System” (2014) 99 Cornell Law Review 425. 5  For discussion, see Richard A Epstein, “The Disintegration of Intellectual Property? A Classical Liberal Response to a Premature Obituary” (2010) 62 Stanford Law Review 455, 463–​465, 497–​520 [hereafter, Epstein, “Obituary”]; Richard A Epstein, “What Is So Special About Intangible Property? The Case for Intelligent Carryovers” in G Manne and J Wright (eds), Competition Policy and Patent Law under Uncertainty: Regulating Innovation (Volume 42, Cambridge University Press 2011) [hereafter, Epstein, “Carryovers”]. 6  See generally, Carol Rose, “The Comedy of the Commons: Custom, Commerce and Inherently Public Property” (1986) 53 University of Chicago Law Review 711. The other position is, at least implicitly, adopted by Harold Demsetz, “Toward a Theory of Property Rights” (1967) 57 American Economic Review 347.

The Basic Structure of Intellectual Property Law    27

2.  Common Versus Private Property 2.1 Physical Resources The earliest systematic treatment of property rights in Justinian’s Institutes starts with the key distinction between common and private property under the ius gentium, or the law common to all peoples. The air, seas, and consequently the beach are treated as res commune, that is, open to all.7 Land, chattels, and animals are known as res nullius, or things owned by no one, which anyone could reduce to private ownership by capture, “for natural reason gives to the first occupant that which had no previous owner.”8 Why this division of resources?9 The first cut into the problem stems from the simple observation that society as we know it could not function if the rules governing private and common resources were reversed, so that anyone could reduce air, rivers, and beaches to private ownership, even as land, chattels, and animals had to remain in the commons, negating the prospect of agriculture or development. More theoretically, it is critical to identify two major threats to social cohesion that pull in opposite directions: conflict (including aggression) and holdouts. If natural resources such as land could not be owned, people would fight over the extent of their individual uses, each use being incompatible with the others. Given that uncertainty, no one would cultivate or develop any resource if others were free to take or use his work product at their will and pleasure. Early hunter-​gatherer systems only developed permanent and exclusive property rights in chattels and animals that they took with them wherever they went. But before the agricultural revolution, there were no property rights in land because, quite literally, no one had any reason to lay down roots in the soil. Once heavy investments had to be made in land, exclusive property rights were necessary to incentivize high levels of improvement and cultivation. While the distribution rules could be more flexible among family and clan members, they nonetheless had to provide strong protection against outsiders. The resulting systematic exclusion of others from land necessarily comes at the cost of limiting the freedom of access by others, which is what led Proudhon to proclaim that “all Property is theft.”10 At this point, the trade-​offs of exclusive rights become clear. Any lack of cooperation between private property owners could lead to major holdout problems, which occur when the owner of some particular asset uses his exclusive rights to block gainful transactions by others. The tacit empirical judgment with respect to land, chattels, and animals is that the proper baseline is exclusive occupation, which, at the margins, has to be modified to minimize holdout risk without unduly crimping incentives to cultivate and develop. For example, the law allows people to enter private property in cases of serious necessity, involving imminent peril to life or property,11 or to gather information necessary to resolve boundary 7

8  ibid at II, 12.12.   Justinian’s Institutes: Book II, Title I, 1. See Richard A Epstein, “On the Optimal Mix of Private and Common Property” (1994) 11 Social Philosophy and Policy 17. 10  P J Proudhon, What is Property? An Inquiry into the Principles of Right and of Government 11–​12 (Howard Fertig 1840, BR Tucker tr, 1966). 11  See, eg, The Tithe Case, YB Trin 21 Hen 7, f 26, 27 (taking property for protection of King and Country); Mouse’s Case, 77 Eng Rep 1341 (KB 1609) (general average contribution in admiralty); Vincent 9 

28   Richard A. Epstein disputes.12 In dealing with air, water, and the beaches, the relative risks are reversed. Access to these common resources is the first priority for communication and transportation. In the early stages of civilization, these open access regimes did not require much by way of investment to maintain the collective asset. Now a basic (empirical) judgment rates the holdout risk from blocking a river or diverting a stream as far greater than any development loss that stems from holding these elements in common. So now the initial baseline veers sharply toward an open-​access regime. But that regime, too, must be modified to dredge rivers and mark navigation routes. Hence, government preserves open access for all by placing these assets into public trust, raising either fees or taxes to maintain the facility.13 Each property rights system therefore is efficient in its own domain. The basic theorem behind all property systems can thus be summarized in this proposition: minimize the sum of social losses attributable to both aggression (including nuisances) and holdout problems.

2.2 Intellectual Property Resources The same basic calculations apply to IP. The six IP fields mentioned previously all presuppose an intellectual commons around which individuals may secure private rights, none of which undercut the intellectual commons itself, which remains open for use by all. Here are some representative statements about the basic position. “A fundamental principle common to all genres of IP is that they do not carry any exclusive right in mere abstract ideas. Rather, their exclusivity touches only the concrete, tangible, or physical embodiment of an abstraction.”14 Similarly “[t]‌he laws of nature, physical phenomena, and abstract ideas have been held not patentable.”15 The same insight applies to copyright: “Copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such.”16 The explanation for this insistence on a robust common domain does not arise from the technical inability to give individuals exclusive use of these regimes. Note how this logic applies to natural resources. It is surely possible to allow any one person to dam up a river and divert its contents for himself. But that physical possibility is rejected because of its systematic negative social consequences. The same is true in general with abstract ideas and laws of nature. It is possible to allow only one person the exclusive right to use a law of nature in scientific work, but again, the results are so ghastly that it is easy to say that these propositions must be left in the public domain even if the parties who discover them could find a way to charge for their use. Modern communications and research would grind to a v Lake Erie Transportation Co., 124 NW 221 (Minn. 1910) (private necessity, subject to duty of just compensation). 12 

Dougherty v Stepp, 18 N C 371 (1835). Illinois Central R.R. Co. v Illinois, 146 US 387 (1892). For the complexities, see Joseph D Kearney and Thomas W Merrill, “The Origins of the American Public Trust Doctrine: What Really Happened in Illinois Central” (2004) 71 University of Chicago Law Review 799. 14  PD Rosenberg, Patent Law Fundamentals (2nd edn, Clark Boardman, 1995), § 1.13. 15  Diamond v Chakrabarty, 447 US 303, 309 (1980). See generally, Justin Hughes, “The Philosophy of Intellectual Property” (1988) 77 Georgia Law Journal 287. 16  Agreement on Trade-​Related Aspects of Intellectual Property Rights, April 15, 1994, Marrakesh Agreement Establishing the World Trade Organization (hereinafter WTO Agreement), Annex 1C, Legal Instruments—​Results of the Uruguay Round vol 31 (TRIPS); 33 ILM 81, 9(2) (1994). 13 

The Basic Structure of Intellectual Property Law    29 halt if some modern Pythagoras could charge each mathematician, scientist, and student a fee for using his theorem. The number of paid transactions would be astronomical; the fees per transaction would necessarily be low, as each researcher would owe compensation to literally thousands of others for their work; the administrative and monitoring burden would be huge, for no pooling arrangement could keep up with the deluge. Therefore, just as with natural resources, it is the practical, or economic, nightmare of any regime of exclusive use that drives every legal system to treating these as common domain assets. The welfare implications of the intellectual commons are strongly positive, given that each person receives implicit in-​kind compensation through his ability to make use of the general ideas previously created by others in exchange for adding his own ideas to the stock of public assets.17 In some cases, however, the risk may remain that these reciprocal benefits might prove insufficient to create the appropriate level of investment for basic research. Private parties can narrow the gap, as they do, by giving direct support for basic research up to the proof of principle, and offering prizes and rewards to the first person who solves some theoretical problem of great importance.18 Yet the limitations of both methods are clear. Basic research institutes—​think the National Institutes of Science—​are not equipped for commercialization. Prizes are not sufficient. Many prizes are given for lifetime achievements, years after some particular breakthrough. But even targeted prizes, much like the award authorized by the Longitude Act of 1714 for a technique to determine longitude,19 offer only a small fraction of revenues that could be derived from a breakthrough patent or copyright. Furthermore, a prize necessarily goes only to the first player in a given field, even when a subsequent rival product turns out to be superior. In contrast, patents and copyrights spur global competition by rewarding second-​ generation inventors and writers whose creations turn out to be more valuable than those of the first-​generation innovator. Indeed, any judgment made by an impartial market is likely to be superior to that made by some learned panel that must calculate the value of the technology when it is first introduced, and therefore necessarily lacks detailed information on the benefits that accrue over time to downstream users.

3.  The Acquisition of Exclusive Rights The foundation of exclusive rights, which starts with physical assets and carries over to various forms of IP, is the subject of an inconclusive debate. The focal point for this debate is often the natural law defense of private property that John Locke offers in The Second Treatise

17 

For discussion of implicit in-​kind compensation generally, see Richard A Epstein, Takings: Private Property and the Power of Eminent Domain (Harvard University Press 1985), 195–​215. For its specific application to copyright, and by extension to other fields of IP, see William M Landes and Richard A Posner, “An Economic Analysis of Copyright Law” (1989) 18 Journal of Legal Studies 325. 18  Vannevar Bush, Director of the Office of Scientific Research and Development, Science, the Endless Frontier (1945), available at (favoring public support for basic research and a strong patent system for commercialization). 19  See Dava Sobel, Longitude: The True Story of a Lone Genius Who Solved the Greatest Scientific Problem of His Time (Walker & Company 1995).

30   Richard A. Epstein on Government (­Chapter 5), which many modern scholars have claimed can be carried over to IP.20 Still others claim that the constitutional protection of patents and copyrights reflects a more self-​conscious instrumental and utilitarian conception of property rights.21 As the US Supreme Court noted long ago: “The limited and temporary monopoly granted to inventors was never designed for their exclusive profit or advantage; the benefit to the public or community at large was another and doubtless the primary object in granting and securing that monopoly.”22 According to one version of the utilitarian position, the incentive to create and innovate is severely cramped in an open commons. At common law, all individuals had the right to sell the goods that they produced. The addition of the patent excluded others from the exercise of that common law right, leaving the patentee as the sole vendor during the period of patent protection. The next question is whether these exclusive rights advance social welfare. The answer is a mixed verdict. In some instances, they confer monopoly power on the holder of the right, but, in other instances, they do not. The creation of patents for new inventions and copyrights for new writings differs profoundly from some historical uses of patents, under which the Crown offered exclusive rights to importers of products that had already been invented.23 In some of these historical cases, the patentee was under an obligation to market the good and to train English apprentices in its mastery, but in other cases, the patents became a tool of political patronage for the Crown.24 Although the phrase “to promote the Progress of Science and useful Arts”25 in the US Constitution does not, on its own, exclude patents for importation, it does appear to preclude their use as either a source of payment for past services on the one hand, or as a naked monopoly with no correlative public benefits on the other. This natural law versus utilitarianism debate, moreover, is not confined to the American constitutional tradition, but arises wherever the scope of IP protection is debated. One reason why this debate has proved so inconclusive is that it becomes difficult in practice to distinguish natural rights theories from utilitarian ones. To see why, recall that Jeremy Bentham claimed that “natural rights are nonsense on stilts.”26 Ironically, however, his utilitarian theory of the possessory rights conferred is virtually identical to the natural law theories that William Blackstone put forward in his Commentaries. Both men recognized

20  See Hughes (n 15), 296–​330 (surveying the theory of Locke and his supporters), Randolph J May and Seth L Cooper, The Constitutional Foundations of Intellectual Property (Carolina Academic Press 2015), 15–​28. 21  See, eg, Christine MacLeod, Inventing the Industrial Revolution: The English Patent System, 1660–​ 1800 (Cambridge University Press 1988), 51, 53; Edward C Walterscheid, The Nature of the Intellectual Property Clause: A Study in Historical Perspective (2002), 226–​228 (noting that the natural rights tradition took greater hold in the US and France than in England). 22  Kendall v Winsor, 62 US 322, 327–​328 (1858). 23  See Adam Mossoff, “Rethinking the Development of Patents: An Intellectual History, 1550-​1800” (2001) 52 Hastings Law Journal 1255, 1259–​1264. 24  ibid at 1265. For an earlier, more concise version of the argument, see Giles S Rich, “The Relation between Patent Practices and the Anti-​Monopoly Laws” (1942) 24 Journal of the Patent Office Society, 85, 92–​93. 25  US Constitution, art I, § 8, cl 8. 26  Jeremy Bentham, “Anarchical Fallacies” in John Bowring (ed), The Works of Jeremy Bentham (Volume 2, 1843), 489, 491.

The Basic Structure of Intellectual Property Law    31 that the notion of “possession” would be insufficient in ordinary life if it only protected people while they actually held things in their hands. Instead, both writers accepted the obvious convenience of adopting the Roman law convention that the party who acquired possession kept it (as it is sometimes said, as “a matter of law”) until it was either abandoned or taken away.27 Thus, Blackstone wrote: [N]‌o man would be at the trouble to provide either [shelter or raiments], so long as he had only an usufructuary property in them, which was to cease the instant that he quitted possession; if, as soon as he walked out of his tent, or pulled off his garment, the next stranger who came by would have a right to inhabit the one, and to wear the other.28

Bentham uses exactly the same argument to explain why the hunter who captures a deer is entitled to keep it even when he leaves his cave in order to perform some other task.29 Legal systems that tie protection of property to possession need a broad definition of possession, for otherwise every dispute would require that the successful claimant go back to the original title in order to beat back the claim of every rival.30 To avoid that senseless waste of resources, every legal system posits that once possession is acquired, it is kept until it is lost by consent or abandonment. The differences between the natural law and utilitarian theory on this and so many points are so small that operationally it becomes difficult to distinguish between them.31 Within this framework, the possession of physical things—​land, chattels, and animals—​ in both common law and civil systems was acquired by occupatio, or occupation; no further use or development was required to perfect title. That possession involves two distinct elements. First, the initial possessor must distinguish himself from everyone else to become the sole owner. Second, the initial possessor has to give notice of that relationship to the rest of the world to preserve priority. The method of giving notice differs by asset class. For land, it is usually necessary to mark the boundaries in some distinct fashion, of which the most powerful (and most expensive) is to fence it in. For chattels, it is to first take them in hand, usually followed by moving them to a place of safety. For animals, it is to capture, control, and sometimes brand them. In each setting, the key element is that the legal system demands as little as possible from the initial possessor owner to separate his claim from that of others. The philosopher most closely aligned with the protection of private property is John Locke. But at no point does he use the word “occupation” to describe how unowned things are reduced to private ownership. That omission has plunged the philosophical literature 27  Digest, 6.3.9: “For it is settled that we remain in possession [of a thing] until either we voluntarily abandon it or are ejected by force.” 28  William Blackstone, “Of the Countries Subject to the Laws of England,” in Commentaries on the Laws of England (1765–1769) University of Chicago facsimile edn, available at . 29  Jeremy Bentham and Etienne Dumont, Theory of Legislation (R Hildreth tr, Weeks, Jordan, & Co. 1840). Locke uses the same example in The Second Treatise of Government, ch 5, para 30 (Two Treatises of Government 2nd edn) Peter Laslett ed, available at . 30  On the relationship between possession and ownership, see FW Maitland, The Forms of Action at Common Law, AH Chaytor and WJ Whittaker (eds), (Cambridge University Press 1936), 27–​36. 31  For discussion, see Richard A Epstein, “The Utilitarian Foundations of Natural Law” (1989) 12 Harvard Journal of Law & Public Policy 713.

32   Richard A. Epstein into deep confusion about Locke’s views on the acquisition of private rights. The matter requires some close attention. Initially, it is always the case that no act is required to obtain ownership of one’s own person or labor, for each person from birth is entitled to both in the original position: “Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his.”32 This claim has an obvious efficiency justification. If each person does not own his or her own labor, then someone else must, at which point a fatal imbalance is created: no one will labor if the gains from that activity are given as of right to a stranger, even if they will share within families or clans. The legal system thus has to work to protect against the theft of labor, as it does, for example, when the law offers people protection against the theft of honest services.33 This rule creates the right incentives because even the smallest expenditure of labor gives its owner full protection of the benefits so produced. Picasso keeps the high value of a sketch that it takes him only minutes to produce. Next, the law has to answer a second question: how does any person claim ownership of any external thing? By not using the term occupation, Locke places a wedge between his philosophical theory and both the Roman and common law traditions. He only makes matters worse with his famous statement that property is acquired when “he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.”34 But then he quickly equivocates: He that is nourished by the acorns he picked up under an oak, or the apples he gathered from the trees in the wood, has certainly appropriated them to himself. No body can deny but the nourishment is his. I ask then, when did they begin to be his? when he digested? or when he eat? or when he boiled? or when he brought them home? or when he picked them up? and it is plain, if the first gathering made them not his, nothing else could. That labour put a distinction between them and common . . . .35

He shortly thereafter extends the argument to land: But the chief matter of property being now not the fruits of the earth, and the beasts that subsist on it, but the earth itself; as that which takes in and carries with it all the rest; I think it is plain, that property in that too is acquired as the former. As much land as a man tills, plants, improves, cultivates, and can use the product of, so much is his property. He by his labour does, as it were, inclose it from the common.36

One possible way to read this last passage is that Locke treats cultivation as a minimum condition for ownership, at which point there is a conscious departure from the Roman and common law rules on occupation, done perhaps to deny Indians title to lands in the colonies. (Locke developed the constitution for the Carolinas.) But that reading seems to be incorrect for two reasons. The first is that he notes that the rules governing acorns carry over here, and secondly, he notes in the last sentence that their labor “incloses” land, which is much closer to the Roman conception that occupation of land requires a delineation of its boundaries. At 32 

John Locke, The Second Treatise on Government, Ch 5, Of Property, para 27, supra note 29. “[T]‌he term scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services.” 18 USC § 1346. 34  ibid para 27. 35  ibid para 28. 36  ibid para 32. 33 

The Basic Structure of Intellectual Property Law    33 no point does Locke offer any reason why the rules of acquisition should differ by property type. What is critical with land is critical with acorns. The ownership is established early in the cycle so that the subsequent acts of improvement are not needed to perfect title, which gives the owner the option to use or to store, without adverse legal consequences. The same rule applies to land, and the modern zoning rules that hold that development rights only vest when permits are granted creates the major risk that extensive predevelopment risks can be wiped out with a stroke of the pen.37 Much turns on the proper reading. Taking the Lockean labor theory literally, only the value added by the appropriator is protected, and not the total value of the product.38 At that point, it tends to verge on the Marxist labor theory of value: “the value of a commodity can be objectively measured by the average number of labor hours required to produce that commodity.”39 For both physical and intellectual resources, it is a grievous mistake to shift from occupation to cultivation. Start with land. Suppose A acquires by initial occupation a bare plot of land that is worth $100. By dint of hard labor, he increases its value to $1,000, at which point it is taken by another, or claimed by the state. The appropriate remedy is $1,000, both in tort and condemnation settings. That award embeds in it full compensation for the market value achieved from the labor expended: the protection of the full value of the property necessarily offers full protection for the labor. Indeed, as an economic matter, it is best that any acquirer expend as little labor as possible on the improvement of the value of the land to increase the net surplus from private ownership. Indeed, an expenditure of $900 in labor to drive the value of the land up $900 results in no social gain from the improvement, which is what the Marxist theory of labor seems to require. Hence, the smaller the amount of labor that the owner needs to acquire that $900 improvement, the greater the social gain. But that outcome will be realized only if the full $1,000 value is protected from expropriation, just as it is protected in the event of a private sale. In addition, explicit allowance has to be made for the ex ante uncertainty of the initial venture. Capping the value received from property to the amount of the cost of labor expended on that one venture does not allow the appropriator ever to recover for the value of labor spent on failed projects. If the gains on successful ventures are small, and the losses are absorbed by the actor, no one will take the risks necessary to drill for oil or create new inventions or literary works. The gains on winning projects have to cover the losses from all dry holes and dead ends, or the enterprise stops. It is futile to try to build those gains into the recovery for successful products by boosting up the final yield, because no one knows how many failures occurred for each success or how much they cost. Nor is there any reason to make that a public determination, when the state can only guess on the size of losses from other transactions, given the open invitation for entrepreneurs to pad expenses. The initial occupation gives full value but still leaves owners subject to market constraints on what they

37  For illustration of the uncertainties, see Valley View Industrial Park v City of Redmond, 733 P2d 182 (Washington 1987) (en banc). 38  See Edwin C Hettinger, “Justifying Intellectual Property” (1989) 18 Philosophy and Public Affairs 31, 37. 39  David L Prychitko, “Marxism,” The Concise Encyclopedia of Economics, available at .

34   Richard A. Epstein can earn, and these automatic constraints should reduce first the number of unwise projects and second the costs of sound ones, without entering into this regulatory morass. This same analysis applies with respect to IP, where the key insight is that the statutory formalities required for the acquisition of rights should be kept as simple as possible, lest the surplus be destroyed by heavy requirements of registration. Indeed, this sound approach is generally followed today. Thus, US patents require modest standards of patentability, such as nonobviousness, but not proof of commercial value. Indeed, if anything, pioneer patents receive somewhat more expansive protection in order to jump-​start new development.40 Patent protection then promotes commercialization, but commercialization is not needed to perfect the patent claim.41 To be sure, the US patent law has a requirement of “utility” which tends to have bite only in the rarest of cases. Elsewhere, Article 27 of The Agreement on Trade-​Related Aspects of Intellectual Property Rights (“TRIPS”) states that any patent must be “capable of industrial application,” which in the sidebar is said to require only that the invention be useful.42 This “industrial applicability” requirement demands proof of commercial benefit to weed out inventions that have only theoretical, and not practical, purposes. There is a wide variation in its interpretation, but in general, it is read “in its broadest sense.”43 That last concession makes good sense, but opens up a further question: Why require a public determination of future value for patentability when matters should sort themselves out without any independent legal requirement? Few people will take the time to patent matters that have no commercial value, so why add an extra test that, if mistakenly applied, could only complicate the patenting process? Similarly, minimal rules apply to copyright to facilitate quick and easy commercialization. For example, copyright protection attaches the moment a work is fixed in some tangible medium. In these cases, as in land cases, the simple requirements for the perfection of title eliminates the ownership ambiguity of the limbo prior to development. Since the value that the invention or work adds to social welfare is not baked into any tangible asset, it has to be protected separately as a form of IP. If successful, this avoids the indirect theft of labor (which, as through Lockean theory, all own as of natural right) that arises when someone else duplicates the protected work without having to bear any of the costs of its creation. Yet the limits of patent and copyright protection are critical. The patent only gives the patent holder the right to exclude others from making or vending the protected invention. “A patent is not the grant of a right to make or use or sell. It does not, directly or indirectly,

40  Cimiotti Unhairing Co. v American Fur Ref. Co., 198 US 399, 406 (1905) (“It is well settled that a greater degree of liberality and a wider range of equivalents are permitted where the patent is of a pioneer character than when the invention is simply an improvement, may be the last and successful step, in the art theretofore partially developed by other inventors in the same field.”) See also Application of Hogan, 559 F2d 595, 606 (CCPA 1977) (“As pioneers, if such they be, they would deserve broad claims to the broad concept”). There is a division of opinion whether the same broad view of the doctrine of equivalents applies to improvement patents. See Dan L Burke and Mark A Lemley, “Policy Levers in Patent Law” (2003) 89 Virginia Law Review 1575, 1656 (downplaying importance of pioneer patents); but see Brian J Love, “Interring the Pioneer Invention Doctrine” (2012) 90 North Carolina Law Review 379 (arguing for a more rejuvenated pioneering patent doctrine). 41  Continental Paper Bag Co. v Eastern Paper Bag Co., 210 US 405 (1908) (rejecting the view that any nonuse should withdraw equitable jurisdiction of the case). 42  Art 27, Note 5, . 43  WIPO Handbook Fields of Intellectual Property Protection, para 2.12.

The Basic Structure of Intellectual Property Law    35 imply any such right. It grants only the right to exclude others.”44 A similar right to exclude is conferred by copyrights,45 trade secrets,46 and trademarks.47 A patent or copyright as such does not give its holder the right to make or vend the product in question. That right must come from another source, usually the well-​established rights under both common and civil law, for any person to use his materials to make or sell any object that he pleases—​a right like other rights that can often be limited for reasons of public policy. Most new drugs, for example, require government licenses before they can be sold. Nonetheless, the exclusive right to various forms of IP has been frequently attacked on the ground that this right is tantamount to the creation of a legal monopoly. The judicial literature on this question is woefully inconsistent, and there is much evidence that the term “monopoly” is eagerly invoked by those hostile to the patent system, and studiously avoided by those sympathetic to it.48 In general, monopoly is inefficient because it raises the purchase price for the goods of the patentee or copyright holder above the marginal cost of their production. Nonetheless, there is a clear analytical distinction between the exclusionary rights conferred by IP and the grant of a legal monopoly with respect to the subject matter to which those rights attach. Again, the rules governing land, animals, and chattels provide the appropriate benchmark. John Doe, as the exclusive owner of 1,000 Marble Lane, does not enjoy an economic monopoly if Jane Roe owns similar property next door. Indeed, in any extended housing market, only rarely does a property owner not face serious competition from others. The only time is when a given home (or, more accurately, the plot of land on which it sits) lies in the path of a railroad or pipeline needed to service the larger community. At this point, the condemnation remedy is available to overcome the holdout problem via payment of just compensation, measured by its value in ordinary use before the coming of the road. This argument carries over to IP. Any author who copyrights a mystery novel necessarily competes with thousands of other authors in that space. The pharmaceutical company with an exclusive patent on one statin (cholesterol-​reducing drug) competes with a dozen other compounds in the same space, given that patent law rightly blocks any claim to patent a broad class of drugs like COX-​2 inhibitors.49 Nonetheless, condemnation is rarely an option in patent cases because no one knows which patents should be condemned, or, if condemned, how should they should be valued. Instead, private devices work much better to overcome

44  Herman v Youngstown Car Mfg. Co., 191 F 579, 584–​585 (6th Cir 1911). See also TRIPS art 28, which covers not only exclusion but also provides in s 2: “Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts.” 45  See 17 USC § 106. 46  See, eg, Ruckleshaus v Monsanto Co., 467 US 986, 1011 (1984) (“[T]‌he right to exclude is central to the very definition of the property interest.”). 47  TRIPS art 16 (“The owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner's consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion.”). 48  For exhaustive document of the equivocation, see Giles R Rich, “The Relation between Patent Practices and the Anti-​Monopoly Laws” (1042) 24 Journal of the Patent Office Society 85, 92–​93. 49  University of Rochester v G.D. Searle & Co., 358 F3d 916 (Fed Cir 2004) (invalidating University’s claim over all COX-2 inhibitors, including both Celebrex and Vioxx).

36   Richard A. Epstein potential holdout questions. Patent pools are commonly used for low-​value patents from many different patent holders. In addition, and as Dan Burk discusses in his chapter in this volume, key patents (called standard essential patents, or SEPs) are incorporated into standards under the established law for common carriers and public utilities, which limit the patentee to the payment of a (fair) reasonable and nondiscriminatory ((F)RAND) rate, which bristles with its own ratemaking complexities.50

4.  Exclusive Rights in Intellectual Property 4.1 Patents 4.1.1 Protected Subject Matter Once the limitations of the commons are grasped, the next challenge is to identify the reasons for taking something out of the commons and putting it under private control. In this regard, note that the US Constitution only gives to authors and inventors “the exclusive right to their respective writings and discoveries.” In dealing with patents, the key question is what kinds of activities are needed to take some idea or discovery out of the commons. Both the American and European systems essentially follow a two-​part test on this point. The first asks whether the idea or discovery has been transformed into patentable subject matter. The second asks whether, if it has, the resulting invention represents a sufficient advance over previous inventions to justify conferring a state monopoly that gives the patentee the exclusive right to exclude others from its use. Both parts of the test present difficult matters of interpretation. On the first, the US patent code lists four classes of patent-​eligible inventions: processes, machines, manufactures, or compositions of matter, or any new and useful improvement thereof.51 The first class covers a variety of scientific methods and techniques for the creation of various new products; the second covers machines that are used to make things; the third includes the manufactures that the machine makes; and the last covers the full range of compounds and chemicals that human ingenuity can devise. These categories contain obvious points of overlap: the lathe made by one company could be a manufacture that is thereafter deployed as a machine. But the far greater concern lies with the gaps in the classification, that is, proposed inventions that do not fall neatly into any of these categories. Although the statutory language is constant, its interpretation has varied wildly. The correct approach asks whether the purported patent-​eligible innovation exerts a blocking function on the ordinary terms of communication and trade. In this regard, the inquiry is

50  Yann Ménière, Fair, Reasonable and Non-​Discriminatory (FRAND) Licensing Terms, JRC Science and Policy Report 2015, (Nikolaus Thumm ed), available at . Janusz Ordover and Allan Shampine, Implementing the FRAND Commitment, The Antitrust Source (October 2014), available at . 51  35 USC § 101 (“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”).

The Basic Structure of Intellectual Property Law    37 a parallel to that which asks which physical resources are left in the common and which are reduced to private property. The narrow scope of patent protection often places items into the common when privatization does not inhibit production by others. Thus one misguided decision that unduly narrows private patent rights is Funk Bros. Seed Co. v Kalo Co.52 In it, Justice William O. Douglas—​a consistent patent skeptic—​held that the product that the plaintiff had developed to mix nitrogen-​fixing bacteria that previously inhibited each other’s growth into a single application was not patentable, even though it eliminated the need for any farmer to use three separate inoculants. To be sure, the qualities of the bacteria in their natural state are not patentable, but their combined use represents a distinctive application of labor that deserves protection. Far from blocking commerce, this patent and its relevant disclosures give other potential inventors a leg up in producing different combinations to compete with the initial patented product. The difference in attitude between Funk and Diamond v Chakrabarty,53 decided in 1980, is palpable. Chakrabarty held that an oil-​eating bacteria was patentable under Section 101(a), taking the view that the 1952 Patent Act let statutory subject matter “include anything under the sun that is made by man.”54 In contrast, the Canadian Supreme Court, in Harvard College  v Canada, held that the Harvard oncomouse, which reliably developed cancer tumors, was a higher form of life not capable of being patented as either a manufacture or composition of matter.55 Chakrabarty is, however, generally followed in Europe and elsewhere, and in Canada, Monsanto Canada Inc. v Schmeiser56 cut back on Harvard by allowing patent protection for genetically modified organisms. As a theoretical matter, the ultimate inquiry is whether the innovation blocks or facilitates innovation. On that question, the living nature of the organism hardly matters, which now reflects the consensus view. The question of patentable subject matter also arises with various naturally occurring hormones and genetic sequences. In 1911, Judge Learned Hand wrote in Parke-​Davis & Co. v H.K. Mulford Co. that the “purification of the principle . . . became for every practical purpose a new thing commercially and therapeutically.”57 Hence, he awarded Jokichi Takamine, the researcher who isolated adrenalin, a composition instead of a process patent. The latter would have offered little protection to Parke-​Davis as the assignee of the patent, because multiple alternative methods of extraction would quickly be developed. So, allowing the substance patent had greater potency for what was clearly a pioneer patent. The obvious question is how far this stratagem can go. In Ass'n for Molecular Pathology v Myriad,58 Myriad obtained a set of composition patents on the BRCA1 and BRCA2 genes, which coded for breast cancer. Without citing Parke-​Davis, the Supreme Court held that the

52

53   333 US 127 (1948).   447 US 303 (1980).   ibid at 309, quoting S Rep No 1979, 82d Cong, 2d Sess, 5 (1952) and H R Rep No 1923, 82d Cong, 2d Sess, 6 (1952). The full sentence reads: “A person may have ‘invented’ a machine or a manufacture, which may include anything under the sun that is made by man, but it is not necessarily patentable under section 101 unless the conditions of the title are fulfilled.” The qualifications in this sentence refer to other conditions, eg, nonobviousness, that have to be satisfied. They do not point to a narrow construction of patentable subject matter. 55  Harvard College v Canada (Commissioner of Patents), [2002] 4 SCR 45, 2002 SCC 76. 56  [2004] 1 SCR 902, 2004 SCC 34. 57  189 F 95, 103 (SDNY 1911). 58  133 S Ct 2107 (2013). 54

38   Richard A. Epstein isolation of the genes for BRCA could not be treated as a new composition, but the creation of complementary DNA (cDNA) (ie, the mirror image of DNA) was indeed patent-eligible as a new composition of matter, albeit one that derived in mechanical fashion from basic DNA. In these cases, a compromise position may better serve the innovative purposes of patent law. In situ, there is no reason why Myriad should be able to claim the patent so as to block treatment of the genetic defect in sick people by other drugs, either patented or unpatented. That roadblock is far too extensive. But by the same token, it could well make sense to allow the preparation of the BRCA genes outside the body to be treated as a new composition of matter on the authority of Parke-​Davis. But even if that is not done, the overall impact of Myriad on basic research is likely to prove small, given that the protection for cDNA looms larger than the loss of protection for the isolated gene. What is clear is that any narrower reading of patentable subject matter would threaten all gene patents and produce an instant turmoil in the biotechnology world.59 A second area of contention involves mathematical algorithms, which standing alone are abstract ideas which fall outside the four classes of patentable subject matter. That position received backing in three Supreme Court cases, the last of which is very close to the line.60 The rejection of mathematical algorithms as a means to convert one set of numbers into another seems fair enough. But by the same token, it does not follow that any machine that starts with real data which is then transformed by mathematical means into some measurable output should not be denied patent protection solely because of the intermediate computer step. Accordingly, Judge Rich in In re Alappat61 correctly distinguished earlier Supreme Court decisions in upholding a patent for a machine that used algorithms to remove noise that made it difficult to get clear images on medical instrumentation. He read the earlier Supreme Court cases as meaning “that certain types of mathematical subject matter, standing alone, represent nothing more than abstract ideas until reduced to some type of practical application, and thus that subject matter is not, in and of itself, entitled to patent protection.”62 Business method patents are the third great battlefield in the patent wars. In State Street Bank & Trust Co. v Signature Financial Group,63 Judge Rich adhered to his strong pro-​ patent stance by finding that a data-​processing system that implemented a general investment strategy was eligible for patentability, given that the program facilitated the pooling of investments from several different funds, with some clear cost savings. In his view, the program took raw financial data, which it then transformed by use of a machine. As often 59   Peter Gosselin and Paul Jacobs, “Clinton, Blair to Back Access to Genetic Code” LA Times (14 March 2000), available at (reporting Joint Statement of US President Bill Clinton and British Prime Minister Tony Blair). The result was a stock price decline in the NASDAQ biotechnology index I for one day, but the market stabilized when the US Patent Office issued a statement that it had not changed its patenting policy. Frank Gaglioti, Wall Street and the Commercial Exploitation of the Human Genome, World Socialist Website (10 April 2000), available at . 60  Gottschalk v Benson, 409 US 63, 64 (1972) (Douglas, J) (rejecting a method for converting binary-​ coded decimal (BCD) numerals into pure binary numerals); Parker v Flook, 437 US 584 (1978) (Stevens, J) (rejecting mathematical algorithm used to calculate alarm limits, indicating dangerous condition); Diamond v Diehr, 450 US 175 (1981) (rejecting as a mathematical idea an algorithm that allowed accurate temperature calculations). 61  33 F3d 1526 (Fed Cir 1994). 62  ibid at 1543. 63  149 F3d 1368 (Fed Cir 1998).

The Basic Structure of Intellectual Property Law    39 happens, this litigation ensued only after negotiations broke down over a potential licensing deal. Nothing about this patent would block the development of rival systems to achieve the same business ends. Nonetheless, the more recent US cases have taken an increasingly cautious line. In Bilski v Kappos, the US Supreme Court rejected limiting patentable processes under Section 101 to inventions that satisfy “the machine-​or-​transformation test [because it] would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals.”64 Nonetheless, it held that, even under this broad definition, devices for hedging risks in energy markets fell outside the scope of patent law because they are just an attempt to patent abstract ideas. At this point, it remains unclear what lies in Bilski’s middle ground between the older machine-​transformation test and the abstract idea. The issue became no clearer in two important US Supreme Court cases. In Mayo Collaborative Services v Prometheus Laboratories,65 the Supreme Court held patent-ineligible a diagnostic test for determining the rate at which a specific patient metabolizes thiopurine-​ based drugs. The protocol was certainly valuable because it eliminated much of the guesswork involved in prescribing the correct amount of medication. Despite its significant contribution to the treatment of autoimmune diseases, the Court considered it to be an unpatentable law of nature because it “only” correlated drug levels with treatment options. The Supreme Court revealed similar hostility towards patents in Alice Corp. v CLS Bank International,66 which held patent-​ineligible an abstract idea for a proposed method to create a third-​party financial escrow service that could be implemented on a computer. The Court held that there was no necessary linkage between the notion of cushioning financial risk and any particular device needed to implement that objective. The outcome in Alice may have been influenced by its underlying facts since CLS had implemented such a system even though the patent claimant Alice Corporation had not developed its program. CLS does not appear to strike down any form of medical instrumentation that takes or transforms raw data and then uses algorithms to transfer them into some usable output67—​ although the matter is now so uncertain in its scope and direction that any generalization is hazardous at best. Whether the subject matter is medical instruments or business method patents, it is a mistake to evaluate each element of a patent claim independent of the overall claim. The correct approach requires that the claimed invention be looked at as a whole, which means that the patent itself should not be rejected as patent-ineligible because one part of it involves the application of a natural law or mathematical proposition. These tests take enormous labor to develop and perfect, and they impair the incentive to innovate if, when all is said and done, the patent law permits the theft of labor by overbroad accounts of patent ineligibility.

4.1.2 Nonobviousness or Inventive Step In many cases, the question of nonobviousness or inventive step overlaps with the issue of patent eligibility. Perhaps the better way to attack the difficulties with algorithms and

64  66 

65  566 US 10 (2012). Bilski v Kappos, 561 US 593, 605 (2010). 134 S Ct 2347 (2014).    67 See In re Alappat, 33 F3d (at 1526, supra).

40   Richard A. Epstein business method patents is to look at them through the second patent law lens, which asks whether the claimed invention is patent-​eligible on the ground that it embodies, under TRIPS, “an inventive step,”68 which is treated as synonymous with the term “nonobvious.” Under 35 USC § 102, “nonobvious” means nonobvious to a “person having ordinary skill in the art,” or PHOSITA,69 and further requires that the claimed invention is not covered by some prior art. These well-​nigh universal substantive requirements are intended to weed out those claimed inventions that do not represent a sufficient advance over prior technology to merit the economic protection supplied by a patent. This requirement blocks claimed inventions developed by a rote application of standard technologies. If anyone could do it, then no one should get the exclusive right for doing it first. But just how high should the bar be? PHOSITA was incorporated in the 1952 US Patent Act in conscious repudiation of Justice Douglas’s statement in Cumo Engineering Corp. that to be patentable “the new device, however useful it may be, must reveal the flash of creative genius, not merely the skill of the calling.”70 That standard, if conscientiously applied, could lead to far fewer patents. Hence the more modest requirement that applies everywhere. A similar logic explains the requirement that the particular invention not be revealed by “prior art,” or at least, by art that was known or available more than one year before the patent was filed.71 Here, too, the sensible claim is that a person should not receive an exclusive right for something that was already available to others, even if the art in question was not publicly known or commercially used. Applying these tests raises difficult questions that are considered by Dan Burk in his chapter in this volume. Suffice it to say that, in broad outline, these requirements do about as well as can be expected in separating out those inventions that qualify for patent protection and those that do not.

4.2 Copyright Copyright law is also organized in a fashion intended to protect the intellectual commons, by again excluding abstract ideas from the protection of the law, which extends its protection only to those activities that are embodied in some tangible means of expression.72 The precise definitions vary between the US patent law and TRIPS, but the basic conception is the same. Those elements that are necessary for communication and the transmission of

68 

TRIPS s 5, art 27 (subject to exceptions, “patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.”). 69  35 USC § 103(a). 70  Cuno Engineering Corp. v Automatic Devices, 314 US 84, 91 (1941), detested by, among others, Judge Giles Rich. 71  35 USC § 102(a), (b). 72  17 USC § 102(a) lists the protected kinds of works, after which s 102(b) provides: (b)  In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

The Basic Structure of Intellectual Property Law    41 ideas are outside the protections of copyright law in order to avoid insuperable holdout problems. The most difficult question on coverage has to do with the role of originality in copyright protection. Originality makes perfectly good sense in dealing with literary and other works, lest the phrase “good morning, sir” receive copyright protection. But the requirement becomes ever more tenuous in connection with databases, where the current copyright law offers explicit protection for “compilations,”73 that must reflect the minimal requirement of being “original works of authorship.”74 But there is a serious question as to why the copyright law should govern this IP area at all; databases are meant to be reliable, not original. Yet they are costly to put together, and their misappropriation again amounts to a theft of labor that property protection can avoid. In Feist Publications, Inc. v Rural Telephone Service Co.,75 the Supreme Court denied protection to a phonebook (ie, a database of phone numbers) because its compilation lacked the minimum level of originality. Feist then noted further that the copyright law did not accept a “sweat of the brow” approach, and correctly cited the critical case on misappropriation, International News Service v Associated Press (INS),76 for the proposition that copyright law did not protect such efforts.77 But unfortunately, in a footnote, Feist cryptically dismissed, without explanation, the non-​copyright arguments that treated INS as “not relevant” to the basic problem.78 In so doing, it blocked a perfectly sensible application of the judge-​made misappropriation theory to databases. Instead complex distinctions are now par for the course, such that ordinary yellow pages receive no protection,79 but databases targeted to Chinese-​ American customers do.80 The Court in Feist rightly noted that Rural, as the local public utility, had the inside track on collecting the information for its database. That monopoly position should not, however, negate the generalized database protection, which applies to all firms, regardless of how they collect their information. Instead, it should subject Rural to the standard common carrier duty to supply the information to all comers, including potential competitors, at a fair and reasonable rate. That solution would properly incentivize the production of databases, without allowing the kinds of holdout problems that pervade much of IP law. But outside this monopoly context, strong protection of databases does not raise any blocking or holdout problems, and these rights are, in general, easily enforced by “salting” a database with false entries and small errors that make it possible to detect copying. There is no reason for judges to wait for legislation to fill the holes in IP law. The protection of IP should not be limited to the copyright law, given that the theft of labor is possible without copyright infringement. The tort of misappropriation, rightly understood, fills the gap created by the limited scope of the copyright law.

73

74   17 USC § 103(a).   17 USC § 102(a).   499 US 340 (1991). Feist is also followed in Canada in Tele-​Direct (Publications) Inc. v American Business Information Inc., [1998] 2 FC 22. The same rule was applied in the EU to football schedules in Football Data Co. v Yahoo, Case C 604/​10 (2012). 76  248 US 215 (1918), discussed infra at text accompanying notes 93–​95. 77  Feist at 353. 78  ibid at 354, n *. 79  BellSouth Advertising & Publ’g Corp. v Donnelley Information Publ’g, Inc., 999 F2d 1436 (11th Cir 1993). 80  Key Publications, Inc. v Chinatown Today Publ’g Enterprises, Inc., 945 F2d 509 (2d Cir 1991). 75

42   Richard A. Epstein

4.3 Trademarks The public domain also plays a prominent role in the law of trademarks, where the “secondary meaning in the term Monopoly—​the board game—​does not block the everyday use of the term in economic analysis.”81 Indeed, the proposition goes in both directions, for the ordinary use of a word does not prevent someone making it a trademark for a particular product. Both uses have value, so both uses are allowed, precisely because in practice they tend to be easily distinguishable by ordinary speakers. The requirement for a secondary meaning is, however, relaxed for trade dress, at least in those cases where the distinctive appearance is sufficient to create an identification by source.82 By the same token, when a given trademark becomes a generic description, it loses trademark protection, which sometimes happens to products that gain a dominant market position, making it easy to confuse a particular brand with the underlying product type. Just that fate happened to terms like aspirin83—​when it went off patent, after which it no longer represented the source of the product but its chemical formula—​thermos,84 and cola (but not Coca-​Cola) that became part of the common domain open to use by all.85

4.4 Right of Publicity A similar dichotomy exists with the right of publicity in the US, which deals with the protection of individual names and likenesses from appropriation by others. The initial hostility to protecting this interest in the US rested upon the belief that such protection necessarily would have to apply equally to “a responsible periodical or leading newspaper” on the one hand or an “advertising card or sheet” on the other.86 But that need not be the case. Allowing the use of name or likeness is strictly necessary for the dissemination of news. Giving a person a veto on the use of his or her name or likeness in all cases of reporting and commentary literally makes it impossible to take pictures or give descriptions of people in public places, which makes it utterly impossible to speak or learn about the affairs of the day. It is only a little exaggeration to say that this prohibition is equivalent in the world of public affairs to giving a scientist a veto on the use of radium or the equations of quantum mechanics. But there is no similar intrusion on public knowledge or discourse when name or likeness is used instead to promote particular goods and services, carrying with it as always the arguably false impression that the designated person actually endorses that particular product use. The social calculus of the two distinct types of uses thus sharply diverges, which helps explain why the earlier uncompromising view quickly was cast aside by adopting, both at common law and by statute, a rule that makes it illegal for anyone to use, “for advertising 81  Anti-​Monopoly, Inc. v General Mills Fun Group, 611 F2d 296 (9th Cir 1979). In contrast, with shredded wheat, the supposed trade name offered the only accurate description of the product. See Kellogg Co. v National Biscuit Co., 305 US 111 (1938). 82  Two Pesos, Inc. v Taco Cabana, Inc., 505 US 763 (1992). 83  Bayer Co. v United Drug Co., 272 F 505 (SDNY 1921) (L Hand, J). 84  King-​Seeley Thermos Co. v Aladdin Indus., Inc., 321 F2d 577 (2d Cir 1963). 85  Coca-​Cola Co. v Nehi Corp., 36 A2d 156, 161 (Del 1944). 86  Roberson v Rochester Folding Box Co., 64 NE 442, 443 (NY 1902).

The Basic Structure of Intellectual Property Law    43 purposes, or for the purposes of trade, the name, portrait or picture of any living person without having first obtained the written consent of such person.”87 The legal protection thus protects the labor expended to develop that name or likeness, first to stimulate its production, and then to prevent misrepresentation in endorsements. The name or likeness of major personalities are valuable in multiple areas. Its legal protection thus lets one person coordinate the different campaigns in order to develop positive synergies among different advertisement campaigns and to eliminate negative ones. No famous star will endorse both high-​end clothes and imitation jewelry. In modern times, the protection of name and likeness, like trademark protection, has often been expanded to analogous cases to cover distinctive dress88 or a distinctive voice89 in order to protect the labor that goes into their creation. Nor does it appear that there is any risk of monopoly abuse because the asserted right does not impinge on the name or likeness of any other individual who might sell his or her name or likeness in competition with the original person.

4.5 Misappropriation The interaction between common law and statutory development, evident with the right to publicity, also is relevant to the tort of misappropriation, which has received a far chillier reception. The misappropriation tort emerged in the 1918 case of International News Service v Associated Press (INS).90 INS arose toward the end of the First World War when the International News Service (INS) consciously lifted information about the European battlefront from the bulletin boards of its competitor, the Associated Press (AP), for distribution to its own members for their use in preparing their daily papers during the current one-​day news cycle. INS only took information about activities along the western front, and then only because its own reporters were barred from the European front by British and French officials because of their perceived pro-​German sentiments. AP had spent extensive money and effort to collect this news. INS well knew that the information was posted solely for the use of AP members. INS is notable also because of the peculiar reversal of intellectual approaches. Justice Mahlon Pitney, a classical liberal, allowed the action only by one direct competitor against another for the information acquired from the site, but limited that protection to the one-​ day news cycle, making clear that the information contained in the bulletins was itself 87 

New York Civil Rights Law § 50. Section 51 allows for actions of injunctions and damages. White v Samsung, 971 F2d 1395, 1398 (9th Cir 1992) (explaining, in the context of a robot image that resembled Vanna White, hostess on Wheel of Fortune, that “[i]‌t is not important how the defendant has appropriated the plaintiff ’s identity, but whether the defendant has done so”). 89  Midler v Ford Motor Co., 849 F2d 460 (9th Cir 1988) (involving a sound-​alike performance); Carson v Here’s Johnny Portable Toilets, Inc., 698 F2d 831 (6th Cir 1983) (regarding a distinctive introduction to the Carson show to promote a line of portable toilets). 90  248 US 215 (1918). For commentary, see Douglas Baird, “Common Law Intellectual Property and the Legacy of International News Service v Associated Press” (1983) 50 Univeristy of Chicago Law Review 411; Richard A Epstein, “International News Service v Associated Press: Custom and Law As Sources of Property Rights in News” (1992) 78 Virginia Law Review 85; Shyamkrishna Balganesh, “ ‘Hot News’: The Enduring Myth of Property in News” (2011) 111 Columbia Law Review 419. 88 

44   Richard A. Epstein publici iuris91—​that is, the history of the day open to all. He only sought to protect the labor expended by one company to gather the information, but without creating a monopoly over the information itself. Accordingly, Pitney relied on the constant motif of the labor theory of value to insist that the defendant should not be allowed “to reap where it has not sown.”92 Without legal protection, INS could convert AP’s labor to its own use. The dissents of both Justices Holmes and Brandeis rejected this guarded notion of misappropriation by hewing to the far narrower libertarian conception of basic rights, which treated the appropriation as legitimate because it did not involve the use of fraud in collecting or distributing the information. Accordingly, they thought that the only remedy would be to ask INS to disclose the origin of its information—​a step of dubious value. To be sure, that would credit AP for its work, but by the same token it would hurt INS by instructing the reader of the accuracy of the information supplied, so that they would not need to go back to the original source. In the US, misappropriation has received cautious, even hostile, treatment in later cases, often for creating common law rights in an area which it is believed should be governed only by legislative schemes. Thus in Cheney Brothers v Doris Silk,93 short-​lived fashion designs received no protection under a misappropriation theory even though they could not be efficaciously protected by either patent or copyright law. The scope of misappropriation has generated much academic controversy,94 pro and con, but as a matter of first principle, it seems best to offer some limited term protection against flagrant copying in order to maintain the incentives associated with design innovation. As in other areas, that protection must extend beyond direct knock-​offs, for otherwise, clever designers will secure nominal changes in their proffered designs to deflect liability without losing their customer base. The protection, if granted, must extend therefore to substantially similar imitations. This circumvention problem is, of course, not unique to design patterns. The patent law “doctrine of equivalents” has long been used to block devices whose trivial changes are introduced to circumvent a patent.95 Even though patent liability is, in general, strict, the doctrine of equivalents should, in principle, have a broader reach when there is evidence that the alleged infringer consciously worked from inventions that he knew had patent protection. But although there are hints of that position in some early cases,96 the more recent

91

92  ibid at 239.   248 US at 234. Cheney Bros. v Doris Silk Corporation, 35 F2d 279 (2d Cir 1929). 94  Kal Rautiala and Christopher Sprigman, “The Piracy Paradox: Innovation and Intellectual Property in Fashion Design” (2006) 92 Virginia Law Review 1687 (against new IP protection); C Scott Hemphill and Jeannie Suk, “The Law, Culture, and Economics of Fashion” (2009) 61 Stanford Law Review 1147. 95  For the inception, see Hotchkiss v Greenwood, 52 US 248, 266 (1851) (“No one will pretend that a machine, made, in whole or in part, of materials better adapted to the purpose for which it is used than the materials of which the old one is constructed, and for that reason better and cheaper, can be distinguished from the old one; or, in the sense of the patent law, can entitle the manufacturer to a patent.”). 96  See, eg, Graver Tank & Manufacturing Co. v Linde Air Products Co., 339 US 605 (1950) (describing as a “fraud” the substitution of manganese silicate for magnesium silicate). Similar doctrines apply in the EU; see European Patent Convention, art 69: “For the purpose of determining the extent of protection 93 

The Basic Structure of Intellectual Property Law    45 American decisions have gone in the opposite way, by denying the application of that subjective approach in favor of a rule that takes “the objective approach to infringement, in that intent plays no role in the application of the doctrine of equivalents.”97 But even if the doctrine of equivalents is judged by the same strict standards as literal infringement, it should still be easier, as a matter of proof, to make out the claim when there is evidence of direct copying of some aspect or element of the case for the analogous element literally recited in the claim.98 Intent evidence may not be necessary for an equivalents claim, but should still be allowed to strengthen it. The “substantial part” doctrine of copyright infringement achieves a similar result for authorial works, and for the same reason.99 Otherwise, the imitator brings to market virtually the same product as the originator, without having to bear the cost of invention or creation, which is why the property right protection must extend to equivalent inventions or substantially reproduced works. The broader protection thus protects against the theft of labor in cases of deliberate use, and of conversion of labor governed by a standard of strict liability when the conversion is accomplished without harmful intention.100 Yet the creativity could be stifled in the opposite direction if the first author who writes a play about the marriage of people of two different religions could prevent others from addressing the same social issue. As Learned Hand put the point, “It is of course essential to any protection of literary property, whether at common-​law or under the statute, that the right cannot be limited literally to the text, else a plagiarist would escape by immaterial variations.”101 The danger here is that the broad extension of the so-​called property right may enable right holders to stifle competition by preventing the use of literary ideas or scientific principles—​which is always an issue in any IP dispute. Nonetheless, with care to institutional design this difficulty could be avoided by preventing the copying of databases, which should have been resolved in Feist, but was not. Needless to say, all these questions of institutional design are not peculiar to the US, but apply to all systems of IP everywhere.

conferred by a European patent, due account shall be taken of any element which is an equivalent to an element specified in the claims.” 97

  Warner-​Jenkinson Co. v Hilton Davis Chem. Co., 520 US 17, 36 (1997).   Moore U.S.A., Inc. v Std. Register Co., 229 F3d 1091, 1107 (Fed Cir 2000). 99   These works are protected under the Berne Convention, art 2, para 3: 98

 ranslations, adaptations, arrangements of music and other alterations of a literary or artistic work T shall be protected as original works without prejudice to the copyright in the original work. The analogous provision in US law is 17 USC § 103(b):  e copyright in a compilation or derivative work extends only to the material contributed by Th the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material. The copyright in such work is independent of, and does not affect or enlarge the scope, duration, ownership, or subsistence of, any copyright protection in the preexisting material. 100  Restatement (Second) of Torts, § 223, Comment b: If the actor has the intent to do the act exercising dominion or control, however, he is not relieved from liability by his mistaken belief that he has possession of the chattel or the right to possession, or that he is privileged to act. 101  Nichols v University Picture Association, 45 F2d 119, 121 (2d Cir 1930) (holding that defendant’s play The Cohens and the Kellys was not a knock-​off of the popular play Abie’s Irish Rose).

46   Richard A. Epstein

5.  The Attributes of Intellectual Property The initial decision to protect IP rights leaves open the major question of how its attributes should be configured. On this topic, we should expect the same variation in the forms of IP as with physical property, given the profound legal differences for legal regimes in land and water.102 No one can take physical possession of IP rights, so it is pointless to ask whether IP rights reach to the heavens or descend to the center of the earth. Nor is it important to think about easements over neighboring property. But at least four other dimensions demand more detailed analysis: duration, exclusion, disposition, and takings. The proper approach to these matters rests on the “carryover thesis,” which seeks to make as few adjustments to the various systems of physical property in order to develop the optimal system of IP.

5.1 Duration Under the usual view, the initial acquisition of land is for perpetual or indefinite ownership. That conclusion rests on the empirical judgment that shortening these property rights by operation of law creates many dislocations but generates few advantages. A fixed temporal boundary makes it difficult for owners to make lumpy investments, some of whose value could easily extend beyond some arbitrarily defined period of exclusive ownership. In addition, an initial term of limited ownership leaves it unclear who takes possession of the property when that term expires. Letting it revert to the commons generates massive instability. To award the property to some arbitrary new entrant creates an unseemly and unnecessary race to claim title for yet another limited period. Of course, starting with outright ownership does not preclude the creation by contract or deed of shorter interests for either commercial or familial purposes, whose terms can provide for an orderly transfer of property on termination of the possessory interest. The analogous inquiry for various IP forms yields a mixed verdict. At one end, the optimal duration for a trademark is permanent, subject as ever to the rules on abandonment, which parallel those for land, chattels, or water.103 These marks tie a particular product to its source, and the value of that linkage does not depreciate over time. Optimal brand investment is far easier over indefinite time horizons. Putting the mark in the public domain robs it of its essential function. The social losses would be huge. Right now, the Apple mark is valued at $145.3 billion, the Microsoft mark is valued at $69.3 billion, the Google mark is valued at $65.6 billion, and the Coca-​Cola mark is valued at $56 billion.104 Of course, the owners of these and other trademarks can exploit their use by issuing multiple licenses or selling them to third parties. 102 

For discussion, see Richard A Epstein, “Playing by Different Rules? Property Rights in Land and Water” in Daniel H Cole and Elinor Ostrom (eds), Property in Land and other Resources (Lincoln Institute of Land Policy 2012), 317. 103  See 15 USC § 1127, which holds that abandonment takes place when a trademark’s “use has been discontinued with intent not to resume such use.” 104  Forbes, “The World’s Most Valuable Brands,” 2015 ranking, available at .

The Basic Structure of Intellectual Property Law    47 The same basic insight applies to trade secrets. These secrets have no obvious end points, and it would be odd to allow the government to force Coca-​Cola, say, to put its secret formula into the public domain when its value has appreciated. So long as competitors may create or acquire their own trade secrets, including the identical formulas or recipes of others, the protection should be of unlimited duration. The protection of name or likeness also raises a duration issue. Should it last only for the life of the person, as under the New York statute, or does it continue, perhaps indefinitely, after death?105 Here the best analogy seems to be the perpetual protection given to trademarks, which are commonly used for advertisement purposes. Even when the name or likeness is itself the object of sale there is little reason to throw it into the public domain, where its value will be diminished. In these cases, the value of the name or likeness is likely to diminish as new competitors emerge, especially in the absence of new exploits to keep the subject before the public. In addition, it is generally wise to allow public figures to keep their former names, both during life and afterwards. These original names only have value because they are still associated in the public eye with the person’s new name. Thus, Kareem Abdul-​Jabbar still retains exclusive control over Lew Alcindor, the name he used during his college days at UCLA. “One's birth name is an integral part of one's identity;  it is not bestowed for commercial purposes, nor is it “kept alive” through commercial use.”106 It is, therefore, a right that is retained at least during life, which may pass at death precisely because it retains its commercial value. The analysis shifts radically with copyrights and patents, where the consensus view is that the subject matter they protect should fall into the public domain after some limited time. The “limited time” restriction is built into the US Constitution, and it is adopted everywhere else for the same simple reason. Adding a work or invention into the public domain does not create any of the major dislocations found with land. The future use of a given work or invention does not preclude its use by the original owner. The person who cannot grow wheat on his land when it is occupied by others is not in the same position as an inventor or author who can still use an invention or sell a copyrighted book after the IP period is exhausted. At this point, the judgement is that the original reason for granting the IP right has been fulfilled, and that any further gains from restricting access to the work or invention will be exceeded socially by the gains from allowing open access to it. But much disagreement arises over the duration of that limited term. As a first approximation, virtually everyone agrees that the length of term for a copyright should be longer than that for a patent. The former are unique works of art that are not likely to be independently created by others. Yet their value is limited in at least two ways. First, others are entitled to develop and keep the same work, thereby reducing its value. Second, market pressures from substitute products made with other techniques eliminate its blocking potential, just as one patent can produce an invention in competition with a previously protected invention. But how long is still a question. The original copyright terms in the US were 14 years, with

105 

Factors Etc., Inc. v Pro Arts, Inc., 579 F2d 215 (2d Cir 1978) (protected); Memphis Development Foundation v Factors Etc. Inc., 616 F2d 956 (6th Cir 1980); PL Felcher and EL Rubin, “Privacy, Publicity, and the Portrayal of Real People by the Media” (1979) 88 Yale Law Journal 1577. 106  Abdul-​Jabbar v General Motors, 85 F3d 407, 411 (9th Cir 1996).

48   Richard A. Epstein a 14-​year renewal, including renewals for copyrighted works.107 But the Copyright Term Extension Act of 1998 increased copyright length to life plus 70 years,108 which brought it into harmony with the copyright term adopted by the European Union (EU) in 1993.109 The prolongation of this rule has survived constitutional challenge in the US,110 and has received widespread acceptance elsewhere. But as a matter of economic principle, the period is far too long. It makes little sense to tie the length of protection afforded to commercial literary works to the lives of their authors. The rationale offered for this rule is that it allows artists to protect their children and grandchildren. But better financial devices are available. First, pick the optimal period of copyright protection and then let artists hire financial advisors to invest or consume their revenues like those received from any other source. Those changes do not require the creation of a longer monopoly period, which is especially dubious for extensions to existing copyrighted works that neither receive nor need fresh incentive for creation. To be sure, the free use of a work by another may have an adverse effect on trademark use. But that tension is built into the basic system that calls for limited copyright terms in the first instance. Cutting protection back is on balance the better move, perhaps even to the 1790 level. But it will not happen any time soon. The debate over patent length takes on a different form. Everyone agrees that patent terms should be far shorter than copyright terms, and their length has never been tied to the life of the inventor. Currently, the basic US rule is that the patent has a 20-​year life that runs from the date of filing, as opposed to the pre-​1995 period, which was 17 years from the date of issuance.111 The same period applies in Europe and under TRIPS, consistent with the coordination between the systems. The use of the filing date, as opposed to the grant date, was intended to block the risk of “submarine patents,” whose publication are consciously delayed in order to trap other parties into infringements for which they could then be held strictly liable.112 The overall explanation for a shorter patent period stems from the basic insight that scientific and technological progress tends to follow discernible patterns once the knowledge has advanced to a certain point, which is why there was, for example, a prolonged battle over patent priority between Elisha Gray and Alexander Graham Bell.113 The higher likelihood of an independent invention thus has two consequences. The first is that, given the frequent overlap in research, the protection from infringement does not require any copying,

107

  Act of 31 May 1790, ch 15, § 1, 1 Stat 124. The term was extended to 28 years with a 14-​year renewal in 1831, Act of 3 February 1831, ch 16, §§ 1, 16, 4 Stat 436, 439; and to 28 years with a 28-​year renewal in 1909. Act of 4 March 1909, ch 320, §§ 23–​24, 35 Stat 1080–​1081, 1976 Act §§ 302–​304. The 1976 Copyright Act, 17 USC § 302(a) called for a term of 50 years from the date of creation, not publication. 108   For the American result, see Copyright Term Extension Act (CTEA), Pub L 105–​298, §§ 102(b) and (d), 112 Stat 2827–​2828 (amending 17 USC §§ 302, 304). In those cases, in which life is not a measuring rod, eg, anonymous or pseudonymous works, and works made for hire, the CTEA allows a term of 95 years from publication or 120 years from creation, whichever is shorter. 17 USC § 302(c). 109   Council Directive 93/​98/​EEC of 29 October 1993 “Harmonizing the Term of Protection of Copyright and Certain Related Rights, 1993,” Official Journal of the European Union (L 290), 9 (EU Council Directive 93/​98). 110  Eldred v Ashcroft, 537 US 186 (2003). 111  5 USC § 154(a)(2). 112  The most notable practitioner was Jerome H Lemelson. 113  For discussion, see Robert V Bruce, Bell: Alexander Graham Bell and the Conquest of Solitude (Cornell University Press 1990).

The Basic Structure of Intellectual Property Law    49 but rests on a strict liability rule by showing that the infringing invention falls within the periphery of the invention claimed by the patentee. The common backdrop also leads to the shorter periods of exclusivity. The monopoly should be shorter because it promises fewer social gains. Yet even within this framework, there is much dispute over whether the same term is appropriate for different kinds of inventions. Software has a shorter useful life and thus seems to call for a shorter period of protection than, say, pharmaceuticals, which keep their value for longer periods of time. In the US, the term has remained constant across patent classes. But the special case of pharmaceuticals has received separate treatment under the 1984 Hatch-​Waxman Act, which offers extension periods for patents to offset, at least in part, the time that the patentee cannot market the pharmaceutical because of the want of FDA approval.114 The maximum allowable extension period for drug development is five years, a period that proved adequate in 1984, but is far shorter than the time needed to shepherd certain drugs through the FDA approval process today. Before the passage of Hatch-​Waxman, it was estimated that the effective patent life of a drug (ie, after FDA approval) was about eight years.115 Today, the useful patent term in the US for many key drugs is between ten and 11 years, which reduces the time available for recoupment of the heavy front-​end costs.116 That short term has dramatic revenue consequences for many drugs whose value increases over time, as more accurate information is acquired about their effectiveness and side effects. Even that ten-​or 11-​year period could be shortened if a new entrant files what is known as a Paragraph IV certification, demonstrating that the original patent is either not valid or that the claimant’s new drug does not infringe.

5.2 Exclusion, Damages, and Injunctions The carryover thesis applies with full force to the right of the holder of IP to exclude others from use of the protected subject matter. As with real property, the first step in defining the protection comes in setting the basic rule of liability. As noted above, most forms of IP rest on strict liability principles, but are subject to defenses like laches and estoppel. The hard question is the choice of remedies in the event that infringement is established. The two basic remedies in all cases are damages and injunctions. Since the work of Guido Calabresi and Douglas Melamed, the choice is commonly said to be either or between damages and injunctions.117

114  Its official title is: The Drug Price Competition and Patent Term Restoration Act, Public Law 98–​417, codified at 9 USC. § 301 et seq. 115  Henry G Grabowski and John Vernon, “Effective Patent Life in Pharmaceuticals” (2000) 10 International Journal of Technology Management 98, 103. 116  ibid. at 108. Clearly there is variance about this mean. The number reported for 2015 is about 11 years. See Josh Bloom, “Should Patents on Pharmaceuticals Be Extended to Encourage Innovation” Wall Street Journal, January 23, 2012, available at . 117  Guido Calabresi and A Douglas Melamed, “Property Rules, Liability Rules, and Inalienability: One View of the Cathedral” (1972) 85 Harvard Law Review 1089.

50   Richard A. Epstein At this point, the law reduces to two uncomfortable alternatives. First, award the i­ njunction, at which point the holdout problem could become acute. That prospect is especially true for firms that have existing infringing inventory, or where the infringing patent constitutes only a small part of the total apparatus. Alternatively, to allow the IP holder to recover only damages is to invite competitors to defy patents and dare other parties to sue them in expensive proceedings promising only incomplete recovery. Much of this unappetizing dilemma can be avoided by treating the two remedies as complements, not substitutes. By moving away from either corner, states might introduce a wide range of new attractive choices. Injunctions can be partial, conditional, or delayed, and damage awards can be used to fill the gaps, setting them higher for willful infringements than for inadvertent ones.118 In this area, the basic rule in real estate transactions is to start with the injunction and then to soften it around the edges.119 Hence, the defendant may be given time to stop the offending action or to relocate his operations. Alternatively, the injunction may apply only to certain activities, for example, limiting heavy drilling to certain times of day, such as between 9am and 5pm. Starting with the injunction limits the need for damage remedy, and thus reduces the pressure that needs to be placed on either of the two standard measures of damages, that is, lost profits, or a reasonable royalty, both of which can be shrouded in doubt.120 The injunctive rule tends to steer parties to voluntary transactions, except in those cases where they result in undue hardship. In eBay Inc. v MercExchange, L.L.C.,121 however, the Supreme Court purported to adopt the standard rule of equity, which it stated to be: (1) that [the plaintiff] has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.122

The fact-​specific questions raised by this four-​part test are more difficult to handle than the simpler rule that first stresses irreparable injury, and then seeks to modify the terms of the injunctions, which increases both litigation costs and overall uncertainty. The main consequence is that the weakened protection for IP leads to higher levels of breach, which in turn produces lower levels of investment.

5.3 Alienation The second major attribute of most systems of property rights is that their holder is presumptively entitled to dispose of them by way of sale, lease, mortgage, gift, will, or license.

118   John M Golden, “Injunctions as More (or Less) than ‘Off Switches’: Patent-​Infringement Injunctions’ Scope” (2012) 90 Texas Law Review 1399. 119  Mark P Gergen, John M Golden, and Henry E Smith, “The Supreme Court’s Accidental Revolution? The Test for Permanent Injunctions” (2012) 112 Columbia Law Review 203 (attacking the eBay test). 120  See 35 USC § 284. For the range of factors in reasonable royalty cases, see Georgia-​Pacific Corp. v United States Plywood Corp., 318 F Supp 1116, 1121 (SDNY 1970), mod and aff ’d, 446 F2d 295 (2d Cir 1971). 121  547 US 388 (2006). 122  ibid at 391.

The Basic Structure of Intellectual Property Law    51 These transactions can be outright, whereby the transferee steps into the shoes of the transferor; or they can be partial, so that the transferor retains some interest in the property. To control against strategic behavior, the sum of the rights of the parties against the rest of the world should in principle be neither increased nor decreased by the transactions.123 The basic aim of the legal system is to reduce the transaction costs in order to facilitate as many voluntary transactions as possible, by the adoption of such devices as writing requirements and registries. Exactly the same logic applies with respect to IP. Reducing transaction costs increases the velocity of transactions in patterns that outsiders cannot predict and may well not understand. In IP, most transactions tend to involve licenses, not sales, except in connection with a sale or transfer of an entire business. In the case of patents, licenses are preferred as risk-​sharing devices given the difficulties of patent valuation. Licenses allow the ultimate fees to vary with future returns, and permit the parties to include all sorts of additional terms on matters such as the scope of patent use, royalty terms, sublicensing provisions, and much more. Many licenses turn out to be nonexclusive, which allows the licensor to coordinate user activity that no top-​down system could hope to replicate. Licenses fall into three general classes: those that are done at retail in individual cases; those that create patent pools, typically of low-​valued patents; and those which use intermediaries such as the American Society of Composers, Authors and Publishers and the European Telecommunications Standards Institute to facilitate the broadcasting of copyright works and the adoption of standard essential technologies. The great controversy is over the third class of licenses, where the perceived risk of holdups is large.124 In my view, the fear is overstated, and with patents, where the issue is most pressing, the key evidence in favor of that position is that in those areas in which standard-​setting organizations have been formed and SEPs registered, the rapid increase in product improvement has been accompanied by dramatic reductions in price, which is inconsistent with the claim of any major drag from these transactional problems. The result holds for both the technological advances in such industries as automobiles and airplanes in the first part of the twentieth century, and for telecommunications and computers 100 years later. Nor is this result surprising. The relevant parties are often repeat players; the pressure to reach an agreement lest the entire industry falter is enormous; and the costs of litigating FRAND disputes could easily turn prohibitive, even when there is little prospect of a clear judicial decision.125 If there were some large effect, it should be evident without the need to resort to inconclusive statistical evidence. No one thinks that detailed statistical evidence is needed to show how the Food and Drug Administration approval process slows down new drugs reaching the market. Yet, here the theoretical concerns lack parallel real-​world examples. Within this framework, therefore, the major challenge is to identify appropriate limitations on the freedom of alienation. One sensible set of restrictions comes from the competition laws in the EU and the antitrust laws in the US, which do and should apply to IP just as elsewhere. The first approximation in an area of immense complexity is that it is exceedingly difficult to position antitrust violations in the way in which an individual markets his or her IP subject matter. But a combination of different holders does raise the

123 

For a discussion, see Epstein, “Obituary” at 463–​465, 496–​511. See materials cited in (n 1) and (n 2). 125  In re Innovatio IP Ventures, LLC Patent Litig., 921 F Supp 2d 903 (ND Ill 2013). 124 

52   Richard A. Epstein possibility of horizontal conspiracies to which direct competitors join, subject to this distinction. Combinations of IP complements are likely to reduce holdout problems through vertical arrangements, while the combination of substitutes increases them through horizontal cartelization.126 However, it is doubtful that any unique restraint on alienation applicable to IP improves social welfare. Freedom of contract among parties should suffice, so long as notice of their arrangement is given to third parties. The distinctive IP doctrines on the restraint of alienation generally are of little benefit.127 In particular, one dubious rule of both copyright and patent law is the “first sale” rule, which prevents the parties to the initial transaction from imposing limitations on third persons who take with notice of the restrictions on the ground that the power of the copyright or patent is “exhausted” on the first sale. In most cases, it makes little sense for the two parties to impose downstream restrictions, but in some cases it does. For both real property and IP, restraints on alienation tend to be justified when they protect the seller’s retained interest property. As early as 1848, the English Chancery Court in Tulk v Moxhay128 insisted that it would be inequitable for anyone to acquire property subject to a restriction for a lower price, only to be able to sell it free and clear of that restriction to a third party. If such maneuvers were allowed, the original sales might never take place. The point can be generalized. The law of real covenants and equitable servitudes also imposes restrictions that require that the covenants touch and concern the land, that they not impose affirmative obligations, and that they are only operative to parties who own real property. But none of these restrictions matter once the initial parties agree to these restrictions and notice of their terms is given to third parties, at which point the prohibition on these restrictions should be lifted.129 The same logic applies to IP. Thus, in UMG Recordings, Inc. v Augusto,130 a distributor of stripped-​down promotional CDs supplied these free of charge to insiders for promotional use only, instructing the promoter to either destroy or return the CDs. All CDs were labeled to give notice to third parties that they could not acquire these CDs by either license or purchase. The Court struck down these restrictions as an improper restraint on sale. But why? The US first sale doctrine does not apply to licenses, but how to draw the line between a long license and an outright sale? Nor is there any reason to do so when the restrictions in question are intended to allow for the effective promotion of the CD, without cutting into sales. Law casebooks in the US are routinely given free of charge to professors subject to the understanding that they will not be sold or given away to students. The same restriction applies with equal force in both markets. Freedom of contract arguments should also allow original vendors to structure the resale or licensing agreements that they make with third parties, but in general, it is held that the rights of the patentee are somehow exhausted by the

126 

See generally US Department of Justice and Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property (1995), . 127  Richard A Epstein, “Obituary,” 496–​511, (n 123). 128  41 Eng Rep 1143, 1144 (Ch 1848). 129  Neponsit Property Owners’ Ass’n v Emigrant Industrial Sav. Bank, 278 NY 248 (NY 1938) (bending older rules to allow modern planned unit developments). For a defense of the development, see Restatement (Third) of Property (Servitudes) § 4.8 (2000). 130  558 F Supp 2d 1055 (CD Cal 2008).

The Basic Structure of Intellectual Property Law    53 first sale.131 So long as everyone knows where they stand, why substitute an inefficient judicial bargain for an efficient private arrangement that takes into account the full range of private interests, as is done with the case of land?

6.  Takings and Unconstitutional Conditions The last unit of common development applies to cases, common in Europe, in which the state either takes IP outright or imposes some restriction on its use or alienation. For these purposes, the initial point is that all legal systems recognize that even though a state may refuse to recognize IP, once it is created it becomes a form of protected property. At the very least, this means that the state cannot cancel the grant at will, such that everyone else is entitled to use the subject matter as of right, free and clear of all royalty obligations. “That intangible property rights protected by state law [ie, that of one of the United States] are deserving of the protection of the Taking Clause has long been implicit in the thinking of this Court.”132 The same of course applies to rights created under national law, so that a patent “confers upon the patentee an exclusive property in the patented invention which cannot be appropriated or used by the government itself, without just compensation, any more than it can appropriate or use without compensation land which has been patented to a private purchaser.”133 At this point, the parallels to other forms of property remain clear. To be sure, Congress is under no obligation to create either a patent or copyright system under the US Constitution, but it has done so for good reason from 1790 onward. The systems thus created mean that inventions and works are developed from the bottom up, not the top down. The central government asks whether these inventions and works fall within the permissible boundaries, but leaves it to private initiative, sometimes with government support, to drive innovation and creativity, by choosing the inventions to patent and the works to copyright. In basic outline, the patent and copyright systems operate the same way within the EU and elsewhere. At this point, the inquiry turns to deciding what government actions count as takings for which compensation is required. As a first approximation, any relaxation of the statutory rights of exclusive use counts as a taking of either the copyright or patent, where the loss is measured by the loss in value to the owner, a figure that will be smaller if he or she retains the basic right to practice or sell the protected invention or produce or sell the protected work, even as others may use them. The only difference between the cases of total and partial expropriation lies in the measure of the damages. In most of these cases, putting something into the public domain will qualify tautologically as a public use, unless perhaps, rarely, if the legislation transfers the exclusive rights to another private party. Most jurisdictions follow some analogous version of the per se rule for permanent physical occupation announced in Loretto v Teleprompter Manhattan CATV Corp.,134 suitably adopted

131 

See Quanta Computer, Inc. v LG Elecs., Inc., 553 US 617 (2008). Ruckelshaus v Monsanto Co., 467 US 986, 1003 (1984). 133  James v Campbell, 104 US 356, 358 (1881), quoted in Horne v Dep’t of Agric., 135 S Ct 2419 (2015). 134  458 US 419 (1982). 132 

54   Richard A. Epstein to cover cases in which outsiders make use of the protected IP subject matter, which they, by definition, cannot reduce to exclusive possession.135 It would be a mistake to assume that the per se rule has no application to IP. At the very least, it should apply to any and all cases where the government makes a restricted use of the IP subject matter, instead of just restricting the uses that the IP holder can make, without conferring rights of use on the public or some members thereof. The issue becomes somewhat more complicated when there is a partial restriction on the use of the protected material that does not involve its required use by another party. Apart from the antitrust laws, these are relatively uncommon situations, so little law on them exists. But the more important question in this context has to do with the interaction between IP rights and independent systems of health and safety regulation. In general, patented property or trade secrets should not receive any exemption from general health and safety law, but there is always a hard question about whether regulation is a bona fide health and safety matter, or a disguised effort to alter the competitive balance among private firms through the licensing process. With drugs or fungicides, for example, it is widely and properly accepted that these can be kept off the market until proven safe and effective. The high level of scrutiny given to these matters usually does not have constitutional significance anywhere in the developed world. But the legal issue becomes far closer when the granting of a license or permit is conditioned upon sharing the protected IP with other individuals, groups, or even governments. In the American context, Ruckelshaus v Monsanto began by treating trade secrets as protected property, only to strip that protection away in the next breath by holding that the government could condition a permit to sell on its willingness, going forward, to share trade secret information with its competitors. In its view, “Monsanto was on notice of the manner in which EPA was authorized to use and disclose any data turned over to it by an applicant for registration.”136 But giving notice by statute or regulation should never be sufficient grounds for stripping subject matter of its IP protection, lest the subject matter becomes worthless. It is no answer to say that an inventor or author who does not like the condition is free to sell his products outside the US, which they could do anyway, assuming of course, that they do not receive notice of the same condition.137 Nonetheless, that result is sometimes achieved by resorting to such slippery notions as “reasonable investment backed expectations.”138 But that ploy should never be allowed to force the surrender of private rights, lest novel conditions put all such property in the public domain. Fortunately, Monsanto was not followed in Philip Morris, Inc. v Harshbarger,139 which struck down a Massachusetts statute140 that required tobacco companies to reveal the valuable trade secret of their tobacco additives in order of concentration. The release of that information was ostensibly justified to protect the health of Massachusetts consumers, but in reality, it allowed competitors everywhere to gain access to valuable trade secrets without compensation.

135  For a defense of this view, see Richard A Epstein, “The Constitutional Protection of Trade Secrets and Patents under the Biologics Price Competition and Innovation Act of 2009” (2011) 66 Food and Drug Law Journal 285; Richard A Epstein, “The Constitutional Protection of Trade Secrets under the Takings Clause” (2004) 71 University of Chicago Law Review 57. 136  Monsanto, 467 US at 1006. 137  ibid at 1007, n 11. 138  ibid at 1005–​1009. 139  159 F3d 670 (1st Cir 1998). 140  Mass Ann Laws ch 94, § 307B (Lexis 2000).

The Basic Structure of Intellectual Property Law    55 The situation in these cases indicates the appropriate form of analysis. The system of regulation for health and safety should be structured, if possible, to avoid any distortion of the competitive balance that comes from the protection of patents or trade secrets. In cases like Monsanto, it means that the data submitted by one company should never be used by a government agent to pass on the health or safety of a firm’s product to its competitor. In a case like Philip Morris, it means that governments may demand that companies disclose their additives only if they are found dangerous by public health authorities, and then only if they are not removed from the product in question. These accommodations make sense precisely because IP protection should not be frittered away by attaching onerous conditions on disposition and sale. These are exactly the same kinds of accommodations that have been introduced by the World Trade Organization to make sure that health and safety considerations do not swamp ordinary competitive processes.141

7. Conclusion This chapter’s detailed overview of IP law is intended to show the continuity that exists between IP and other property systems. In virtually all cases, the sound approach is to first seek the proper analogy in the wide repertoire of physical property. Once that is done, the next question to ask is how the relevant IP regime ought to be modified to take into account its distinctive nature. Using that approach stresses the startling similarities across the physical/​IP divide. In both areas, property is divided between common and private, and for exactly the same reason: to minimize the sum of negative externalities and holdout risks. Private property minimizes social conflict and facilitates development, while common property facilitates communication and transportation. In both systems of private property, the correct version of the labor theory of value relies on bottom-​up systems of investment whereby title to those forms of property, capable of private ownership, is perfected by expending as little labor in the creation or development of a resource as required to give the world notice of the claim. Both systems need to develop strong bastions of exclusivity, usually protected by a mix of injunctive relief and damages, and usually starting with injunctive relief that can then be tamped down in appropriate cases. All systems of physical and IP rights must develop cheap and reliable ways to transfer, license, and record property rights in order to maximize gains from trade. And both systems need strong constitutional property protection against expropriation that survives in an age when health and safety regulations and inspections rightly apply to all sorts of assets. The ability to forge a single framework of analysis for all property systems helps organize complex new materials in ways that ensure laws everywhere across the globe recognize the optimal mixture of common and private property consistent with overall social welfare.

141 

See TRIPS arts 7 and 8. For discussion, see WTO Agreements & Public Health (2002), available at .

56   Richard A. Epstein

Acknowledgments Laurence A  Tisch Professor of Law, the Peter and Kirsten Bedford Fellow, The Hoover Institution, the James Parker Hall Distinguished Service Professor Emeritus and Senior Lecturer, the University of Chicago. My thanks go to  Justine Pila for her careful review of this entire essay and to John Golden for helpful comments on an earlier draft, and to the participants of a workshop in January 2017 organized by The Hoover Institution Working Group on Intellectual Property, Innovation and Prosperity. This chapter has also benefited from the usual excellent research assistance of Rachel Cohn, Krista Perry, the University of Chicago Class of 2016, Julia Haines, the University of Chicago Class of 2017. Thanks also go to Kenneth Hersey and Jonathan Povilonis for their usual excellent research assistance.

Chapter 3

W hat Kind of Ri g h ts Are Intelle c t ua l Propert y Ri g h ts ? Robert P. Merges * 1.  Intellectual Property Rights as Rights The phrase is common enough that it rolls off the tongue: intellectual property (IP) rights. It even has a well-​known acronym, “IPRs.” 1 But are they really rights? And if so, what kind of rights? Most importantly, what difference does it make that they are rights—​what practical import does this carry? These are the questions I take up here. I begin by clearing up some misunderstandings about legal rights. The primary one is that rights are absolute. A secondary one is that one need do nothing to obtain or exercise a right, and that, therefore, any legal entitlement that requires affirmative steps to secure it cannot be a right. Next, I consider a prominent critique of the idea that IP rights are property rights, which holds that they are more akin to government regulation. Further, I turn to an enumeration of the details of IP rights, described in the terms laid down by the prominent theorist of legal relations, Wesley Newcomb Hohfeld. Two special problems then draw my attention: injunctions in IP law and constitutional takings of IP rights. Finally, I conclude with some observations about why, when properly framed, engaging in “rights talk” about IP does not inexorably point to absolutist views. Throughout I emphasize two highly consistent thoughts: IP rights are real rights; but they are limited rights. They dominate some interests, but not all, and they are subject to restrictions and limitations that third parties sometimes also hold as rights. * 

Robert P Merges has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  According to the useful Google Ngram tool, which tracks the occurrence of words and phrases in millions of books over time, the first appearance of “intellectual property right” came in 1931, gained greater prominence by the 1980s, and then increased over 100 times between 1980 and 2008. See (search for “intellectual property rights”). See generally Jean-​ Baptiste Michel, et al, “Quantitative Analysis of Culture Using Millions of Digitized Books” (2011) 331 Science 176, available at .

58   Robert P. Merges

1.1 Intellectual Property Rights Are Property Rights If IP rights are rights, the next logical question is: what kind? The brief answer is that they are property rights. As is well understood, these are true rights, though for many they are not at the top of the hierarchy of rights. In liberal political theory, that place is usually reserved for fundamental civil rights, such as freedom of conscience, freedom of speech, freedom to make lifestyle choices, the right to fair criminal procedures, and the like.2 Libertarians, however, often note that property is just as much a fundamental right as these other rights; and indeed, they say that the “devaluation” of property in contemporary liberal theories is a major failing of those theories compared to “classical liberal” political theory.3 The value of property in theories of this sort is that it embodies a strongly decentralized societal ethic:  true independence requires individual control over resources.4 In a society based on individual ownership, government is necessarily limited and subservient to the needs, plans, and preferences of widely dispersed individual owners. Though not customarily counted a libertarian theorist, Immanuel Kant’s views on property are consistent with a vision of this sort.5 Even in liberal theory, however, within its proper place, property is a species of right that has distinct features. As I described earlier, a major theme in IP scholarship over the past 20 years or so is that property rhetoric supports the broadening or strengthening of IP rights. From this perspective, property rhetoric might be said to be inherently libertarian in spirit: it always pushes toward a form of absolutism. For this reason, the status of IP as property has been vigorously contested. But as mentioned, in my view, this association between property and expansive rights is misguided. It is possible, in other words, to speak of IP as property while resisting the idea that IP is or ought to be intensively expansive across all its dimensions.6 To see why, we need some background on the essential features of property. Lawyers and legal scholars define property generally as exclusive rights to possess, use, and dispose of various assets. Under this definition, IP is recognized by legislatures and courts as property. Though scholars debate whether this is good—​and in particular, whether the

2 

John Rawls, A Theory of Justice (Harvard UP 1971), 302. Richard Epstein, Takings: Private Property and the Power of Eminent Domain (Harvard UP 1985). 4  Robert Nozick, Anarchy, State and Utopia (Basic Books 1974). 5  See, eg, Arthur Ripstein, Force and Freedom: Kant’s Legal and Political Philosophy (Harvard UP 2009), 67: “For Kant, property in an external thing—​something other than your own person—​is simply the right to have that thing at your disposal [so as] to set and pursue your own ends.”); Arthur Ripstein, “Authority and Coercion” (2004) 32 Phil & Pub Aff 2, 9–​10: “For Kant . . . rummaging through my home or my goods for purposes that I do not share violates my ability to be the one that determines the purposes to which they will be put.” See Robert P Merges, Justifying Intellectual Property (Harvard UP 2011), 87, 88: Section title: “Kant and the Community of Individual Creators”; “The interlocking duties that result [from Kant’s theory of property] constitute what I call the community of owners.” 6  Merges (n 5) 13: “In writing this book I hope to . . . to write a liberal theory of intellectual property law . . . . [including] a commitment to individual ownership as a primary right, respect for third-​party interests that conflict with this right, and . . . an acceptance of redistributive policies intended to remedy the structural hardships caused by individual property rights.” 3 

What Kind of Rights Are Intellectual Property Rights?    59 property label pushes toward over-​protection or absolutism—​in the practical world of law and business, there is nothing to argue about. IP rights can be enforced in court, assigned, licensed, bequeathed, pledged as collateral, and so on. Putting aside the normative question of whether IP should be property, and focusing only on the positive question whether it actually is, there is no question about the status of IP. It walks like property, talks like property, and acts like property. And, so it is. IP has also been discussed as a species of human right in recent years.7 Beginning with the work of Professor Lawrence Helfer, legal scholars and courts have begun to classify IP rights as among the basic property rights that are recognized in international treaties and some national legislation, particularly in Europe. A distant US cousin to this strain of thought is the assimilation of IP into the strong property movement, a movement most noted for its push to expand the law of takings under the US Constitution. Theorizing about property has become an important branch of US legal scholarship in the past 30 or so years, so it is noteworthy that IP has made increasing appearances in papers and books on property theory. This literature centers on analytic features and distinctions, such as decomposability (the “bundle of rights” view) and decision-​making or governance rights (prominent in so-​called exclusion theory). Though the theorists working on these issues differ on many features of property, they all agree that IP is property. In recent years, numerous examples from IP law have been used to illustrate various features of the different theories. So, for this group of scholars who spend their time thinking hard about the nature of property, there is no doubt that IP is property. From an economic point of view, property rights are understood differently. Broadly speaking, they are seen as general “entitlements,” or legally defined starting points. They are the stuff on which economic transactions are based. As property theorist Lee Ann Fennell says, “Transactions have entitlements as their subjects, and property law merely provides the vehicles in which tradable commodities arrive on the scene.”8 A number of economists have concerned themselves with the specification and enforcement of property rights, but many others take the broad category of legal entitlements as more or less given, while saving their main attention for issues of contracting and transacting more generally. In recent years, various scholars have applied property rights economics to a range of issues related to IP. Topics here include the role of IP rights in encouraging firm-​level specialization; the structure of IP entitlements and its effects on group labor and teamwork; and the general relationship between IP and transaction costs. Throughout the literature, economic theories of property show a good fit with how IP law works in practice. Once again, from the perspective of this branch of theory, there is no doubt that IP is a form of property.

7 

See Peter K Yu, “The Anatomy of the Human Rights Framework for Intellectual Property,” 69 SMU L Rev 37 (2016); Rochelle Cooper Dreyfuss, “Patents and Human Rights: Where Is the Paradox?” in Willem Grosheide (ed), Intellectual Property and Human Rights: A Paradox (Edward Elgar 2010); Laurence R Helfer, “The New Innovation Frontier? Intellectual Property and the European Court of Human Rights,” 49 (2008) Harv Int’l LJ 1, 1. 8  Lee Anne Fennell, “The Problem of Resource Access” (2013) 126 Harv L Rev 1471, 1488.

60   Robert P. Merges

1.2 The Basic Features of Intellectual Property as Property Because property is such a broad concept, the discussion of why IP is property can be confusing. To simplify it, here are (in my view) the key attributes of property as it applies to IP rights: 1. It is “good against the world”—​no prior contract or other legal relationship is required to create a duty on the part of third parties to respect the right. 2. It defines uses of an asset that are under control of the owner; it demarcates what is “in” and “out” of the owner’s ambit of authority. 3. It is broadly transferable; yet the owner retains residual rights over those aspects of the right that are not transferred. In addition, it includes a special form of quasi-​transfer power, in that it permits the owner alone to decide whether and when to enforce the right. While each of these features is contested in one way or another in the IP literature, these are the essential earmarks. In what follows, I explain why I choose these attributes as the key ones. Property bestows rights; and thus, logically, it creates duties. Traditionally we call the entity that holds the rights the “owner.” But who holds the duties? Everyone else does. Everyone must respect the property right. That’s what it means for it to be “good against the world.”9 At a practical level, the right holder can invoke the power of the government in enforcing rights against strangers who violate them. The government, that is, the state, gives a small dollop of its power to a right holder. This power allows (but does not require) the right holder/​owner to go to court to seek redress against anyone who violates the right. The plaintiff in such a case pleads that it owns a right and that the defendant is violating it. There need be no other relationship or interaction between the parties. The legal relation is created by the property right and the defendant’s actions with respect to it. The right in such a case can be envisioned as an “off the shelf ” contract between the owner and everyone else. An obvious implication is that if a stranger to the owner wants to make use of the asset covered by the right, that stranger knows who to deal with: the owner. The property relation concentrates power over the asset in the hands of a single legal “focal point”—​the owner. As I explained in Justifying Intellectual Property, The most important core principle of the institution of private property is this: it assigns to individual people control over individual assets. It creates a one-​to-​one mapping between owners and assets. I argue in this book that this one-​to-​one mapping is the best way to handle intangible assets, just as it is with most other assets. For me, it is this powerful logic of individual control that makes property appropriate and appealing; it has little to do with the nature of the assets in question. That is why I see IP as a perfectly plausible, and even desirable, system for administering intangible assets. The logic of decentralized control and coordination—that is, individual ownership—makes just as much sense to me for intangible assets as it does for physical assets and the other objects of traditional property law.10

9  This feature of IP is emphasized in Jeremy Waldron, “From Authors to Copiers: Individual Rights and Social Values in Intellectual Property,” 68 Chi-​Kent L Rev (1993) 841, 844, 887. 10 Merges, Justifying Intellectual Property (n 5).

What Kind of Rights Are Intellectual Property Rights?    61 Much of the legal and economic literature on property is built on this simple feature.11 This is the heart of the entitlement/​transaction nexus. It is the heart of the Coase Theorem, and neoclassical contracting, and it is central to transaction cost economics. In many ways large and small, property entitlements are tied up with contracting and economic efficiency. And the key to the whole apparatus is that owners are focal points; they are who you must deal with to gain access to an asset.

1.2.1 The Right to Control Uses The essence of property is to permit individual owners to decide how to use or deploy an asset. This involves a grant from the state to the owner. The grant typically specifies in very broad terms what the owner can do with the asset. In real property, the broadest such grant is fee simple absolute, which confers broad use rights on an owner. IP law also grants broad rights, but they are usually listed in a series of expansive categorical uses. So for example, a US patent gives its owner the right to “make, use, sell, or import” any device covered by the patent’s claims.12 Copyright law in the US confers a specific list of rights in 17 U.S.C § 106: the right to reproduce a work, to prepare derivative works based on it, and, in the case of certain works, to publicly perform them, display them, or to digitally perform them.13 And US trademark law gives the owner of a mark the right to sell certain classes of goods in commerce under the mark.14 Because IP rights are exclusive, the owner of an IP right over an asset is the only entity permitted to use it in the ways specified by the relevant statute. (This is aside from privileges explicitly carved out in favor of third parties, such as members of the general public.) As in any area of law, there are edge cases. But in the main, an IP right confers clear and powerful use rights on its owner. If you want to make an invention, copy a book, or sell goods using a trademark, you know who controls these activities. Ownership means control: the owner decides. In the first instance, putting aside privileges, and with no license in place, the right to use assets covered by IP rights resides with their owners. So, a third party who wants to use an asset covered by an IP right knows who to contact to try to strike a deal: the IP owner.

11 

See, eg F Scott Kieff, “Property Rights and Property Rules for Commercializing Inventions” (2001) 85 Minn L Rev 697; Paul J Heald, “A Transaction Costs Theory of Patent Law” (2005) 66 Ohio St LJ 473, 488–​489, 497; F Scott Kieff, Coordination, “Property, and Intellectual Property: An Unconventional Approach to Anticompetitive Effects and Downstream Access” (2006) 56 Emory LJ 327 (discussing “the role of property rights as focal points in facilitating coordination among complementary users of an invention”); Paul J Heald, “Optimal Remedies for Patent Infringement: A Transactional Model” (2008) 45 Hous L Rev 1165, 1170, suggesting that the “primary function” of patent law “is to create a property right that reduces the cost of contracting between inventive firms and firms needing inventions”). See generally Stephen Yelderman, “Coordination-​Focused Patent Policy” (2016) 96 BUL Rev 1565. 12  35 USC § 271. 13  17 USC § 106. 14  Lanham Act § 32, 15 USC § 1114 (registered marks); Lanham Act § 43(a), 15 USC § 1125 (unregistered marks).

62   Robert P. Merges

1.2.2 The Right to Transfer Property means that, aside from excluded uses (that is, privileges held by third parties such as members of the public), and within the proper scope of the right, it is the owner who decides what can and cannot be done with an asset. Because many of us are lawyers and/​or legal scholars, we deal in “edge cases,” which makes it hard to see how basic and important this feature is. To understand it, consider the following. A writer has a manuscript. He, she, or an agent, offers it to various book publishers. If a publisher wants it, the author can license first publication rights. This use of the asset—​ making a book out of a manuscript—​is under the control of the author. Likewise, the inventor of a new toy (a Rubik’s cube, for example; or a hollow Frisbee like an Aerobie) can offer it to various toy companies. If a company wants it, the right to manufacture and sell the toy can be licensed. Or the owner of a trademark, such as The Donut Zone for donut shops, can offer franchises in various cities across the US. Ownership of the mark allows the franchisor to decide on the proper licensing fee for use of the trademark in each exclusive region. In each of these simple cases, the owner can carve out rights from the license. Perhaps the author of the manuscript wants to try e-​publishing on his or her own; these rights are carved out of the publication agreement. Perhaps the toy inventor wants to pursue overseas patents; he or she can separately license the US rights, and work to develop non-​US markets. Perhaps the Donut Zone franchisor wants to keep rights to the Detroit region for him or herself; easily done. Or the Donut Zone mark owner wants to set up mini-​locations inside convenience stores and gas stations; these can be excluded from franchise agreements, and the mark licensed separately for this use. The possibilities are almost endless. Two features of IP rights make it all work: (1) they confer broad use rights, which the owner can subdivide; and (2) any rights not explicitly licensed away stay with the owner. Broad rights to use, in other words, mean that rights can be divided out yet the owner can retain broad residual use rights.15

1.2.3 The Special Case of Waiver Waiver is an underappreciated aspect of property ownership. It is a practical tool that has many uses, and that makes property a highly flexible instrument. The two keys to the power of waiver are these: 1. Owners decide whether to enforce rights, and if so, when. 2. Owners can “opt out” of property enforcement against certain classes of users, which makes property extremely flexible; it is much easier for owners to “ratchet down” from property enforcement than it is for non-​owners to “ratchet up” (e.g. by contract) into a property-​like regime. Property rights are “good against the world.” This creates a duty on the part of everyone in a given jurisdiction to avoid using the asset covered by the rights; get permission to use it; 15  This feature of property has been well-​described; see Henry E Smith, “Institutions and Indirectness in Intellectual Property” (2009) 157 U Pa L Rev 2083, 2087–​2088.

What Kind of Rights Are Intellectual Property Rights?    63 or suffer the consequences of unauthorized use. The scope and magnitude of these duties has often been the focus of concern and debate; it is the very strength of property rights that makes many wary of assigning them in the first place. True enough, but this misses the crucial issue of enforcement. Property is not self-​ enforcing. And it is often costly to enforce. In addition, there are often good reasons to affirmatively choose not to enforce. An oft-​overlooked feature of property, and IP in particular, is that owners are often quite selective about enforcing rights. For a combination of reasons, including enforcement costs and strategic advantage, IP owners very frequently leave many or most of their exclusionary rights “on the table” for others. This makes an enormous difference in the world; the effective reach of IP is often far less daunting than its apparent reach. It is a classic case of “law on the books” differing in essential and far-​reaching ways from “law in action.” An example from the world of platform technologies will show what I mean. Platform technologies are technical systems such as computer hardware (eg, the Apple iPhone or Samsung Android cell phone handsets) or software (the Microsoft Windows or LINUX operating systems). They provide a common starting point for further technological development: the creation of special chipsets for the iPhone, for instance; or a cell phone application designed for use with the Google Android operating system software. For some time, scholars have understood the economic/​technological forces at work in these “platform markets.” What is of interest to IP scholars is how firms in platform markets use IP rights as strategic instruments. Some firms profit from proprietary platforms, which are covered by various IP rights. For them, exclusive IP rights exclude direct competitors, obviously. But in the case of “allies,” companies that develop complementary technologies or content that increase the overall value of the platform “ecosystem,” IP rights are often purposely waived.16 So IP law permits a pattern of selective enforcement and selective waiver that is used by sophisticated platform players to advance their interests in this complex area. Other examples include (1) “patent pledges,” which are public statements of patent non-​ enforcement that apply to certain classes of users (such as end-​users, versus competitors);17 (2) open-​source and Creative Commons contributions that include a commitment to non-​ enforcement against non-​commercial users and contributors; and (3)  longstanding non-​ enforcement plus promotion of widespread adoption, which can lead to implied licensing and de facto waiver over time.18 While it would be advantageous to change the law to make it

16 

See Timothy Simcoe, “Open Standards and Intellectual Property Rights,” in Henry Chesbrough, Wim Vanhaverbeke, and Joel West (eds), Open Innovation: Researching a New Paradigm (OUP 2008), 161–​183; Robert P Merges, “Intellectual Property Rights and Technological Platforms” (2008), Working Paper, University of Berkeley School of Law, http://​papers.ssrn.com/​sol3/​papers.cfm?abstract_​ id=1315522> [Accessed 14 January 2017]; Jonathan M Barnett, “The Host’s Dilemma: Strategic Forfeiture in Platform Markets for Informational Goods” (2011) 124 Harv L Rev 1861. 17  See Jorge L Contreras, “Patent Pledges: Between the Public Domain and Market Exclusivity” (2015) 2015 Mich St L Rev 787; Robert P Merges and Jeffrey Kuhn, “An Estoppel Doctrine for Patented Standards” (2009) 97 Cal L Rev 1. 18  See Robert P Merges, “To Waive and Waive Not: Property and Flexibility in the Digital Era” (2011) 34 Colum J L & the Arts 113.

64   Robert P. Merges easier for owners to surrender rights in whole or in part, extensive waiver of rights is a prominent and important aspect of the IP landscape.

1.3 Limitations on Intellectual Property Rights IP rights are surely rights, but they are limited in three ways. Specifically, IP rights are: 1. Contingent; they are subject to government processes to acquire or enforce, such as perfection, approval, maintenance, and the like. 2. Time-​limited; most IP rights have specified terms, and even those that do not will usually lapse at some time. 3. Bounded in scope; the class of assets the IP rights cover is subject to boundaries drawn with more or less precision. None of these limits is enough to disqualify IP from being property. But altogether they impose significant restrictions on the strength or power of an IP right.

2.  What Kind of Rights? Hohfeld and Intellectual Property So far, I have tried to establish two main points. IP rights are rights, but this does not and should not indicate a blind absolutism. And, though IP rights are property rights, property is an expansive and flexible concept. So again, no argument for absolutism. I move here from this preliminary posture, to a fuller statement. If IP rights are rights, what kind of rights are they? What are their primary features and characteristics? For answers, we turn to the locus classicus for the systematic taxonomy of legal rights, in the work of Wesley Newcombe Hohfeld. His Fundamental Legal Conceptions as Applied in Judicial Reasoning, first published in the early twentieth century, described legal rights in a series of four paired concepts. These dissect legal rights into finer classifications, and show (by opposition) what kinds of burdens or obligations are created by each type of right. It makes sense to start with these when talking about any rights, including IP rights. Here are Hohfeld’s pairs. They are stated in terms of the holder of an entitlement first, followed by the corresponding legal position, as experienced by those against whom the ­entitlement applies: Claim Right—​Duty Liberty Right/​Privilege—​No-​claim Power/​Authority—​Liability Immunity—​Disability

Because these are abstract concepts, examples are always helpful in understanding what they mean. So, I will take each entitlement pair in sequence.

What Kind of Rights Are Intellectual Property Rights?    65

2.1 Claim Right/​Duty In real property, a classic “claim right” is the right to keep people off your land, or to keep them from harming your land.19 This claim right creates in others (third parties) a correlative duty to keep off the land and not to cause it harm. In IP law, the primary claim right boils down to the notion of an exclusive right. To exclude means to keep out, to prevent entry. There are two key elements to this claim right in IP: the scope of the right, and the remedy available to the right holder to enforce the right. Scope in IP is a complex topic. Geographic metaphors are common, particularly in patent law, where the “metes and bounds” trope is relentlessly used to explain patent claims. In recent years, some influential scholarship has challenged the effectiveness of notice in patent law.20 Claims are so unclear, and there are so many of them, that “notice failure” is a serious problem. Potential infringers simply cannot identify and pre-​clear all of the patent rights they may violate. This is especially true when potential infringers are manufacturers of complex, multi-​component products that may touch on hundreds or thousands of patents. Yet, it should be pointed out, notice failure is not a ubiquitous feature in patent-​ intensive industries. “Freedom to operate” studies are extremely common in the life sciences industries such as biotechnology and medical devices. These studies routinely identify all relevant patents that might interfere with the introduction of a new product. Investors rely heavily on the accuracy of these studies; before they invest, they require assurance that the company they are investing in will not be slammed with litigation just after it introduces a new product on the market. At a practical level, then, notice seems to work well in these industries. To some extent, the idea of notice failure is predicated on the need for pre-​clearance. But where clearance is not possible, such as with complex multi-​component products, potential infringers have taken the approach of product introduction first, patent clearance (when necessary) second. So, in these industries the burden falls on right holders to identify potential infringers. This is ex post clearance as opposed to ex ante clearance. This reflects the reality that IP enforcement is not automatic; patent and copyright owners must actively seek out companies that may be infringing. The incentive to perform this sort of search depends on the economics of IP litigation. Given current trends, in a complex multi-​component product market, some fair number of patent and copyright infringement lawsuits can be expected for any successful product. The mobile phone and computer software industries are excellent examples. Because a certain amount of litigation is expected, but complete pre-​clearance is impossible, producer companies in these industries engage in two forms of risk reduction: (1) for patents, they preemptively buy up potentially troublesome patents—​those that others might use to sue them;21 and (2) for

19 

The examples that follow are drawn from Hohfeld, 746–​747. Peter S Menell, Michael J Meurer, “Notice Failure and Notice Externalities” (2013) 5 J Legal Analysis 1, 9–​10, 18. 21  See Scott Graham, “With Rockstar-​RPX Deal, ‘Tis the Season for Patent Peace, The Recorder” (23 December 2014), , describing the transaction in which many patents formerly owned by now-​defunct 20 

66   Robert P. Merges patents and copyrights, they buy various forms of litigation insurance to lower the systemic costs of infringement liability.22 Pre-​emptive patent buying to some extent gives the lie to the notice failure concern. If companies could not determine potential instances of infringement, they would not know which patents to buy up. At the same time, companies looking for pre-​emptive purchases often buy in bulk.23 This signals that it may be difficult to identify with any precision specific problem patents. Certain metrics or parameters are identified, and then a buy-​up program is implemented. Notice in these cases is not completely lacking, but it falls short of the absolute precision usually associated with urban land boundaries and other valuable real property holdings. Litigation insurance is another solution to fuzzy patent boundaries. The idea here, as with any insurance, is that there are known risk factors based on overall experience ratings. These data, accumulated over time, provide a baseline for pricing insurance. As with adverse weather, where it is impossible to predict a specific tornado or hurricane, patent litigation is viewed as a systemic risk. When a particular patent litigation plaintiff appears, the insurance policy kicks in to help pay for the litigation and potential settlement/​damages that may result. Thus, as with patent buy-​ups, insurance helps mitigate the risks posed by notice failure in the patent space. In a limited sense, one might say, they are substitute market mechanisms that help economic actors adjust to notice problems. Of course, there is another way to view the need for complex patent buying and insurance schemes. Rather than seeing this as evidence of a sophisticated adjustment to property rights in a complex environment, it might instead represent proof that something is wrong with the property environment to begin with. It might, as the notice failure literature says, represent a complete “failure” of the property/​notice model. Under this view, if the institution of property were working as it should, there would be no need for insurance and patent buying schemes. The market may have provided a solution (as it often does); but this, it can be argued, does not mean all is well. There are all sorts of cases where a private market solution arises out of dysfunction. Private security fills in for effective policing; private schools or

company Northern Telecomm were purchased by RPX, Inc., a consortium of major manufacturing and service companies such as Microsoft and Google; the RPX business model joins member companies together with the explicit purpose of pre-​emptively buying up patents that might otherwise be used to sue member companies). See generally Michael J Burstein, “Patent Markets: A Framework for Evaluation” (2015) 47 Ariz St L J 507; Michael Risch, “Licensing Acquired Patents” (2014) 21 Geo Mason L Rev 979; Andrei Hagiu and David B Yoffie, “The New Patent Intermediaries: Platforms, Defensive Aggregators, and Super-​Aggregators” (2013) 27 J Econ Persp 45. 22  See, eg, Intellectual Property Insurance Services Corporation, (describing IP insurance products and services); also, at (describing case study in the software industry, including policy limits, client premium, claim example (successful litigation defense), etc.); Michael C Donaldson, Clearance & Copyright: Everything You Need to Know for Film & Television (Silman-​James 2008) (copyright infringement, or “errors and omissions” (E&O) policies). See generally Lisa A Small, “Offensive and Defensive Insurance Coverage for Patent Infringement Litigation: Who Will Pay” (1998) 16 Cardozo Arts & Ent LJ 707. But see Menell and Meurer, “Notice Failure and Notice Externalities” (2013) 5 Journal of Legal Analysis, 1, 1–59 (claiming that IP insurance is “almost nonexistent”). 23  See James M Rice, “The Defensive Patent Playbook” (2015) 30 Berkeley Tech LJ 725.

What Kind of Rights Are Intellectual Property Rights?    67 tutors fill in for effective public education; oxygen tank rentals are available where effective air quality controls are lacking. And so on. None of these market solutions indicate that all is well. Perhaps this is so with property rights in industries selling complex, multi-​component products? Then again, perhaps not. Notice failure points toward pathology in a property system only if the ability to pre-​clear is considered an essential attribute of property. But as I have argued at several points here, essentialism with respect to property rights is a dangerous practice. Experience shows that, where practical constraints put pressure on classical arrangements, property law adapts. And the resulting structure of rights and practices still qualify as property—​despite the adaptations. A good example is the way property law responds to land rights in cattle country. Where cattle ranching predominates, individual landholders are required to “fence out” roaming cattle.24 Their fee simple absolute entitlement is modified, in effect, by the need to accommodate practical realities of the economic context behind their landholdings. But when cattle ranching becomes less common, and farming predominates, the legal rule changes, and cattle owners are required to “fence in” their cattle.25 The “fencing out” rule might be seen as a violation of basic property norms. After all, the right to be free of trespass is a fundamental feature of the claim-​right aspect of property ownership. In the same way, the inability to clearly identify all relevant property boundaries in advance might be seen as a violation of basic property norms. Yet in both cases property law adjusts to the situation. For land owners in cattle country, fencing out is required, in effect modifying the classical model of property ownership through a slight adjustment in the structure of the entitlement. The right to exclude, in this limited case, becomes a duty to exclude, at least if the owner wants to prevent harm. In the same way, in complex multi-​component product industries, pre-​clearance may not be possible. And so, property rules adjust: the burden of enforcement is on patent owners to enforce their rights, and the failure to pre-​clear rights ought not be, and generally is not, held against someone who undertakes economic activity that ends up infringing. Of course, remedies must be applied wisely and with sensitivity in the case of multi-​component patent-​intensive industries. Otherwise, the lack of notice, coupled with extensive enforcement, could end up taxing economic activity so heavily that market entry and innovation are stifled. While this remains a concern, the practical point to notice is that market entry and innovation remain robust in these industries, at least so far. Large-​scale software, mobile phones (hardware and content), and consumer electronics are all examples. Pre-​clearance is impossible, and patent enforcement has been extensive, but the industries remain—​thus far anyway—​robustly innovative.

24 

The formal legal rule is explained in Richard A Posner, Economic Analysis of Law, Fifth Edition (Aspen 1998), 60 (explaining the preference for fencing in versus fencing out in terms of the ratio of cattle to crops). Other scholars have noted, however, that in tight-​knit communities the formal rule is often replaced with an informal norm, which is usually a “fencing in” as opposed to a “fencing out” norm. See Robert C Ellickson, Order Without Law (Harvard UP 1991), 52–​81; Thomas W Merrill and Henry E Smith, “What Happened to Property in Law and Economics?” (2001) 111 Yale LJ 357, 388–​389. 25  Posner, (n 24), 60.

68   Robert P. Merges

2.2 Privilege/​No Claim It is also standard property law that the owner of a fee simple absolute interest in land has the right to enter or not enter the land, develop or not develop it, even to neglect or harm it in some cases. These are liberty rights or privileges, in the Hohfeldian lexicon. Third parties cannot prevent behaviors that are protected by a privilege, so we say that these parties have “no claim” over the privileges of the owner. The liberty rights or privileges of IP owners are in some ways quite limited. For example, a trademark owner that does not continue to sell products under the protected mark is in danger of losing legal rights. In a similar vein, IP owners are subject to restrictive doctrines with respect to laches and implied licenses. In real property, it can often take a significant period of time to lose one’s interest in a piece of land (eg, under adverse possession); but it is unsafe to neglect an IP right, or to refuse to enforce it, for even a few years.26 And complete neglect, culminating in destruction, may have other consequences as well. Because a copyrighted work may be subject to a parallel set of “moral rights” that remain with the work’s creator, even an outright owner of the copyright who has taken legitimate title to the work cannot destroy it or neglect it in certain other ways without being subject to legal consequences. Finally, in many areas of technology, a patent does not confer an absolute right to manufacture products and sell them on the market. Other, related patents may cover parts of the same technology, eliminating a patentee’s liberty to deploy its own patent. Or parallel regulatory regimes (eg, FDA approval in patent law) may well have to be satisfied in order to take affirmative steps to commercialize products covered by a patent. Even the right to ignore an IP right, to let it languish without using it in any way, is subject to restrictions. Various third parties might have plausible claims to an unused right, such as under the “working” or compulsory licensing requirements in some countries, or “fair use” claims in copyright in some cases.27 The limitations of liberty rights with respect to IP are also evident in a species of antitrust case. A patentee may condition the purchase of a patented item on an additional purchase, for example, an input into a patented machine, an associated component, or even an add-​on service such as a repair contract. Courts have consistently evaluated licensing agreements such as these—​called “tie-​ins”—​under the antitrust rule of reason. When a patentee appears to be illegitimately leveraging its market power in the patented good to promote sales of the unpatented item, the agreement will be condemned. To reach this result, courts early on confronted an argument based squarely on liberty rights. No less an authority than Justice Oliver Wendell Holmes had argued that, because the patentee has the right to refuse access to anyone, he or she necessarily has the right to grant

26 

Case in point: an enterprising bar owner in North Dakota seized on a lapsed trademark on “Geographic Center of North America,” that had been registered by a nearby town until 2009, and in 2016 assumed ownership of the mark. See Jukian Robinson, “The Center of North America has MOVED: Cunning Bar Owner in North Dakota Steals Title from a Neighboring Town and Claims it for His Own Community,” Daily Mail  (19 December 2016), available at . 27  See generally Oskar Liivak and Eduardo Peñalver, “The Right Not to Use in Property and Patent Law” (2013) 98 Cornell L Rev 1437, 1440–​1443.

What Kind of Rights Are Intellectual Property Rights?    69 access on whatever restrictive terms are desired. So, the right to keep an invention to oneself justifies the right to license the invention on condition that its purchase be tied to purchase of another item. As Holmes said: I suppose that a patentee has no less property in his patented machine than any other owner, and that, in addition to keeping the machine to himself, the patent gives him the further right to forbid the rest of the world from making others like it. In short, for whatever motive, he may keep his device wholly out of use. Continental Paper Bag Co. v Eastern Paper Bag Co. 210 U.S. 405 [1908]. So much being undisputed, I cannot understand why he may not keep it out of use unless the licensee, or, for the matter of that, the buyer, will use some unpatented thing in connection with it. Generally speaking, the measure of a condition is the consequence of a breach, and if that consequence is one that the owner may impose unconditionally, he may impose it conditionally upon a certain event. Non debit cui plus licet, quod minus est non licere. D. 50, 17, 21 [Ulpian]. No doubt this principle might be limited or excluded in cases where the condition tends to bring about a state of things that there is a predominant public interest to prevent. But there is no predominant public interest to prevent a patented teapot or film feeder from being kept from the public, because, as I have said, the patentee may keep them tied up at will while his patent lasts. Neither is there any such interest to prevent the purchase of the tea or films that has made the condition of the use of the machine. The supposed contravention of public interest sometimes is stated as an attempt to extend the patent law to unpatented articles, which of course it is not, and more accurately as a possible domination to be established by such means. But the domination is one only to the extent of the desire for the teapot or film feeder, and if the owner prefers to keep the pot or the feeder unless you will buy his tea or films, I cannot see, in allowing him the right to do so, anything more than an ordinary incident of ownership, or, at most, a consequence of the Paper Bag Case, on which, as it seems to me, this case ought to turn.28

The Latin phrase cited by Holmes, which is taken from a Roman Digest entry attributed to the great jurist Ulpian, translates roughly as “He to whom the greater is lawful ought not to be precluded from the lesser as unlawful.” It is thus one form of the general maxim, “the greater includes the lesser,” which was a frequent theme in Justice Holmes’s opinions.29 The difficulty with the argument is that it is often false. The law frequently permits a greater power but denies lesser ones.30 Put simply, IP rights carry reasonably robust claim-​rights, but they have significant limitations when it comes to liberty rights.

28 

Motion Picture Patents Co. v Universal Film Mfg. Co., 243 US 502, 519–​520 (1917) (Holmes, J, dissenting). 29  See, eg, Myers v United States, 272 US 52, 177 (1926) (Holmes, J, dissenting); McAuliffe v Mayor of New Bedford, 155 Mass 216, 220, 29 NE 517, 517–​518 (1892) (Holmes, J). 30  See, eg, 44 Liquormart v Rhode Island, 517 US 484, 511–​512 and n 20 (1996) (collecting cases where the greater power does not include the lesser); Einer Richard Elhauge, “The Scope of Antitrust Process” (1991) 104 Harv L Rev 668, 708, (noting that the logical claim that the greater power must include the lesser “lacks force” in antitrust analysis); Donald F. Turner, “Legal Restrictions on Exploitation of the Patent Monopoly: An Economic Analysis” (1966) 76 Yale L J 267, 276, (“sound answers to the problems the [tie-​in] cases posed cannot be reached by . . . metaphysical assertions that the right to exclude totally necessarily embraces the right to exclude partially”) (citations omitted); Louis Kaplow, “Extension of Monopoly Through Leverage” (1985) 85 Colum L Rev 515 (similar).

70   Robert P. Merges

2.3 Power/​Liability The third Hohfeldian entitlement is a power or legal authority. Broadly, this means the right to dispose of an entitlement. The most important manifestation of a power is the right to alienate all or part of the interest in an entitlement such as land. The owner has “authority” to sell or lease, in other words, whereas others do not. Third parties are, in fact, subject to any change in ownership effected by an owner, and so these parties are said to experience a “liability” when the owner exercises its power. Third parties are, in other words, “liable” to the exercise of the owner’s power. IP rights come with significant powers, perhaps the most important being the power to alienate, and to grant rights to third parties generally. The key to this type of right is the exclusive authority to control access to the domain carved out by the claim-​right. At the practical level, this is what permits assignment and licensing. One way to think about this aspect of property rights is as an exclusive “governance zone,” which defines a set of behaviors that only a right owner may authorize. This provides the foundation for much of the theorizing about property (including IP) associated with the work of Professors Henry Smith and Thomas Merrill. They have shown that the right to exclude allocates decision rights to a single entity who has sole authority to determine which activities are permitted within the zone of exclusion. This is contrasted, in their writings, with more regulatory systems of control under which society-​level rules determine what may and may not be done with a certain asset. In the Smith & Merrill theory, the main advantage of exclusionary rights is that it gives individual owners an incentive to gather information about the best and most valuable use of an asset. In this way, exclusionary zones associated with individual owners are justified on the basis of information costs. Owners control access and use, which gives them an incentive to maximize the value of the owned asset. And third parties need not consult complex regulations concerning what may and may not be done with an asset. This would require gathering too much information. The only information a third party needs is who the owner is. With that information, a third party can propose access and use schemes to the owner, who is in the best position to determine if those schemes make sense. In Hohfeldian terms, it is the authority (or power) of the owner that makes this all work. Fourth, and finally, is the right to be protected from third parties with respect to some activities, called an immunity. An owner of land, for example, is immune to the efforts of a third party to sell or lease the owner’s land, or to prohibit someone from entering the land, where such prohibition is against the wishes of the owner. Third parties are, correlatively, “disabled” from exercising these rights and so are said to be subject to a disability.

2.4 Immunity/​Disability Immunities, the fourth type of Hohfeldian right, are just the flip side of powers. An owner has immunity from third-​party actions. Immunities mean no third party has any authority over an entitlement owned by someone else. Thus, no third party can legally alienate or l­ icense an IP right without permission of the owner. Because a right holder has power (or authority) over an IP right, that owner is immune from purported power-​assertions by third parties. One important result of this mirror-​image structure is that third parties who deal with an

What Kind of Rights Are Intellectual Property Rights?    71 owner cannot be frustrated by inconsistent transfers made by other purported owners. A potential exclusive licensee who is dealing with an IP owner is confident in knowing that no other license of the relevant IP right may be executed by a third party. These rules are eminently sensible, although in some cases (such as co-​ownership) there are twists that significantly undermine the simple structure of authority/​power—​immunity rights. It is important to distinguish immunities with respect to individual property rights from a broader sense of immunity. As described earlier in the section on privileges, IP rights generally do not carry with them broad rights to act in disregard of third-​party claims. The owner of a patent, for example, can be assured that no third party may grant a license under the owner’s own patent. And she may be assured that a third party cannot otherwise encumber the patent (by pledging it as collateral or the like). But the IP right provides no assurance that she is immune from the claims of owners of other patents. Ownership of Patent A, in other words, provides no immunity whatsoever over the actions of one who owns Patent B. So, if both patents A and B would be infringed by making or selling some product, A will need clearance from B, and vice versa, if she wants to sell the product. Immunity is related specifically and solely to a single IP right; it does not apply when it comes to other related rights. And because of the interlocking and overlapping nature of IP rights, this is a significant limitation.

2.5 Hohfeld: Conclusion How does this analysis help us understand IP rights? In a good number of ways, but most importantly, it cordons off the basic exclusionary right—​a classic claim-​right—​from related, but quite distinct, legal conceptions. IP cases, particularly in patent law, often say that the right to exclude is the essence of property. This may or may not be so; essentialism in such a flexible regime as property can be a dangerous practice. But what is most definitely not so is that this claim-​right automatically or inherently or organically extends to a strong set of adjacent rights. That is demonstrably not the case with respect to IP rights. Hohfeld’s analytic pairs are quite helpful here in demarcating the specifics of IP entitlements. They are strong with respect to certain claim-​rights, and moderately strong in conferring Hohfeldian powers; but they are quite weak when it comes to privileges and immunities.

3.  Obstacles to Conceiving Intellectual Property as Property Despite the common sense case for IP as property, three obstacles stand in the way, First, IP rights are typically issued or recognized by the government before they can be enforced. The necessity of obtaining or perfecting IP makes it seem to some people as if IP is not a real right; the need for government approval makes them seem less solid and more a matter of governmental discretion. Second, IP rights are not always everywhere backed by an injunctive remedy; especially with respect to US patents after the highly influential eBay decision, this leads some to argue that IP is no longer so assuredly a “right to exclude,” which they say makes

72   Robert P. Merges it less like property. Finally, because IP plays a role in permitting or discouraging entry into economic markets, it has been described (particularly by influential IP scholar Professor Mark Lemley) as more akin to regulation than real property. I consider each objection in turn.

3.1 Intellectual Property Acquisition and Misunderstandings About What it Means to be a Right Most confusion about why IP rights should not be considered rights has to do with absolutism. When someone uses the language of rights, it has a certain connotation: an unassailable, impregnable entitlement. An entitlement that cannot be offset, overridden, or countermanded. A final and complete claim. This is wrong as a general matter, as I show throughout this chapter. And so, it is wrong with respect to the subject matter of IP. For those who question the status of IP as property, one of the key proof points is that, to acquire IP rights, one must often follow certain government-​mandated procedures. This is apparent with respect to patents, and true also of trademarks in many (but not all) cases. Copyright, on the other hand, famously “subsists” from the moment of creation or material fixation; but even here, to enforce one’s rights in the US, it is necessary to register the copyright. In these and other ways, the law interposes a set of ministerial steps or requirements on the would-​be holder of an IP right. How can it be a right, the question goes, if you have to satisfy a bunch of government requirements? The language of rights implies not an inchoate claim that must be perfected, but an absolute entitlement. The presence of ministerial requirements appears to undercut the status of a right. This point is sometimes supported with reference to John Locke’s theory of property rights. For Locke, property rights are “pre-​political.” They are natural and ethically mandated. Property rights, derived from the ineluctable claim to one’s labor, belong first to people, who may choose to come together to form a civil society. The very essence of such a society is, in fact, the defense of these property rights. Property precedes the state; it is the fundamentalis ratio existendi of the state—​its founding principle. In such a theory, the state does not ratify or approve of property claims. If it did—​if property were not valid without state approval—​the natural order would be upended. That which precedes the state would be subject to the whim and discretion of the state. The result is a Lockean absurdity.31 Despite its appeal, this argument carries no water. Locke recognized the important distinction between the founding rationale for the state and the workaday operations of civil society, once established. The founding story is a conceptual narrative, written as a critique of the “divine right” theory of monarchical sovereignty. Locke was arguing against the notion that the king or queen has initial title to all the land in a kingdom (by virtue of being enthroned with acquiescence from a virtuous Deity). For Locke, the monarch serves at the behest of the citizens of the kingdom, put in his or her exalted position to defend property claims that conceptually predate the choice of the monarch. 31 

Mark A Lemley, “Faith-​Based Intellectual Property” (2015) 62 UCLA L Rev 1328, 1338, (“they believe in IP as an end in itself—​that IP is some kind of prepolitical right to which inventors and creators are entitled”).

What Kind of Rights Are Intellectual Property Rights?    73 In operation, however, the very legitimacy the state derives from its founding allows it to place conditions and requirements on all sorts of its citizens’ activities. Land ownership is one example. Owners can be required to register deeds, to maintain current records of ownership, and, of course, to pay taxes to support the legitimate state whose protection is needed to secure property claims. In short, ministerial acts to perfect, maintain, and enforce rights are perfectly consistent with Locke. Arguments to the contrary misunderstand the nature of a “prepolitical” right, and underestimate the importance of the concept of civil society in Lockean political theory. As with land, so too with IP rights. The need to apply for, secure, and maintain an IP right in no way undermines its status as a right. Dependence on the state apparatus to manage a complex system of interlocking and sometimes overlapping rights says nothing about the nature of those rights. Failure to pay one’s property taxes may result in seizure of one’s land. This does not mean that one does not own it. It does not mean that this ownership is not a right. It just means that this right is subject to duties and affirmative acts required to maintain one’s right in good standing. But what about patents, or registration of a US federal trademark? Here the ministerial acts required to secure an enforceable IP right go beyond registering and maintaining the right. It must first be established, to the satisfaction of agents of the state, that the IP right is deserved in the first place. How can it be called a right if proof is required to show worthiness? Isn’t a right something you ought to have, without more, without proving anything? Not necessarily. The act of establishing that an invention meets the statutory requirements for patentability, or that a trademark may be properly registered, does not undermine the case for patents and trademarks as rights. A complete statement of these issues is this: an inventor has a right to a patent for a fully patentable invention, as long as he or she follows proper procedures for securing the patent. A person has a right to a trademark for a sign that is unique and distinctive (within a given class of goods) so long as he or she follows procedures and secures the right in the appropriate ministerial way. No one has a right to a patent for an unpatentable invention, or an invalid trademark, but given stated requirements for patentability and proper trademark status, there is a valid claim to an IP right for subject matter that meets those requirements. The need to establish that the conditions for holding a right have been met –​with supervision of a recognized government authority –​in no way undermines the status of such a right once obtained. Property is a right that must be earned if it is to be recognized and made enforceable. It is state power (in the hands of the property owner) that enables an owner to enforce. So state procedures may rightfully be imposed in order to earn that power.

3.2 What, No Automatic Injunction? That’s Not Property! Particularly after the eBay decision in 2006, it was proclaimed in some quarters that if patents had ever been property, they were no longer.32 The point was simple:  property equals the right to exclude; the hammer blow from this rule has always been the

32  See, eg, Richard A Epstein, “The Disintegration of Intellectual Property? A Classical Liberal Response to a Premature Obituary” (2010) 62 Stan L Rev 455, 494, (“Nothing in the traditional principles

74   Robert P. Merges availability of an injunction, under which a court orders a party to stay out of the technology space claimed in a patent; the elimination of injunctions as an automatic remedy in patent cases removes the hammer in at least some cases; and so therefore patents cannot be considered property rights anymore. This was a popular argument not only among those who favored a regulatory or relatively “weak” version of patents, but also by staunch defenders of patent rights—​who claimed that eBay is an aberration that needs to be fixed. But this is wrong. Even in the US after eBay, most patent and copyright owners who win infringement suits receive a permanent injunction. The injunction rate did not drop to zero after eBay; it dropped to roughly 75 percent.33 And for many industries and companies, injunctions continue to be essentially automatic. What eBay did, in effect, was to weaken the strength of the property right only in certain cases where the traditional remedy was causing serious economic damage. Companies whose sole function is to acquire and litigate patents have come to be known as Patent Assertion Entities (PAEs), which tend to obtain and assert patents in certain technology fields. The chief characteristic of these technologies is that they are found in complex, multi-​component products that are often covered by hundreds or even thousands of patents. An injunction for infringing a single patent in this context causes serious problems, especially given that manufacturing companies have to freeze their product designs long before learning of most patents. The resulting dynamic, known as “holdup” or “holdout”34 takes shape when an injunction issues. The property right over a single component allows the patent holder to extract much more value from the infringer than is realistically attributable to the intrinsic worth of the individual patent. Injunctions, in other words, confer “undue leverage” on patent holders in this situation. PAEs with single-​component patents are far removed from the fundamental purpose of patents—​to encourage creation and dissemination of valuable technologies. And so, because an injunction seriously overcompensates patent holders in this situation, courts post-​eBay now routinely deny an injunctive remedy in this particular case.35 The usual contrast here is with real property, where it is presumed that injunctive relief is absolutely automatic in cases of trespass and the like. The truth is otherwise: there are common and fairly frequent cases involving real property rights in which an injunction is not issued in favor of the property owner.36 We will review a few of the well-​known

of equity requires that radical revision of the right to exclude that eBay seems to invite”). See also Bernard Chao, “Causation and Harm in a Multicomponent World” (2016)164 U Pa L Rev Online 61, 73, (“Richard Epstein is a leading thinker in the ‘patents are property’ camp”). 33  Christopher B. Seaman, “Permanent Injunctions in Patent Litigation After Ebay: An Empirical Study” (2016) 101 Iowa L Rev 1949, 1983. It should be noted that, contrary to my analysis, Professor Seaman sees eBay as a major shift in the patent system away from a property entitlement: “[T]‌he application of this four-​factor test [in eBay] represents a significant shift away from property rules toward liability rules for the enforcement of patent rights.” Seaman, at 1962. 34  See Sean M Collins and R Mark Isaac, “Holdout: Existence, Information, and Contingent Contracting” (2012) 55 J L & Econ 793. 35  See Robert P Merges, “The Trouble with Trolls” (2009) 24 Berkeley Tech L J 1583. 36  Indeed, property theorist Carol Rose has described liability rules, under the classic Calabresi-​ Melamed framework, as simply a modified version of property rule entitlements. See Carol M Rose, “The

What Kind of Rights Are Intellectual Property Rights?    75 instances here, to illustrate. The chief point to notice as we do so is this: in each case, violation of a small magnitude right would, if met with injunctive relief, result in a legal remedy worth a huge amount of money. The reward, in other words, is highly disproportional to the magnitude of the violation. This is precisely the situation in which injunctions are denied in patent cases. It just so happens that, at least under conditions prevalent between 2000 or so and 2017, this small right/​huge reward scenario was more common in patent law than in real property cases. But the fact that this situation was more common with respect to patent rights than real property rights does not in any way undermine the status of patents as property. This is an empirical regularity—​and perhaps a transient one, if the many measures of patent reform have the desired effect of eliminating or shrinking the small right/​large reward dynamic. Regardless of how well these changes work, however, instances where an injunction gives undue leverage to a property owner do not change the nature of that owner’s right. These instances produce an exception to the standard remedy given to a property owner; they do not transmute the owner’s interest into something other than property. Copyright injunctions have always been a bit more complicated because an order that prevents an infringer from publishing or disseminating a copyrighted work runs headlong into first amendment concerns.37 When a court stops someone from speaking in any way, even to protect copyright, defenders of civil liberties sit up and take notice. Ultimately, this leads to discretion on the part of district courts when it comes to granting or denying injunctions, particularly preliminary injunctions. Even so, there is widespread consensus that injunctions are generally available for copyright infringement, and that this means copyright is protected as a property right.38 So, IP law, in general, provides an injunctive remedy. Granted, this is subject to some limitations and exceptions. Yet that is not enough to remove IP from the category of property. The reason is that even in other situations where there is widespread agreement that assets are covered by property rights, injunctions are not always available. The “canonical” instances of real and personal property provide ample evidence of rules that deny strong injunctive protection in all cases. If these assets are nonetheless recognized as classic subjects of property law, then IP is no different. Property neither requires nor demands an automatic and inflexible injunctive remedy in all cases and all situations. Again, property is more flexible than that. To see this, consider some examples.

Shadow of The Cathedral” (1997) 106 Yale L J 2175, 2179, (observing that a liability rule creates a “property right subject to an option (or easement)”—​that is, a “PRSTO (or PRSTE)”). The restatement of liability rule entitlements in the terms of real property ownership (property subject to an easement) shows that (1) real property ownership is not absolute, and (2) that post-​eBay patent “easements” (in the form of continuing royalties when injunctions are denied) do not undermine the status of patents as property rights. 37  Mark A Lemley and Eugene Volokh, “Freedom of Speech and Injunctions in Intellectual Property Cases” (1998) 48 Duke L J 147–​242. 38  Jiarui Liu, “Copyright Injunctions After eBay: an Empirical Study” (2012)16 Lewis & Clark L Rev 215, (finding that injunctions are typically granted when copyright infringement is found); Michael E Kenneally, “Commandeering Copyright” (2012) 87 Notre Dame L Rev 1179, 1220, (“In copyright law, property rules predominate”).

76   Robert P. Merges 1. Even an injunction is not as absolute it sounds; with the normal remedy of civil contempt for violating an injunction, a party can “buy” its way out of the injunctive remedy, though the price may be stiff.39 2. Encroachment:  An adjacent landowner who innocently builds a valuable structure that oversteps an owner’s property line will not be ordered to tear down the building or otherwise be enjoined from using it, if such an order would impose undue hardship on the adjacent landowner.40 3. Trespass: Damages are awarded for one-​time trespass and in other cases where the trespass is not shown to cause irreparable injury to the landowner.41 4. Adverse possession, which has been defined as “efficient trespass.”42 5. Conversion of chattels: Damages are routinely awarded in the amount of the full value of the converted item.43 39  John M Golden, “Injunctions as More (or Less) than ‘Off Switches’: Patent-​Infringement Injunctions’ Scope” (2012) 90 Tex L Rev 1399, 1412–​1413, (“When any threat of being found in contempt is realistically limited to a threat of civil contempt . . . [the] risk of being found in contempt can essentially amount to no more than a risk of being subjected to heightened but still limited monetary sanctions”). 40  See, eg, Amkco, Co. v Welborn, 21 P3d 24, 28 (NM 2001) (Hardship to adjoining landowner by truck stop's encroachment of 58 feet onto his land, which constituted roughly nine percent of tract, did not compel issuance of injunction requiring removal of encroachment, where adjoining landowner provided no evidence that he suffered hardship, and requiring removal would cost truck stop operators $188,837 cost of improvements, $107,687 in lost revenue, and would make $1.25 million project unviable.); Proctor v Huntington, 238 P.3d 1117, 1123 (Wash. 2010) (en banc) (“[W]‌e recognize the evolution of property law in Washington away from rigid adherence to an injunction rule and toward a more reasoned, flexible approach”). Cf. Parry v Murphy, 79 AD3d 713, 913 NYS2d 285 (2d Dep't 2010) (underground pipeline: plaintiff landowner is not entitled to an injunction; he did not show that he would suffer irreparable harm from presence of pipeline that substantially outweighed injury which injunctive relief would cause defendants; instead, award of damages, measured as difference between value of property with and without encroachment, would adequately compensate landowner.) The rule is otherwise when the encroachment is willful or intentional. See, eg, Culbertson v Bd. of Cnty. Comm'rs, 44 P3d 642, 658 (Utah 2001) (“ ‘[W]here the encroachment is deliberate and constitutes a willful and intentional taking of another's land, equity may require its restoration without regard for the relative inconveniences or hardships which may result ...’ ” (quoting Papanikolas Bros. Enters. v Sugarhouse Shopping Ctr. Assocs., 535 P.2d 1256, 1259 (Utah 1975))). See generally Mark P. Gergen et al., “The Supreme Court's Accidental Revolution? The Test for Permanent Injunctions” (2012) 112 Colum L Rev 203. 41  See, eg, Donovan v Kissena Park Corp., 181 App Div 737, 168 NY Supp 1035 (1918) (equity jurisdiction to restrain a trespass, although unquestioned, is sparingly used; trespass alone does not suffice to invoke it; equity rests in the probability of irreparable injury; and the rule still prevails that equity will interfere only in cases where the remedy at law is inadequate). See also Wing Ming Properties (U.S.A.) Ltd. v Mott Operating Corp., 79 NY2d 1021, 1023, 594 NE2d 921, 922 (1992) (de minimis incursion into air space owned by plaintiff did not warrant an injunction). See generally Richard A. Epstein, “Protecting Property Rights with Legal Remedies: A Common Sense Reply to Professor Ayres” (1998) 32 Val U L Rev 833, 840, (“The traditional view is that trespass is a wrong; all that is then left for the court to decide is whether damages, injunctions, or self-​help in defense of property is appropriate under the circumstances, just as the conventional analysis has it.”) 42  Lee Anne Fennell, “Efficient Trespass: The Case for “Bad Faith” Adverse Possession” (2006) 100 NW U L Rev 1037, 1038, (“adverse possession can best be understood as a doctrine of efficient trespass”). See also Thomas W Merrill, “Property Rules, Liability Rules and Adverse Possession” (1985) 79 NW U L Rev 1122. 43  See, eg, Clark v Allied Assocs., 477 So 2d 656, 657 (Fla Dist Ct  App 1985) (“Equity will not injunctively command return of personal property unless it is of peculiar value and character and unless

What Kind of Rights Are Intellectual Property Rights?    77 To return to the IP context: Non-​injunctive remedies are substituted routinely in certain well-​recognized situations. This does not mean the assets in these cases are no longer the subject of property rights.44 It just means the remedy is adjusted to take account of various factors that mitigate the desirability of the normal injunctive remedy. The fact that the frequency of these well-​recognized cases in real property may be lower than the current frequency of PAE litigation does not mean that patents are any less property than the rights at issue in these other cases. Scottish legal philosopher Professor Neil MacCormick admitted this possibility in an essay on rights and discretion, where he describes “a mixed system of objectively stated rights whose vesting conditions or operative contents are so vaguely or evaluatively stated as to introduce quite extensive discretion at the remedial level of judicial cognition and enforcement.”45 MacCormick distinguishes the “first level,” the one at which rights are defined, from the “second,” at which courts are sometimes vested with discretion about the specific scope and remedial effects of those rights.46 Unlike Professor Christopher Seaman, I do not see this is as the end of property for patents in general, or even for the patents in technology fields favored by PAEs.47 The adjustment of the remedy in these cases (1) applies to a minority of patents, where (2) the patents and their deployment context meet specific criteria. The application of eBay to copyrights and trademarks includes similar limiting principles. No property right—​even the canonical fee simple absolute in land—​is absolute. If encroachment and the classic “forced sale” remedy do not take away property status for land, then eBay and its progeny do not take away property status for IP rights.

its loss or retention by one not entitled to it cannot be fully compensated in damages”). See generally Richard A. Epstein, “Protecting Property Rights with Legal Remedies: A Common Sense Reply to Professor Ayres” (1998) 32 Val U L Rev 833, 847, (“The standard measure of damages for conversion [is] the chattel's full value.” Epstein goes on to describe Restatement of Torts factors that may mitigate the award of damages, such as a voluntary return of the converted item to its rightful owner, see also at 846–​ 847 (footnotes omitted). 44 

Professor Shyamkrishna Balganesh has a different view of all this, one worth noting. The point of exclusion, he says, never devolved to a simple right to enjoin. Shyamkrishna Balganesh, “Demystifying the Right to Exclude: Of Property, Inviolability, and Automatic Injunctions” (2008) 31 Harv J L & Pub Pol’y 593. Exclusion is best defined, Balganesh argues, in terms of the duty it imposes on third parties to stay away from a resource marked as owned by another. Exclusivity, in this view, is more like a posture encoded in the law than a firm statement of remedial consequences. Balganesh says this is why the phrase “right to exclude” in the Patent Act appears in the section on the grant of patents and not in the section on remedies. Further, at 628, his point is that patent law borrows the moral language of inviolability so as to express the strength of the rights held by a patent owner. In my view, inviolability remains not just a unifying trope, but an actual (if not absolute) fact about IP rights. 45  Neil MacCormick, “Discretion and Rights” (1989) 8 Law & Phil 23, 35. 46  MacCormick, “Discretion,” at 32. It should be noted, however, that MacCormick believes that in some definitional sense, (excessive) discretion is opposed to rights; therefore, in his view, the two-​level approach described in the text might not be an example of an operative right at all. 47  Christopher B Seaman, “Permanent Injunctions in Patent Litigation After Ebay: An Empirical Study” (2016) 101 Iowa L Rev 1949, 2006.

78   Robert P. Merges

3.3 Why Intellectual Property Rights Are Not “Regulation” 3.3.1 The First Sense of “Regulation” The leading scholar of IP law, Professor Mark Lemley, raises a different sort of argument against IP as property. Because of his prominence, and because there is something valuable in his critique, I take some time here to traverse his points. While I think he is wrong, he does point to a trend—​call it the “statutorification” of IP law—​that raises some legitimate concerns. Lemley says that IP is a form of regulation, and not a true property right: Intellectual property (IP) is a form of market entry and price regulation. The government grants a favored party the legal right to exclude others from entering the market at all (in rare cases in which an IP right is coextensive with an economic market), from entering the market under certain terms and conditions (via injunctions), or from entering the market without paying an entry tax (via a patent damages award). Modern IP is certainly more like regulation than it is like property, at least as people traditionally think of property, though there are certain kinds of property that have regulatory characteristics because they are used to define markets or restrict entry. Even disciples of the ‘IP is property’ faith generally acknowledge that IP is not much like real property. Rather, as the Supreme Court put it in the nineteenth century, IP is like the government grant of an exclusive franchise. Taxi medallions, exclusive concessions at airports or sporting events, and the old East India Company might all be described as property rights. But they are unlike other property rights in that their character is essentially regulatory: the right conferred by government fiat is the right to control competition.48

This concept of IP as regulation is offered in distinct contrast to the view that IP rights are true property.49 IP as regulation avoids the “mischief ” that can be caused when property rhetoric is applied to IP. The chief problem is that old bugaboo, property absolutism. One example, according to Lemley: “Indeed, those who analogize intellectual property to real property often assert that intellectual property should be perpetual, just as real property is.”50 This is incorrect as a factual matter; serious students of IP almost never propose any such thing. But the regulatory view of IP advances mostly via this kind of speculative

48 

Mark A Lemley, “Taking the Regulatory Nature of IP Seriously” (2014) 92 Tex L Rev 107, 107–​108, (hereafter Lemley, “Regulatory Nature of IP”). To be fair, it should be noted that Lemley does issue this disclaimer: “In prior work, I have suggested that while regulation is the closest analogy to IP, we might be better off doing without analogies altogether, because all of them, including regulation, carry baggage,” cited in Mark A Lemley, “Property, Intellectual Property, and Free Riding” (2005) 83 Texas L Rev 1031, 1032. Others have noted similar features of IP law. See Shubha Ghosh, “Patents and the Regulatory State: Rethinking the Patent Bargain Metaphor After Eldred” (2004) 19 Berkeley Tech L J 1315. For an alternative analysis, based on property concepts, see Irina D Manta and Robert E Wagner, “IP Infringement as Vandalism” (2015) 18 Stan Tech L Rev 331, (analyzing the relationship between IP and real property law, with a particular emphasis on remedies). 49  Lemley, “Regulatory Nature of IP,” at 107, n 1. Lemley does note that there are some who view property as a broad and expansive institution, but he says they distort the concept so severely that they “cause great mischief.” See also 107, 108, n 3. 50  Mark A Lemley, “What's Different About Intellectual Property?” (2005) 83 Tex L Rev 1097, 1104, n 23.

What Kind of Rights Are Intellectual Property Rights?    79 projection: it attributes a staunch absolutism to property theorists, or at least to the common understanding of property.51 Put differently, the idea that property implies absolutism (or inevitably leads other actors to so presume) is the rigid worldview regulatory theorists condemn. Property theorists insist that the institution of property does not have an absolutist ideology as its essence. But those who favor IP as regulation disagree; they claim that less sophisticated actors see the property label as an absolutist totem, and will be unable to resist its pull: Anyone who sees [property as originally and therefore always about land] will always see intellectual property as an awkward transplant. For them, the idea of property contains certain historical-​essentialist traits that cannot be altered to better adapt it to intangible things. As applied to intangibles, property will always have the feel of a northern fir in the tropics, or a damp fern in the high desert. It just does not fit.52

The same passage rejects the historical-​essentialist view that property leads to absolutism: The very wide range of things that property concepts have been applied to suggests to me an expansive and highly adaptable legal category. Land, tools, trees, minerals, water, fractional ownership claims, legal obligations to pay money—​these and many, many other things are subject to property’s wide embrace. Over its long career, property has shown a restless capacity to jump from one arena into another, morphing and adapting as it goes. While some of its distinctive features were shaped by its early history, I believe this history supplied property not with a set of burdensome constraints, but largely with a highly adaptable and flexible conceptual vocabulary that renders it wonderfully adaptive to all sorts of new things and situations. This vocabulary is singularly effective in structuring relations between legal actors and unique things of value to them. Property has proven robust because, like a spoken language that grows and spreads, it has shown itself quite capable of absorbing new dimensions and changing in significant ways, while retaining fidelity to certain core principles that provide its basic structure.53

So, I disagree that IP is “fundamentally unlike” real property. Or that the concept of property itself is (or ought to be) a narrow one.54 I also believe that IP rights are very different from government regulation. But in what way? Although the grant of an IP right under a statute is an event with important social consequences, the deployment, assertion, or licensing of such a right is undoubtedly a private law event. IP disputes are almost always between two private parties.55 This alone

51 

As I argue later in this section, property theorists assiduously avoid this sort of absolutism. For examples of those who believe property is an expansive concept, see Michael A Carrier, “Cabining Intellectual Property Through a Property Paradigm” (2004) 54 Duke L J 1, 1, (discussing the many ways in which property law “is not as absolute as is often claimed”); Carol M Rose, “Canons of Property Talk, or, Blackstone's Anxiety” (1998) 108 Yale L J 601, 603, (noting that “Blackstone himself was thoroughly aware of pervasive and serious qualifications on exclusive dominion”). 52  Merges, “Justifying IP,” at 4. 53  Merges, at 4–​5. 54  For a like-​minded view, see Peter S Menell, “The Property Rights Movement's Embrace of Intellectual Property: True Love or Doomed Relationship?” (2007) 34 Ecology L Q 713, 722. 55  And even an IP infringement suit against a government actor is in many ways more in the way of a private law dispute.

80   Robert P. Merges brings them outside the realm of regulation—​that is, the realm of public law.56 Both civil law and common law scholars classify IP as a private law field.57 As with contract law—​a classic private law field—​the state is involved at the enforcement stage, when private parties need to resolve a dispute. But the state here plays a secondary role, merely helping the private parties effectuate the purpose they set out to achieve (in contract) or to protect a private party’s zone of autonomy (torts and property). The state serves the goal primarily of delivering corrective justice; it acts in the service of a private right holder. Regulation usually denotes the need for private parties to obtain more specific and direct government authorization. To regulate means to control, govern, or direct by rule. In private law, the parties control and set the rules (within bounds, of course); the government merely effectuates these private purposes if and when the power of the state is invoked to further the private ends of the parties. In regulation, and public law generally, the government’s role is direct. It specifies, through some statute or publicly applicable rule, an appropriate course of action. And it enforces its edicts directly, often without the need for a private party to instigate enforcement. Put simply, regulation typically requires direct government permission or compliance. So, is it right to call property rights, and the transactions based on them, regulation? Well, there are thousands of transactions every day involving real and personal property. The vast majority require no government permission to go forward. (Notification sometimes, yes; permission, no.) There are likewise thousands of IP transactions every day. A consultant writes ad copy or a musical jingle and licenses it to a client; a freelance programmer writes a patch on some old software code for a client; a composer licenses a piece of music for use in a movie; an inventor assigns a patent to a startup company she is forming; a biotech company concludes a carefully worked out licensing arrangement giving distribution and limited manufacturing rights to a big pharmaceutical company; and so on and so on. In each case, complex commercial arrangements are worked out around the centerpiece of a government-​granted right to exclude. No permit or government approval is needed. No regulatory authority is consulted. We see in these multitudinous transactions the classic distinction between private and public law. The government is a necessary component of each; it grants the rights or allows for (but does not order) their enforcement. In private law fields, the government grants property rights and enforces contracts. But the action is directed by private actors. The government’s enforcement power is invoked when there are disputes between private parties. Government approval (or grant) of initial entitlements, and government resolution of private disputes differ from direct regulatory approval. It is true, as regulatory theorists say, that IP is ultimately about “market entry.” And IP can act as a barrier to entry. But the crucial point is this: Once the right is granted, there

56 

Richard A Epstein, “Unifying Copyright: An Instrumentalist's Response to Shyamkrishna Balganesh” (2012) 125 Harv L Rev F 120, 120, (“[T]‌he definition of private law does not depend on the origin of the rights in question, but only on the parties to a particular dispute. Private law involves suits between two private individuals . . .”). 57  See, eg, Ralf Michaels and Nils Jansen, “Private Law Beyond the State? Europeanization, Globalization, Privatization” (2006) 54 Am J Comp L 843, 847. See also See James Gordley, Foundations of Private Law: Property, Tort, Contract, Unjust Enrichment (OUP 2006).

What Kind of Rights Are Intellectual Property Rights?    81 is typically no government permission needed to conclude the private deal-​making that determines terms and conditions of market entry.58 The fact that economists have argued for some time that more regulatory approvals ought to be bought and sold on the market does not mean that the line between property and regulation has disappeared. The desire to make (some) regulatory approvals take on more “property-​like attributes” does not mean that property is regulation, and vice versa. There are still major differences between allocating private decision rights in respect of discrete assets (property) and requiring government permission to do things that might affect the general public welfare. Okay, so maybe IP is only “regulatory” in a loose sense. Maybe the point is more normative: equating IP to regulation is less than completely accurate, but it has the benefit of providing an alternative to IP as property. It avoids the dangers of “property talk.” Shouldn't we give credit for lowering the risk of negative consequences that may follow from calling IP property? To begin, the negative consequences of calling IP property are only rarely spelled out. These worriers are generally concerned that the image of fee simple absolute in land will blind people to the subtle requirements and limitations of property rights in other kinds of assets. But I think this is a baseless fear. Do we worry that the fee simple concept carries over to ownership of personal property like a car? Not really. An ambitious would-​be pet sitter who puts a business card on a car windshield while the owner is in a store does not worry about the strict law of trespass that follows from the label of property. The would-​be pet sitter knows that this type of asset, a car, in this location, a parking lot, comes with implied norms and limitations concerning permitted activity. The same with a backpack that someone is about to leave behind as they exit a subway car. The helpful stranger who picks it up and hands it to its owner does not worry about licenses and permissions. The property rights in respect of the backpack in that situation are recognized to have implied features that make them different from fee simple absolute in land. The same is true with IP rights. Despite jokes to the contrary, private families continued to sing “Happy Birthday” with aplomb while it was in copyright. Graduate students, postdocs, and primary investigators in the sciences use lab techniques and reagents with very little regard for patent rights, despite consistent fears that patents will inject themselves into the research process. And journalists use trademarked terms in news stories on a regular basis without real concern that they will be accused of infringement. Some additional activities might be “chilled” by the fear of property absolutism, though there is not much evidence for this. All we can say for sure is that a large volume of traditional uses of IP-​protected assets continues. Whatever “mischief ” follows from this does not seem to have slowed the wheels of commerce or the workings of society to any appreciable degree.

58  There are exceptions, such as when a patent covers sensitive military technology, and the licensing deal is with an overseas company, particularly one with ties to an overseas government. Classic concepts of regulation may well apply to deals like this: the state will take a direct interest, and government approval may be necessary. But note that this exception shows just how different the run of the mill transaction is. No governmental agency need approve the deal.

82   Robert P. Merges

3.3.2 The Second Sense of “Regulation” There is a second way in which IP rights might be like regulation. This comes from the sheer burden of seeking permissions from numerous and dispersed right holders. The idea here is that the collective burden of so many permissions creates the same kind of restrictions and impediments as a single omnipresent government regulation. All the scattered right holders, when considered as a unitary force, constitute one gigantic “Mother, may I?” regime.59 This is not a new thought. It runs under a number of rubrics in the IP literature, most prominently the idea of the “anticommons.” Central theme: Too many discrete rights, held by too many individual owners, constitute a giant drag on economic activity. It is well-​trod territory, perhaps best captured in the title of Professor Michael Heller’s The Gridlock Economy. Another bumper sticker version of the same idea is “royalty stacking,” with the same connotation of too many individual hands that must be satisfied before some important economic activity can move forward. The name of the game is transaction costs. Finding right holders; negotiating deals with each one; handling right holders who assert their rights after costs have been sunk (holdups); resolving conflicts (often through litigation) when negotiations occasionally break down: these are the costs that create all the problems. Too many IP rights, too many costs in threading the needle through all of them—​again, an old story in the IP world. This is a compelling story, and it points towards compelling policies. Its only real defect is lack of evidence. The anticommons works in theory, but not really in practice.60 Transaction costs exist, but economic activity works around them, for the most part. For every theory about why transaction costs will sink the IP ship, there is a new model of transactional activity floated by some entrepreneur that solves the problem, in at least a workable way.61 Transaction costs are the major problem looming on the IP horizon—​and according to 59 

Mark A Lemley, “The Regulatory Turn in IP” (2013) 36 Harv J L & Pub Pol’y 109, 110, (stating that it is a “complex” question whether IP law is a “Mother, may I?” regime); but see also at 115. 60  See Jonathan M Barnett, “The Anti-​Commons Revisited” (2015) 29 Harv J L & Tech 127, 130. 61  Compare Michael A Heller and Rebecca S Eisenberg, “Can Patents Deter Innovation? The Anticommons in Biomedical Research” (1998) 280 Science 698 with Jonathan M Barnett, “The Anti-​ Commons Revisited” (2015) 29 Harv J L & Tech 127, 145 (hereafter Barnett, “Anti-​Commons”) citing Wesley M Cohen and John P Walsh, “Real Impediments to Academic Biomedical Research,” in Adam B Jaffe, Josh Lerner, and Scott Stem (eds), Innovation Policy and the Economy (Volume 8, National Bureau of Economic Research 2007) (reviewing multiple surveys of industry and academic scientists and finding that patent-​related access limitations or other “anticommons” effects rarely impede research) and citing Zhen Lei et al, “Patents Versus Patenting: Implications of Intellectual Property Protection for Biological Research” (2009) 27 Nature Biotech 36, (reporting survey findings showing that scientists “do not [generally] encounter an anti-​commons or a patent thicket” but that mandated technology transfer agreements can slow down the exchange of research tools, and reporting perception that those agreements are associated with an academic environment in which patenting is encouraged) and John P Walsh, Charlene Cho, and Wesley M Cohen, “View from the Bench: Patents and Material Transfers” (2005) 309 Science 2002, (finding that only one percent out of 414 interviewed academic biomedical researchers reported any delay in research, and none reported halting research, due to access constraints attributable to patents); John P Walsh, Ashish Arora, and Wesley M Cohen, “Working Through the Patent Problem” (2003) 299 Science 1021, (finding that scientific research communities have developed work-​around solutions to patent-​related transactional obstacles or, in some cases, follow norms that tolerate limited infringement, based on interviews with seventy IP attorneys, scientists, and managers from pharmaceutical firms, biotech firms, and universities).

What Kind of Rights Are Intellectual Property Rights?    83 IP scholars, they always will be. But that horizon seems to keep right on receding. IP researcher Jonathan Barnett, reviewing the classic account of the anticommons in biomedical research, says: Extensive survey studies of biomedical researchers in the United States and other countries provide little evidence that increased patenting has had significant incremental adverse effects on biomedical innovation, in the form of either delayed or halted projects. The survey results are consistent across different samples and countries. A review of these surveys by leading researchers in the field concludes: ‘[L]‌egal excludability due to patents does not appear in practice to impose an important impediment to academic research in biomedicine . . . ’62

But what about other fields? And what about actual innovations—​not research, but the delivery of actual new products on the market? Could it be that patents are having a negative effect in these other ways? Of course it could be. But the facts do not seem to indicate this level of concern. In the software industry, where patents have long been thought to be troublesome at least and ruinous at worst, innovation seems quite robust.63 More generally, in the Information and Communications Technology (ICT) industries where patent “thickets” and extensive litigation have caused the greatest alarm, Barnett concludes there is little or nothing to worry about: Throughout a period in which patent applications and issuance have grown at historically significant rates, various measures indicate that innovation in the ICT sector has continued at robust levels and prices have steadily fallen. On the supply side, private R&D spending in the U.S. computing and electronics industries has grown almost every year for the period 1998-​ 2013. On the demand side, consumers of electronics goods have enjoyed an uninterrupted flow of new products, increasing output and declining prices during that same period. Consider the computer industry: prices for computers and peripheral equipment have declined every year from 1995 through the present, while worldwide shipments of servers, desktops and laptops have increased from 1.1 million units in 1980 to an estimated 517 million units as of 2015. Data collected by other researchers with respect to telephone equipment, televisions, personal computers, and portable computing devices -​all patent-​intensive industries -​shows relative price declines (adjusted for quality) over the period 1992-​2013 and especially dramatic declines since 2005. If we look more closely at particular segments of the information technology industry, the same pattern indicative of a healthy competitive market-​declining prices and increasing output repeats:  (1) worldwide shipments of smartphones increased from one-​half billion units in 2011 to over one billion units in 2013; (2) worldwide shipments of tablet computers increased from zero in 2010 to slightly more than 200 million in 2013; and (3) worldwide shipments of Bluetooth-​enabled devices increased from zero in 2000 to approximately 2.5 billion units as of year-​end 2013. If there is an [anticommons] effect in the electronics and communications markets, it has yet to be realized.64

To summarize: traversing property claims in pursuit of private economic activity is not the same as negotiating government regulation. And in addition, to the extent that there is a

62 

Barnett, “Anti-​Commons” 145, quoting Cohen and Walsh, “Real Impediments,” 11. See Robert P Merges, “Software and Patent Scope: A Report from the Middle Innings” (2007) 85 Tex L Rev 1627, 1628. 64  Barnett, “Anti-​Commons” 143–​144. 63 

84   Robert P. Merges concern about excessive private clearances or permissions, the evidence does not support the concern that thickets or tangles of IP rights are slowing down research, innovation, or economic activity generally.

3.3.3 Freedom and Permission The second sense in which Lemley and others use the term “regulation,” then, is really about the need to clear IP rights. Lemley argues that the need to get permission before market entry can be expected to slow the rate of innovation, and is in general counter to economic freedom. I have just shown that, as a positive matter, the concern with “excessive” private permissions is probably unfounded. Now let me pursue an alternative issue, taking the idea of excessive permission as a possible future concern: whether IP is or is not slowing innovation in our current system, IP has the capacity to do so by encumbering market entrants. It is therefore potentially akin to state regulation in terms of its effect on the freedoms available to economic actors. It holds the capacity to impinge on private individuals and firms, and requires them to jump through legally backed hoops before they can do what they want to do. Its primary function, from the point of view of a would-​be entrant, is to restrict. This explains Lemley’s position that IP ought to be anathema to libertarians. Like state-​issued laws and regulations, privately owned IP has the capacity to get in the way of things that people want to do. This argument for IP as regulation fails in its basic purpose.65 The rhetorical strategy is to appeal to libertarian impulses. But the argument, which equates permission from private right holders with excessive state regulation, misunderstands basic libertarian principles. In libertarian thought, permission from private right owners differs fundamentally from compliance with state regulation. This is quite clear from basic writings from this school of thought. It is also clear with particular respect to IP rights. US cases from the nineteenth century, which was as close to a libertarian era as we have had in US history, recognize without criticism the fact that IP ownership entails the need for third parties to gain permission in many cases. The requirement to license patents, in other words, was never equated with state regulation during this period. Clearing multiple contracts with individual owners was never compared with regulatory compliance. To assimilate the two types of permission in a single category (“Mother, may I?”) is to commit a serious category mistake. Classic libertarian thought defends private entitlements—​even when these might entail “permission.” Permission, in fact, is just another way of saying “private ordering.” Structuring economic activity on the basis of entitlements will normally involve rights that demand permission. This is the basis of private ordering; the right holder bargains away his or her permission, in exchange for something of value. The only requirements a libertarian

65  Self-​identified libertarians and “classical liberals” themselves have no doubt about the property status of patents. Frank H Easterbrook, “Intellectual Property is Still Property” (1990) 13 Harv J L & Pub Pol’y 108, 112; Simone A Rose, “Patent ‘Monopolyphobia’: A Means of Extinguishing the Fountainhead?” (1999) 49 Case W Res L Rev 509, 515, (recommending that the Patent Act be amended to clarify that “patents are property”); Richard A Epstein, “The Disintegration of Intellectual Property? A Classical Liberal Response to a Premature Obituary” (2010) 62 Stan L Rev 455; Adam Mossoff, “The Trespass Fallacy in Patent Law” (2013) 65 Fla L Rev 1687, 1692, (“Patents have long been identified as property rights in American law.”)

What Kind of Rights Are Intellectual Property Rights?    85 imposes on the legitimacy of entitlements is (a) that they be obtained without force or fraud, and (b) that whoever holds them has a clear chain or title stretching back to the original (legitimate) acquisition.66 Entitlements held by virtue of rent-​seeking are not legitimate in this setup, but so long as IP rights are assigned neutrally on the basis of merit as defined by the relevant statutes, there can be no complaint about the original acquisition of these rights. The simple point is that for libertarians, contractual restrictions—​and the need for permission that follows from them—​are not at all on the same plane as state regulation. The great defender of Benthamite individualism in nineteenth century Britain, A.V. Dicey, said this: Laissez faire, be it noted, was with Bentham and his disciples a totally different thing from easy acquiescence in the existing conditions of life. It was a war-​cry. It sounded the attack upon every restriction, not justifiable by some definite and assignable reason of utility, upon the freedom of human existence and the development of individual character. Bentham assaulted restraints imposed by definite laws.67

But did this same concern extend to contractual restrictions? Hardly: From these three guiding principles of legislative utilitarianism—​the scientific character of sound legislation, the principle of utility, faith in laissez faire —​English individualists have in practice deduced the two corollaries, that the law ought to extend the sphere and enforce the obligation of contract, and that, as regards the possession of political power, every man ought to count for one and no man ought to count for more than one.68

But what about the fact that contracts restrict freedom of action? What about the concern that contracts create a “Mother, may I?” regime? Not an issue: Once [we] admit that A, B, or C can each, as a rule, judge more correctly than can any one else of his own interest, and the conclusion naturally follows that, in the absence of force or fraud, A and B ought to be allowed to bind themselves to one another by any agreement which they each choose to make—​i.e., which in the view of each of them promotes his own interest, or, in other words, is conducive to his own happiness. From one point of view, indeed, a contract between A and B whereby, for example, A agrees to sell and B to buy a horse for £20, places a limit upon the freedom of each of them, since A comes under a legal compulsion to sell, and B comes under a legal compulsion to pay for the horse; but, if the matter be fairly considered, it is easily seen that freedom of contract is an extension of an individual’s power to do what he likes, i.e., of his freedom. As both A and B are at full liberty not to enter into a contract at all, it must be assumed that, at the moment of contracting, A wishes to have £20 instead of the horse, and B wishes to have the horse at the price of £20. For the law to give effect to the agreement by which this result is attained, as also to more complicated contractual engagements, is nothing else than an extension of each individual’s power to get what he wants.69

66  67 

104.

68  69 

Nozick, “Anarchy, State and Utopia,” 161–​163, 182–​184. Albert Venn Dicey, Law and Public Opinion in England in the Nineteenth Century (2nd edn, 1919), Venn Dicey, Law and Public Opinion. Venn Dicey, Law and Public Opinion, 104–​105 (footnote omitted).

86   Robert P. Merges As with the purchase and sale of a horse, so with complex patent licensing transactions. Of course, the need for a multitude of patent licenses creates a complex transactional landscape for others. Still, the basic principle holds. Each property owner (patentee) has the right to structure economic activity according to his or her wishes. The “restrictions” this creates for third parties are, from a libertarian point of view, not a defect. They are simply a side effect of the private ordering that each patent owner has the right to. The number or complexity of transactions in no way undermines what Dicey called the “zeal . . . for freedom of contract.”70 Nineteenth century US jurisprudence embodied the same stance: private contractual permission was considered a necessary adjunct to the proper exercise of private property and contract rights, while regulation demanding government approval was an altogether less favored proposition.71

3.3.4 Permissions in Historical Perspective The general point is that private contracting is not the same as governmental pre-​approval. Courts in IP cases recognized this general principle from early in the nineteenth century. The cases speak plainly in saying that patent and copyright licenses are not equivalent to government regulation. To begin with, IP was recognized and respected as a legitimate state-​granted form of property from the earlier, more libertarian, days of US history. The status of IP rights as property was simply never questioned in this earlier era.72 In patent cases, for example, judges instructed juries that a “patent right . . . is a right given to a [person] by law where he has a valid patent, and, as a legal right, is just as sacred as any right of property.”73 This conception of patents as rights, and thus a form of property, was in no way weakened by recognition that at times economic actors would have to seek permission to make, use, and sell technologies. Permission of this type was simply not understood as an illicit check on economic freedom. In fact, permission from patentees was understood to be an essential attribute of granting patents in the first place. Thus, in an 1850 case involving the famous telegraph invention of Samuel F. B. Morse, the Court said: The same latitude for further inventions and improvements is open to others as was open to Mr. Morse himself. He was allowed to make any improvement on his predecessors; and others are 70 

Venn Dicey, Law and Public Opinion, 105. See, eg, Farrington v State of Tennessee, 95 US 679, 682 (1877). See also The Slaughter-​House Cases, 83 US 36, 90 (1872) (the Fourteenth Amendment “was undoubtedly” designed “to give to [each citizen] the right to pursue the ordinary avocations of life without other restraint than such as affects all others, and to enjoy equally with them the fruits of his labor.”); Barbier v Connolly, 113 US 27, 31 (1884) (“The fourteenth amendment . . . undoubtedly intended not only that there should be no arbitrary deprivation of life or liberty, or arbitrary spoliation of property, but that . . . all persons should be equally entitled to pursue their happiness, and acquire and enjoy property; that they should have like access to the courts of the country for . . . the enforcement of contracts”); Charles W McCurdy, “Justice Field and the Jurisprudence of Government-​Business Relations: Some Parameters of Laissez-​Faire Constitutionalism, 1863–​1897” (1975) 61 J Am Hist 970, 973, (“The Fourteenth Amendment, [Justice Field] periodically asserted, was ‘undoubtedly intended’ to protect both the title to a person’s property and his liberty to dictate its use and ‘enjoy’ its income”). 72  See Jane C Ginsburg, “A Tale of Two Copyrights: Literary Property in Revolutionary France and America” (1990) 64 Tulane L Rev 991. 73  Hayden v Suffolk Mfg. Co., 11 F Cas 900, 901 (CCD Mass 1862) (No 6,261). 71 

What Kind of Rights Are Intellectual Property Rights?    87 equally allowed to make any improvement on him. To be sure, if his improvement was engrafted on a machine or manufacture before made and patented, he could use or patent only his improvement, and not what had been previously patented, without obtaining first a license or purchase from the patentee. So of others in relation to him.74

The need for permission—​the “Mother, may I?” requirement—​did not affect the Court’s view that Morse’s invention was “his own property.”75 Another case from this era noted the many restrictions and permissions that follow from property in general. In one passage, the Court distinguishes the permissions required under federal patent law from those that are incidental to run of the mill personal property, which is governed by state law: The franchise which the patent grants, consists altogether in the right to exclude every one from making, using, or vending the thing patented, without the permission of the patentee. . . . But the purchaser of [an] implement or machine for the purpose of using it in the ordinary pursuits of life, stands on different ground. . .  . The inventor might lawfully sell it to him, whether he had a patent or not, if no other patentee stood in his way. . . . And if [the owner’s] right to the implement or machine is infringed, he must seek redress in the courts of the State, according to the laws of the State, and not in the courts of the United States, nor under the law of Congress granting the patent. The implement or machine becomes his private, individual property, not protected by the laws of the United States, but by the laws of the State in which it is situated. Contracts in relation to it are regulated by the laws of the State, and are subject to State jurisdiction.76

Our interest here is not the relationship between state and federal law that arises when patented items are sold outright to buyers. It is the fact that the Court recognizes the many permissions required in a system of property entitlements. And this in an era that has been described as the “golden age” of liberty—​the high-​water mark of libertarian thought.

3.4 Intellectual Property Rights as Property Rights: Summing Up IP rights are ownership claims in respect of individual assets that are good against the world. They allow owners to invoke the power of the state (when they choose to do so) to exclude others, or in some cases to extract damages for failing to “keep out.” As with all property, they

74 

Smith v Downing, 22 F Cas 511, 519 (CCD Mass 1850). ibid (“[T]‌he patentee . . . is allowed to protect that improvement, as he ought to be—​it being his own invention, his own property, and the fruit of his own exertion, though, of course, it does not protect, and should not, a monopoly of what else may have been invented by others before, or may be invented by them afterward, on the same subject”). 76  Bloomer v McQuewan, 55 US 539, 549–​550 (1852). One might incorrectly assume that the use of the term “franchise” in this passage (“the franchise which the patent grants”) has a regulatory sound to it; and that it sets up a tension with the later part of the passage, referring to patents as “his private, individual property.” The truth is that nineteenth century courts routinely defined a patent “privilege” or “franchise” as the grant of a property right. Adam Mossoff, “Who Cares What Thomas Jefferson Thought About Patents? Reevaluating the Patent ‘Privilege’ in Historical Context” (2007) 92 Cornell L Rev 953, 992–​993, and 1002–​1003 (equating “franchises” with “privileges”: “the patent statutes secured special legal privileges granting monopoly franchises to inventors”). 75 

88   Robert P. Merges are not absolute. In the case of IP, the rights must be pursued, maintained, or at least enforced through the offices of government agencies. They are limited in time and in other ways as well. They are not permits to serve a market; they can be subdivided and assigned; and they are invoked at the discretion of individual owners. In other words, they are property, plain and simple. I have argued to this point that IP rights are property rights. Much of the emphasis has been on the proper status of IP as property, and why that is not a negative label that inevitably leads to absolutist positions. What about the second half of the phrase: IP as rights? Is there a downside to this part of the formulation? Legal language is filled with references to rights. The “right to vote,” the “right to marry,” the “right to assemble,” and so on. There are many senses of the word, and indeed, in general usage it is often tantamount to the notion of a claim.77 Especially in constitutional law, there are so many rights that they often come in conflict, and the structure of the case law is often built around resolving clashes between conflicting rights. Professor Mary Ann Glendon famously said that there was in fact too much “rights talk.” She decried the absolutism of the language of rights, and said that this way of speaking implicitly supports the abbreviation and rigidity that characterizes so much political discourse: Though sound-​bites do not permit much airing of issues, they seem tailor-​made for our strident language of rights. Rights talk itself is relatively impervious to the other more complex languages we still speak in less public contexts, but it seeps into them, carrying the rights mentality into spheres of American society where a sense of personal responsibility and of civic obligation traditionally have been nourished. An intemperate rhetoric of personal liberty in this way corrodes the social foundations on which individual freedom and security ultimately rest. . . . [T]‌ime and again it proves inadequate, or leads to a standoff of one right against another. . . . [because of] its starkness and simplicity, its prodigality in bestowing the rights label, its legalistic character, its exaggerated absoluteness, its hyperindividualism, its insularity, and its silence with respect to personal, civic, and collective responsibilities.78

One telling example, quite relevant for our purposes here, concerns property claims: A penchant for absolute formulations (‘I have the right to do whatever I want with my property’) promotes unrealistic expectations and ignores both social costs and the rights of others. A near-​aphasia concerning responsibilities makes it seem legitimate to accept the benefits of living in a democratic social welfare republic without assuming the corresponding personal and civic obligations.79

In the end, Glendon’s critique has much in common with the critique of IP as property. The main complaint again is the tendency to absolutism: The belief that labeling a thing as a “right” influences debate in the direction of strengthening legal claims over that thing at the expense of competing claims.

77  Oxford English Dictionary, Second Edition (OUP 1989); “Right,” meaning 9: “A legal, equitable, or moral title or claim to the possession of property or authority, the enjoyment of privileges or immunities, etc.” 78  Mary Ann Glendon, Rights Talk: The Impoverishment of Political Discourse (Free Press 1993), Preface, at p. x. Then at p. xi. 79 Glendon, Rights Talk, at xi.

What Kind of Rights Are Intellectual Property Rights?    89 For all the reasons I described earlier with respect to the debate over property, I reject the charge of absolutism. I reject it on conceptual grounds, in that it would surrender a valuable and flexible legal term before joining the fight over the ways it ought to be limited. And I reject it on consequentialist grounds. There is basically very little evidence that “IP rights talk” has held back the development of exceptions and limitations in IP law. The feared-​of consequence—​absolutism—​has not, in fact, come to pass. During the contemporary era, when IP rights have become a common phrase, we have witnessed some strengthening of IP rights, it is true. But it is also undeniable that we have seen vigorous and effective pushback against this trend. Fair use in copyright law has been expanded and vigorously protected. As we have seen, remedies in patent law have been adjusted, and the “automatic injunction” rule swept away by eBay. New institutions for cheaper ways of invalidating patents have been enacted and embraced. Nominal use and other limitations in trademark law have been expanded. I have argued at length elsewhere that it is nigh impossible, using current techniques and data, to figure out whether IP law as a whole is net social welfare positive or not. But I do not think it defensible to say that since the era when legal actors began talking about IP rights the law has marched inexorably in an absolutist direction. The data are good enough to refute that charge. And with it, the concerns over “rights talk” as well as over “property talk” have been dispelled. There may be reasons to refrain from calling IP “property.” But concern that this language will push us inexorably into the chasm of absolutism is not a legitimate reason. The evidence is not there.

4.  Problems with Conceiving Intellectual Property as Property Though property is a broad concept, this form of entitlement does come with some problems. While I do not believe “IP as property” points inexorably toward stronger rights or absolutist thinking, it does present some problems. Three of them concern me here: group ownership claims, takings, and transaction costs.

4.1 Group Ownership The great thing about property is that it provides a focal point for bargaining over an asset or resource. But one problem is that sometimes, many hands go into the creation or development of a valuable asset. When those many hands can be effectively represented by a single entity—​such as in a corporation or partnership—​there is no focal point problem. (Issues of fairness regarding the respective contributions of individuals are another matter.) But what happens if there are no clear rules about group ownership? An example is the members of a traditional tribe, village, region, or ethnic group; IP law has struggled at times with the problem of awarding rights in respect of group creations such as handicraft styles, traditional medicines, and folklore. Another type of group-​created asset arises when dispersed individuals form around some central resource, such as a technological platform, canonical content repository, or the like.

90   Robert P. Merges Examples here include user-​generated computer programs and know-​how surrounding online computer games, programming languages, and software applications.80 When individual contributions are identifiable and substantial, individual IP rights may still make sense. But when individual contributions are very small, and/​or difficult to associate with individual contributors, the value lies in the aggregate collection of user-​supplied material. The logic of individual property claims makes little sense for such decentralized, dispersed contributions. Yet the aggregate value of the individual contributions may be very great. Consider for example macros and “scripts” for use with a popular and widely-​available software platform, such as the Adobe PDF format or Microsoft Excel or Adobe Photoshop.81 A software copyright case from the 1990s, Lotus v Borland,82 actually confronted this issue.83 In the case, the First Circuit denied copyright protection to the menu command structure of the Lotus 1-​2-​3 spreadsheet program. The majority’s holding was straightforward, and came right out of the copyright statute.84 But the concurrence by Judge Boudin was different. In it, he stressed that much of the value of Lotus’s menus was created by the efforts of those who used the 1-​2-​3 program: Requests for the protection of computer menus present [a]‌concern with fencing off access to the commons in an acute form. A new menu may be a creative work, but over time its importance may come to reside more in the investment that has been made by users in learning the menu and in building their own mini-​programs—​macros—​in reliance upon the menu. . . . .. A different approach [to resolving this case] would be to say that Borland’s use is privileged because, in the context already described, it is not seeking to appropriate the advances made by Lotus’ menu; rather, having provided an arguably more attractive menu of its own, Borland is merely trying to give former Lotus users an option to exploit their own prior investment in learning or in macros. The difference is that such a privileged use approach would not automatically protect Borland if it had simply copied the Lotus menu (using different codes), contributed nothing of its own, and resold Lotus under the Borland label.85

The idea that the users’ collective efforts, their labor, should count in the analysis of the original program owner’s property rights builds implicitly on the idea that property has to do with labor; that central to a legitimate property claim is the expenditure of labor. This is pure John Locke, of course.86 But the Boudin concurrence defied conventional thinking in contemplating

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Fanfiction—​stories, artwork, and other adaptations of well-​loved fictional worlds such as Star Wars, Star Trek, Twilight, etc.—​is a bit different. User-​generated stories, modifications, and adaptations of well-​loved fictional worlds can be seen, collectively, as group-​created material; but it may often be easier to identify individual contributions within each genre of fanfiction. 81  See, eg, Pauline Cabrera, “11 Best Sites To Find Free Photoshop Actions” (2 July 2013), available at (listing good websites for downloading “actions,” or macro scripts, for working with Adobe Photoshop, a popular photo editing program). 82  Lotus Dev. v Borland Int’l, 49 F3d 807 (1st Cir 1995). 83  The analysis here is drawn from Robert P Merges, “Locke for the Masses” (2008) 36 Hofstra L Rev 1179. 84  Merges, “Locke for the Masses,” n 3, (finding that “expression that is part of a ‘method of operation’ cannot be copyrighted”). 85  Merges, “Locke for the Masses,” n 4 (Boudin, J, concurring). 86  See Merges, “Locke,” in Justifying Intellectual Property (Harvard UP 2011), 31–​67.

What Kind of Rights Are Intellectual Property Rights?    91 the assignment of some sort of property right to the dispersed users; or, at any rate, recognizing the efforts of the dispersed users in the overall property calculus relating to the Lotus 1-​2-​3 program. This intriguing idea runs up against two practical problems: (1) the scope of the right, and (2)  group representation. Sometimes, for example, a group has a norm against commercializing group-​created content; if so, the group-​level rights to the material will take the form of a strictly negative right: the right to prevent commercialization. This strategy of using property to prevent privatization is now well-​known due to the Creative Commons and open source content projects. There may, however, be need for other rights. At times, the group might simply want recognition for group-​level contributions or adaptations, for example. And it is even conceivable that the group might want to profit from some of its work, which would entail (a) licensing the right to use group content, and (b) enforcing group-​ level rights against infringers. To some extent the group itself may determine the scope of rights it will retain in group-​ level content. The key to solving this problem is to figure out focal point constructs.87 Ideally this takes the form of some representative person or small decision-​making body endowed with the right to speak for the group. Although the IP rights will belong to and reside with the wider group, the group can delegate the focal point function to a person or body chosen to represent the group. Obviously, governance of this type comes with the potential for problems, in particular, self-​dealing or conflicts of interest between group representative and the group as a whole. And the solution must be drawn from the toolkit of oversight, supervisory, and regulatory instruments developed in the law of corporations, trusts, government administration, and the like. This will entail costs. Overseeing the fairness of group representatives means there must be procedures to investigate and punish irregularities. Even when perfect and fair, these procedures can be costly. But if they are capable of being misused by disgruntled group members, costs may rise further. This is all unfortunate, but it is necessary. If a group creates something valuable and worth protecting, then focal points for securing legal rights and making deals are essential. If there are costs in overseeing these focal point constructs, it is just the inevitable result of extending the benefits of property rights to group-​ created assets.

4.2 Intellectual Property as Constitutional Property: The Takings Problem If IP is indeed a right, and in particular, a property right, the US Constitution comes into play. When the government executes a “taking” of property, it must compensate the owner.88 A full and complete taking, such as a government “condemnation” of a patented

87 

For one, characteristically creative, approach, see Abraham Bell and Gideon Parchomovsky, “Copyright Trust” (2015) 100 Cornell L Rev 1015. 88  US Const amend V (“[N]‌or shall private property be taken for public use, without just compensation”).

92   Robert P. Merges flu vaccine or HIV therapy, would no doubt require payment to the patent’s owner.89 The same would be true of the government-​declared ownership of copyright in a privately authored text or film; the copyright owner would also have a constitutional taking claim.90 For patents, there is even a statute that covers government infringement of patents.91 But the stickier problem arises when Congress or the courts change some aspect of IP doctrine. Are there changes to IP law that are so radical they work an effective “taking” of IP rights? In the technical terms of takings jurisprudence, when should a court find a “regulatory taking” with respect to IP? The first part of any answer to these questions is to dispel a myth: that calling IP rights property somehow implies that courts should readily and frequently find changes in IP law and doctrine to be regulatory takings. This is wrong. As I have stressed throughout this chapter, property is a flexible concept. This allows us to say without question that IP is property. The regulations affecting different types of property will themselves differ in nature, number, scope, and intensity. This, in turn, allows us to say with no hesitation that the property label does not dictate outcomes under regulatory takings doctrine. Those outcomes turn instead on whether by means of a new regulation “the government has deprived a [property owner] of all

89 

Horne v Dep't of Agriculture, 135 S Ct 2419, 2427 (2015) (noting that the Takings Clause applies to a “patented invention” as much as it applies to “land” (quoting James v Campbell, 104 US 356, 358 (1882))). Note that my example applies to an outright seizure or condemnation of a patent. Normal, run-​of-​the-​mill patent infringement (such as when a branch of the military manufactures a vaccine that is covered by a privately owned patent) is different. Under established case law, the infringement action is considered a species of tort, and therefore implicates sovereign immunity issues. See Zoltek Corp. v United States, 442 F3d 1345, 1349 n 2 (Fed. Cir. 2012) (recognizing that “the patentee’s recourse for infringement by the government is limited by the scope of the waiver of sovereign immunity established by the Congressional consent to be sued”). A long-​established statutory procedure permits suits against the government for patent infringement. See 28 USC § 1498, which permits a patentee to bring an action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture whenever the government infringes a valid patent). Some commentators believe that cases such as Zoltek imply that patents are not subject to Fifth Amendment takings claims. See Davida H Isaacs, “Not All Property Is Created Equal: Why Modern Courts Resist Applying the Takings Clause to Patents, and Why They Are Right to Do So” (2007) 15 Geo Mason L Rev 1. But the Supreme Court, and most scholars, hold that they are. See Horne v Dept. of Agriculture (n 90); Gregory Dolin & Irina D. Manta, “Taking Patents” (2016) 73 Wash & Lee L Rev 719, 775–​780; Adam Mossoff, “Patents as Constitutional Private Property: The Historical Protection of Patents Under the Takings Clause” (2007) 87 B U L Rev 689. 90  Roth v Pritikin, 710 F2d 934, 939 (2d Cir 1983) (“An interest in a copyright is a property right protected by the due process and just compensation clauses of the Constitution”). See also Coll. Sav. Bank v Fla. Prepaid Postsecondary Educ. Expense Bd., 527 US 666, 673 (1999) (State statute, Fourteenth Amendment takings claim, sovereign immunity issues: “The Lanham Act may well contain provisions that protect constitutionally cognizable property interests—​notably, its provisions dealing with infringement of trademarks, which are the ‘property’ of the owner because he can exclude others from using them.”); see also at 675 (noting that the “assets of a business (including its good will) unquestionably are property” within the scope of the Fourteenth Amendment’s Due Process Clause); Fla. Prepaid Postsecondary Educ. Expense Bd. v Coll. Sav. Bank, 527 US 627, 642 (1999) (Fourteenth Amendment claim under state statute: determining that a patent is property protected by the Fourteenth Amendment’s Due Process Clause). 91  28 USC § 1498.

What Kind of Rights Are Intellectual Property Rights?    93 economically beneficial uses,”92 as compared to the baseline situation before the new regulation was enacted. When a new IP-​related change is analyzed carefully, it will very rarely meet this test—​despite the status of IP as property. This is so for several reasons. First of all, IP doctrines change over time and always have. So, the standard of “substantial similarity” in copyright has evolved and adapted to changing technologies and situations. So, too, with fair use. Standards of patentability shift over time too; nonobviousness under 35 U.S.C. § 103 may be applied more liberally or more strictly at various times. In trademark, the “likelihood of confusion” and nominal (or non-​trademark) use doctrines have undergone various twists and turns. The simple point here is that, barring a very radical change (such as a nonobviousness standard that makes almost all inventions unpatentable, for example), the baseline expectation in IP law is one of doctrinal evolution and variation. A sudden shift in doctrine would have to all but obviate an entire field of IP law or an entire class of protected things for it to be rightly called a regulatory taking. As the Supreme Court recognized long ago, in the context of land ownership, “Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.”93 Second, IP rights are acquired for a number of different reasons and are frequently held in large portfolios. This makes it very difficult to argue that a particular doctrinal shift has eliminated “all economically beneficial uses” of an IP right. Two IP scholars have argued, for example, that the new administrative patent validity proceedings created by the America Invents Act of 2011 have so increased the risk of patent invalidity that they may constitute a taking of property under the Fifth Amendment.94 Although the authors make some cogent points, it seems to me their argument ultimately fails. This is because many patents are neither licensed nor asserted in litigation. In fact, many companies hold patents that do not cover any of the products they actually sell. These patents might have been obtained with the thought that a technology would follow a certain path, and it ended up developing in a different direction. Or the patents may cover features of a competitor’s product, and are held in reserve, to be used only as bargaining chips if the competitor sues the patent holder, or enters a market especially important to the competitor. In these cases, the extra invalidity risk posed by the new AIA procedures does not affect the economic value very much—​not enough for it to be said that the patents post-​AIA have been deprived of “all economically beneficial uses.”95

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Lucas v South Carolina Coastal Council, 505 US 1003, 1019 (1992) (finding that land use regulation was a taking because it deprived the landowner of “all economically beneficial use” (emphasis in original)). 93 Quoting Pennsylvania Coal Co. v Mahon, 260 US 393, 413 (1922). 94  Dolin and Manta, “Taking Patents.” 95  Even for patents that are challenged in an AIA proceeding and invalidated, it would be very difficult to say that the invalidity risk added by the AIA was so substantial that it amounted to a taking of these patents. First, AIA proceedings very often challenge fewer than all the claims in a patent; if even one claim survives, the patent still has some value. Second, because patents have always been subject to administrative challenge (in certain less robust but still widely used pre-​AIA proceedings), as well as invalidity challenge in district courts (as a defense to patent infringement lawsuits), it is very difficult to say in a particular case whether the AIA procedures radically shifted the baseline risk. There is always some risk of invalidity; patent defenses are very numerous and quite strict (eg, very obscure, even unknowable, prior art can torpedo a patent). It is just extremely difficult to conclude with certain that a new procedure increased the risk so much that it amounts to a taking.

94   Robert P. Merges

5. Conclusion The title poses a question: what kind of rights are IP rights? The answer has two parts: 1. They are property rights. 2. But they are limited property rights. To summarize: They are property rights because they give individual entities control over discrete assets. They map rights onto the owners of individual assets. They give individual owners a small dollop of state power in the form of the right to invoke the power of the state to prevent others from impinging on an owner’s exclusive domain. Because of the debate over IP, it has been necessary for me to talk at length about what IP rights are not. The primary point here has been this: They are not absolute, and calling them “property” and “rights” does not indicate otherwise. They are shot through with limitations and exceptions—​none of which deprive them of the label “property.” They also, in the main, require affirmative steps to secure but again this does not make them any less property, nor any less a right. In describing what type of rights IP rights are, I employed the terminology and concepts that originated with Wesley Newcomb Hohfeld. I worked through a number of objections to my thesis, including that the unavailability of automatic injunctions renders them something less than true property. I  considered also another prominent critique, which holds that IP is more akin to government regulation. Not so, as I showed at length; regulatory approval is not required for most IP-​related deployments and transactions. IP is a field of private law, and not primarily a study in direct government regulation. I tried also to show that “rights talk” about IP does not inexorably point to absolutist views. Next, I considered some problems that arise from calling IP property. One is the issue of group ownership, which is a problem I expect to become more prominent as technology makes possible widespread and far-​flung groups of contributors that are not united in a legally recognized organization or firm. The answer here is to preserve the benefits of property by inventing techniques for identifying focal point representatives of groups, to protect group rights and provide a way for third parties to bargain with the group. The second issue is takings. In my view, the fact that IP is property does not dictate an absolutist position; I am especially wary of extending the “regulatory takings” concepts to the fast-​changing landscape of IP rules and doctrines. Throughout I  emphasize two highly consistent thoughts:  IP rights are real rights; but they are limited rights. They dominate some interests, but not all, and they are subject to restrictions and limitations that third parties sometimes also hold as rights. To classify them as property rights is not to cut off debate over a host of issues. It is instead to clarify starting points for a host of future debates. In the immortal words of Maurice Sendak: Let the wild rumpus start!96

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Maurice Sendak, Where the Wild Things Are (Harper and Row 1963).

Chapter 4

In tellectual Prope rt y as a Pu blic I nt e re st Mechani sm Rebecca Tushnet * 1. Introduction What, if anything, distinguishes the public interest from private interests, or from a purely utilitarian calculus in which the policy that maximizes overall utility is the best one? We might say that the public interest is the aggregated interest of the people who might be affected by some private action, as opposed to the concentrated interest of that private actor. The public is not necessarily undifferentiated, but it is diffuse. Perhaps more positively, we could think of the public interest as in some way public-​regarding, or as Jack Balkin has suggested,1 related to civics, education, shared culture, or shared governance. Tracking this general orientation, the concept of public interest in intellectual property (IP) theory generally seems to mean a thumb on the scales against private control in certain arguments about good policy, as well as concern for distribution and not just for maximizing utility. This chapter explores the ways that IP regimes, both in their coverage and in their limits, have been conceptualized as having promotion of the public interest as their primary goal, rather than benefiting private actors or balancing private interests against the public interest. It first examines copyright and patent law and then turns to trademark law, with a few excursions into related doctrines. For each body of law, it discusses how public interest arguments are used first to justify both the initial allocation of rights to a private party, and then to justify the scope of the rights and their limits. Of course, this characterization does not describe every element of IP rights in every nation, but it regularly provides much of the justificatory framework for IP, and thus deserves sustained attention. *   Rebecca Tushnet has asserted her moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1   J Balkin, “Digital Speech and Democratic Culture: A Theory of Freedom of Expression for the Information Society” (2004) 79 NYU L Rev 1.

96   Rebecca Tushnet

2.  Copyright and Patent: Public Interest in Private Rights The most common conception of IP as a public interest mechanism focuses on copyright and patents, and sees authors and inventors as people to be rewarded instrumentally, in order to get them to generate the public benefit of their creations. As Lord Macaulay said when opposing a copyright term extension, when the term was much shorter than it is presently: The principle of copyright is this. It is a tax on readers for the purpose of giving a bounty to writers. The tax is an exceedingly bad one; it is a tax on one of the most innocent and most salutary of human pleasures; and never let us forget that a tax on innocent pleasures is a premium on vicious pleasures. I admit, however, the necessity of giving a bounty to genius and learning. In order to give such a bounty, I willingly submit to even this severe and burdensome tax. Nay, I am ready to increase the tax, if it can be shown that by so doing I should proportionally increase the bounty.2

The United States (US) has likewise regularly endorsed the concept of a quid pro quo: ­exclusive rights in return for sharing creations and inventions. The asserted justification in the US Constitution for copyright and patent systems is “to promote the progress of science and useful arts,” rather than to protect natural rights or property rights. James Madison, writing in defense of the Copyright and Patent Clauses in the proposed Constitution, claimed that “the public good fully coincides  . . .  with the claims of individuals.”3 The European constitutional tradition sees IP rights as property rights, but also therefore as rights that encourage creation and invention for the greater public good—​unlike personal or real property, or even other intangible rights such as stocks, copyright, and patents are not perpetual, indicating that the European approach likewise recognizes that the “property” label needs tweaking when it comes to IP rights. The dominant understanding of the resulting harmony between public and private interests holds that copyright and patents are monopolies that are neither unlimited nor primarily designed to provide a special private benefit. Rather, the limited grant is a means by which an important public purpose may be achieved. It is intended to motivate the creative activity of authors and inventors by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired.4

2  L Macaulay and L Trevelyan, Speeches: The Complete Writings of Lord Macaulay (Kessinger Publishing 2004) 279. 3  J Madison, The Federalist No 43 (Buccaneer Books 1992) 217. 4  Sony Corp of America v Universal City Studios, Inc 464 US 417, 429 (1984); see also Eldred v Ashcroft 537 US 186, 212, n 18 (copyright supplies the economic incentive for creativity, “recognizing that the incentive to profit from the exploitation of copyrights will redound to the public benefit by resulting in the proliferation of knowledge”) (citing American Geophysical Union v Texaco Inc 802 FSupp 1, 27 (District Court (Southern District of New York) 1992), affirmed 60 F3d 913 (2nd Circuit 1994)).

Intellectual Property as a Public Interest Mechanism    97 Creators and owners are distinctly secondary in this justification: the means rather than the end of the rights they hold.5 Thus, exclusive rights mediate the trade-off between incentives and access, not only in duration but also in other aspects of scope.6 More baldly, Justice Souter quoted Johnson in explaining why fair use needed to protect creators of commercial transformative works, not just creators of noncommercial works: “No man but a blockhead ever wrote, except for money.”7 (It is less often noted that this quotation comes from Boswell’s Life of Johnson, immediately followed by Boswell’s commentary, “Numerous instances to refute this will occur to all who are versed in the history of literature.”) As the constitutional linkage of the patent and copyright regimes indicates, similar reasoning is common in patent law (which generally focuses less on natural rights or moral rights as an alternative justification). The public’s interest is supported by patent protection, which allows successful innovation to receive monetary rewards;8 the patent right is balanced by the public interest in access.9 Whereas European conceptions of authors’ rights diverge from the incentive model of American copyright, in patent law there is no such contest over justifications: Patents everywhere are economic rights—​nothing more. This discussion has assumed that the patents at issue are utility patents, designed to encourage technical innovation. While utility patents encourage inventions, US design patents encourage innovation in design so that the objects that surround us are more pleasurable to see. Although their focus is completely different—​design patents must not be merely functional in a utilitarian sense—​the incentive/​access rationale remains securely in place, as it does for European design rights, which likewise protect the visual appearance of industrial or mass-​marketed designs, including fashion designs. 5  United States v Paramount Pictures 334 US 131, 158 (1948) (“The copyright law, like the patent statute, makes reward to the owner a secondary consideration”); see also Fox Film Corp v Doyal 286 US 123, 127 (1932) (“The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors”). 6  Twentieth Century Music Corp v Aiken 422 US 151, 156 (1975) (“The limited scope of the copyright holder’s statutory monopoly, like the limited copyright duration required by the Constitution, reflects a balance of competing claims upon the public interest: Creative work is to be encouraged and rewarded, but private motivation must ultimately serve the cause of promoting broad public availability of literature, music, and the other arts”). 7  Campbell v Acuff-​Rose Music, Inc 510 US 569, 584 (1994) (“No man but a blockhead ever wrote, except for money”) (quoting S Johnson from GB Hill (ed), Boswell’s Life of Johnson 19 (OUP 1934)). 8  Kewanee Oil Co v Bicron Corp 416 US 470, 480 (1974) (observing that patent laws promote “progress by offering a right of exclusion for a limited period as an incentive to inventors to risk the often enormous costs in terms of time, research, and development” and thus engender a “positive effect on society through the introduction of new products and processes of manufacture into the economy, and the emanations by way of increased employment and better lives for our citizens”); Mercoid Corp v Mid-​Continent Investment Co 320 US 661, 665 (1944) (“It is the public interest which is dominant in the patent system”); EI duPont de Nemours & Co v Polaroid Graphics Imaging, Inc 706 FSupp 1135, 1146 (District Court (District of Delaware) 1989) (“[I]‌f inventors cannot depend on their patents to exclude others, . . . research and development budgets in the science and technology based industries would shrink, resulting in the public no longer benefitting from the labors of these talented people”). 9  Graceway Pharmaceuticals LLC v Perrigo Co 722 FSupp 2d 566, 580 (District Court (District of New Jersey) 2010) (“The public interest is enhanced by enforcing valid patents: encouraging the development of new drugs through incentives connected to future profits from limited temporal monopolies. The public interest is also enhanced by competition: encouraging generic drugs to come onto the market the moment legal patent protection ends”).

98   Rebecca Tushnet Patent law is not the only source of protection for innovation. Rights with their origins in common law torts, rather than statutory grants of rights, are less likely to appeal purely to incentive rationales. For example, trade secrets provide another source of incentives for business innovations, especially for unpatentable inventions. Unlike patent law, however, trade secret law also appeals to a general standard of business morality and fair dealing. Arguably, the law of idea protection represents a similar stance towards non-​copyrightable ideas, which are generally free for use but may be shared under circumstances that justify payment to the person who communicated the idea to the person who used it. The law of contract, modified somewhat to deal with the ways in which creative ideas are commonly shared, provides the moral framework. The existence of these non-​monopoly regimes with their greater orientation towards just or moral behavior tends to highlight the ways in which patent and copyright systems more strongly disclaim interest in pure morality, as opposed to providing incentives to the market-​minded. The traditional incentive story is also consistent with the standard international narrative, in which “intellectual property” (often not broken down into its component rights) serves as a promoter of general economic development in countries with historically minimal IP protections and weak legal systems.10 An additional wrinkle for less-​developed countries is that, because wealthier countries have linked lowering trade barriers to greater IP protections,11 they may benefit in other areas of the public interest by granting increased private rights. Even if more restrictive IP laws primarily benefit large Western corporations, lowered tariffs may improve national welfare overall. Relatedly, nations such as China may seek international legitimacy and credit for developing the rule of law by touting their accomplishments in protecting foreigners’ IP.12 In sum, patents and copyright serve as the mechanical rabbits towards which we want our innovative and creative greyhounds to run.13 If their creations have market value, they are rewarded by the market, and society benefits from the new products and works now available to it. The implications of this conception of the justification for patent and copyright systems go well beyond Lord Macaulay’s willingness to keep adding rights if that kept adding productivity. The contrapositive is equally true: There is less need for IP rights where rights do not provide incentives to create. Easy examples include advertising and ordinary documents created in the course of business or private life, which do not depend on copyright as incentive for creation. More controversially, to the extent that even conventionally published works stem at least in significant part from the intrinsic motivations of their creators, there

10 

K Idris, Intellectual Property: A Power Tool for Economic Growth (WIPO 2003), 1. See ME Kaminski, “The Capture of International Intellectual Property Law Through the US Trade Regime” (2014) 87 Southern California L Rev 977. 12  See, eg, SJ Palmer, “An Identity Crisis: Regime Legitimacy and the Politics of Intellectual Property Rights in China” (2001) 8 Indiana Journal of Global Legal Studies 449; cf SD Valenzi, “Confederate Copyright: The Role of Nationalism in Defining a Copyright Regime” (manuscript on file with author) (explaining that the US Confederacy sought international legitimacy by protecting foreigners’ copyright, in contrast to the nationalist American regime). 13  Trade secrets and possibly the right of publicity serve similar functions for business information that has more value if it is kept secret and for celebrities, respectively. See discussion of the right of publicity, n 56. 11 

Intellectual Property as a Public Interest Mechanism    99 is less need for copyright’s incentives: The public can get lots of expression without paying for it.14 Relatedly, if we fully committed to an incentive theory, we should shift our incentive policies to reward publishers and other intermediaries that fund and develop long-​form works, on the theory that intermediaries are the rational reward-​maximizers who can afford to pick and choose between those artists committed to composing country and western songs and those artists committed to penning blockbuster science-​fiction dramedies (since most authors are not flexible enough to go in any direction the market demands).15 With creation-​happy authors providing expression in the wild and intermediaries cultivating the high-​value gardens behind legally enforced walls, we can maximize both blog posts and blockbuster movies.

3.  The Public Interest as Boundary: Scope and Limitations Both rights and limits on rights can be characterized as public-​serving: The rights incentivize creation or at least its commercialization; the limitations then protect freedom where other concerns are more important to the public, or where the incentive function isn’t significant enough to restrict others’ freedom.16 Copyright’s refusal to protect facts and ideas is an example of this deliberate boundary-​setting. As the Supreme Court wrote in Feist Publications v. Rural Telephone Service, although the freedom to copy facts and skip the hard work of unearthing them may seem “unfair,” this is not “some unforeseen byproduct of a statutory scheme,” but rather fundamental to copyright; freedom to use facts discovered by others is “the means by which copyright advances the progress of science and art.”17 The limited terms of copyright and patents provide another easy example. Eventually, the exclusive rights expire, which further enriches society at large both by providing fodder for new creations and by allowing producers to compete to offer the invention or the work at its marginal cost of production, thereby allowing consumers to capture more of the benefits of the creation. Because the marginal value to the owner of a very long patent or copyright term is functionally zero, the limited term should induce essentially the same amount of creativity from rational actors, and actors with hyperbolic discount rates—​that is, almost everybody—​ will react with even more indifference to a limited term. Other limits on rights also serve public functions. Assuming that fair uses are uses we want to occur because, as US copyright doctrine teaches, they too serve the goal of promoting progress, then they should be allowed, even when made for profit. Fair dealing in Europe and elsewhere similarly protects identified socially beneficial activities such as news 14 

S Breyer, “The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs” (1970) 84 Harvard L Rev 281. 15  See J Barnett, “Copyright Without Creators” (2013) 9 Review of Law & Economics 389; but see W Gordon, “The Core of Copyright: Authors, Not Publishers” (2014) 52 Houston L Rev 613. 16  See, eg, Medtronic, Inc v Mirowski Family Ventures, LLC 134 S Ct 843 (2014) (identifying a public interest in having patent monopolies kept within their legitimate scope). 17  Feist Publications, Inc v Rural Telephone Service Co, 499 US 340, 349–​350 (1991) (citations omitted).

100   Rebecca Tushnet reporting and parody. Likewise, a number of other exceptions, such as compulsory licensing for certain uses of music and for cable systems, fine-​tune the relationship between private actors in particular markets, where exclusive rights would not be worth their costs to others. Exceptions for libraries and educational uses, for example, identify highly socially valuable uses that improve citizens’ capacity to understand and engage with ideas, but the institutions involved cannot internalize those benefits through a market mechanism, and thus cannot afford to pay for their uses, at least on an individualized basis. In a number of countries, such eleemosynary uses do require remuneration to a general fund for authors, which can be supplied by tax revenue or payments for tuition, but the covered institutions need not expend resources on identifying authors or seeking permission, which may not be withheld. Thus, those countries reason, authors benefit without obstacles to socially productive uses. This reasoning, in which the public interest justification for rights also explains the limits of those rights, also operates in patent law. The ability of other producers to innovate around a patent arguably encourages further new inventions directed at achieving the same goal. Prohibitions on patenting certain types of inventions, or on enforcing them in particular circumstances (in medical emergencies; when surgical methods are used by doctors; when the patent would grant rights in a human) serve public policies that lawmakers consider more important than promoting innovation through rights exclusivity at the margin. Patent law seems increasingly concerned with certain patent types that have seemed disturbing in their social and economic implications, either because of actual litigation or imagined future cases: the most controversial include business methods, medical techniques, human genes, and human/​animal hybrids.18 Various administrative and interest groups have fought against this kind of calibration of rights. Exclusions can make administering a rights regime more complicated, and can also make the right seem less important, so copyright owners in particular have sought to ensure that copyright is a thick and even blanket wrapped around every work. For example, subject matter restrictions on copyright have been largely eliminated, so that there is no need to identify any public interest in their production in order to find copyrightability. Thus, pornography and advertising are copyrightable whether or not they need copyright’s incentives and whether or not they have net social value. The exclusions that remain are, however, still justified as public-​regarding, and the exclusions that seem most like interest group carve-​outs—​specifically, the exclusions that limit music copyright owners’ rights in order to preserve various others’ business models—​are the ones that seem most unfair and in need of revision. This idea of the public interest in limiting rights is pervasive, even outside the core copyright/​patent rights. Trade secret’s limitations are very much in line with patent’s conception of the public interest. The ability to reverse engineer and otherwise recreate trade secrets through any fair means serves a public interest in access, just as patent law’s disclosure requirement and term limits do. The public’s freedom to copy an object whose patent has expired, or which was unpatentable, is as much a part of the patent scheme as the exclusive rights of a patentee are, which is why the Supreme Court has held that states may not confer monopoly rights of their own outside the patent system.19 18 

See, eg, Patent Act, s 287(c), exempting medical professionals from patent remedies in many cases. Sears, Roebuck & Co v Stiffel Co 376 US 225 (1964); Compco Corp v Day-​Brite Lighting, Inc 376 US 234 (1964); Bonito Boats v Thunder Craft Boats 489 US 141 (1989). 19 

Intellectual Property as a Public Interest Mechanism    101 Constraints and expansions also come from outside the IP system. The concept of a general public interest has played a role in limiting international IP rights just as it has in expanding them. Historically, restrictions on recognizing the IP rights of foreigners have assisted countries in developing a domestic production industry by giving producers raw materials to copy. The US played the role of rogue for a long time, subsidizing its publishers by denying copyright to foreigners and then by protecting works only if they were physically published with the US. While this rule harmed American authors by forcing their works to compete with rights-​free British manuscripts, US publishers successfully defended their legal freedoms for two centuries.20 These limits were eventually reduced and finally abolished, and the US now routinely excoriates other countries for failing to provide sufficient protection for copyright, trademark, and patent rights—​evidencing a historical amnesia whose ironies have not gone unnoticed. Beyond the industrial development rationales used to limit IP protection in developing countries, the high-​protectionist views that controlled international policymaking for the last half-​century now face competition from a vision of access to knowledge as more important to public flourishing than IP rights are. Movements such as Creative Commons and Free Culture use even their names to lay claim to the concept of a public interest that pushes back against proprietary rights and restrictive licenses.21 Representatives of developing countries often argue that their citizens’ general interests are better served by broad exceptions and limitations on narrower IP rights, such as provisions allowing for compulsory licensing of important medications.22 These countries have sought a better balance between the costs and benefits of enhanced IP protections sought by trade representatives from wealthier countries as part of a broader development agenda.23 These protests have achieved some successes. The 2013 Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled was the first international treaty directed at imposing mandatory limits on national copyright laws in order to protect the interests of print-​disabled members of society. Nonetheless, international institutions remain less practiced at balancing authors’ private interests “with some nascent notion of a (global) public interest.”24 However, Abraham Drassinower has recently criticized incentive theories as completely empty because of their inability to justify the nature of IP rights. In his view, precisely because

20 

See generally R Spoo, Without Copyrights: Piracy, Publishing, and the Public Domain (OUP 2013). See generally G Krikorian and A Kapczynski (eds), Access to Knowledge in the Age of Intellectual Property (Zone Books 2010). 22  See, eg, Proposal by Argentina and Brazil for the Establishment of a Development Agenda for WIPO (WIPO 2004); WIPO, Proposal to Establish a Development Agenda for the World Intellectual Property Organization (WIPO): An Elaboration of Issues Raised in Document WO/​GA/​31/​ 11: Submission by the Group of Friends of Development IIM/​1/​4 Annex (WIPO 2005) ; . 23  RC Bird, “Defending Intellectual Property Rights in the BRIC Economies” (2006) 43 American Business LJ 317 (2006) (noting the argument that “developing nations were able to achieve their current development levels in part because they were unrestricted by intellectual property rules”). 24  C May and SK Sell, Intellectual Property Rights: A Critical History (Lynne Rienner Publishers 2005) 218. 21 

102   Rebecca Tushnet incentive theories posit a simple relation in which the law supplies an incentive and the creator supplies a product, they cannot justify copyright or patents as such.25 For example, they cannot explain why we would not provide copyright protection for ideas, systems, or processes, as surely we want more of these. If we could be certain that granting copyright for ideas would increase the generation of ideas, incentive theory suggests we ought to do so, as indicated by the famous quote of Lord Macaulay with which this chapter began. The number of rights that could be invented to incentivize intangible creations is potentially limitless. Incentive theory, indeed, is a notable contributor to the metastasis of the right of publicity in American law, despite the empirical dubiousness of the claims that celebrities need economic incentives in the form of control over all commercial uses of their identities. In IP, “if value, then right,” is unfortunately not only a realist criticism, but also a never-​ending threat.26

4.  Trademark and Related Rights: Public Interest Goes to Market It is perhaps in trademark law, and the related law of publicity rights, where the threat of never-​ending expansion has been realized most thoroughly. Trademark law currently offers an appealing justification for its existence: The enforcement of rights against confusing uses of trademarks protects the public against confusion. As the reasoning goes, the public has “an interest in not being deceived . . . [and] being assured that the mark it associates with a product is not attached to goods of unknown origin and quality.”27 A person who seeks a Diet Coke should not be diverted to an alternative she considers inferior, nor should she be tricked into trying a new product, thinking that it is a familiar friend—​the trickery disrespects her autonomy even if she suffers no physical or monetary loss.

4.1 Trademark as Protector of the Public Interest As Graeme Dinwoodie and Dev Saif Gangee write, “the protection of the consumer is a universal justification for trade mark law as a whole.”28 Accordingly, in trademark cases “a court must expand the more frequent, one-​on-​one, contest-​between two sides, approach. A third party, the consuming public, is present and its interests are paramount.”29 This prioritization

25 

A Drassinower, What’s Wrong with Copying? (Harvard UP 2015). RC Dreyfuss, “Expressive Genericity: Trademarks as Language in the Pepsi Generation” (2014) 65 Notre Dame L Rev 397. Dreyfuss picks up on the Legal Realist critiques of legal reasoning that assumed that all value should be allocated to private owners, and that such claimed rights preexisted the legal system that created a right to exclude. 27  New York City Triathlon v NYC Triathlon Club 704 FSupp 2d 305, 344 (District Court (Southern District of New York) 2010). 28  G Dinwoodie and DS Gangjee, “The Image of the Consumer in European Trade Mark Law” in D Leczykiewicz and S Weatherill (eds), The Image of the “Consumer” in EU Law: Legislation, Free Movement and Competition Law (Hart Publishing 2015) 339, 345. 29  James Burrough Ltd v Sign of the Beefeater Inc 540 F2d 266, 274 (7th Circuit 1976). 26 

Intellectual Property as a Public Interest Mechanism    103 of the public interest is not universal: An Australian court has said that the existence of separate consumer protection laws directed at misleading conduct means that trademark law now tilts more towards protection of trademark owners. But the protection of consumers remains an objective in Australia, as it is in every trademark system.30 As with copyright, there is an “everyone wins” story about trademark as well, even if producer protection is the most direct goal. By protecting trademarks, we give producers incentives to maintain consistent quality so that consumers will be able to use trademarks as a shortcut to finding the products they desire, which itself benefits the public.31 If the system works as posited, then consumers and producers benefit, if not in equal measure then at least in a way that trades off. Furthermore, to the extent that a trademark has value in itself because of the aura created by the trademark owner’s advertising, such as the glamour associated with Louis Vuitton and Hermès, or even the feeling of community associated with Coca-​Cola, there are competing accounts of how that emotional resonance affects the public interest. One position, now rarely held in its strongest form, is that this aura is a detriment, deceiving people into spending money on name brands when generics are just as good and inducing them to invest too much in consumerism generally.32 When we accept advertisers’ claims that we will be unattractive, smelly, and socially isolated without consuming the latest pills, potions, and perfumes, we fall prey to this manipulation. We substitute purchases of goods, and the struggle to earn enough to buy more and more of them, for the experiences and human relationships that in fact are the key to the good life. This concern was historically associated with distrust of monopolies. Without strict limits that make trademark law a kind of false advertising law, trademarks become, like copyright, a tax leveled on the public that is justifiable only insofar as it produces benefits for the commonweal. An alternative account treats the warm fuzzy feeling of liking a brand as a form of utility like any other. If consumers value feeling like members of an exclusive club, or enjoy a sense of harmony with the world when they drink a Coca-​Cola, then there’s a public interest in having those emotions generated.33 But, as critics respond, even if that’s true, there remains the question of whether the right to generate those emotions should be controlled by a single party, or available for competitors to use. If consumers really do value having Batman on the 30 

Registrar of Trade Marks v Woolworths (1999) 45 IPR 411, 413 (“The policy of the 1995 Act can be said to some extent to have shifted the balance of the objectives of trade mark law more towards the identification and protection of commercial products and services than the protection of consumers, although the latter remains an objective. In respect of deceptive trade marks the interests of consumers are also protected by comprehensive federal and state laws relating to conduct which is misleading or deceptive or likely to mislead or deceive”). 31  See, eg, Bi-​Rite Enterprises, Inc v Button Master 555 FSupp 1188, 1193 (District Court (Southern District of New York) 1983) (“Section 43(a), and unfair competition law in general, function primarily to protect consumers from confusion as to the source of goods in the market. . . . By imposing sanctions on parties that pass off their goods and services as those of other established producers, consumers gain confidence in the source and quality of the goods they purchase, and producers reap benefits from investments they make in establishing their unique identity among the purchasing public”) (citations omitted). 32  RS Brown Jr, “Advertising and the Public Interest: Legal Protection of Trade Symbols” (1948) 57 Yale LJ 1165; cf N Klein, No Logo (Picador USA 2009). 33  WM Landes and RA Posner, “An Economic Analysis of Copyright Law” (1989) 18 Journal of Legal Studies 325.

104   Rebecca Tushnet box of their breakfast cereal, as Jessica Litman argues, then competition is usually the route by which we get consumers what they want in the cheapest, most efficient way possible.34 The trademark registration system adds another complication; registration sits on top of common law protection for trademarks or against unfair competition. Registration serves a separate public interest function: It allows businesses to understand what terms are free for them to use, and provides them with notice so that they can make good choices for their own trademarks. Trademark registries thus have a different function than copyright registries (now permissive rather than required for protection in the US, as elsewhere) and patent registries (where examination is more substantive). This notice function can create conflicts with other trademark interests, as when a jurisdiction decides to suppress a use because it conflicts with a registered mark even in the absence of actual confusion, but the reinforcement of the value of the register may seem worth the costs as long as competitors have sufficient alternatives for their own marks. Trademark registration as an incentive for production is apparently regarded as a more persuasive claim in Europe, where the rationale is that trademark and the registration system incentivize product differentiation and “innovation,” which is often defined (circularly) as the number of IP rights sought or as “new products,” defined as products using different marks.35 By this measure, a firm innovates when it produces two identical formulations of a headache medicine, but labels one as being for the treatment of migraines and sells it in a package suggesting extra strength.36 The studies generally recognize that even an association between registrations and such innovation is insufficient to prove the incentive theory. The causation may well be that innovation in nonfunctional features leads to registration of a new trademark, rather than that the availability of registration leads to innovation. Still, the incentive claim can readily be deployed in policy arguments for strengthening trademark rights.37 (Relatedly, people who support protection for geographic indications often argue that they give producers incentives to develop geographically concentrated specialties, so that a locally distinctive character will emerge whose benefits can be appropriated only by local producers.) Although the underlying theoretical premises are rarely examined, the trademark-​as-​ incentive idea must be either that differentiation itself increases consumer welfare because of the benefits of choice, or that differentiation in non-​functional features generates its own benefits, similar to the way that popular brands have an aura that doesn’t depend on objectively provable aspects of the underlying product. Interestingly, much current research suggests that choice in itself doesn’t benefit consumers, who may instead be overwhelmed, 34 

J Litman, “Breakfast with Batman” (1999) 108 Yale LJ 17. See P Schautschick and C Greenhalgh, “Empirical Studies of Trade Marks: The Existing Economic Literature” (2013) Melbourne Institute Working Paper No 25/​13 (reviewing different attempts to use empirical trademark data to measure “innovation,” usually defined as product differentiation). 36 See Boris v Wal-​Mart Stores, Inc 35 FSupp 1163 (District Court (California) 2014) (finding that selling two identical formulations, one more expensive and differently labeled for the treatment of migraines, did not constitute false advertising). 37  See, eg, D Crass and FSchwiebacher, “Do Trademarks Diminish the Substitutability of Products in Innovative Knowledge-​Intensive Services?” (2013) ZEW–​Centre for European Economic Research Discussion Paper No 13-​061 (finding that firms that use trademark law extensively report that their products aren’t easily substituted for others’, and therefore concluding that “trademarks are an important supplementary mechanism to protect innovations in knowledge-​intensive services”). 35 

Intellectual Property as a Public Interest Mechanism    105 and may even end up more dissatisfied because of the numerous options they had to forego.38 It is not clear why the public interest should consider as a benefit the mere proliferation of brand names, or even product shapes, on shelves. To the extent that trademarks and product differentiation across nonfunctional features make products harder to compare, they may, as Ralph Sharp Brown suggests, disadvantage consumers in attempting to secure the functional features they desire at the lowest price.39

4.2 Consumer Protection—​from What? The resulting trademark system speaks a lot about consumers, but it does not necessarily benefit them in the ways it promises. American courts say that, rather than existing primarily to protect merchants, trademark infringement law “exists primarily to protect consumers, not only the holder of the trademark.”40 This was not always the case—​at the very least, protection of the trademark owner used to be more significant than the public’s right to avoid confusion, as indicated by older cases refusing to find infringement where there was public confusion but no loss of sales.41 Currently, however, the consumer is at least rhetorically the crucial justification for protection: When Congress added a new provision to the 1946 Lanham Act to deal with domain name “cybersquatting,” or non-​trademark owners using domain names confusingly similar to existing marks, the law was designated the Anticybersquatting Consumer Protection Act. In this vision, trademark owners are

38 

B Schwartz, Paradox of Choice (Harper Perennial 2004). Brown (n 32). One peson’s incentive is another’s disincentive. Compare, eg, V Millot, “Trade Mark Strategies and Innovative Activities” (2012) (arguing that trademarks limit spillovers from introducing a beneficial new product, allowing the firm to appropriate more consumer surplus) with BM Frischmann and Mark A Lemley, “Spillovers” (2007) 107 Columbia L Rev 257 (arguing that spillovers regularly benefit the public, and that increased private appropriation after a certain point is likely to harm consumer welfare). 40  Sorensen v WD-​40 Co 2015 WL 3634612 (7th Circuit 2015); see also James Burrough Ltd v Sign of Beefeater, Inc 540 F2d 266, 276 (2nd Circuit 1976) (“The trademark laws exist not to ‘protect’ trademarks, but . . . to protect the consuming public from confusion, concomitantly protecting the trademark owner’s right to a non-​confused public”); Corporation of Gonzaga University v. Pendleton Enterprises, LLC 55 FSupp 3d 1319 (District Court (East District of Washington) 2014) (“the primary purpose of the trademark laws is to protect the public from confusion”); Jose Armando Bermudez & Co v Bermudez International 2000 WL 1225792 at 5 (“The US trademark laws are primarily consumer protection laws, designed to shield domestic consumers from fraud and deception in the marketing and sales of products”). But see Boston Duck Tours, LP v Super Duck Tours, LLC 531 F3d 1, 14 (1st Circuit 2008) (“the primary justifications for protecting trademarks” are “to aid competition and lower consumers’ search costs”). 41  See M McKenna and W McGeveran, “Confusion Isn’t Everything” (2013) Scholarly Works Paper 1061; see also Coty v Prestonettes, Inc 285 F501 (2nd Circuit 1922) (“[W]‌hile the purpose of the Trade-​ Mark Acts is twofold, the primary purpose is the protection of the trade-​mark owner’s business. If the sole purpose of the act be the protection of the public, that certainly cannot constitute a sound reason for affording a private remedy. Fraud upon the public cannot be the ground of private action or suit”), reversed on other grounds 264 US 359 (1924); Old Charter Distillery Co v Continental Distilling Corp 174 FSupp 312, 326 (District Court (Delaware) 1959) (“Although the test for determining consumer deception is couched in terms of likelihood of public confusion, the public interest is not the primary rationale behind trademark protection”). 39 

106   Rebecca Tushnet designated enforcers of the public’s interest, and therefore, their rights claims are in everyone’s benefit. Unfortunately, this conception of trademark law ignores the classical principal-​ agent problem: The trademark owner’s interests are not perfectly aligned with the public’s interests. The trademark owner is likely to over-​enforce and under-​enforce in ways that serve its own interests at the expense of the public. Over-​enforcement occurs when the trademark owner brings anticompetitive actions against socially beneficial uses that may nonetheless cause the trademark owner to lose sales through comparative advertising or through providing an alternate source of a desirable product feature. It also occurs when the trademark owner seeks to suppress criticism of its products, or even to suppress speech that merely uses the trademark as a cultural reference, such as a film titled “Dairy Queens” about Midwestern beauty pageants. Under-​enforcement occurs for similar reasons of misaligned interests: Trademark owners will not take sufficient care to avoid confusing consumers through actions of their own, such as changing a product’s formulation.42 The use of public interest arguments to justify ever-​greater expansions of private rights is understandable, and often enough not even disingenuous: We are all tempted by the thought that our interests, properly understood, suffice to justify the policies that benefit us. However, that doesn’t make trademark owners’ claims correct. One problem appears when the concept of “protecting the public from deception” is examined. That formulation is fatally incomplete: protection from deception about what? The harm from being confused into making a purchase one otherwise would not have made is pretty clear, though anti-​regulation and anti-​ lawsuit/​pro-​freedom of speech forces have increasingly challenged that assumption where the harm is not physical or financial, as when one buys cheap clothing falsely labeled as “union made.” Despite these jabs, false advertising law generally finds false advertising when, and only when, a misrepresentation is material to a purchasing decision: A consumer is harmed when she is misled, which means that she is led to change her behavior by the misrepresentation.43 But trademark law has branched off from general false advertising and unfair competition law, and one casualty of this divergence has been materiality. As a result, many trademark cases now accept “confusion in the air”—​consumer confusion about the precise relationship, if any, between the trademark owner and the accused trademark user, even if consumers do not care and would not change their behavior with respect to the accused product, or punish the trademark owner for any failing in the accused product, as the result of their beliefs.44 As a result, cases finding liability for what seem like expressive, immaterial uses of a mark can invoke the consumer protection rationale to justify suppressing otherwise protected speech, for example, the use of recognizable imitations of the Dallas Cowboys cheerleaders’ uniform in a sexually explicit work.45 42 

LR Bradford, “Trademark Law and Agency Costs” (2015) 55 IDEA 193. R Tushnet, “Running the Gamut from A to B: Federal Trademark and False Advertising Law” (2010) 159 University of Pennsylvania L Rev 1305; North American Medical Corp v Axiom Worldwide, Inc 522 F3d 1211, 1226 (11th Circuit 2008). 44  See Tushnet (ibid); M Lemley, “The Modern Lanham Act and Death of Common Sense” (1999) 108 Yale LJ 1687. 45  Dallas Cowboys Cheerleaders, Inc v Pussycat Cinema, Ltd 604 F2d 200, 205 n 9 (2nd Circuit 1979) (“Because the primary purpose of the trademark laws is to protect the public from confusion, it would be somewhat anomalous to hold that the confusing use of another’s trademark is ‘fair use’ ”) (citation omitted). 43 

Intellectual Property as a Public Interest Mechanism    107 Worse, these expanding concepts of confusion are self-​reinforcing. First, trademark owners’ increasing control makes it more plausible that consumers would be confused about remaining unauthorized uses. Second, in the absence of materiality, consumers are more likely to be uncertain—​even confused—​because they simply do not care enough to figure out the true relationship between the user and the trademark owner; it’s not worth their time to resolve their confusion or uncertainty.46 Cases continue to tell us that the law protects trademarks in order to protect the public, but the “from what?” question has disappeared, to the great detriment of the law.47

4.3 Dilution and the Right of Publicity: Further from the Public Interest In addition, the presence of a cause of action for trademark dilution further removes trademark from its concerns for consumers, shifting to protecting trademark owners’ interests in exclusive control over the marks—​and the meaning of those marks. Dilution refers either to “blurring,” which is some sort of diminution in a mark’s distinctiveness so that it becomes less recognizable as a mark, or to “tarnishment,” which means some sort of harm to the mark’s reputation, for example, by association with sex toys. Dilution is a relatively new cause of action, which is consistent with the general expansion of trademark law over the past century. It seeks to guard the trademark owner’s investment in its reputation against unfair commercial interference. Whereas infringement targets “interference with the source signaling function” of trademarks, dilution protects owners “from an appropriation of or free riding on” the investment they’ve made in promoting their marks.48 As the influential Judge Kozinski wrote, “dilution law protects only the distinctiveness of the mark, which is inherently less weighty than the dual interest of protecting trademark owners and avoiding harm to consumers that is at the heart of every trademark claim.”49 Barton Beebe has written critically of trademark’s evolution into a sumptuary code, so that trademarks are used to define and enforce economic hierarchies.50 Whether this is in the public interest is obviously highly contestable: How important is it that a person know her place? Dilution, with its focus on protecting the aura of famous and exclusive brands, values fixity rather than the play of meaning, which affects both the trademarks themselves and the people who might use them. However, precisely because of the greater appeal of consumer protection and the public interest compared to the private interests of powerful trademark owners in retaining their power, trademark dilution has also sometimes been explained in public-​regarding terms.

46 

See Tushnet (n 43); R Tushnet, “Running the Gamut from A to B: Federal Trademark and False Advertising Law” (2011) 159 University of Pennsylvania L Rev 1305. 47  See, eg, American Dairy Queen Corp v New Line Products, Inc 35 FSupp 2d 727, 732 (District Court (Minnesota) 1998). 48  IP Lund Trading ApS v Kohler Co 163 F3d 27, 50 (1st Circuit 1998). 49  Mattel, Inc v MCA Records, Inc 296 F3d 894, 905 (9th Circuit 2002). 50  B Beebe, “Intellectual Property Law and the Sumptuary Code” (2010) 123 Harvard L Rev 809.

108   Rebecca Tushnet Specifically, dilution apologists have sought to explain why non-​confusing uses might cause consumers to spend more time trying to recognize the original brand, and thus might cause their “search costs” to rise. This interference with search appears to be “noise” in the market leading to less efficiency all around. These stories are rarely very convincing, as I have written elsewhere: The evidence that a strong mark can be weakened by a non-​confusing use comes from highly artificial tests, whereas context easily distinguishes and reinforces strong marks in the real world.51 Laura Bradford disagrees with some of my evaluations of the empirical evidence, but agrees that normatively, dilution does not fare well because the emotional mechanism by which dilution causes harm is the same mechanism by which brands gain value. If the emotional resonance of powerful brands is legitimately obtained, even though it doesn’t rely on rationality or conscious thought, then the emotional resonance of diluting uses should be equally legitimate.52 One can also attempt a defense of dilution in incentive terms, similar to the incentive theories that predominate in explaining copyright and patent laws.53 This kind of reasoning is rare, however, because it’s not clear why trademark owners need any more incentives to create powerful and distinctive marks. Protection against confusion allows them to reap plenty of rewards from their success. Incentive theories are more commonly advanced for dilution’s cousin, the right of publicity,54 though even there the justification is dubious, given fame’s many other rewards.55 The separate right of publicity is like dilution in that it rewards private success by allowing celebrities to control commercial uses of their images, even in the absence of confusion. The right allowed a game show hostess to prevent an advertiser from showing a blonde-​wigged robot next to a game board in an ad, and enabled actors to prevent the copyright owner of the TV show in which they appeared from licensing the show’s characters for use in a bar that looked like the show’s setting.56 This is not a tort of invasion of privacy, but rather a right against misappropriation. It protects the allocation of rewards as between private actors—​ the celebrity whose talents or luck have given her identity value, the commercial entity that wishes to profit from referencing that identity, and sometimes the owner of the copyright in the work in which the celebrity appears.

51  R Tushnet, “Gone in Sixty Milliseconds: Trademark Law and Cognitive Science” (2008) 86 Texas L Rev 507. 52  LR Bradford, “Emotion, Dilution, and the Trademark Consumer” (2008) 23 Berkeley Technology LJ 1227. 53  Panavision Intl, LP v Toeppen 945 FSupp 1296, 1301 (District Court (Central District of California 1996) (“Whereas traditional trademark law sought primarily to protect consumers, dilution laws place more emphasis on protecting the investment of the trademark owners. Still, dilution laws do promote consumer welfare: if trademarks are valuable to consumers, then protecting businesses’ investments in trademarks will benefit consumers by increasing the willingness of businesses to invest in the creation of recognized marks”). 54  See, eg, Zacchini v Scripps-​Howard 433 US 562, 576 (1977). 55 See Cardtoons, LC v Major League Baseball Players Association 95 F3d 959 (10th Circuit 1996); M Madow, “Private Ownership of Public Image: Popular Culture and Publicity Rights” (1993) 81 California L Rev 127. 56  White v Samsung Electronics America, Inc 9731 F2d 1395 (9th Circuit 1992); Wendt v Host International 125 F3d 806 (9th Circuit 1997).

Intellectual Property as a Public Interest Mechanism    109

4.4 Limitations: What is “the” Public Interest? As the previous sections indicate, trademark’s public interest justification is both central and contested, and is always competing with the interests of individual private actors. Trademark limitations, even more than trademark justifications, challenge us to evaluate what is in the public interest. The considerations involved are more multifaceted and multidirectional than in copyright and patent law, where we are generally trying to maximize creativity and innovation.57 Even if we say we want to maximize consumer protection with trademark law, there are a number of elements to consumer protection—​consumers benefit from truthful information, but also from competition and lower prices. Moreover, the public is not a unitary group with unitary reactions to uses of marks. Some groups are more sophisticated than others; some are more interested in price, while others seek quality; some prefer thinking deeply about purchases, while others prefer to be able to make decisions more quickly. This variance is highly relevant to trademark policy, and not just because the target group may affect when confusion is likely. In addition, because of these different competencies and preferences, measures taken to protect one group may well hurt another. Keeping a similar but not identical product off the market to protect consumers who are easily confused limits the options of the consumers who would have been able to tell the difference. There may be a group of consumers who have strong emotional connections to a brand and feel personally harmed when it is mocked or used in political ads; dilution law, discussed above, can protect their interests at the expense of others’ free speech.58 We may try to encourage consumers to invest an optimal amount of effort in protecting themselves, especially given the fact that enforcement will never be perfect (there will always be counterfeiters, for example).59 But as long as consumers remain heterogenous, which is to say as long as consumers remain people, we will face inevitably normative judgments about whose deception is worth whose greater utility. And where consumer preferences directly conflict, as with dilution, we will likewise have to make normative decisions about which to value. The multiplicity of consumer interests makes it important to protect non-​confusing uses that the trademark owner dislikes simply because they represent competition for consumer dollars. Too-​robust trademark rights can make litigation a weapon to deter beneficial competition, as US cases limiting the protection of product designs and encouraging comparative advertising have noted.60 European legal systems, with broader concepts of unfair competition, may, by contrast, disapprove of comparative advertising, on the theory that even truthfully disparaging a competitor is inappropriate or that the advertiser may achieve an undue boost by relying on the reputation of the brand to which it truthfully compares

57 

Glynn Lunney has attempted to sketch out what a full efficiency analysis would look like for copyright, where we would also be interested in whether protecting copyright too strongly was diverting resources from investments that would overall be more productive, but most scholarship stays within the local maximization framework. GS Lunney, “Copyright’s Mercantilist Turn” (2014) 42 Florida State University L Rev 95. 58  Hershey Co v Friends of Steve Hershey 33 FSupp 3d 588 (District Court (Maryland) 2014). 59  M Grynberg, “Trademark Litigation as Consumer Conflict” (2008) 83 NYU L Rev 60. 60  Wal-​Mart Store, Inc v Samara Brothers, Inc 529 US 205 (2000) (product design); Conopco Inc v May Department Stores Co 46 F3d 1556 (Federal Circuit 1994) (comparative advertising).

110   Rebecca Tushnet itself. Disagreement on the scope of legitimate comparative advertising reflects historical European distrust of advertisers who attract attention by making comparisons with a better-​ known rival, and who will be inherently biased in favor of themselves in any comparison.61 In recent years, however, the Court of Justice of the European Union has approved at least limited use of trademarks by competitors in placing ads via search engines, recognizing that some comparative advertising is in the public interest.62 The public interest in competition shows up in many other ways in trademark law. The law refuses to protect generic terms as marks, even if they have “de facto secondary meaning” in that the public associates them with one producer—​perhaps because the producer had patent protection that eventually expired.63 Competitors’ entitlement to explain to consumers what they have a right to sell, in addition to the consumer benefits of competition in the market for the product, outweighs the risk of confusion. Fortunately, if producers understand this rule, they will have powerful incentives to create a trademark distinct from the generic term for their products. First-​comers will simply have to invent two different terms: one for their brand and one to dedicate to the public, as the TiVo company did with the generic term “digital video recorder” for its product. If producers respond appropriately, we won’t even have to tolerate much linguistic confusion in order to protect competition. The concept of functionality plays a similar role in limiting one party’s control over product features. Likewise, the law does not protect descriptive terms as marks in the absence of secondary meaning, while it allows immediate appropriation of inherently distinctive marks because there’s less competitive need for freedom to use such terms. In the United States, the defense of descriptive fair use further allows competitors to use descriptive terms in their non-​ trademark sense, providing additional room for competing uses. Although confusion is not in the public interest, the Supreme Court has held that it must sometimes be tolerated given competitors’ needs to describe themselves truthfully.64 Because the public interest is not measurable by one single metric, sometimes the goal of avoiding confusion must give way, although the Supreme Court attempted to further balance the public interests at stake by holding that the degree of confusion is relevant to fairness. In addition, the requirement that a defendant’s use be use “as a mark” implicates issues of the public interest, often as a kind of hybrid of free speech and competition concerns. A use of a trademark or symbol that is not a use “as a mark” doesn’t interfere with the functions we want trademark law to serve, even if the trademark owner would prefer to control all such uses. While “trademark use” remains a requirement for liability in most jurisdictions, it is largely defunct in the US as a separate element of infringement or dilution. However, the concept apparently can’t be extirpated entirely, as US courts deploy “use as a mark” to get around difficult conceptual problems where the doctrinally appropriate answer would otherwise conflict with the obviously correct result. For example, in Christian Louboutin SA v Yves Saint Laurent America Holdings, Inc (YSL), the Second Circuit ruled that Louboutin could have a valid mark in the red soles of its shoes, but only where the upper is a contrasting 61  T Bodewig, “The Regulation of Comparative Advertising in the European Union” (1994) 9 Tulane European & Civil Law Forum 179. 62  Florists’ Transworld Delivery, Inc v Fleurop-​Interflora 261 FSupp 2d 837 (District Court (Eastern Michigan District) 2003). 63  Kellogg v National Biscuit Co 305 US 111 (1938). 64  KP Permanent Make-​Up, Inc v Lasting Impression I, Inc 543 US 111 (2004).

Intellectual Property as a Public Interest Mechanism    111 color.65 As a result, Yves Saint Laurent (YSL) was free to make its all-​red shoe, without any consideration of potential confusion. Though the Court didn’t explain its reasoning, the fact that YSL had good reasons to make an all-​red shoe from the perspective of aesthetics, and that these reasons would make sense even in a counterfactual world in which Louboutin didn’t exist, provided a justification for essentially holding that YSL simply wasn’t using the red sole as a mark for its own shoes, and thus couldn’t cause actionable confusion. The public interest in diverse fashion was therefore protected without expensive and uncertain wrangling over the possible empirical evidence of likely confusion among consumers. Freedom of speech has played a greater role than “trademark use” in the United States cases as a constraint on trademark rights. Free speech defenses arise largely in response to trademark owners’ relatively recent willingness to sue people making expressive uses, from fictional software products to songs about Barbie to video games with parodic recreations of bad neighborhoods and the strip joints therein.66 Although there was a period in which trademark owners succeeded in suppressing movie titles, parody ads, and entire books,67 strong First Amendment protections for use of trademarks in expressive works are now well-​ established, even if that protective case law doesn’t always deter overreaching by trademark owners.68 Whether or not the various speech-​protective defenses work well in practice, US law formally recognizes a strong public interest in speaking freely, including making allusive and aesthetic uses of trademarks as part of the modern life world, as well as in simply referring to trademarked goods and services. While other nations lack the United States’ hypertrophic First Amendment, they too often recognize certain free speech interests in using trademarks in social criticism.69

5.  Public Interest as False Promise: Criticisms and Revisions IP is routinely subject to criticism as failing to serve the public interest. The most common frame is to accept the regime’s goal but to argue that current configurations either fail to provide the proper incentives, or provide the incentives at the expense of third parties’ fundamental rights. Current debates about “patent trolls” who use bad patents to extort money from productive sectors of the economy, which acts as an overall drag on 65 

Christian Louboutin SA v Yves Saint Laurent America Holdings, Inc 696 F3d 306 (2nd Circuit 2012). Fortres Grand Corp v Warner Bros Entertainment, Inc 763 F3d 696 (7th Circuit 2014) (movie company sued over fictional software product used by Catwoman); Mattel, Inc v MCA Records, Inc 296 F3d 894 (9th Circuit 2002); ESS Entertainment 2000, Inc v Rock Star Videos, Inc 547 F3d 1095 (9th Circuit 2008). 67  Dr Seuss Enterprises, LP v Penguin Books USA, Inc 109 F3d 1394 (9th Circuit 1997); Anheuser-​Busch, Inc v Balducci Publications 28 F3d 769 (8th Circuit 1994); American Dairy Queen Corporation v New Line Productions 35 FSupp 2d 727 (District Court (Minnesota) 1998). 68  M Grynberg, “Things are Worse than We Think: Trademark Defenses in a ‘Formalist’ Age” (2009) 24 Berkeley Technology LJ 24. 69  Case 389526 Nadia Plesner Joensen v Louis Vuitton Malletier SA (2011) KG ZA 11–294; Laugh It Off Promotions CC v South African Breweries International (Finance) BV t/​a Sabmark International (CCT 42/​ 04) (2005). 66 

112   Rebecca Tushnet innovation and production, are an example of the first kind of public interest argument. Current debates in jurisdictions that recognize the inviolability of human dignity and the integrity of the person about the patenting of inventions that incorporate human embryonic and other biological materials are examples of the second kind. Another common villain is interest group capture, brilliantly explained in the US copyright context by Jessica Litman in her book Digital Copyright. Certain industries and institutions are directly and profoundly affected by copyright law, and they were the ones Congress invited to sit down and write the statutory provisions. Because the public in general wasn’t represented in these negotiations, the end result was very broad rights that serve the interests of major copyright owners (not necessarily authors) accompanied by specific exceptions for groups that were concentrated enough and organized enough to secure representation for themselves. Even without ongoing interest-​group capture, the accretion of industry-​specific rules over time has created a mare’s nest of rights and restrictions that have very little to do with overall social benefit. An easy example comes from music licensing, which is a morass in Europe because of problems with cross-​border transactions and nation-​specific collecting societies, and a different morass in the US because the entities that ­administer the reproduction and performance rights, and the entities that control musical compositions and sound recordings, have often-​conflicting institutional interests. Almost everyone would be better off with a simpler scheme, but the few institutions that would likely lose out—​including the organizations set up to license specific slices of music rights—​have enough power to prevent any change, at least in the US. These arguments over failures related to interest-​group capture and lock-​in are perfectly intelligible within the incentives/​access framework because they offer different evidence and policy arguments in service of the same goal: more creative stuff, and more access to that creative stuff overall. If the public interest is empirically tricky at best, and unrepresented at worst, what are the alternatives? In copyright, the answer is well-​established: authors’ rights—​a particular class of private interests that deserves special protection because of the dignity of authorship itself. Jane Ginsburg is the most prominent proponent of this viewpoint in the US, though author-​centric accounts are more common in Europe, where EU legislation emphasizes the importance of copyright and related rights in “safeguarding the independence and dignity of artistic creators and performers.”70 From a far more restrictionist perspective, Abraham Drassinower has offered a different rights-​based account of copyright, which is focused on the idea of the author as a participant in a conversation, whose rights and obligations to respect other speakers are mutually constituting.71 In practice, rough intuitions about free riding seem to play an important role in copyright infringement judgments, despite the doctrine’s formal disavowal of such considerations.72

70  Directive 2001/​29/​EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society [2011] OJ L167/​10 recital 11. See also, eg, JC Ginsburg, “European Copyright Code–​Back to First Principles (with Some Additional Detail)” (2011) 58 Journal of the Copyright Society of the USA 265; JC Ginsburg, “The Concept of Authorship in Comparative Copyright Law” (2003) 52 DePaul L Rev 1063. 71  Drassinower (n 25); see also P Goldstein, “Copyright” (1992) 55 Law and Contemporary Problems 79. 72  S Balganesh, I Manta and T Wilkinson-​Ryan, “Judging Similarity” (2014) 100 Iowa L Rev 267.

Intellectual Property as a Public Interest Mechanism    113 Outside copyright, IP has fewer competing justifications. Deontological accounts are rare in patent law, even though creative practices and processes may in fact be more similar across the patent and copyright fields than we often think and thus the inventor may, in the abstract, deserve the same kind of dignity as the author.73 Jeremy Sheff has argued that morality ought to play more of a role in trademark law—​and that, in fact, morality does drive many trademark doctrines. If a sense of right and wrong, fair and unfair, in commercial dealings, actually drives key trademark principles, it should be no surprise that utilitarian accounts of the law are often confusing, contradictory, and misleading.74 Recent scholarship relatedly explores trademark law’s definition of the “average consumer” who perceives marks. The concept of the average consumer presently either mashes together normative and empirical concepts in unprincipled ways or, in a kinder telling, attempts to balance the two approaches.75 Another way of approaching the public interest is to try to expand the circle of concern: Who is the relevant public? Does it include people in other countries? Does it include people of other traditions related to creativity, specifically aboriginal or Native? Should it focus, in Rawlsian maxi-​min fashion, on those who are most disadvantaged? In this line of scholarship, Madhavi Sunder has connected IP to accounts of human flourishing, and Sonia Katyal (with sometimes coauthor Eduardo Peñalver) has explored the role of resistance to IP law as something that is itself productive of valuable social change under appropriate circumstances.76 These scholars’ work is highly attentive to the gendered and racialized patterns perpetuated by current IP systems. These feminist and subaltern criticisms challenge us to ask whose interests are left out of the “public” interest, and question the unity and justness of that public. Sunder in particular suggests that progressive criticisms of IP rights expansions leave out groups for whom new forms of IP, such as geographic indications, might, if properly implemented, offer new paths to empowerment.77 Other scholars have focused on particular rights or groups, or the intersection between them, illuminating how rules about authorship, for example, have disempowered women and men of color while allowing white men to claim a disproportionate share of copyright’s rewards.78 It’s worth remembering that the concept of “public” is highly fraught in gendered (as well as classed and racialized) terms—​women are too often excluded from the “public” or attacked when they appear in “public.”79 These distributional issues, too, are part of the public interest. 73 

J Fromer, “A Psychology of Intellectual Property” (2010) 104 Northwestern University L Rev 1441. JN Sheff, “Marks, Morals, and Markets” (2013) 65 Stanford L Rev 761. 75  A Bartow, “Likelihood of Confusion” (2004) 41 San Diego L Rev 721 (criticizing the current formulations); Dinwoodie and Gangjee (n 28) (arguing that a balance is at least possible). 76  M Sunder, “IP3” (2006) 59 Stanford L Rev; SK Katyal, “Semiotic Disobedience” (2006) 84 Washington University L Rev 489; SK Katyal & EM Peñalver, Property Outlaws: How Squatters, Pirates, and Protesters Improve the Law of Ownership (Yale UP 2007). 77  For an excellent discussion of the complicated issues involved in the encounter between non-​ Western cultures and current and proposed forms of intellectual property, see MF Brown, Who Owns Native Culture? (Harvard UP 2004). 78  CJ Craig, “Digital Locks and the Fate of Fair Dealing in Canada: In Pursuit of ‘Prescriptive Parallelism’” (2010) 13 Journal of World Intellectual Property 503; KJ Greene, “Intellectual Property at the Intersection of Race and Gender: Or Lady Sings the Blues” (2008) 16 American University Journal of Gender, Social Policy & the Law 365. 79  R Tushnet, “My Fair Ladies: Sex, Gender, and Fair Use in Copyright” (2007) 15 American University Journal of Gender, Social Policy & the Law 273, 291. 74 

114   Rebecca Tushnet Julie Cohen has focused on the relations of government and private corporate power and surveillance that shape us, and has argued for seeing IP rules as one component of the world we encounter. The works we experience help constitute us and then we make our own new works. Cohen maintains that we should replace abstract invocations of “incentives” with thick descriptions of how creativity works. She suggests that this would entail greater respect for the felicitous encounters that come from the play of incompletely controlled people and artifacts. The result would be laws that further human flourishing, rather than laws that accept the false dream of complete control and predictability through technology and law.80 Some of the thick description for which Cohen advocates has begun to be carried out. Scholars such as Laura Murray, Tina Piper, Kirsty Roberton, and Jessica Silbey have investigated creative practices on the ground, and their interactions with law or with creators’ concepts of the law—​the latter of which sometimes bear only a glancing resemblance to the law on the books.81 These qualitative empirical studies do not find that the incentive function of IP law—​its promise of money for successful creation—​plays a substantial direct role in the work of individual creators, although they don’t investigate the large-​scale investments in distribution that might behave more consistently with classic predictions. Among other insights, Silbey finds that creators are often indifferent to which right they invoke. Instead, they regularly speak of their rights in moral terms, and they attempt to use copyright and trademark laws for purposes distinct from their purported incentives, for example, to ensure attribution. Silbey’s results raise the question of whether there is a reason to distinguish rights when creators’ norms do not—​the answer is likely to be yes, but it is notable that creators (and the public) persist in thinking of IP rights differently than many theorists do. This practical indifference to forms of IP may also contribute to rights stacking, a phenomenon explored by Mark McKenna, and considered by Estelle Derclaye in her chapter on overlapping rights later in this volume.82 Trademark owners who encounter a policy-​based limit on trademark protection may turn to copyright, or design patents, instead, and the same is often true of patent owners who invoke trademark law, and so on. The core problem with rights stacking is that the public interest may be disserved if a use deliberately left free to further the policy of one type of right is suppressed by assertion of a different type of right. While rights are not usually mutually exclusive in US law, some cases have recognized this problem, such as Dastar, which shut down an attempt to use trademark law to replace copyright where the underlying claim was based on the defendant’s copying of an uncopyrighted work.83 Similarly, the Supreme Court has held that trademark law must

80 

JE Cohen, Configuring the Networked Self: Law, Code, and the Play of Everyday Practice (Yale UP 2012). 81  LJ Murray, ST Piper and K Robertson, Putting Intellectual Property in its Place: Rights Discourses, Creative Labor, and the Everyday (OUP 2014); J Silbey, The Eureka Myth: Creators, Innovators, and Everyday Intellectual Property (Stanford UP 2014). 82  M McKenna, “An Alternate Approach to Channeling?” (2010) 51 William & Mary L Rev 873. 83  Dastar Corp v Twentieth Century Fox Film Corp 539 US 23, 33 (2003) (“The right to copy, and to copy without attribution, once a copyright has expired, like ‘the right to make [an article whose patent has expired]—​including the right to make it in precisely the shape it carried when patented—​passes

Intellectual Property as a Public Interest Mechanism    115 not protect functional product features in order to preserve the realm of utility patents—​ including the realm of unpatentable or patent-​expired product features.84 The concept of the public interest in the proper functioning of each IP scheme may be the only way we have to explain what each field requires to be left for free copying as the raw material for further innovations or creations, as well as what each field allows to be proprietized.

6. Conclusion Public interest arguments appeal in part because we don’t have much empirical evidence about the effects of differing levels of IP law. What evidence we have tends to be ambiguous and context-​dependent.85 Whereas appeals to efficiency and incentives are often more theoretical than rigorously based in fact, rules based on a coherent conception of the public interest may make sense as a recognition of the imperfection of empirical analysis. Broad principles—​both in rights and in limitations to those rights—​can be more honest guides than detailed rules based ultimately on best guesses. What Oren Bracha and Talha Syed have written with respect to the difficulty of highly situation-​customized copyright is true of other aspects of IP as well: Calibrating copyright on the basis of the trade-​offs involved along the various supramarginal and inframarginal parameters requires predicting a host of complex effects in multiple markets and then attempting to fine-​tune doctrines that are not always well-​suited to the task. . . .. [S]‌uch complexity should give pause when it comes to embracing the theory’s prescriptive relevance, and should motivate further reflection on second-​best, comparative considerations regarding what kinds of necessarily rough judgments or imprecise proxies are most plausible to distill and implement as the theory’s takehome lessons.86

Regardless of whether our concerns are primarily distributional or for maximizing output, this necessary roughness cautions in favor of the use of broader principles in making laws. In the absence of a omniscient utility-​measuring entity, it is useful to identify the various ways in which people are affected by the expansion of rights or of limitations on those rights.

to the public’ ” (citing Sears, Roebuck & Co v Stiffel Co 376 US 225, 30 (1964)). In fact, the film at issue in Dastar turned out to be protected by copyright because it was a derivative work of a book whose copyright had been renewed, but the trademark aspect of the case was decided at the Supreme Court on the theory that the film was in the public domain. 84 

TrafFix Devices, Inc v Marketing Displays, Inc 532 US 23 (2001). See, eg, F Machlup, An Economic Review of the Patent System (Study No 15 of Subcommittee on Patents Trademark and Copyright of the Senate Committee on the Judiciary, 85th Congress 2d Session 1958) 80 (“If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it”); see also M Boldrin and DK Levine, “The Case Against Patents” (2013) 27 Journal of Economic Perspectives 7 (“[I]‌t is fair to say that the sector-​level, national, and cross-​national evidence fail to provide any clear empirical link from patents to innovation or to productivity”). 86  O Bracha and T Syed, “Beyond the Incentive–​Access Paradigm? Product Differentiation & Copyright Revisited” (2014) 92 Texas L Rev 1841, 1882. 85 

116   Rebecca Tushnet When we go beyond incentives, we can see how IP rights function in a broader social and political context—​which implicates individuals not only as potential creators or consumers, but also as citizens. Margaret Thatcher famously claimed that there was “no such thing as society,” only individuals.87 One could argue that, likewise, there is no such thing as the public interest, only an aggregation of private interests. IP law, however, has rarely accepted that position, and instead usually strives to promote specific public interests. Whether there is a single overriding aim (as with patents and copyright) or a more diffuse set of goals (as with trademarks), the policy questions remain difficult. It is not enough to identify the public interest(s). We must also ask how those interests can best be served—​and the devil is in the details.

87  Interview with Margaret Thatcher in London, UK (23 September 1987) .

Chapter 5

In tellectual Prope rt y and Hum an Ri g h ts Mapping an Evolving and Contested Relationship Laurence R. Helfer * 1. Introduction Contestations over the relationship between human rights and intellectual property (IP) are occurring within and among numerous international organizations, government agencies, courts, and civil society groups at the global, regional, and national levels. Reflecting the increased awareness of these debates, a rich literature analyzes these developments and offers different normative frameworks for how the two fields ought to intersect. As a result of these activities and this scholarly attention, a map of the legal and political terrain demarcating the interface of human rights and IP looks profoundly different today than it did only a decade ago. This chapter provides an overview of the contested and evolving relationship between these two legal regimes.1 It is intended to be accessible to readers who are new to these debates and to provide a useful resource for those who are deeply involved in shaping or monitoring these developments. In addition to identifying key treaty texts, legal doctrines, and court cases, the chapter analyzes the legal and political strategies that states and non-​ state actors deployed in multiple international and domestic venues to advance competing conceptions of the relationship between human rights and IP. It also reviews the scholarly and advocacy writings published by academics and civil society groups to advance these competing conceptions. *  Laurence R Helfer has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  For a definition of international regimes, an analysis of their components, and an application to international IP law, see Laurence R Helfer “Regime Shifting: The TRIPS Agreement and New Dynamics of International Intellectual Property Lawmaking” (2004) 29 Yale Journal of International Law 1, 10–​18.

118   Laurence R. Helfer The chapter divides the intersection of the IP and human rights regimes into four periods or phases. Prior to about the mid-​1990s, human rights and IP existed as separate and distinct legal and policy domains, a separation that only partly explains the lack of scholarly interest in the intersection of the two regimes. The second period, roughly between the mid-​ 1990s and 2000, involved a rapid expansion of IP protection rules in multilateral, regional, and bilateral treaties and in national legislation. Sections 2 and 3 provide a succinct overview of these two time periods and the literatures analyzing their respective legal and policy developments, which have been extensively discussed elsewhere.2 Less well known to IP scholars, and thus more extensively analyzed in Sections 4 and 5, are two subsequent periods. During the decade from approximately 2000 to 2010, the most salient events were backlashes against the expansion of the IP regime by developing countries and civil society groups, together with a clear understanding of how that regime could undermine human rights. The period from 2010 onward has seen efforts to codify ceilings on IP protection in multilateral treaties and, separately, attempts by litigants to invoke human rights arguments offensively and defensively in litigation involving IP before national and regional courts and international arbitral tribunals. A brief conclusion (Section 6) identifies future trends and contestations visible on the horizon.

2.  Distinct IP and Human Rights Regimes (Prior to the Mid-​1990s) 2.1 Legal Norms, Institutions, and Actor Strategies The IP and human rights regimes are the product of a gradual accretion of international and domestic laws and institutions. The terrain of international IP was the first to emerge. Initially the subject of national copyright and patent laws and bilateral treaties among European nations, the regime’s modern contours are anchored by two multilateral agreements adopted at the end of the nineteenth century—​the Paris Convention on industrial property, and the Berne Convention on literary and artistic works. In contrast, the human rights regime did not emerge until after the Second World War, with the founding of the United Nations (UN), the adoption of the Universal Declaration of Human Rights (UDHR), and the drafting of two key global treaties—​the International Covenant on Civil and Political Rights (ICCPR), and the International Covenant on Economic, Social and Cultural Rights (ICESCR). The evolution of the two regimes also differed. International human rights law developed over half a century through the relatively rapid codification and expansion of rights and freedoms and the creation of new international institutions. Beginning in the late 1940s, states began to adopt dozens of nonbinding declarations and legally binding treaties to protect a growing array of civil, political, economic, social, and cultural rights. National constitutions, legislation, and judicial decisions incorporated many of these rights, adding a layer of domestic legal protection. Human rights groups were keenly aware, however, that 2  See, eg, Laurence R Helfer and Graeme W Austin, Human Rights and Intellectual Property: Mapping the Global Interface (Cambridge University Press 2011).

Intellectual Property and Human Rights    119 states are often unwilling or unable to police their own conduct. They thus advocated for creating international courts and review bodies to monitor whether governments were, in fact, respecting these rights. Not surprisingly, many states were reluctant to submit themselves to external scrutiny and resisted proposals to create a global human rights court or centralized monitoring mechanism. Instead, the international human rights institutions were created in a piecemeal fashion, which resulted in a dizzying array of global and regional courts, commissions, committees, and investigatory procedures. Within the UN alone, the number of review and monitoring mechanisms is staggering. It includes the Human Rights Council (which, prior to 2006, was known as the Commission on Human Rights); the Council’s Advisory Committee (until 2006, the Sub-​ Commission on the Promotion and Protection of Human Rights), the Office of the High Commissioner for Human Rights, scores of special rapporteurs and working groups, and nearly a dozen treaty bodies charged with monitoring specific human rights conventions. The evolution of the international IP regime differed in several respects. For more than a century after the adoption of the Berne and Paris Conventions, IP norms advanced through gradual and modest expansions of protected subject matters and exclusive rights. States negotiated these expansions at diplomatic conferences that concluded with the adoption of treaty amendments. These amendments augmented the scope and reach of the conventions, but they also gave governments considerable discretion to decide how best to transpose their international requirements into their respective domestic legal systems.3 In the 1960s, responsibility for these and other multilateral IP conventions was delegated to the World Intellectual Property Organization (WIPO), a specialized UN agency established to “promot[e]‌creative intellectual activity and facilitat[e] the transfer of technology . . . to developing countries in order to accelerate economic, social and cultural development,”4 and to “promote the protection of intellectual property throughout the world.”5 WIPO officials achieved these arguably disparate goals by administering IP treaties, providing technical assistance to domestic IP administrative agencies, and hosting multilateral conferences. For most of its first two decades, these tasks were widely viewed as technical and ministerial activities with little relevance to other areas of international governance. Beginning in the mid-​1980s, however, industrialized nations and their content and innovation industries began a campaign to strengthen the protection of IP worldwide, especially in developing countries. Their efforts unfolded principally in two venues. At the national level, these industries lobbied the United States (US) and the European Community (EC) to threaten or impose unilateral trade sanctions against countries with weak IP protection. Globally, the US and EC opposed efforts by developing states in WIPO to roll back or dilute provisions of the Berne and Paris Conventions. The economic coercion inherent in the first strategy engendered, at best, grudging acceptance or even outright resistance to stronger IP protection standards in many developing countries. The contestations of the second strategy politicized WIPO, resulting in a deadlock that precluded the adoption of revisions to either convention. 3 

See the chapter by Sam Ricketson on the international IP system, this volume. Agreement Between the UN and the World Intellectual Property Organization, 17 December 1974, art 1. 5  Convention Establishing the World Intellectual Property Organization, 14 July 1967, art 3(i). 4 

120   Laurence R. Helfer In sum, until the mid-​1990s, human rights and IP existed as distinct legal domains. But they shared important characteristics: Each was comprised of international legal norms and institutions that were generally modest and unobtrusive. Each country could decide whether or not to ratify the key multilateral conventions in each regime. In addition, those states that did ratify could plausibly argue that the treaties did not impose onerous legal obligations, nor did they establish robust international adjudication or monitoring mechanisms to identify potential violations. As a result of this normative and institutional landscape, every nation enjoyed broad discretion to determine which national laws and policies best served its domestic welfare goals.

2.2 Scholarship: Explaining the Absence of Cross-​Regime Engagement The normative and institutional separation of the two regimes helps to explain the dearth of writings by scholars or advocacy groups analyzing their relationship. This silence is nevertheless something of a mystery, given that two foundational human rights instruments—​the UDHR and the ICESCR—​protect the “moral and material interests” of authors, inventors, and other creators,6 while also recognizing the public’s right “to enjoy the benefits of scientific progress and its applications.”7 What might account for this lack of engagement? One plausible answer is that actors were looking inward and focused on building the core norms and institutions of each regime. During the second half of the twentieth century, a pressing concern for human rights advocates was elaborating and codifying legal norms and creating new international monitoring mechanisms. In the IP regime, in contrast, the central focus was on gradually expanding protection through multilateral treaty revisions that were then transposed to the national and local levels. The states and non-​state actors in each regime thus did not view the activities of their counterparts as helpful or harmful to these endeavors or as threatening their respective spheres of influence. This conclusion is bolstered by the lack of textual engagement in key legal instruments. In the human rights regime, the treaty articles on creators’ rights and public access quoted above were aptly described as among “the most neglected set of . . . provisions” in any human rights treaty.8 The absence of extra-​regime textual references is even more pronounced in

6 

UDHR, art 27(2) (“Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he [or she] is the author.”); ICESCR, art 15(1)(c) (recognizing the right of everyone “to benefit from the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he [or she] is the author”). 7  UDHR, art 27(1) (“Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits.”); ICESCR, art 15(1)(b) (recognizing “the right of everyone . . . to enjoy the benefits of scientific progress and its applications”). 8  Audrey R Chapman, “A Human Rights Perspective on Intellectual Property, Scientific Progress, and Access to the Benefits of Science” in Intellectual Property and Human Rights: A Panel Discussion to Commemorate the 50th Anniversary of the Universal Declaration of Human Rights 127, 129 (Geneva

Intellectual Property and Human Rights    121 international IP law. No mention of human rights appears in the Paris or Berne Conventions or in the more recently adopted IP treaties discussed later in this chapter. To be sure, these international agreements refer to the protections granted to authors, inventors, and firms as “rights.” But the principal justification for these rights lies not so much in deontological claims about inalienable liberty as in economic and instrumental welfare benefits that flow from protecting IP products across national borders. A third explanation for the lack of engagement is that the actors in each regime speak very different languages. IP advocates and scholars apply the analytical tools of utilitarianism and welfare economics to evaluate the trade-offs between providing incentives to create and innovate while encouraging public access to works protected by IP rights. Human rights advocates and commentators, in contrast, seek to delineate the negative and positive duties of states to respect and promote the fundamental freedoms of all individuals. Seen from this perspective, to label something as a “human right” implies a rhetoric of absolutes and unconditional legal entitlements that is ill-​suited to revising IP policy in response to new technologies and changing economic conditions.9 Compounding these differences, the stakeholders in each regime interacted infrequently, if at all, prior to the mid-​1990s and thus had little opportunity to engage with their differing conceptual approaches.

3.  The Rapid Expansion of the International IP Regime (Mid-​1990s–​2 000) 3.1 Legal Norms, Institutions, and Actor Strategies By the early 1990s, the generally successful strategy of using threats of unilateral trade sanctions to leverage stronger IP protection in developing countries, and the concomitant failure of multilateral negotiations in WIPO, led the US and EC to conclude that they could not satisfy industry demands for more robust IP protection by revising the conventions within that organization’s purview. Instead, these actors made IP protection a mandatory component of the Uruguay Round of trade negotiations to establish a new World Trade Organization (WTO). These efforts resulted, in 1994, in the adoption of the Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS).10 As is now well known, TRIPS revolutionized international IP law. It enhanced the substantive rules of pre-​existing conventions and incorporated them into a single omnibus treaty. As a condition of joining the WTO, every nation—​including many developing countries that had never joined the Berne or Paris Conventions or that only weakly supported the

9 November 1998) [WIPO Panel Discussion], (accessed 10 August 2017). 9  See Rochelle Dreyfuss, “Patents and Human Rights: Where is the Paradox?” in Willem Groscheide (ed), Intellectual Property and Human Rights: A Paradox (Edward Elgar Publishing 2009), 72–​96. 10  Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS), 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, Legal Instruments—​ Results of the Uruguay Round, 33 ILM 1125 (1994).

122   Laurence R. Helfer protection of IP—​was required to accept TRIPS and to participate in a WTO dispute settlement system that included the power to impose trade sanctions against treaty violators.11 Over the next several years, industrialized nations continued their campaign by pressuring developing countries to enter into “TRIPS Plus” regional and bilateral agreements. The label “TRIPS Plus” indicates that these treaties incorporate IP protection rules more stringent than those found in TRIPS, require developing countries to join other multilateral IP agreements, or create their own dispute resolution mechanisms, such as the investor-​state dispute settlement under bilateral investment treaties.12 The momentous changes wrought by TRIPS and TRIPS Plus treaties did not, however, eclipse WIPO as a forum for IP issues. To the contrary; an informal division of labor developed between the two international organizations, with the WTO emphasizing enforcement and dispute settlement and WIPO focusing on creating new legal norms, administering existing treaties, and providing technical assistance to developing countries. This bimodal institutional structure facilitated a further expansion of the international IP regime via new multilateral agreements—​such as the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, the Patent Law Treaty, and the Marrakesh Treaty (discussed in Section 5.1.1)—​and a profusion of soft-​law instruments promulgated by WIPO standing committees on copyright and related rights, patents, and trademarks, industrial designs and geographical indications. These events also substantially narrowed the policy freedom that governments had previously enjoyed. No longer could states pick and choose which IP conventions to ratify, since accepting TRIPS or TRIPS-​Plus treaties amounted to a de facto commitment to the requirements of many of these conventions, whether or not states were formally parties. Nor could a government accept TRIPS in principle and then ignore it in practice, since the WTO dispute settlement mechanisms and the prospect of trade sanctions made such shirking a far more costly strategy. By the century’s end, therefore, the cumulative effect of these developments was a rapid and pronounced expansion of the international IP regime. It thus appeared that the US, EC, and other industrialized countries and their IP industries had succeeded in their campaign for a global expansion of the international IP regime. Yet contrary to the predictions of some commentators, this expansion did not engender a consensus in favor of stronger IP protection. Instead, it fostered a growing conviction—​one shared by many developing country governments, civil society groups, and human rights advocates—​that TRIPS and its progeny were coerced international agreements that should be resisted, rather than embraced.13

11 Helfer, Regime Shifting (n 1), at 23.

12  Genetic Resources Action International (GRAIN), “TRIPs-​plus” through the back door: How bilateral treaties impose much stronger rules for IPRs on life than the WTO (July 2001) (accessed 10 August 2017). 13  Inge Govaere and Paul Demaret, “The TRIPs Agreement: A Response to Global Regulatory Competition or an Exercise in Global Regulatory Coercion?” in Daniel C Esty and Damien Geradin (eds), Regulatory Competition and Economic Integration: Comparative Perspectives (Oxford University Press 2001); Donald P Harris, “Carrying a Good Joke Too Far: TRIPS and Treaties of Adhesion” (2006) 27 University of Pennsylvania Journal of International Economic Law 681.

Intellectual Property and Human Rights    123

3.2 Scholarship: Identifying Public Interest Values in International Intellectual Property Law The late 1990s saw several strands of academic and advocacy writing relevant to the intersection of IP and human rights. These publications shared a common feature—​they sought to identify public interest values embedded in the new generation of IP treaties. These publications engaged in little cross-​regime analysis, such as, by identifying specific human rights that could be undermined by overly expansive IP protection. Instead, they sought to push back in various ways on the assumption that if some IP protection is good, more is necessarily better. The counter-​narrative advanced in these writings also emphasized the distinctive economic and development needs of poor nations and of marginalized indigenous communities in all countries. One group of writings reflected a concerted effort by academics to identify the flexibilities in TRIPS and post-​TRIPS treaties, explain their vital role in the IP regime, and suggest how international dispute settlement panels should interpret and apply these provisions to particular controversies. The archetype of this literature, a 1997 symposium on Intellectual Property Law in the International Marketplace, included articles by a dream team of international IP scholars.14 The symposium’s principal focus was to frame the TRIPS Agreement and the WIPO Copyright Treaty as minimum standards agreements that give considerable discretion to governments to tailor IP rights to local conditions and to achieve other salutary social objectives. Neil Netanel’s contribution to the symposium, however, argued that the “international law regarding freedom of expression might militate toward a more balanced approach to interpreting TRIPS, one in which TRIPS’s copyright provisions would properly be construed to allow Member States considerable leeway in carving out public interest limitations to copyright owner prerogatives.”15 Other influential works of this period advanced similar arguments. These include Ruth Okediji’s analysis of the relationship between IP and the right to development and her subsequent proposal for an international fair use doctrine,16 Rob Howse’s critique of a WTO panel decision interpreting TRIPS’ patent provisions as insufficiently attentive to international

14 

See, eg, Rochelle Cooper Dreyfuss and Andreas F Lowenfeld, “Two Achievements of the Uruguay Round: Putting TRIPS and Dispute Settlement Together” (1997) 37 Virginia Journal of International Law 275; JH Reichman, “Enforcing the Enforcement Procedures of the TRIPS Agreement” (1997) 37 Virginia Journal of International Law 335; Pamela Samuelson, “The U.S. Digital Agenda at WIPO” (1997) 37 Virginia Journal of International Law 369; Neil W Netanel, “Next Round: The Impact of the WIPO Copyright Treaty on TRIPS Dispute Settlement” (1997), 37 Virginia Journal of International Law 441. 15  Netanel (n 14) at 446. Netanel further developed this argument in a subsequent article. See Neil Weinstock Netanel, “Asserting Copyright’s Democratic Principles in the Global Arena” (1998) 51 Vanderbuilt Law Review 217, 223, 296 (arguing that a “democratic entitlement”—​defined as “a set of international law norms concerning democratic governance, political participation, and individual autonomy” that is grounded in international human rights law—​“imposes limits on the proprietary control of information and expression”). 16  Ruth L Okediji, “Toward an International Fair Use Doctrine” (2000) 39 Columbia Journal of Transnational Law 75; Ruth L Gana (now Okediji), “The Myth of Development, The Progress of Rights: Human Rights to Intellectual Property and Development” (1996) 18 Law and Policy 315.

124   Laurence R. Helfer norms prioritizing the protection of public health,17 and Laurence Helfer’s proposal for WTO dispute settlement panels to apply the margin of appreciation and consensus doctrines of the European human rights system when interpreting the copyright provisions of TRIPS.18 A second cluster of publications focused on substantive linkages between IP and global social justice issues informed by human rights concerns. Leading contributions can be found in a 1998 symposium on Sovereignty and the Globalization of Intellectual Property,19 which examined the intersections among IP, biodiversity, indigenous knowledge, and cultural progress. Among these studies, Rosemary Coombs identified tensions between the then little-​known UN guidelines on protecting the cultural heritage of indigenous peoples and IP claims to traditional knowledge.20 Samuel Murumba’s contemporaneous proposal for a “justice-​constituency” approach to analyzing linkages between IP and other international regimes sounded similar themes.21 A third noteworthy contribution to the literature was a 1998 panel discussion on IP and human rights and organized by WIPO and the Office of the High Commissioner for Human Rights.22 The panelists’ contributions were among the first to rediscover the creators’ rights and public access provisions of the UDHR and ICESCR and to consider whether IP is protected under the property rights clauses of regional human rights treaties. Yet with the exception of Audrey Chapman’s detailed analysis of the right to enjoy the benefits of scientific progress and its applications,23 and Silke von Lewkinski’s comparison of nondiscrimination rules in human rights and IP law,24 the panelists’ presentations and the discussions that followed reveal a rudimentary understanding of international human rights laws and institutions. In fact, the papers’ principal focus was not on the interface of human rights and IP as such, but rather on the history and doctrines of IP law and the relationship between different types of IP and subjects such as public health, genetic resources, traditional knowledge, and natural rights.25

17  Robert Howse, “The Canadian Generic Medicines Panel: A Dangerous Precedent in Dangerous Times” (2000) 3 Journal of World Intelletual Property 493 (critiquing Canada—​Patent Protection of Pharmaceutical Products (Generic Medicines), WTO Doc WT/​DS114/​R). 18   Laurence R Helfer, “Adjudicating Copyright Claims Under the TRIPS Agreement: The Case for a European Human Rights Analogy” (1998) 39 Harvard International Law Journal 357. 19   See, eg, Keith Aoki, “Neocolonialism, Anticommons Property, and Biopiracy in the (Not-​so-​ Brave) New World Order of International Intellectual Property Protection” (1998) 6 Indiana Journal of Global Legal Studies 11; Rosemary J Coombe, “Intellectual Property, Human Rights & Sovereignty: New Dilemmas in International Law Posed by the Recognition of Indigenous Knowledge and the Conservation of Biodiversity” (1998) 6 Indiana Journal of Global Legal Studies 59; Kenneth D Crews, “Harmonization and the Goals of Copyright: Property Rights or Cultural Progress?” (1998) 6 Indiana Journal of Global Legal Studies 117. 20   Coombs (n 19) at 71 and n 50. 21   Samuel K Murumba, “Globalizing Intellectual Property: Linkage and the Challenge of a Justice-​ Constituency” (1998) 19 University of Pennsylvania Journal of International Economic Law 435. 22 23  ibid 127–​141.   WIPO Panel Discussion (n 8). 24  Silke von Lewinski, “Intellectual Property, Nationality and Non-​Discrimination” in WIPO Panel Discussion (n 8) at 175, 191–​196. 25  Peter Drahos, The Universality of Intellectual Property Rights: Origins and Developments; Christine Steiner, Intellectual Property and the Right to Culture; Silvia Salazar, Intellectual Property and the Right to Health; John Mugabe, Intellectual Property Protection and Traditional Knowledge; all in WIPO Panel Discussion (n 8) at 13, 43, 65, 97.

Intellectual Property and Human Rights    125 The participants can be excused for giving short shrift to the international human rights regime. As Peter Drahos’ paper accurately explained: “Human rights instruments tend to be drafted at the level of principle and in open textured ways. The precise content of these rights is difficult to formulate.”26 Drahos thus aptly summed up the consensus view of many participants when he stated that “a lot of work has to be done in terms of . . . looking at the typology of human rights and meshing that with different kinds of intellectual property rights.”27 That call for greater clarity regarding the human rights affected by the global expansion of IP protection standards was decisively answered over the next decade.

4.  The Intellectual Property Backlash and Increasing the Legalization of Human Rights (2000–​2 010) 4.1 Legal Norms, Institutions, and Actor Strategies Beginning in 2000, a concatenation of events created a groundswell of opposition to TRIPS and other recently-​adopted IP treaties. This backlash was motivated by growing concerns that the rapid expansion of the international IP regime was encroaching on a wide range of value-​laden economic, social, and political issues with human rights implications—​ including health, education, food and agriculture, privacy, free expression, and indigenous peoples’ rights. These intrusions had both substantive and procedural dimensions. Substantively, TRIPS and its offspring mandated IP protection for materials—​such as seeds, plant varieties, and medicines—​that other legal regimes had placed outside private ownership on moral, cultural, or public health grounds. Procedurally, tensions were engendered by the TRIPS’ enforcement mechanisms, which were more stringent than those of human rights agreements. These enforcement disparities created an imbalance whereby a state’s compliance with its human rights obligations could, in practice, be subordinated to compliance with TRIPS and other IP treaties.28 Industrialized countries and IP industries exacerbated fears of such subordination by filing complaints in the WTO and in national courts that endorsed maximalist IP protection arguments and ignored countervailing human rights concerns. These substantive and procedural tensions triggered a concerted backlash against the expansion of IP protection by broad coalitions of developing countries and civil society groups. The backlash’s origins can be traced to two UN documents adopted in August 2000—​a general comment by the Committee on Economic, Social and Cultural Rights,29 and a resolution of the UN Sub-​Commission on the Promotion and Protection of Human Rights.30

26 

27 ibid at 60. 28 Helfer, Regime Shifting, (n 1) at 26–​27. Drahos ibid at 27. General Comment No 14—​The Right to the Highest Attainable Standard of Health (art 12), UN Doc E/​C12/​2000/​4 (11 August 2000) [General Comment No 14]. 30  Sub-​Commission on Promotion and Protection of Human Rights, Intellectual Property Rights and Human Rights, Res 2000/​7, UN Doc E/​CN4/​Sub2/​RES/​2000/​7 (17 August 2000) [Resolution 2000/​7]. 29 

126   Laurence R. Helfer As explained later in this chapter, the general comment gave greater precision to the content of the human right to health—​at the time a subject of intense scrutiny given the millions of individuals infected with HIV/​AIDS who could not afford patent-​protected antiretroviral drugs—​while the Sub-​Commission resolution highlighted the negative consequences of TRIPS for economic and social rights writ large. Taken together, these two documents provided a more detailed analysis of how IP protection can infringe on human rights. The documents were widely influential, triggering a “norm cascade” of recommendations, resolutions, and reports across the UN over the next decade.31 The first of the two UN documents, General Comment No. 14, is a detailed exegesis of the legal obligations that, according to the ICESCR Committee, are implicit in the recognition of “the right of everyone to the enjoyment of the highest attainable standard of . . . health.”32 As applied to pharmaceuticals, this right includes four elements—​the availability of medication in sufficient quantity, the physical and economic accessibility of medication without discrimination, the acceptability of medication in light of cultural and ethical norms, and the provision of medication of an appropriate quality. The general comment also applied the Committee’s distinctive tripartite framework of state obligations to respect, protect, and fulfill. To respect the right to health, states must refrain from denying or interfering with access to essential medicines. To protect that right, states must prevent third parties, including private actors, from interfering with such access. And to fulfill the right, states are required to adopt appropriate legislative, administrative, and budgetary measures to facilitate access.33 In recognition of the progressive nature of all economic, social, and cultural rights,34 General Comment No. 14 does not require states to provide immediate access to all medicines. Rather, it identifies as a “core obligation” the provision of “essential drugs, as from time to time defined under the World Health Organization (WHO) Action Programme on Essential Drugs.”35 As part of that program, the WHO maintains and updates a Model List of medicines for priority health needs. As of 2003, 12 of the medicines on the list were patent-​protected antiretroviral drugs for treating HIV/​AIDS.36 The Committee’s analysis thus provided, for the first time, legal support for the claim that enforcing patents in essential drugs would reduce their availability and thus violate the right to health. The Sub-​Commission’s analysis of the adverse effects of TRIPS for economic and social rights was equally momentous. The Sub-​Commission’s focus on IP issues originated in a statement by a consortium of nongovernmental organizations (NGOs) that forcefully asserted “the primacy of human rights obligations over the commercial and profit-​driven

31 

For a discussion of human rights norm cascades, see Martha Finnemore and Kathryn Sikkink, “International Norm Dynamics and Political Change” (1998) 52 International Organization 887, 895. 32  ICESCR, art 12. 33  General Comment No 14 (n 29) paras 33–​38. This tripartite framework was first articulated in General Comment No 3—​The Nature of States Parties’ Obligations (art 2, para 1), UN Doc E/​1991/​23 (1991). 34  ICESCR, art 2.1 (requiring each ratifying state to “take steps . . . to the maximum of its available resources, with a view to achieving progressively the full realization of ” economic, social, and cultural rights). 35  General Comment No 14 (n 29) para 43(d). 36  Amir Attaran, “How Do Patents and Economic Policies Affect Access to Essential Medicines in Developing Countries?” (2004) 23 Health Affairs 155.

Intellectual Property and Human Rights    127 motives upon which agreements such as TRIPS are based.”37 The consortium’s views shaped the Sub-​ Commission’s subsequent resolution, titled “Intellectual Property Rights and Human Rights.” The resolution asserted that “actual or potential conflicts exist between the implementation of ” TRIPS “and the realization of economic, social and cultural rights.” These conflicts cut across a wide swath of legal terrain, including: impediments to the transfer of technology to developing countries, the consequences for the enjoyment of the right to food of plant variety rights and the patenting of genetically modified organisms, ‘bio-​piracy’ and the reduction of communities’ (especially indigenous communities’) control over their own genetic and natural resources and cultural values, and restrictions on access to patented pharmaceuticals and the implications for the enjoyment of the right to health.38

To resolve these conflicts, the Sub-​ Commission urged states, intergovernmental organizations, and NGOs to recognize that human rights have “primacy . . . over economic policies and agreements.”39 A rapid evolution of norms occurred in the decade following the adoption of General Comment No. 14 and Resolution 2000/​7. Multiple UN expert and political bodies produced dozens of resolutions,40 reports,41 and authoritative statements42 that explored in detail the 37 

David Weissbrodt and Kell Schoff, “A Human Rights Approach to Intellectual Property Protection: The Genesis and Application of Sub-​Commission Resolution 2000/​7” (2003) 5 Minnesota Intellectual Property Review 1, 26. 38  Resolution 2000/​7 (n 30) para 11; see also ibid, para 2 (identifying conflicts between TRIPS and “the right of everyone to enjoy the benefits of scientific progress and its applications, the right to health, the right to food and the right to self-​determination”). 39  ibid, para 3. 40  See, eg, Resolutions by the Commission on Human Rights urging states to ensure “Access to Medication in the Context of Pandemics such as HIV/​AIDS, Tuberculosis and Malaria,” Commission on Human Rights, Res 2003/​29, UN Doc E/​CN4/​RES/​2003/​29 (22 April, 2003); Commission on Human Rights, Res 2001/​33, UN Doc E/​CN4/​RES/​2001/​33 (23 April 2001); Commission on Human Rights, Res 2002/​32, UN Doc E/​CN4/​RES/​2002/​32 (22 April 2002); see also Human Rights Council, Res 12/​24, UN Doc A/​HRC/​RES/​12/​24 (2 October 2009), para 2 (emphasizing “the responsibility of States to ensure access to all, without discrimination, of medicines, in particular essential medicines, that are affordable, safe, effective and of good quality”). 41  See, eg, Report of the High Commissioner on the Impact of the Agreement on Trade-​Related Aspects of Intellectual Property Rights on Human Rights, UN Doc E/​CN4/​Sub2/​2001/​13 (27 June 2001) (asserting that IP rules, including TRIPS, must promote access to knowledge and innovation, opposing TRIPS Plus treaties, and emphasizing states’ obligations to provide access to essential medicines to treat HIV/​AIDS); Report of the UN Secretary-​General on Economic, Social and Cultural Rights, Intellectual Property Rights and Human Rights, UN Doc E/​CN4/​Sub2/​2001/​12 (14 June 2001); Special Rapporteur on the Right to Food, Report to Commission on Human Rights, UN Doc E/​CN4/​2004/​10 (9 February, 2004) (prepared by Jean Ziegler) (criticizing the use of patents to control the quality, supply, and price of plant materials and genetically modified seeds). 42  See, eg, Statement on Human Rights and Intellectual Property, UN Doc E/​C12/​2001/​15 (14 December, 2001) (policy statement by ICESCR Committee asserting that IP “must be balanced with the right to take part in cultural life and to enjoy the benefits of scientific progress and its applications,” and that “national and international intellectual property regimes must be consistent with” the obligation of states’ parties in the ICESCR); General Comment No 17: The Right of Everyone to Benefit from the Protection of the Moral and Material Interests Resulting from Any Scientific, Literary or Artistic Production of Which He is the Author, art 15(1)(c), UN Doc E/​C12/​GC/​17 para 35 (12 January, 2006) (asserting that states’ parties

128   Laurence R. Helfer intersections of human rights and IP. Many of these documents contain trenchant critiques of TRIPS and TRIPS Plus treaties, and of expansive IP protection more generally. Others contain detailed textual analyses of the creators’ rights provisions of human rights instruments. And still others assess the empirical effects of IP protection on specific human rights, with particular emphasis on the right to health in the context of pandemics such as HIV/​AIDS.43 All of these pronouncements were nonbinding, and thus did not, as a formal matter, create conflicts with the legally binding obligations of TRIPS or TRIPS Plus treaties. Yet the pedigree and reinforcing analysis in these documents provided normative fodder to contest the expansion of IP protection.44 Developing countries’ governments and human rights NGOs invoked the documents in multiple international and national venues and sought to reorient a legal discourse that privileged the private (and often corporate) ownership of IP over human rights and other societal values.45 As the number, density, and specificity of these arguments increased, it became progressively more difficult for industrialized countries, acting alone or in international organizations such as the WTO and WIPO, to contest the legitimacy of critiquing IP from a human rights perspective.

4.2 Scholarship: Conceptual Frameworks, History, Strategy, and Law in Action The literature on human rights and IP between 2000 and 2010 can be divided into several categories. One group of scholars analyzed alternative conceptual frameworks for understanding the relationship between the two regimes. A second focused on the origins of the creators’ rights and public access provisions in the UDHR and ICESCR and sought to unearth the views of their drafters. A third cluster of studies analyzed the strategic moves and mobilization strategies of shifting coalitions of states and non-​state actors seeking to influence the development of new legal norms across a dense network of policy spaces. A fourth

to the ICESCR must “ensure that their legal or other regimes for the protection of the moral and material interests resulting from one’s scientific, literary or artistic productions constitute no impediment to their ability to comply with their core obligations in relation to the rights to food, health and education, as well as to take part in cultural life and to enjoy the benefits of scientific progress and its applications, or any other rights enshrined in the Covenant”). 43 

For a complete list of these documents, see Helfer and Austin (n 2), 53–​56. See, eg, Lisa Forman, “ ‘Rights’ and Wrongs: What Utility for the Right to Health in Reforming Trade Rules on Medicines?” (2008) 10 Health and Human Rights 37. 45  These campaigns thwarted high-​profile litigation against Brazil and South Africa seeking to enforce patents in antiretroviral drugs for HIV/​AIDS. In the WTO, developing countries and public health advocates pushed for the adoption of a Declaration on TRIPS and Public Health in 2001 and a 2005 amendment to TRIPS that recognized the need to limit pharmaceutical patents in light of public health needs. For further analysis, see Frederick M Abbott and Jerome H Reichman, “The Doha Round’s Public Health Legacy: Strategies for the Production and Diffusion of Patented Medicines under the Amended TRIPS Provisions” (2007) 10 Journal of International Economic Law 921; Daniel Wanjau Muriu, “Third World Resistance to International Economic and Structural Constraints: Assessing the Utility of the Right to Health in the Context of the TRIPS Agreement” (2009) 11 International Community Law Review 409. 44 

Intellectual Property and Human Rights    129 set of publications focused on law “in action,” and analyzed contestations between IP, human rights, and other social values in different local settings, especially in developing countries.

4.2.1 Alternative Conceptual Frameworks One way to conceptualize the relationship between human rights and IP is to view the two legal regimes as fundamentally in conflict. To resolve these conflicts, several studies urge states to recognize the principle of primacy, according to which a state’s obligations under international human rights law take precedence over international IP treaties and national laws.46 Although the conflicts/​primacy approach appears straightforward, in fact it masks a number of embedded assumptions and ambiguities. These include the type of conflict that must exist before a state’s human rights obligations supersede its IP commitments and the justifications for giving primacy to human rights over other legal obligations. Whereas some positivists see conflicts as arising only where two legal obligations are mutually inconsistent (in the sense that compliance with one rule necessarily violates the other), experts and commentators define conflicts more broadly to include situations such as where an earlier treaty authorizes or encourages (but does not compel) a state to act in a certain way and a later agreement prohibits the same conduct.47 The justifications for primacy also diverge, ranging from Howse and Mutua’s bare assertion that most human rights are fundamental and thus necessarily of higher importance than private economic interests,48 to Christophe Geiger’s more nuanced claim that human rights should serve as “corrective[s]‌ when [IP] rights are used excessively and contrary to their functions.”49 The principal value of the conflicts/​primacy approach lies in its ability to reframe demands for access to inventions and knowledge goods as international legal entitlements equivalent to those of IP owners. The approach’s major disadvantage is that it fails to consider 46 

See, eg, Richard Elliott, TRIPS and Rights: International Human Rights Law, Access to Medicines, and the Interpretation of the WTO Agreement on Trade-​Related Aspects of Intellectual Property Rights (Canadian HIV/​AIDS Legal Network & AIDS Law Project, South Africa, 2001); Robert Howse and Makau Mutua, “Protecting Human Rights in a Global Economy: Challenges for the World Trade Organization” (2001) Human Rights in Development: Yearbook 1999/​2000: The Millennium Edition 51. 47  Compare Gabrielle Marceau, “WTO Dispute Settlement and Human Rights” (2002) 13 European Journal of International Law 753, 792 (“For a conflict to exist between a WTO provision and a provision of a human rights treaty, evidence must be put forward that the WTO mandates or prohibits an action that a human rights treaty conversely prohibits or mandates. Such situations would be rare.”) with International Law Commission, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, paras 25–​26, UN Doc A/​CN4/​L682 (13 April, 2006) (explaining that one treaty “may sometimes frustrate the goals of another treaty without there being any strict incompatibility between their provisions” and endorsing a “wide notion of conflict as a situation where two rules or principles suggest different ways of dealing with a problem”). 48  Howse and Mutua (n 46) (“Human rights, to the extent they are obligations erga omnes, or have the status of custom, or of general principles, will normally prevail over specific, conflicting provisions of treaties such as trade agreements.”); see also Paul L C Torremans, “Copyright (and Other Intellectual Property Rights) as a Human Right” in Paul L C Torremans (ed), Intellectual Property and Human Rights (Kluwer Law International 2008), noting that, for many scholars, the “solution” of human rights primacy as a response to conflicts is based on the normative claim that human rights are fundamental and of higher importance than IP rights. 49  Christophe Geiger, “Fundamental Rights, a Safeguard for the Coherence of Intellectual Property Law?” (2004) 35 International Review of Intellectual Property and Competition Law 268, 278.

130   Laurence R. Helfer the dynamic nature of innovation and creativity. If a patented invention or copyrighted work with high societal value already exists, the human rights primacy argument favors making that invention or work widely available at the lowest possible cost. Taken to an extreme, however, such a response would sharply reduce the incentives to, for example, find a treatment for the next disease or to discover the next advance in communications software.50 A second way to conceptualize the relationship of human rights and IP is to view both legal fields as asking the same basic question—​how to give authors and inventors sufficient incentives to create and innovate while providing the public with adequate access to the fruits of their intellectual efforts. This approach sees the two regimes as coexisting in the same policy space, but at odds over where to strike the balance between incentives on the one hand and access on the other. Scholars endorsing a coexistence approach—​including Abbe Brown, Philippe Cullet, and Hans Morten Haugen, among others—​argue that states must give greater weight to promoting social and economic welfare in order to restore balance to IP protection rules following the expansion of the international IP regime in the 1990s.51 A key question that these scholars ask is how existing IP rules should be modified in light of human rights concerns. Of particular relevance are IP flexibilities, such as subject matter exclusions, exceptions, limitations, compulsory licenses, and differential treatment of developing nations. Governments have made insufficient use of these tools or restricted them in response to lobbying by IP industries or pressure from other countries. Once these flexibility mechanisms have been revived, and perhaps expanded, these scholars claim, the international IP regime can better achieve the goals that it shares with the international human rights regime. An attractive feature of the coexistence approach is that it increases the domestic regulatory space available to policymakers. However, the flexibility mechanisms in IP treaties were not designed with human rights goals in mind. The mechanisms can thus provide only limited guidance for governments and NGOs seeking to restructure innovation and creativity policies in ways that affirmatively promote human rights. A third group of scholars seeks to close this gap by developing proposals to integrate the human rights and IP regimes. Two articles in a 2007 symposium on International Rights Approaches to Intellectual Property exemplify this approach. Laurence Helfer argues that such an approach should follow a two-​step inquiry—​first specify the minimum entitlements of health, food, education, and other economic and social rights that international law requires, and then identify the range of legal and policy tools—​of which IP is only one—​that states can deploy to achieve those outcomes.52 Peter Yu explains how to reconcile tensions

50  For additional discussion, see Helfer and Austin (n 2) at 506–​511; Laurence R Helfer, “Human Rights and Intellectual Property: Conflict or Coexistence?” (2003) 5 Minnesota Intellectual Property Review 47, 50; Holger Hestermeyer, Human Rights and the WTO—​The Case of Patents and Access to Medicines (Oxford University Press 2007). 51  See, eg, Abbe E L Brown, “Socially Responsible Intellectual Property: A Solution?” (2005) 2 SCRIPTed 485; Philippe Cullet, “Human Rights and Intellectual Property in the TRIPS Era” (2007) 29 Human Rights Quarterly 403; Hans Morten Haugen, “Human Rights and TRIPS Exclusion and Exception Provisions” (2008) 11 Journal of World Intellectual Property 345. 52  Laurence R Helfer, “Toward a Human Rights Framework for Intellectual Property” (2007) 40 UC Davis Law Review 971, 1018–​1020.

Intellectual Property and Human Rights    131 between by the protective and restrictive dimensions of a human rights approach to IP53 using the principles of just remuneration, core minimum protection, and progressive realization.54 Animated by similar goals, but more audacious in scope, is Thomas Pogge’s 2005 proposal for an intergovernmental fund to channel medical research to treatments for neglected diseases and the health needs of the world’s poor.55 These integrationist proposals share two overarching features. First, they seek to work with the existing IP system, rather than against it, by redirecting market incentives toward socially desirable goals. Second, they are empirically grounded and urge use of human rights impact assessments and other indicators to evaluate whether a specific legal or policy proposal is likely to help or hinder the realization of particular human rights.56

4.2.2 Rediscovering the Historical Record A second group of studies returns to the origins of the creators’ rights and public access rights in the UDHR and ICESCR, seeking to answer questions such as why the drafters of these instruments included these clauses, what scope of protection they intended to provide, and how the clauses relate to each other and to other human rights. Peter Yu provides one of the best overall guides to this topic in his study of the historical record and exploration of the wider geostrategic and political contexts in which these clauses were negotiated.57

53 

As Helfer and Austin explain:

The protective dimension [of a human rights approach to IP] requires states (1) to recognize and respect the rights of individuals and groups to enjoy a modicum of economic and moral benefit from their creative and innovative activities and (2) to refrain from bad faith and arbitrary interferences with intellectual property rights that the state itself has previously granted or recognized. In contrast, the restrictive dimension, which includes both a process component and a substantive standard, identifies the conditions under which the realization of a specific right or freedom requires (1) a diminution of intellectual property protection standards and enforcement measures, (2) a restructuring of incentives for private creativity and innovation, or (3) both. Helfer and Austin (n 2) at 512. 54 

Peter K Yu, “Reconceptualizing Intellectual Property Interests in a Human Rights Framework” (2007) 40 UC Davis Law Review 1039, 1077–​1078, 1096, 1108–​1109, 1113–​1114. 55  Thomas W Pogge, “Human Rights and Global Health: A Research Program” (2005) 36 Metaphilosophy 182, 184–​194; see also Thomas Pogge, “Access to Medicines” (2008) 1 Public Health Ethics 73 (special issue on access to medicines, justice, and alternative innovation mechanisms). 56  See, eg, James Harrison and Alessa Goller, “Trade and Human Rights: What Does ‘Impact Assessment’ Have to Offer?” (2008) 8 Human Rights Law Review 587. For a more recent discussion, see Lisa Forman and Gillian MacNaughton, “Moving Theory into Practice: Human Rights Impact Assessments of Intellectual Property Rights in Trade Agreements” (2015) 7 Journal of Human Rights Practice 109. 57  Yu, (n 54), at 1047–​1075. Other thoughtful historical analyses include: Audrey Chapman, “Approaching Intellectual Property as a Human Right: Obligations Relating to Article 15(1)(c)” (2001) 35 Copyright Bulletin 4; Committee on Economic, Social and Cultural Rights, Drafting History of the Article 15(1)(c) of the International Covenant on Economic, Social and Cultural Rights, E/​C12/​2000/​15 (9 October, 2000) (prepared by Maria Green); Lea Shaver, “The Right to Science and Culture” (2010) Wisconsin Law Review 12; Elsa Stamatopoulou, Cultural Rights in International Law: Article 27 of the Universal Declaration of Human Rights and Beyond (Brill 2007); Paul Torremans, “Copyright as a Human Right” in

132   Laurence R. Helfer Although filling a longstanding gap in the literature, most of these studies recognize that the historical record is suggestive rather than conclusive. Negotiators reached consensus on the public’s right to participate in cultural life and to enjoy the benefits of scientific progress and their applications. In contrast, they were divided over whether to recognize creators’ rights and the rationales for such recognition. These findings suggest that, to maintain compatibility with international human rights law, IP protection rules should eschew excessive restrictions on access to protected works. Yet the insights that can be gleaned from the negotiating history are ultimately too abstract to meaningfully inform national law reform efforts or treaty negotiations.

4.2.3 International Regime Complexity and Mobilization Strategies A third strand of scholarship analyzes the strategies that competing coalitions of states and NGOs use to create, contest, and implement legal norms at the intersection of human rights and IP. As the adverse reactions to TRIPS and TRIPS Plus treaties gathered steam, legal norms were increasingly generated not only in the WTO and WIPO, but also in international organizations, negotiating forums, and review bodies, such as the UN human rights system’s expert and political bodies, the World Health Organization, the UN Food and Agriculture Organization, and the UN Development Programme. These international venues have different subject matter mandates, memberships, voting rules, and permeability to civil society groups. These variations make some venues more amenable than others to mobilization strategies that seek to challenge the expansion of IP protection rules.58 Several law journal special issues analyze these issues in depth.59 Some contributors to these symposia warn that human rights claims and regime shifting strategies are likely to “further entrench some dangerous ideas about property” as an inviolable human right,60

Paul LC Torremans (ed), Copyright and Human Rights: Freedom of Expression—​Intellectual Property—​ Privacy (Kluwer Law International 2004). 58 

For additional discussion, see Helfer, Regime Shifting (n 1) 55–​63. See, eg, Peter K Yu, “The International Intellectual Property Regime Complex International Enclosure, the Regime Complex, and Intellectual Property Schizophrenia” (2007) Michigan State Law Review 1 (introduction for symposium, The International Intellectual Property Regime Complex); Peter M Gerhart, “Introduction: The Triangulation of International Intellectual Property Law: Cooperation, Power, and Normative Welfare” (2004) 36 Case Western Reserve Journal of International Law 1 (introduction for symposium The Future of International Intellectual Property: The International Relation of Intellectual Property Law); Olufunmilayo B Arewa, “TRIPS and Traditional Knowledge: Local Communities, Local Knowledge, and Global Intellectual Property Frameworks” (2006) 10 Marquette Intellectual Property Law Review 155 (lead article for symposium, The First Ten Years of the Trips Agreement). 60  Kal Raustiala, “Commentary: Density and Conflict in International Intellectual Property Law” (2007) 40 UC Davis Law Review 1021, 1032; see also Laurence R Helfer, “The New Innovation Frontier? Intellectual Property and the European Court of Human Rights” (2008) 49 Harvard International Law Journal 1 (analyzing rationales for protecting the property interests of corporations and other business entities in the European human rights system); Jennifer W Reiss, “Commercializing Human Rights: Trademarks in Europe After Anheuser-​Busch v Portugal” (2011) 14 Journal of World Intellectual Property 176 (analyzing trademark protection under the right of property clause in the European human rights system). 59 

Intellectual Property and Human Rights    133 or create a “suboptimal global regime” characterized by “thickets of rights, conflicting demands, disputes that perpetually cycle, and uncertainties created by institutional cacophony.”61 Other analyses are more sanguine and laud the use of regime shifting to strengthen the bargaining power of developing countries, indigenous communities, and civil society groups by coordinating IP reform campaigns around proposals that are tested and refined in more sympathetic international venues.62 Both groups of scholars agree, however, that IP rules in the 2000s were generated in a far more dense and complex institutional and policy environment than in previous decades.63

4.2.4 Empirical Studies of IP Law in Action The studies described in Section 4.2.3 focus on strategies for reframing the relationship between IP and human rights at the international level. A fourth group of studies in the 2000s investigates the on-​the-​ground impact of these strategies. These empirical investigations of law “in action” reveal the sometimes surprising ways in which international IP rules “on the books” are reshaped and modified by human rights concerns when they are implemented in different national and regional legal systems, as well as in online communities. Several of these studies focus on the intersection of pharmaceutical patents, the right to health, and national health strategies. Amy Kapczynski analyzes the distinctive way in which India has implemented TRIPS’ patent provisions, first by adopting a national law that pushes the boundaries of internationally recognized IP flexibility mechanisms, and then by allowing the Indian IP agency to interpret and apply the legislation in ways that further the country’s public health goals.64 In Latin America, Karen Alter and Laurence Helfer explain how the patent and trademark legislation adopted by the Andean Community to give effect to TRIPS has been interpreted by the Andean Tribunal of Justice and domestic IP agencies in the region to incorporate the Community’s human rights, public health, and consumer protection goals.65 As a result of the alliance between supranational judges and agency officials, Andean law today retains limitations on IP that many other developing countries abandoned in the face of pressure from the United States and foreign

61 

Graeme B Dinwoodie and Rochelle C Dreyfuss, “Designing a Global Intellectual Property System Responsive to Change: The WTO, WIPO, and Beyond” (2009) 46 Houston Law Review 1187, 1192–​1193 (footnotes omitted). 62  See, eg, Arewa (n 59); Margaret Chon, “Intellectual Property and the Development Divide” (2006) 27 Cardozo Law Review 2821; Chidi Oguamanam, “Intellectual Property Rights in Plant Genetic Resources: Farmers’ Rights and Food Security of Indigenous and Local Communities” (2006) 11 Drake Journal of Agricultural Law 273. 63  See Laurence R Helfer, “Regime Shifting in the International Intellectual Property System” (2009) 7 Perspectives on Politics 39 (analyzing how complexity in the international IP regime shapes domestic and international strategies of states and non-​state actors). 64  Amy Kapczynski, “Harmonization and its Discontents: A Case Study of TRIPS Implementation in India’s Pharmaceutical Sector” (2009) 97 California Law Review 1571. 65  See, eg, Andean Tribunal of Justice, Noncompliance Judgment 114-​AI-​2004 at 46 (2005) (interpreting Andean Decision 486 and stating that “granting exclusive rights [in pharmaceutical test data] for specified time periods may conflict with fundamental human rights, such as health and life, since the consumption of drugs is related to its price and the monopoly price may make it impossible to access the medication, which can lead to illness and death”).

134   Laurence R. Helfer IP industries.66 Adopting a comparative perspective, Molly Land explores the divergent paths that the human rights and access to knowledge movements have followed in advocacy campaigns relating to freedom of expression and IP on the Internet.67 Focusing on a different topic, Margaret Chon examines the relationship between copyright in educational materials and the human right to education and explains how copyright norms spread among in developing nations even in the absence of formal IP harmonization efforts.68 Taken together, these studies illuminate another tool for government officials and non-​state actors to oppose expansive IP protection—​formally adhering to international legal scripts while tailoring their application to local circumstances. This strategy is facilitated by the cacophony of legal norms generated in multiple international institutions. As the international rules regulating IP and human rights have become more numerous, nuanced, and sometimes contradictory, they provide greater leeway for states to interpret and implement these rules in ways that further their own interests while making it more difficult for other countries to challenge their actions as contrary to international IP agreements such as TRIPS.

5.  Proposals for Exceptions and Limitations Treaties and Raising Human Rights Arguments in IP Litigation (2010–​P resent) 5.1 Legal Norms, Institutions, and Actor Strategies The last several years have seen a winnowing of the modalities by which states and non-​ state actors contest the relationship between human rights and IP. Within international lawmaking venues, the focus has shifted from challenging expansive IP protection rules and clarifying their consequences for realizing human rights, to concrete proposals for ceilings or limits on IP protection.69 These efforts are spearheaded by the Member States 66  Laurence R Helfer, Karen J Alter, and M Florencia Guerzovich, “Islands of Effective International Adjudication: Constructing an Intellectual Property Rule of Law in the Andean Community” (2009) 103 American Journal of International Law 1 (2009); Laurence R Helfer and Karen J Alter, “The Influence of the Andean Intellectual Property Regime on Access to Medicines in Latin America” in Rochelle Dreyfuss and César Rodríguez-​Garavito, (eds), Balancing Wealth and Health: The Battle Over Intellectual Property and Access to Medicines in Latin America (Oxford University Press 2013), 247. Another example from Latin America concerns the power of Brazil’s National Health Surveillance Agency (ANVISA) to review drug patents granted by the National Institute of Industrial Property (INPI). See Center for Strategic Studies and Debates, Brazil’s Patent Reform: Innovation Towards National Competitiveness, 130–​151 (2013) (accessed 10 August 2017). 67  Molly Land, “Protecting Rights Online” (2009) 34 Yale Journal of International Law (2009) 1. 68  Margaret Chon, “Intellectual Property ‘From Below’: Copyright and Capability for Education” (2007) 40 UC Davis Law Review 803. 69  This focus on IP ceilings is occurring alongside continuing studies of IP within the UN human rights system. The most noteworthy developments in this regard are several reports by Special Rapporteurs appointed by the UN Human Rights Council, many of which critique patent, copyright, and plant variety protection rules and enforcement measures as adversely impacting a wide range of human rights, in particular the right to science and culture. See, eg, “Patent policy and the human

Intellectual Property and Human Rights    135 of international organizations whose mandates include human rights or IP. Separately, individuals, businesses, and governments are clashing in courtrooms and arbitration venues over the application of existing IP rules in specific cases. Litigants in these battles are raising a range of human rights claims, primarily to argue against expansive interpretations of IP rules but sometimes to bolster arguments for more expansive protection under the human right of property.

5.1.1 Proposals for Multilateral Agreements Mandating IP Exceptions and Limitations With regard to international lawmaking initiatives, the most important development is the adoption of a new multilateral agreement to expand the availability of copyrighted works to the nearly 300 million individuals around the world who are blind or visually impaired. The Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled, adopted in June 2013,70 seeks to achieve this goal by requiring states’ parties to enact exceptions and limitations to copyright to facilitate the creation of accessible format copies and their distribution domestically and across borders. The Marrakesh Treaty is a watershed in multiple respects. It is the first international agreement focusing on mandatory exceptions to IP protection rules. It also marks the first time that the realization of human rights law has been the explicit objective of a treaty negotiated under the auspices of WIPO. The Treaty is also a step toward fulfilling an obligation of states’ parties to the UN Convention on the Rights of Persons with Disabilities to “take all appropriate steps, in accordance with international law, to ensure that laws protecting intellectual property rights do not constitute an unreasonable or discriminatory barrier to access by persons with disabilities to cultural materials.”71 The Marrakesh Treaty thus provides a concrete illustration of the integrationist strand of scholarship discussed in Section 4.2.1—​it employs the legal and policy tools of copyright law to advance human rights ends.72 right to science and culture,” Report of the Special Rapporteur in the field of cultural rights, UN Doc A/​70/​279 (4 August 2015) (prepared by Farida Shaheed); “Copyright policy and the human right to science and culture,” Report of the Special Rapporteur in the field of cultural rights, UN Doc A/​HRC/​ 28/​57 (24 December 2014) (prepared by Farida Shaheed); “The right to enjoy the benefits of scientific progress and its applications,” Report of the Special Rapporteur in the field of cultural rights, UN Doc A/​HRC/​20/​26 (14 May 2012) (prepared by Farida Shaheed); Report of the Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression, UN Doc A/​HRC/​17/​27 (16 May 2011) (prepared by Frank La Rue); “Seed policies and the right to food: Enhancing agrobiodiversity, encouraging innovation,” Report of the Special Rapporteur on the right to food, UN Doc A/​64/​170 (23 July 2009) (prepared by Olivier De Shutter). 70  WIPO Doc VIP/​DC/​8, adopted 27 June 2013, entered into force 30 September 2016. 71  United Nations Convention on the Rights of Persons with Disabilities, UN Doc A/​RES/​61/​106, adopted 13 December 2006, art 30.3. The first paragraph of the Marrakesh Treaty’s preamble recalls “the principles of non-​discrimination, equal opportunity, accessibility and full and effective participation and inclusion in society, proclaimed in the [UDHR] and the United Nations Convention on the Rights of Persons with Disabilities.” 72  For a more detailed discussion, see Laurence R Helfer, Molly K Land, Ruth L Okediji, and Jerome H Reichman, The World Blind Union Guide to the Marrakesh Treaty: Facilitating Access to Books for Print-​ Disabled Individuals (Oxford University Press 2017).

136   Laurence R. Helfer The Marrakesh Treaty, which enjoys growing support from nations around the world, entered into force at the end of September 2016.73 But it is not the only proposal for a multilateral agreement to integrate human rights and IP issues. Within the WHO, a 2012 experts’ report recommended a legally binding instrument to encourage medical research and innovation on neglected diseases and to improve access to medicines, especially in developing countries.74 The report analyzes the obstacles that patent protection creates to achieving these goals, but it characterized the proposed medical research and innovation convention “not as a replacement for the existing intellectual property rights system but as a supplementary instrument where the current system does not function.”75 The proposal, which has generated opposition among some industrialized countries and pharmaceutical firms, has been put on a slow track at WHO for several years, and its future prospects are uncertain.76 Perhaps even more contentious are proposals for an international agreement on exceptions and limitations for libraries, archives, and educational activities. The WIPO Standing Committee on Copyright and Related Rights has considered the possibility of a treaty on these topics since 2011. It has since commissioned a series of expert reports that catalogue the prevalence and variation in these exceptions and limitations in national copyright laws. To date, however, the Member States of the organization are deadlocked over whether the outcome of its analyses of this topic should be soft law recommendations and best practices or the negotiation of a legally binding multilateral convention that builds on the foundation of the Marrakesh Treaty.77

5.1.2 Raising Human Rights Arguments in IP Litigation and Arbitration As Member States in WIPO, WHO, and other international organizations debate the merits of drafting new treaties to regulate the human rights–IP interface, individuals, corporations, and civil society groups are raising a growing array of human rights arguments in national and regional courts and in international arbitral proceedings. These arguments were first invoked at the turn of the century, when human rights concerns were raised in opposition

73  As of August 2017, 31 states had ratified the Treaty. WIPO, Contracting Parties—​Marrakesh VIP Treaty, (accessed 10 August 2017). 74  Report of the WHO Consultative Expert Working Group, Research and development to meet health needs in developing countries: Strengthening global financing and coordination (5 April 2012), (accessed 10 August 2017). 75 ibid at 14. 76  See, eg, Rachel Kiddell-​Monroe, Johanne Helene Iversen, and Unni Gopinathan, “Medical R&D Convention Derailed: Implications for the Global Health System” (2013) 1 Journal of Health Diplomacy 1; Knowledge Ecology International, WHA69: Resolution WHA69.23 on CEWG follow-​up charts course for WHO’s work on R&D (28 May 2016) (stating that “the WHO has chartered a course which leaves the Organization and its member states policy space to consider an agreement on global norms for R&D funding” after the current Director-​General steps down in 2017). 77  The proponents of a new convention on these issues include developing countries in Africa and Latin America, UNESCO, and the International Federation of Library Associations and Institutions (IFLA). See, eg, Margaret Ann Wilkinson, “International Copyright: Marrakesh and the Future of Users’ Rights Exceptions” in M Perry (ed), Global Governance of Intellectual Property in the 21st Century (Springer 2016), 107, 121–​124; IFLA, Copyright Limitations and Exceptions for Libraries & Archives, available at (accessed 10 August 2017).

Intellectual Property and Human Rights    137 to suits against Brazil and South Africa seeking to enforce pharmaceutical patents for HIV/​ AIDS drugs.78 Such defensive assertions of human rights were successful in that the suits were withdrawn or settled. They did not, however, result in judicial decisions that addressed the merits of the disputes.79 A second wave of litigation, beginning in the early 2000s and continuing to the present, involves affirmative human rights claims by individuals and public interest NGOs invoking the right to health. The complainants in these suits bolstered their arguments by referring to the ICESCR Committee’s General Comment No. 14 and resolutions of UN human rights bodies endorsing a right of access to medicines. National judges in several countries have responded favorably to these claims. For example, high courts in Argentina, Colombia, Costa Rica, Ecuador, El Salvador, Kenya, Peru, South Africa, and Venezuela have ordered health ministries to provide patented drugs to individual patients and to restructure national health plans to expand access to essential medicines.80 The courts in several of these cases expressly or implicitly endorsed the conflicts/​primacy approach to reconciling human rights and IP, ruling in favor of claimants with little regard for the costs involved, the consequences for national health policies, or the impact on incentives to innovate.81 The third group of disputes provides opportunities for courts and arbitral bodies to develop more nuanced ways to mediate the interactions between the two regimes. Viewed collectively, these decisions reveal that domestic and regional judges reviewing infringement suits—​as well as international judges and arbitrators adjudicating state responsibility under international law—​are increasingly open to human rights arguments, both as background principles for interpreting IP rules and as freestanding claims challenging the human rights-​ compatibility of IP laws and enforcement actions. Recent decisions of the Court of Justice of the European Union (CJEU), the European Court of Human Rights (ECtHR), and a decision of an investment arbitral tribunal aptly illustrate these trends.

78 

For a discussion of these disputes, see Heinz Klug, “Law, Politics and Access to Essential Medicines in Developing Countries” (2008) 36 Politics and Society 207 (2008); Ellen ‘t Hoen, “TRIPS, Pharmaceutical Patents, and Access to Essential Medicines: A Long Way from Seattle” (2002) 3 Chicago Journal of International Law 27. 79  A more recent example in which human rights arguments may have promoted a settlement involves a request for WTO consultations initiated in 2009 by India and Brazil against the European Communities for seizures of generic medicines in transit. The complaining states bolstered their claims alleging violations of TRIPS and the General Agreement on Tariffs and Trade by referring to resolutions of the UN Commission on Human Rights concerning access to medicines and statements by the Special Rapporteur on the right to health. In 2011, the EC agreed to restrict its authority to intercept such medicines. See Brook K Baker, Settlement of India/​EU WTO Dispute re Seizures of In-​Transit Medicines: Why the Proposed EU Border Regulation Isn’t Good Enough, PIJIP Research Paper Series No. 1-​1-​2012, (accessed 10 August 2017). 80  See, eg, Alicia Ely Yamin and Siri Gloppen, “Litigating Health Rights: Can Courts Bring More Justice to Health?” (2011); O’Neil Institute for National and Global Health Law, Global Health and Human Rights Database, (accessed 10 August 2017). 81  See, eg, Colleen M Flood and Aeyal Gross, “Litigating the Right to Health: What Can We Learn from a Comparative Law and Health Care Systems Approach” (2014) 16 Health and Human Rights Journal 62; Emmanuel Kolawole Oke, “Incorporating a Right to Health Perspective into the Resolution of Patent Law Disputes” (2013) 15 Health and Human Rights Journal 97.

138   Laurence R. Helfer The CJEU’s first major foray into the relationship between IP and human rights involved the unauthorized use of a cartoon by a member of a rightwing political party in Belgium to lambast a public official.82 In response to the cartoonist’s copyright infringement suit, the defendant raised the exception for parody permitted by the Information Society Directive. A  Belgian court requested a preliminary ruling on how to interpret the undefined term “parody.”83 Although in previous decisions the CJEU had strictly interpreted exceptions to copyright, its 2014 ruling adopts a capacious definition of parody. Recognizing that parody is “an appropriate way to express an opinion,” the court stresses the need to ensure a “fair balance” between a copyright owner’s property interest and a user’s right to freedom of expression.84 It also gives national judges considerable leeway to strike that balance in individual cases.85 A pair of 2013 ECtHR judgments adopt a similar balancing test to determine state responsibility for human rights violations resulting from domestic IP enforcement actions. In these cases, the Strasbourg court rejected freedom of expression challenges to criminal prosecutions of photographers who distributed fashion photographs of Paris runway shows,86 and the founders of Pirate Bay, a large file sharing website.87 Although the outcomes of these cases are unsurprising, the ECtHR’s reasoning is noteworthy. The court for the first time asserts that the enforcement of IP laws interfere with the right to receive and impart information and ideas. To justify such an interference, the state’s actions must be prescribed by law and necessary in a democratic society for the achievement of certain societal aims, such as the rights and freedoms of others, including the property rights of copyright holders. Given the commercial nature of the activities and the lack of contribution to public debate, the applicants in both cases were unable to satisfy this proportionality balancing test.88 But the decisions suggest that, in future cases, the ECtHR may conclude that IP infringement or enforcement actions transgress these principles and thus violate the right to freedom of expression.89 At the same time, however, the ECtHR has affirmed that the right of property

82 

Deckmyn v Vandersteen (C-​201/​13) EU:C:2014:2132, CJEU Grand Chamber (2014). Art 5(3)(k) of the Information Society Directive lists parody as an optional limitation on copyright protection without indicating how judges should interpret that term. 84 See Deckmyn v Vandersteen (n 82), 23, 25. In addition, when discussing a copyright owner’s “legitimate interest in ensuring that the work protected by copyright is not associated with . . . a message” an objectionable message, the CJEU referred to the right of nondiscrimination on the basis of race, color, or ethnic origin protected by the EU Charter of Fundamental Rights. ibid at 31. 85  See Bernd Justin Jütte, “The Beginning of a (Happy?) Relationship: Copyright and Freedom of Expression in Europe” (2016) 38 European Intellectual Property Review 11, 19 (arguing that the CJEU in Deckmyn “allowed for a certain margin of appreciation that is to be exercised by the national courts” on a case by case basis when interpreting exceptions and limitations to copyright in light of human rights). 86  Ashby Donald and Others v France, App No 36769/​08, ECtHR (2013). 87  Neij and Kolmisoppi v Sweden, App No 40397/​12, ECtHR (2013). 88  Id at 10–​11; Ashby Donald and Others v France at para 40. 89  Bernt Hugenholtz first identified the likelihood of such rulings in the early 2000s. See P Bernt Hugenholtz, “Copyright and Freedom of Expression in Europe” in Rochelle Cooper Dreyfuss, Diane L Zimmerman, and Harry First (eds), Expanding the Boundaries of Intellectual Property: Innovation Policy for the Knowledge Society (Oxford University Press 2001) (“[F]‌reedom of expression arguments are likely to succeed against copyright claims aimed at preventing political discourse, curtailing journalistic or artistic freedoms, suppressing publication of government produced information or impeding other forms of public speech.”) (internal quotation omitted). 83 

Intellectual Property and Human Rights    139 encompasses all forms of IP owned by individuals and corporations, and that in appropriate circumstances it will find a violation of that right and award damages.90 These different strands of case law increase the likelihood that the ECtHR will be asked by private litigants to police the upper and lower boundaries of domestic IP protection in Europe,91 albeit within the “margin of appreciation” that national-​decision makers possess to balance competing rights and interests.92 Human rights arguments also influenced the outcome of a high-​profile international arbitration involving a clash between a bilateral investment treaty (BIT) and the WHO Framework Convention on Tobacco Control. Like the other states’ parties to the Framework Convention, Uruguay adopted a range of public health measures to strictly regulate the packaging and design of tobacco products. Philip Morris invoked the investor-​state dispute settlement mechanism to challenge these regulations as a violation of the BIT between Switzerland and Uruguay. The multinational tobacco giant argued that the restrictions amounted to an indirect expropriation of its trademarks and a denial of fair and equitable treatment protected by the BIT. In a July 2016 decision, the arbitral tribunal rejected these claims. In addition to characterizing the Framework Convention as a treaty “guaranteeing the human right . . . to health,”93 a majority of the tribunal imported the ECtHR’s margin of appreciation doctrine to defer to Uruguayan restrictions on the use of trademarks on tobacco packaging.94 Because the government’s regulations were “an attempt to address a real public health concern . . . not disproportionate to that concern and . . . in good faith,” they were not contrary to the BIT.95 Public health arguments have also been raised in a pending WTO dispute challenging, as a violation of TRIPS, regulations in Australia that require tobacco products to be marketed

90  See, eg, Anheuser-​Busch v Portugal, App No 73049/​01, ECtHR Grand Chamber (2007); Balan v Moldova, App No 19247/​03, ECtHR (2008). The protection of property rights—​including IP—​also appears in art 17 of the Charter of Fundamental Rights of the European Union (“Everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions . . . . Intellectual property shall be protected.”). 91  See Helfer, “New Innovation Frontier?” (n 60) at 46 (expressing concern that the ECtHR will “impose both a floor and a ceiling on domestic intellectual property rights” resulting in human rights “interventions at the upper and lower boundaries” of IP protection that are “inevitably ad hoc”). 92  The ECtHR affords states considerable leeway—​or, in the court’s parlance, a “margin of appreciation”—​to strike the balance between competing rights and freedoms. In the context of IP and freedom of expression, the width of the margin depends on factors such as the type of information at issue, the commercial or noncommercial nature of the defendant’s use, and the government’s objectives in regulating property in the public interest. See, eg, Neij and Kolmisoppi v Sweden (n 86) at 10; Draon v France, App No 1513/​03, ECtHR (2005). 93  Philip Morris Brands Sàrl v Oriental Republic of Uruguay, ICSID Case No ARB/​10/​7 (8 July 2016), para 304. 94  Id para 399 (concluding that the margin of appreciation doctrine “applies equally to claims arising under BITs, at least in contexts such as public health. The responsibility for public health measures rests with the government and investment tribunals should pay great deference to governmental judgments of national needs in matters such as the protection of public health.”) (footnote and internal quotations omitted). The dissenting member of the panel, Gary Born, rejected the conclusion that a doctrine developed for a human rights convention applies to the very different context of investor–state dispute settlement. 95  Id para 409.

140   Laurence R. Helfer in plain packaging.96 Given the important structural, institutional, and doctrinal differences between the dispute settlement systems of the international trade and international investment regimes, it is questionable whether the arbitral tribunal’s reasoning should have any influence on the outcome of the plain packaging case.97 Regardless, the claim that public health is an overriding national interest finds direct support in Article 8 of TRIPS, which refers to the adoption of “measures necessary to protect public health” as one of the treaty’s overarching principles.98

5.2 Scholarship: Mainstreaming and Stocktaking Over the last several years, human rights have moved into the mainstream of international IP scholarship. This mainstreaming is reflected in the growing number of journal articles and book chapters devoted to treaty proposals and international and domestic court decisions, including those discussed in Section 5.1. An equally telling indicator is the number of bespoke monographs devoted to the human rights–​IP interface, as well as the prevalence of human rights discussions in edited volumes and anthologies on general international IP law topics. The latter publications include works that revisit the origins of IP treaties, take stock of recent developments, and attempt to bring conceptual coherence to an increasingly complex and contested legal and institutional landscape. These works are too numerous to review individually; a few representative examples will have to suffice. The intersection of human rights and IP is now a specialized subfield within international IP law. At least a dozen book-​length studies devoted to the topic have been published since 2010.99 Earlier works on the intersection between the two regimes were overwhelmingly 96  Australia—​Certain Measures Concerning Trademarks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, WT/​DS434, WT/​DS435, WT/​DS441, WT/​DS458, WT/​DS467. For a discussion of the ICSID case’s importance for the WTO plain packaging dispute, see Alexandra Nightingale, “The Significance of Uruguay’s Win Over Philip Morris International,” Intellectual Property Watch (21 July 2016), (accessed 10 August 2017). 97  See Joost Pauwelyn, “The Rule of Law without the Rule of Lawyers? Why Investment Arbitrators are from Mars, Trade Adjudicators from Venus” (2015) 109 American Journal of International Law 761. 98  TRIPS (n 10), art 8. 99  See, eg, Abbe EL Brown, Intellectual Property, Human Rights and Competition: Access to Essential Innovation and Technology (Edward Elgar 2012); Christophe Geiger (ed), Research Handbook on Human Rights and Intellectual Property (Edward Elgar 2015); Christophe Geiger (ed), Intellectual Property and Access to Science and Culture: Convergence or Conflict? Centre for International Intellectual Property Studies Publication Series (Strasbourg, 2016); Willem Grosheide (ed), Intellectual Property and Human Rights: A Paradox (Edward Elgar 2010); Laurence R Helfer (ed), Intellectual Property and Human Rights: A Research Collection (Edward Elgar 2013); Helfer and Austin (n 2); Joo-​Young Lee, A Human Rights Framework for Intellectual Property, Innovation and Access to Medicines (Wiley Blackwell 2016); Duncan Matthews, Intellectual Property, Human Rights and Development: The Role of NGOs and Social Movements (Edward Elgar 2011); Marcelin Tonye Mahop, Intellectual Property, Community Rights and Human Rights: The Biological and Genetic Resources of Developing Countries (Routledge 2010); Susan Isiko Štrba, International Copyright Law and Access to Education in Developing Countries (Brill 2012); Paul LC Torremans (ed), Intellectual Property and Human Rights, Third Edition (Kluwer Law International 2015); Ting Xu and Jean Allain (eds), Property and Human Rights in a Global Context (Hart 2016).

Intellectual Property and Human Rights    141 focused on access to medicines.100 More recent publications have a wider scope. They investigate issues that include access to knowledge, privacy and the Internet, genetic resources, domestic IP enforcement actions, and bilateral and plurilateral trade and investment agreements.101 The appeal of human rights arguments to established IP scholars is also noteworthy. This trend is exemplified by a contribution to a 2015 research handbook on international IP law authored by Jane Ginsburg and Sam Ricketson. The chapter identifies “human rights and justice” as the conceptual foundations of the Berne Convention’s first Act, while also recognizing that the last three decades have seen an “increasing awareness of other human rights that are competing for attention along with those of authors.”102 The influence of human rights is also apparent in a 2016 volume, published in the prestigious Max Planck Institute Studies on Intellectual Property and Competition Law, that takes stock of the first two decades of the TRIPS Agreement.103 The volume contains a 60-​page chapter devoted to the relationship between TRIPS and economic and social rights, and two other chapters in which human rights feature prominently.104 In the same year, Henning Grosse Ruse-​Khan published a comprehensive analysis of the place of IP in international law, with a focus on how to reconcile competing legal norms within and across international regimes.105 For Grosse Ruse-​Khan, the growing salience of human rights arguments in IP policymaking and scholarship is attributable to two factors—​ “the increasing amount of IP expertise amongst academics, NGOs, and IOs that deal with human rights,” and a shift in focus from identifying conflicts between the two legal regimes “towards the balancing mechanisms within the IP system.”106 The result of these trends, he argues, is that human rights advocates have “capture[d]‌or coloniz[ed] well-​known elements of the international IP system” while, at the same time, offering “WTO/​IP lawyers with acceptable arguments to integrate and take into account human rights objectives within their own system, relying on their own tools.”107 These observations underscore the deep

100 

See, eg, Hestermeyer (n 50). See, eg, Xavier Seuba, Human Rights and Intellectual Property law at the Bilateral and Multilateral Levels: Substantive and Operational Aspects in Geiger (ed), Research Handbook (n 98), 173–​200; see also Pedro Roffe and Xavier Seuba, “Introduction: ACTA and the International Debate on Intellectual Property Enforcement” in Pedro Roffe and Xavier Seuba (eds), The ACTA and the Plurilateral Enforcement Agenda: Genesis and Aftermath (Cambridge University Press 2015) (“The attention paid to ACTA’s impact on fundamental rights was unprecedented in the context of negotiations for an intellectual property treaty.”). 102   Jane Ginsburg and Sam Ricketson, “The Berne Convention: Historical and Institutional Aspects” in Daniel J Gervais (ed), International Intellectual Property: A Handbook of Contemporary Research (Edward Elgar 2015). 103   Hanns Ullrich, Reto M Hilty, Matthias Lamping, and Joseph Drexel (eds), TRIPS Plus 20: From Trade Rules to Market Principles (Springer 2016). 104   Klaus D Beiter, “Establishing Conformity Between TRIPS and Human Rights: Hierarchy in International Law, Human Rights Obligations of the WTO and Extraterritorial State Obligations Under the International Covenant on Economic, Social and Cultural Rights” in ibid. 445–​505; see also Annette Kur, “From Minimum Standards to Maximum Rules” in ibid 133, 139–​144; Max Wollott, “The Proportionality Principle in the TRIPS Agreement” in ibid 213, 236–​238. 105  Henning Grosse Ruse-​Khan, The Protection of Intellectual Property in International Law (Oxford University Press 2016). 106 ibid 260. 107  ibid 261, 265. 101 

142   Laurence R. Helfer enmeshment of the two regimes and the multidirectional conversations among stakeholders with diverse agendas and objectives.

6. Conclusion What lies ahead for the relationship between human rights and IP? Proposals for new international agreements mandating exceptions and limitations offer promising opportunities for constructive engagement. Yet, acute political contestations among developing and industrialized countries and civil society groups are likely to complicate and delay the decision to move forward with these treaty-​based initiatives. In the meanwhile, three developments are likely to occupy the attention of governments, NGOs, and scholars. The first concerns the adjudication of disputes over ICESCR provisions involving the material and moral interests of creators and access to science and culture. The ICESCR Committee has issued two general comments on these provisions and has mentioned them in its review of state party reports.108 It has not, however, been possible for the Committee to elucidate the meaning of these provisions or their interrelationship in the context of a concrete dispute alleging a violation of these rights. That changed in 2013 with the entry into force of an Optional Protocol establishing a complaints procedure for all of the economic, social, and cultural rights in the ICESCR.109 For countries that have ratified the Protocol (currently 22 nations, mainly in Europe and Latin America), the Committee receives complaints from individuals and groups and issues nonbinding decisions and recommendations indicating whether the state against which they have been filed has violated the treaty.110 Given the many high-​profile disputes over the intersection of human rights and IP, the Committee may soon be asked to address an alleged violation of the creators’ rights and public access clauses in the ICESCR. A second development concerns the diminution of domestic policy space resulting from the concretization of human rights norms in response to the backlash against expansive IP rules. In previous eras, governments enjoyed considerable discretion to decide how best to give effect to international norms that were ambiguous or limited in scope. Today, the larger number of treaties and rulings by international and national courts have made these norms more precise and enforceable, significantly contracting the space for domestic regulation. A few commentators have called for further constraints, arguing that under international human rights law “states must use TRIPS flexibilities to fulfill their duties under the right to health, and that they must negotiate less restrictive intellectual property rights in 108  General Comment No 17 (n 42); (interpreting the creators’ rights provision in art 15(1)(c) of the ICESCR); General Comment No 21: Right of Everyone to Take Part in Cultural Life, art 15(1)(a), UN Doc E/​C12/​GC/​21 (21 December 2009). The right to enjoy the benefits of scientific progress and its applications in ICESCR art 15(1)(b) has not been the subject of a general comment by the Committee, although that provision has been analyzed in two recent reports of the Special Rapporteur in the field of cultural rights. See Peter K Yu, “The Anatomy of the Human Rights Framework for Intellectual Property” (2016) 69 SMU Law Review 37, 41–​42. 109  Optional Protocol to the International Covenant on Economic, Social and Cultural Rights, GA Res 63/​117, art 2, UN Doc A/​RES/​63/​117 (10 December 2008). The Optional Protocol entered into force on 5 May 2013 after it had been ratified by ten states. 110  ibid arts 2 and 9.

Intellectual Property and Human Rights    143 bilateral free-​trade agreements.”111 It is uncertain how governments will respond to this diminution of policy discretion once its consequences become more apparent. A third development concerns how international obligations are incorporated into national legal orders. Domestic implementation provides a crucial opportunity to challenge interstate bargains or revisit disputes that could not be fully resolved during multilateral negotiations. As Karen Alter and Sophie Meunier have explained, international “political deals often get redefined during implementation because the actors who implement agreements have different priorities and are subject to different pressures than are the policy-​makers who designed the deal in the first place.”112 The Marrakesh Treaty, discussed in Section 5.1.1., provides an apt example. The Treaty sets forth a legal framework for print disabled individuals and authorized entities to make and share accessible format copies of copyrighted works, including across borders. But it also—​and inevitably, given the divergent views of government negotiators—​leaves many key terms undefined and identifies multiple options for states to implement the agreement. With the Treaty’s entry into force, these battles have shifted to the domestic level as officials, disability rights organizations, and scholars stake out competing positions over these provisions.113 The resolution of these contestations will determine whether the Marrakesh Treaty meaningfully advances the human rights of individuals with print disabilities. If the Treaty achieves its objectives, it may provide the impetus needed to move forward with proposals for other international agreements to reconcile the human rights–IP interface.

111 

Lisa Forman, “Trade Rules, Intellectual Property and the Right to Health” (2007) 21 Ethics and International Affairs 337, 345 (emphasis added). 112  See, eg, Karen J Alter and Sophie Meunier, “The Politics of International Regime Complexity” (2009) 7 Perspectives on Politics 13, 15–​16. 113  Helfer et al (n 72) 21–​85 (identifying the legal and policy choices available to governments to implement the Marrakesh Treaty).

Chapter 6

Intellectua l Prope rt y Incent i v e s Economics and Policy Implications Stephen M. Maurer * 1. Introduction The virtues of using markets to organize the production of physical goods are so widely acknowledged that today even socialists feel obliged to pay lip-​service. Therefore, it is no surprise that policymakers often assume that the production of information goods should be organized the same way. This explains our era’s unprecedented fondness for laws that turn knowledge into “intellectual property” (IP).1 This chapter argues that IP could indeed be the correct path. That said, the analogy is much less straightforward than people assume. The conventional argument for markets derives from nineteenth-​century theorems show that markets allocate physical resources better than any human manager. Crucially, however, these proofs are expressly limited to so-​called “rival” goods that can only be consumed by one person at a time. Formally, at least, they tell policymakers nothing at all about how to best manage research and development (R&D) for the “information goods” that dominate the twenty-​first-​century economy. *  Stephen M Maurer has asserted his moral right to be identified as the author of this Contribution. Additionally, readers will recognize this chapter’s large debt to the late Suzanne Scotchmer’s landmark Innovation and Incentives (MIT Press 2004). All websites were last accessed in February 2018, unless otherwise specified. 1  This admiration is remarkably recent: mainstream opinion was generally hostile to patents in Victorian times (MD Janis, “Patent Abolitionism” (2002) 17(2) Berkeley Technology LJ 899; F Machlup and E Penrose, “The Patent Controversy in the Nineteenth Century” (1950) 10 Journal of Economic History 1) and again in the 1940s (D Kennedy, Freedom from Fear: The American People in Depression and War, 1929–​1945 (OUP 1999)). As late as the 1970s, a sitting Supreme Court Justice could observe that most federal judges “approach patents with the same suspicion and hostility that a city-​bred boy feels when he must traverse a jungle full of snakes”: A Fortes, “The Patent System in Distress” (1971) 14 Trademark and Copyright Journal 571. IP’s current popularity dates from Congress’s decision to create a dedicated patent court in 1982. The Federal Circuit has predictably worked to bolster IP (and its own importance) ever since.

Intellectual Property Incentives    145 So what should policymakers do? One possibility is to ignore the theoretical uncertainty and assume that markets will turn out to be the right solution after all. IP statutes like patent and copyright law implement this instinct by letting inventors buy and sell ideas as if they were physical objects. But policymakers can also jettison markets by funding R&D directly and distributing the results gratis for anyone to use. This is a deep choice, and we would prefer that policymakers make it on the basis of something better than hunches or ideology. Fortunately, economists have spent the past half-​century extending microeconomic theory to information goods. This chapter reviews what economists have learned about when IP is preferable to other rewards, and how policymakers can make the IP laws they do enact as effective as possible. Section 2 introduces the basic trade-off between R&D effort and monopoly using the archetypal example of patents. Section 3 extends the discussion to theories in which patents coordinate effort across multiple independent R&D programs. Section 4 asks how well our patent analysis fits other forms of IP like copyrights and trademark. Section 5 presents a brief conclusion.

2. Fundamentals Patents are such a familiar and widely admired innovation incentive that policymakers could easily forget that they have a choice. But society actually uses many different methods to promote R&D, including prizes, grants, contract research, and, most recently, open source initiatives. The continuing importance of these alternative methods reminds us that patents are just one element within a larger toolbox for managing innovation.2 Viewed from this perspective, the question is less whether patents are “better” than other incentives than when and how policymakers should invoke them. Most of us have grown used to rhetoric which insists that markets are the best way to organize economic activity.3 But we will see that innovation economics is profoundly agnostic:  Depending on the circumstances, IP might be the best solution, but so might some other mechanism. The remainder of this section—​like the underlying literature—​introduces IP through the motivating example of patents. This is convenient, not least because we have to start somewhere. We will see how these basic insights carry over into copyright and other forms of IP in Section 4.

2.1. The Downside: Monopoly and “Deadweight Loss” Many people assume that patents are costless. However, this is only true in the trivial sense that consumers can always ignore new products and choose to live without them. Policymakers should be more ambitious than that. The whole point of innovation, after all, is 2 

Most R&D is supported through non-​patent rewards. For a survey see Scotchmer (n 1) 227–​242. The conclusion is subject to various exceptions, especially where externalities and fixed costs are substantial. Even so, the neo-​liberal instinct that production should be organized by markets summarizes microeconomic prescriptions very succinctly for most industries. 3 

146   Stephen M. Maurer to make life better. And this can only happen when inventions are actually adopted and used. The great advantage of economic theory is that it provides a practical and comprehensive framework for deciding when patents are desirable and how best to design them. Economists have criticized patent law for creating monopolies since Victorian times.4 Furthermore, monopolies are especially costly for information goods. Most of us still think of monopolies in terms of manufactured goods where the cost of the second (third, fourth . . .) copy is almost always a large fraction of the first one. The difference in the Digital Age is that the second (or fiftieth) copy of an information good can be supplied for next to nothing. There is something miraculous here: It is as if the Universe has decided to do humanity a favor. The strange thing about patents is that they refuse the gift by making information expensive. But in that case what should the price be? Following classical microeconomics, we might guess that markets should set prices so that consumers can buy the last (“marginal”) copy of the good at or near the cost of production. However, we have already said that every copy of information after the first costs nothing. Thus, classical microeconomics leaves us with the apparently nonsensical answer that knowledge should be priced at zero. One possibility is to take this advice literally. Incentive schemes that fund reward from tax revenue and similar sources do this by publishing discoveries so that anyone can use them gratis.5 Patents, on the other hand, let monopolist/​owners set prices. But this runs into the formidable objection that every non-​zero price, no matter how small, persuades otherwise willing consumers to stop buying and using the good. These lost transactions—​usually denoted “deadweight loss”—​mean that consumers use patented knowledge less than they would like to, with the result that society never receives full value from its R&D efforts. Patent advocates like to minimize this defect by claiming that monopoly does not matter when it is “narrow,” or has “close substitutes,” or is too weak to attract the attention of competitions policy regulators. But these are only questions of degree, because every lost transaction impoverishes someone. Monopoly can only be justified to the extent that society receives something in return.

2.2 The Upside: New Knowledge and Products So far, we have emphasized the downside of monopoly. This reminds us that patents are “strong medicine,” that is, a bet that something that we normally consider evil—​monopoly—​ is redeemed when it pays for new technologies. As usual, the devil is in the details. Patents might be a good social investment, but this depends on how much innovation consumers receive in return. This is as far as we can go without adopting some definite hypothesis about incentives, that is, how much inventive effort society expects for each dollar invested. It is possible to imagine all sorts of complicated models. However, the traditional microeconomic assumption that inventors are “strict profit maximizers” works remarkably well and we will normally use it in what follows. 4 Janis (n 2).

5  Of course, sponsors must get the money somewhere. For governments, this implies higher taxes that are themselves distortionary. Economists usually assume that taxes cause less distortion than patent monopolies, though this is not certain.

Intellectual Property Incentives    147 That said, many readers will find that our approach takes some getting used to. This is mostly because profit maximization implies that entrepreneurs will fund any project that promises to return even a penny more than costs. Part of the strangeness is superficial and semantic:  Economists typically define “profit” more stringently than the definitions that most people use in everyday life.6 However, it is also possible to imagine special facts under which investors might indeed demand higher returns, for example, where capital is so scarce that it must be rationed, or where would-​be investors lack sufficient information to accurately estimate reward.7 The existence of these more complicated possibilities raises the usual question of what policymakers should do when theory is indeterminate. The usual answer, on the principle of Occam’s Razor, is that policymakers should favor simple assumptions that capture the “essence” or the “main features” of the problem at hand. More complex assumptions should only be admitted reluctantly, for example, when some unusual fact is plainly important, or where simpler models fail to produce lifelike results.

2.3 Balancing Costs and Benefits We have stressed that patent schemes promote innovation while incurring monopoly and deadweight loss. Most of the economic literature for the past 50 years has focused on how society should balance the two. The starting point, following Nordhaus8, is that R&D faces diminishing returns. This means that doubling research effort, for example, will hardly ever deliver twice as much benefit to consumers. At the same time, our profit maximizer assumption implies that policymakers must still pay for the extra effort with twice as much reward and deadweight loss. Worse, this deadweight loss applies to all inventions, including the “easy” ones that would have been invented anyway under more modest incentives. At some point, consumers are better off enjoying the easy inventions sooner even if some hard ones are never discovered at all. This led Nordhaus to the central result that patents yield the most benefits when they have a limited (but non-​zero) lifetime. Of course, knowing that patents should have limited duration says nothing at all about what that lifetime should be. As Machlup testified almost 60 years ago, “No economist, on the basis of present knowledge, could possibly state with certainty that the patent system, as it now operates, confers a net benefit or a net loss upon society.”9 Worse, the ideal trade-off can

6  Most lay people think of “profit” according to the usual accounting definition of “dollars earned less dollars spent.” Economists expand the concept so that “zero profit” also includes (i) normal returns to capital and labor, and (ii) the expected cost of failed projects (“dry holes”) for each successful project. The result is that even zero-​profit projects will normally return more cash than investors paid out. 7  Investors may also look beyond average return to the detailed mix of risk-​return gambles hidden within the portfolio. See, eg. FM Scherer, “The Innovation Lottery” in RC Dreyfuss, DL Zimmerman, and H First (eds), Expanding the Boundaries of Intellectual Property: Innovation Policy for the Knowledge Society (OUP 2001). Scherer  argues that real investors are more likely to invest in portfolios that feature large-​but-​rare payoffs compared to small-​but-​steady ones. 8  WD Nordhaus, Invention, Growth, and Welfare: A Theoretical Treatment of Technological Change (MIT Press 1969). 9  F Machlup, “An Economic Review of the Patent System” (1958) Study No. 15 of Subcommittee on Patents, Trademarks, and Copyrights .

148   Stephen M. Maurer change: While policymakers usually assume that technical progress will continue at something like its historic rate,10 some scholars argue that most easy inventions have already been discovered.11 If so, R&D is becoming more difficult so that large rewards impose the same burdens while generating fewer inventions than they used to do. But in that case, patent strength should now be adjusted downward to restore the old balance of costs and benefits. All of these difficulties assume that patent statutes offer a one-​size-​fits-​all monopoly. In principle, policymakers can do better by tailoring reward so that industries where invention is easy receive weaker monopolies.12 Real patent statutes typically reject this approach, although some observers claim to detect different standards for, say, biotech patents as opposed to software.13 Furthermore, we can imagine policymakers going even further by matching reward against the R&D cost of individual inventions. However, these estimates are notoriously difficult,14 especially since courts lack both the manpower and expertise to make them.15 One partial solution is to start with a best-​guess reward and adjust it upward if and when solutions fail to appear.16 The deeper problem with these approaches is that they are inherently contradictory. We have said that policymakers choose patent law because they believe that markets can allocate resources better than any human. But letting judges second-​guess market rewards immediately discards this advantage. This suggests that policymakers would be better advised to seek out some market test that ties reward to R&D costs. One possibility is to amend patent law to include an “independent invention defense,” which would let rival manufacturers escape infringement so long as they went to the time and expense of re-​inventing technologies without reference to the original patent.17 At first glance, encouraging this sort of duplication 10  For a popular account of the economics debate over whether innovation is slowing down, see T Aeppel, “Economists Debate: Has All the Important Stuff Already Been Invented? Northwestern University Colleagues Have Opposing Views of 21st Century Economy” Wall Street Journal, New York, 15 June 2014. See also K Arrow, “Economic Welfare and the Allocation of Resources for Invention” in R Nelson (ed), The Rate and Direction of Economic Activities: Economic and Social Factors (Princeton UP 1962) 623 (arguing that R&D investments should be based on historic rates of return). 11  RJ Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War (Princeton UP 2016). 12  Nordhaus (n 8) 79. Reward also depends on market structure. For example, monopoly is most valuable where it flips formerly competitive markets into monopoly. This suggests that the patent monopoly should be narrower in such markets: Scotchmer (n 1) 117–​118. 13  DL Burk and MA Lemley, “Is Patent Law Technology-​Specific?” (2002) 17(4) Berkeley Technology Law Journal 1155. 14  Estimates are difficult for various reasons. First, it is notoriously difficult to reconstruct actual R&D costs from accounting records. Second, inventions often look deceptively obvious after the fact. This hindsight bias could easily encourage courts to under-​reward inventions, thereby compromising future incentives to innovate. Finally, the actual inventor could be inefficient so that paying her actual R&D expenses over-​rewards R&D that rivals could have delivered more cheaply: Scotchmer (n 1). 15  Verizon Wireless, Inc v Law Offices of Curtis V Trinko LLP 540 US 398 (2004). Public utility regulators typically hire hundreds of highly educated staff to estimate reward. 16  N Erkal and S Scotchmer, “Scarcity of Ideas and R&D Options: Use it, Lose it or Bank it” (2009) NBER Working Paper 14940 . The solution is approximated by patent law doctrines that (i) grant additional breadth to very basic, “pioneer” discoveries and (ii) offer patents more readily to inventions that satisfy “long felt needs.” 17  This could notionally be done by constructing “clean rooms” that deliberately restrict engineers’ access to prior patents. Despite their theoretical merit, such schemes are hard to police and raise

Intellectual Property Incentives    149 might seem wasteful. However, Maurer and Scotchmer show that this is not true so long as the parties can negotiate licenses.18 The reason is that profit maximizing patent owners can always earn more money by licensing their technology than forcing each would-​be competitor to reinvent it. At the same time, each license introduces more competition so that what is left of the patent monopoly becomes less lucrative—​and commands fewer fees the next time some new competitor demands a license. This causes license fees to spiral downward in each negotiation until the patent owner’s revenue barely covers her R&D cost—​the exact reward our profit-​maximizer hypothesis requires.19 A second and more radical market test would be for government to buy patents on the open market and let anyone use them.20 The main drawback of this scheme is that it measures reward against consumer benefits, and to that extent will normally over-​reward inventors compared to our profit maximizer assumptions. That said, it provides a surprisingly convincing example of how policymakers could eliminate deadweight loss altogether.

2.4 Toward More Detailed Theories: Breadth, Injunctions, and Damages Rules Early economic models characterized patents according to a single variable: duration. But real statutes delineate the patent monopoly in much more complicated ways. This makes it natural to ask whether some definitions produce better trade-offs than others. Starting in the 1980s, economists began to investigate a second factor called “breadth,” which asks how different competing products must be from one another to escape infringement. The breakthrough came when Gilbert and Shapiro21 showed that weak (“narrow”) breadth can sometimes22 improve social welfare by pushing deadweight loss into the distant future where it has less impact on consumers. an obvious potential for cheating. Carl Shapiro has argued that this difficulty disappears when the defense is limited to R&D conducted before the patent application is published: see C Shapiro, “Patent Reform: Aligning Reward and Contribution” in AB Jaffe, J Lerner, and S Stern (eds), Innovation Policy and the Economy (University of Chicago Press 2007). 18 

SM Maurer and S Scotchmer, “The Independent Invention Defence in Intellectual Property Law” (2002) 69 Economica 535. 19  In practice the result will happen immediately if the first licensee anticipates that other firms will seek licenses to the point where its own rights barely cover R&D cost: M LaManna, R MacLeod, and D de Meza, “The Case for Permissive Patents” (1990) 33 European Economic Review 1427; Maurer and Scotchmer (n 20). 20  Michael Kremer argues that market value can be accurately determined by holding auctions in which (i) private parties bid for patent rights, but (ii) the winning bid only receives the patent at random intervals, say once in every thousand auctions: M Kremer, “Patent Buyouts: A Mechanism for Encouraging Innovation” (1998) 113 Quarterly Journal of Economics 1137. The latter requirement ensures that private parties will occasionally end up owning the patent. This enforces honest bids. 21  R Gilbert and C Shapiro, “Optimal Patent Length and Breadth” (1990) 21(1) RAND Journal of Economics 106. 22  More precisely, adding breadth does not improve social welfare for models that assume linear demand curves: WD Nordhaus, “The Optimal Life of a Patent” (1967) Cowles Foundation Discussion Paper 241 , 24. Gilbert and Shapiro proved that this statement is not true for many non-​linear models.

150   Stephen M. Maurer But this is only the first step. As Gallini23 points out, generalizing patent incentives to include breadth does more than change the rate at which reward is paid out. It also reduces the cost of developing non-​infringing products. This encourages rivals to waste resources on technologies that offer little or no improvement compared to existing ones. But in that case, the benefits of short/​narrow patents are inconclusive after all. Maurer and Scotchmer24 partially resolve this conflict by showing that the patent owner can always earn more by licensing rivals. This suggests that threats to “invent around” are mostly a bargaining position that is seldom carried out in practice. Assuming that license negotiations are possible, long-​but-​narrow patents are indeed the best policy choice.25 But why stop at two variables? Reward also depends, inter alia, on patent requirements, infringement defenses (eg, “reverse doctrine of equivalents,” “laches,” “estoppel”), and the rules governing injunctions and damage awards. Schankerman and Scotchmer26 provide a game theoretic analysis of how these rules operate to share reward, although more remains to be done.

2.5 Caveats: Price Discrimination, Transaction Costs, and Network Effects Like all formal theories, conventional patent economics recognizes important exceptions. Most obviously, traditional arguments against deadweight loss assume that the monopolist must offer the same price to every consumer. But clever manufacturers sometimes find ways to charge some customers more than others. This “price discrimination” usually reduces deadweight loss by increasing sales to consumers who would not have bought the product otherwise.27 A second exception applies when the transaction costs of licensing exceed the patented product’s benefits. This can happen when the benefits to individual consumers are inherently small,28 patented knowledge flows in both directions so that net benefits cancel,29 or complex legal environments impose prohibitively high expenses.30

23

  NT Gallini, “Patent Policy and Costly Imitation” (1992) 23(1) RAND Journal of Economics 52. 25 See (n 20).   Maurer and Scotchmer (n 20). 26  M Schankerman and S Scotchmer, “Damages and Injunctions in the Protection of Intellectual Property” (2001) 32 RAND Journal of Economics 199. 27  Most economists agree that price discrimination improves welfare on net. However, it is easy to imagine counterexamples where imperfect schemes have the opposite effect. For a review, see LA Stole, “Price Discrimination and Competition” in M Armstrong and R Porter (eds), Handbook of Industrial Organization—​Volume 3 (Elsevier 2007). 28  The conventional example is electronics, where a $50 microchip can easily contain one million patents. 29  This is especially true in software communities where members trade code back and forth. Open source works well in these circumstances: S Scotchmer, “Openness, Open Source, and the Veil of Ignorance” (2010) 100 Proceedings of the American Economic Association 165. 30  For example, many legal scholars argue that the biotech and electronics industries are clogged with “patent thickets” that contain thousands of obscurely worded claims. This makes hiring lawyers to decide which patents are genuinely infringed and ought to be licensed prohibitively expensive: TR Beard and DL Kaserman, “Patent Thickets, Cross-​Licensing, and Antitrust” (2002) 47 Antitrust Bulletin 345. 24

Intellectual Property Incentives    151 Finally, economists usually assume that consumers choose inventions independently. But in the New Economy, buyers often want products that “interoperate” with their friends’ devices. Here, the invention’s value depends both on its inherent technical merits, and on the number of consumers who already own or plan to buy it. These “network effects” have several important implications. First, they divorce the inventor’s reward from R&D effort so that even trivial technical advances can capture large markets.31 This implies far more deadweight loss than our profit maximizer hypothesis recommends. Second, strong network effects imply that early and essentially random differences in product popularity can attract consumers whose presence will then attract still more consumers over time. The resulting rich-​get-​richer dynamic means that technically inferior products can sometimes prevail over better ones, that is, that we can no longer trust “the market” to sort winners from losers.32 Finally, this same “tipping” phenomenon means that information goods industries are more prone to monopoly.33 This poses deep challenges to competitions policy, which has historically struggled to rein in monopoly even for physical goods.

2.6 Beyond Monopoly: Comparing Patents Against Other Incentives Up until now, we have focused on deadweight loss. However, economists have identified other sources of inefficiency that can block innovation, even when reward is adequate. We start by briefly reviewing these difficulties and comparing the relative strengths and weaknesses of patents, prizes, grants, and other innovation incentives in addressing them. Agency Problems—​Inventors. Sponsors seldom know how hard inventors work or how good their ideas are.34 This makes it tempting for a researcher to pocket grant money and other up-​front payments without inventing anything at all.35 By comparison, 31 

So-​called “Applications Program Interfaces” or “APIs” consist of arbitrary numeric strings that permit different pieces of software to place “calls” on the computer’s resources. According to our profit-​ maximizing hypothesis, these strings cost practically nothing to develop and should therefore receive little or no reward. But in fact, they do have value, since competitors cannot enter the enormously lucrative Windows market otherwise. This reward owes almost nothing to the cost of developing Windows, and everything to the network effects that would have made some operating system similarly dominant even if Windows had long ago dropped by the wayside. 32  The observation lends new respectability to formerly discredited claims that government technocrats should be allowed to “pick winners” by funding particular technologies. In the Old Economy, European governments repeatedly failed to build better airliners than Boeing. In the New Economy, their GSM cellphone standard became dominant throughout the world. 33  For an extended version of the argument, see C Shapiro and HR Varian, Information Rules: A Strategic Guide to the Networked Economy (Harvard Business Press 1999) 179. 34  As usual, it is possible to think of counterexamples. For example, drug testing on animals is highly routinized and, once started, requires relatively little discretion or creativity. This makes innovation effort comparatively easy to monitor through, for example, audits and surprise inspections: SM Maurer, “Choosing the Right Incentive Strategy for R&D in Neglected Diseases” (2006) 84 World Health Organization Bulletin 376. 35  This is only partly true if the grant agency remembers failures so that grant recipients who fail to deliver value are less likely to receive grants in the future.

152   Stephen M. Maurer patents and prizes minimize this risk since no money is paid unless and until the inventor succeeds. Agency Problems—​Sponsors. Discoveries cannot be “un-​invented.” Once an inventor has developed a new product, our profit maximizing hypothesis implies that she will license it for the largest obtainable reward even if this is still too small to cover her original investment.36 This encourages sponsors to promise large rewards and later renege. But in that case, we should expect inventors, knowing this, to demand large risk premiums.37 This needlessly raises the cost of prizes compared to methods (eg, contract research) that feature up-​front payments. Economists conventionally assume that patents offer a more reliable reward than prizes, though the prevalence of patent litigation casts doubt on this. Investing the Right Amount. Most non-​patent incentives invite policymakers to set whatever reward they think is appropriate. This invites both over-​and under-​payments.38 In principle, sponsors can even set prize amounts so high that inventors spend more on R&D than consumers receive in value. In this case, innovation yields negative returns to society. Such accidents are much less likely under a patent system, where inventors can never collect more revenue than consumers are willing to pay. Eliciting Private Knowledge. Policymakers often possess significant information about which new technologies are likely to succeed. At the same time, they know that the world is filled with experts who possess different and sometimes better information. Even so, it seems crazy for policymakers to ignore whatever information they do have. This suggests a broad middle ground where sponsors can mix their private knowledge with market signals. So-​called “tournament prizes” that reward whichever inventor makes the most progress toward a government-specified technical goal in a particular period provide a handy vehicle for doing this. Public Choice. This chapter is narrowly concerned with economic efficiency. However, real policymakers are almost always part-​ politicians. That biases them toward solutions that implement the familiar imperative to hide costs and advertise benefits. This works in favor of patents, which raise money from monopolies that are nearly invisible to the average voter and then channel the money to narrow and invariably well-​organized interests.39

36  This insight is typically summarized by the opaque slogan that “sunk costs are sunk.” The point is that profit-​maximizing inventors should always seek the biggest payoff they can today, ignoring money that has already been spent and is no longer recoverable. This leads to the surprising-​but-​logical conclusion that an inventor who has spent $1 million to develop a product should sell her rights for $10,000 whenever the alternative is to receive nothing at all. 37  One widely cited example is the case of eighteenth-​century inventor John Harrison, who repeatedly met the British Parliament’s requirements for a marine navigation prize only to be denied payment for years: D Sobel, Longitude (Walker 1995). 38  For example, our profit-​maximizer assumption suggests that rational sponsors should normally offer prizes just $1 larger than expected R&D costs. But pharmaceutical companies jealously guard their R&D costs so that the true figure is uncertain by at least ± $100 million. This implies that prize authorities must choose between large overpayments and seeing many drugs go undeveloped, Maurer 2006 (n 36). 39  S Scotchmer, “The Political Economy of Intellectual Property Treaties” (2004) 20 Journal of Law, Economics and Organizations 415.

Intellectual Property Incentives    153 The foregoing examples support our earlier comment that there is no single “best” innovation incentive for every R&D challenge. Instead, policymakers should start from judgments about which social obstacles predominate for any given project. This might lead to using prizes, say, where inventive effort is hard to monitor but contract research where competitive bidding is feasible and can reduce costs. That said, patents perform remarkably well along most dimensions. Innovation policy would be a great deal simpler if only policymakers could ignore the central trade-offs around deadweight loss. So far, our discussion has argued that all existing R&D incentives are imperfect. However, it would be foolish to expect better methods any time soon.40 This makes it tempting to ask whether policymakers can do better by splicing two or more incentives together. The problem, in most cases, is that such schemes tend to multiply weaknesses more than strengths. Consider by way of illustration the recent fashion for offering prizes over and above normal patent rewards. We have already said that prizes have the important weakness that they let policymakers set rewards that greatly exceed any possible value to society. Adding patents to the mix does nothing to fix this. At the same time, patents short-​circuit the usual argument that prizes avoid deadweight loss. In this case, at least, combining incentives adds nothing. Even so, we can imagine narrow circumstances where hybrid incentives offer advantages. For example, microeconomic theory suggests that patent monopolists seldom extract the full value that their inventions confer on consumers.41 This suggests that some very expensive inventions may never be funded at all. Government subsidies that force firms to make matching payments are a natural way to supply this missing revenue.42 A second reason is that patent revenues may sometimes reward not just R&D, but also the dissemination of discoveries. Defenders of the Bayh-​Dole Act have long argued that giving universities patent rights over federally-​funded university research keeps the output from languishing “on the shelf.”43 From this standpoint, the statute represents a bet that IP-​funded marketing will increase the consumption of knowledge despite higher prices. The question remains how policymakers should best balance patents against other R&D incentives. The main difficulty is that policymakers cannot identify, much less evaluate, every project that deserves support. Patents fill this gap by providing an automatic and decentralized mechanism for funding investment.44 But in that case the corollary is that policymakers cannot selectively turn patents “on” and “off ” whenever it suits them. This generates two kinds of deadweight loss. First, we have already argued that patent rewards

40  The rise of Open Source more than a generation ago shows that fundamentally new institutions do occur, but also that they are few and far between. 41  Standard microeconomic arguments show that monopolists facing linear demand curves only extract fifty percent of the benefits that their products confer on consumers. See, eg, DG Luenberger, Information Science (Princeton UP 2006) 105–​106. The result disappears in the (unlikely) case that patent owners can practice perfect price discrimination. 42  The US government frequently follows this strategy for military aircraft and space procurement: Scotchmer (n 1). 43  35 USC §§ 200-​212; J Colyvas, M Crow, A Geljins, R Mazzoleni, R Nelson, N Rosenberg, and B Sampat, “How Do University Inventions Get Into Practice” (2002) 48(1) Management Science 61, 62. Whether this is true or not remains an open question: D Mowery, R Nelson, B Sampat, and A Ziedonis, “The Growth of Patenting and Licensing by US Universities: An Assessment of the Effects of the Bayh-​ Dole Act of 1980” (2001) 30 Research Policy 99. 44  Erkal and Scotchmer (n 18).

154   Stephen M. Maurer are redundant in cases where people would invent anyway for reasons like pleasure (eg, open source) or salary (eg, college professors), or because they already possess a temporary monopoly because of “first-​mover effects” and other market imperfections. Here, the best policymakers can do is to design alternative interventions so that they withhold payment unless and until the inventor waives her patent rights. The second and much deeper problem is that patent rewards set a floor for other incentives. For example, our profit maximizer assumption implies that policymakers should adjust prize amounts downward for industries where estimated R&D costs are low. But this option is not available where investors can always choose patent rewards instead. The best policymakers can do is to stop patent law from invading research arenas that are more efficiently funded by other institutions. Traditional rules against patenting basic science fit this description nicely.45

3.  Multiple Independent Inventors So far we have assumed that inventors work in isolation. However, innovation often proceeds when multiple inventors compete or build on each other’s work. This section explains how patents can supply a market signal for coordinating effort across R&D programs. The trade-off is that society must usually pay for this function in the form of larger rewards—​and more deadweight loss—​than the relatively simple theories discussed to this point.

3.1 Prospect Theory and Racing The first multi-​inventor theory was due to Professor Kitch, who pointed out that many patented inventions are independently discovered at roughly the same time. But in that case, it follows that R&D is often duplicative and wasteful. Kitch’s “prospect theory” argues that the problem could be avoided by giving the first inventor broad patent rights. This would empower her to act as a kind of traffic cop, assigning each licensee a different and usually non-​overlapping field to investigate.46 Crucially, Kitch assumed that duplication was accidental. But in fact, the situation is worse than that, because patent law’s first-​past-​the-​post rules often encourage firms to race when the reward is large.47 The silver lining is that racing also offers benefits. For 45 

Bilski v Kappos 561 US 593 (2010). It is worth asking why patents should be desirable for commercial R&D but bad for basic science. The most convincing answer is that academic research is atomistic. When Einstein published his Theory of Special Relativity, thousands of researchers could immediately use the discovery in their own work. Einstein could never have foreseen, much less licensed, these uses. And even if he could, most individual uses would have been too minor to justify the transactions cost of negotiating a license. Given that patents work poorly in this context, funding research through grants followed by open publication seems plausibly more efficient. 46  EW Kitch, “The Nature and Function of the Patent System” (1977) 20 Journal of Law and Economics 265. 47  GC Loury, “Market Structure and Innovation” (1979) 93 Quarterly Journal of Economics 395. Suppose, for example, that a drug will be worth $1 billion but costs only $300 million to develop. Following our “profit-​maximizer” assumption, we expect three companies to race since each can earn

Intellectual Property Incentives    155 example, redundant programs make failure less likely, accelerate delivery dates, expand consumer choices, and increase the chances of developing at least one high-​quality product. Policymakers who think these benefits justify more deadweight loss can design strong patent monopolies that deliver rewards well above expected R&D costs. The trouble, inevitably, is knowing when to stop. Because of diminishing returns, benefits decline with each new firm that enters the race. Ideally, entry should stop at the point where duplication starts to make society poorer on net. But in fact, theory predicts that new firms will go on entering until expected profits fall to zero.48 Patent races also lead to other problems. Because racing encourages secrecy, firms seldom have a clear idea of what their competitors know. This means that the rivals cannot pool their knowledge to create better products than each would develop on its own. Worse, ignorance makes racing still more wasteful since firms have no way of knowing when they are hopelessly behind and should drop out. Competitors can even find themselves in equilibria where each firm (wrongly) interprets the other’s willingness to race as evidence of private information that the R&D problem is solvable—​even when it isn’t.49

3.2 The Ideas Model and Cumulative Innovation Early innovation models assumed that R&D opportunities were universally known. This led to models in which every firm knew the “production function” (ie, recipe) for turning existing resources into new technologies.50 Production function models were particularly persuasive in the first half of the twentieth century, when most inventions seemed to follow a “pipeline” that led in a straight line from university research to large industrial labs to commercial products.51 This viewpoint hardened into a kind of orthodoxy after the Second World War, when massive government funding had turned recent university discoveries into miraculous new technologies like radar, computers, and atomic weapons.52

(1/ 3) x ($1 billion) = $333 million in expectation. Careful readers may worry that the winning firm will simply pocket the $33 million profit so that society suffers deadweight loss with nothing to show for it. Fortunately, this does not happen so long as firms can accelerate research by paying more. Instead, racing forces each firm to “compete away” its expected profit. This extra R&D effort may or may not be worth the additional deadweight loss. 48  Scotchmer (n 1) 100–​103. Kitch’s proposal includes the drawback that monopolists can usually earn more revenue by restricting R&D effort below the socially optimal level. 49  Scotchmer (n 1) 46, 114, 121–​123. 50  See, eg, Nordhaus (n 8); J Reingamun, “The Timing of Innovation: Research, Development and Diffusion” in R Schmalensee and RD Willig (eds), Handbook of Industrial Organization—​Volume 1 (Elsevier 1989); B Wright, “The Economics of Invention Incentives: Patents, Prizes and Research Contracts” (1983) 73 American Economic Review 691; P Tandon, “Rivalry and Excessive Allocation of Resources to Research” (1983) 14 Bell Journal of Economics 152; P Tandon, “Optimal Patents With Compulsory Licensing” (1982) 90 Journal of Political Economy 470; SM Shavell and T van Ypserle, “Rewards versus Intellectual Property Rights” (2001) 44(2) Journal of Law and Economics 525. 51  RL Geiger, To Advance Knowledge: The Growth of American Research Universities 1900-​1940 (Transaction Series in Higher Education 2004). 52  See V Bush, Science: The Endless Frontier (United States Government Printing Office 1945).

156   Stephen M. Maurer Production function models are still popular today.53 By the 1980s, however, R&D had changed so that many of the most valuable inventions seemed to come from small biotech and computer startup firms that built on each other’s products. In these cases, at least, having a good idea seemed to be much more valuable than possessing the resources to develop it. Scotchmer and coauthors formalized this insight as an “Ideas Model” in which different R&D opportunities occur to different people at different times. The new viewpoint was especially congenial to economists since it implied that ideas, like other assets, are scarce. The principal lesson was that patents can indeed coordinate innovation across multiple independent inventors. The corresponding downside is that performing this new function almost always required larger rewards and more deadweight loss than simple models in which a single firm invents everything. Ideas models are particularly important where each new invention builds on the previous one. Following Scotchmer54, we consider three cases.

3.2.1 Cumulative Innovation Case 1: Foundational Technologies Case 1 involves situations where a first generation (“1G”) discovery opens the door to a much more valuable second generation (“2G”) invention. We start by considering the benchmark case in which a single firm develops both products. Crucially, society will never receive the second product unless the firm makes two separate decisions: The 1G Decision. Plainly, the 2G product will never be developed unless the firm first invests in 1G technology. In practice, it has two incentives to do this since it knows that successful 1G research will produce both (i) a possibly saleable 1G product, but also (ii) an opportunity (more formally, ‘option’) to invest in a 2G product. In some cases, at least, the firm would not invest based on the 1G product alone. In any case, the 2G option is valuable and the firm should always consider it. This is also the correct social result. The 2G Decision. Once the 1G invention is complete, the firm must make a second decision to invest in the 2G product. According to our profit-​maximizing assumption, we expect the firm to invest in the 2G product whenever its expected revenues exceed costs. Crucially, this decision follows the logic of “sunk costs,” that is, that the firm no longer cares whether the 1G invention was a bad investment in hindsight. Instead, the firm must decide whether, given that the money it spent pursuing the 1G invention is no longer recoverable, it should spend still more money to invent the 2G product. Once again, this is the right social result. Now consider what happens in an Ideas Model, where the 1G and 2G firms are different. We have already said that policymakers should want patent incentives to produce exactly the same investment decisions as our baseline case. This means, among other things, that the 1G firm should consider the 2G invention’s option value in making its investment decision. According to our profit maximizer hypothesis, it follows that patent law should force the

53  See, eg, Reingamun (n 50); Wright (n 50); Tandon 1983 (n 50); Tandon 1982 (n 50); Shavell and van Ypserle (n 50); D Romer, Advanced Microeconomics (McGraw Hill 1996). 54 Scotchmer (n 1).

Intellectual Property Incentives    157 2G firm to share at least part of its reward with the 1G firm. This can most easily be done by making patents broad enough for the 1G inventor to demand part of the 2G reward. But this creates problems. The reason is that the 2G inventor will only invest if she expects enough patent income to cover her R&D costs after paying the 1G inventor. That violates our principle that R&D decisions should be taken without regard to the sunk cost of 1G investments. This forces policymakers to restore the 2G firm’s incentives by offering a larger reward and incurring still more deadweight loss.55 As often happens in economics, these clumsy legal rules are not quite as bad as they seem. The reason is that the parties can rewrite dysfunctional reward allocations through licensing. The best outcomes happen when the 1G and 2G firms negotiate before either company invests. In that case, we expect each firm to demand enough royalties to cover its expected R&D costs and walk away from any agreement that fails to deliver them. The trouble in the Ideas Model is that the 1G and 2G firms may never have heard of each other. This makes early negotiation impossible. Predictably, the worst outcomes occur when the parties negotiate after both R&D programs are complete. In this situation, the 1G inventor can demand so much profit that the second inventor fails to recover her R&D costs. Seeing this outcome, prospective inventors may decide that it is better to avoid 2G products altogether.56

3.2.2 Cumulative Innovation Case 2: Quality Ladders Thus far, we have assumed that patent duration is set by legislatures. But duration is meaningless when technology proceeds so fast that products become obsolete before the formal patent term expires. Many, if not most, patented products seem to fit this description.57 But in that case, legislators must find some other policy lever to manage the trade-off between innovation and deadweight loss. Building on our earlier discussion, the obvious candidate is breadth. As discussed in Section 2, the narrower the patent, the more rivals will be tempted to invent around it. This implies that narrowing patent rights will reduce the rate of technical change and increase effective duration.58 In practice, policymakers should choose breadth so that (i) firms improve products at the most cost-​effective rate, and (ii) would-​be imitators are suppressed long enough for the 1G and 2G inventors to extract their rewards. The former goal mirrors our racing discussion in the sense that policymakers should balance the benefits of accelerated discovery against diminishing returns. The second goal is

55  The problem is still more complex where the 1G technology is not essential but only makes the 2G invention cheaper to develop. In that case, a well-​functioning patent system should only compensate the 1G inventor for the 2G inventor’s cost savings. But this would force courts to estimate costs. Real patents do not do this, which only increases the chances that the 1G firm will be over-​rewarded. 56  The 1G reward will be further eroded if the 2G inventor demands extra payment to cover the risk of “blocking patents,”that is, the possibility that strangers to the license will develop and patent the 2G invention first and demand royalties from the licensed developer. 57  E Mansfield, “R&D and Innovation: Some Empirical Findings” in Z Griliches (ed), R&D, Patents and Productivity (University of Chicago Press 1984). 58  S Scotchmer, “Standing on the Shoulders of Giants: Cumulative Research and the Patent Law” (1991) 5 Journal of Economic Perspectives 29; T O’Donoghue, S Scotchmer, and JF Thisse, “Patent Breadth, Patent Life and the Pace of Technological Progress” (1998) 7 Journal of Economics and Management Strategy 1.

158   Stephen M. Maurer automatically met so long as the 1G and 2G firms can negotiate licenses and hold at least one patent between them.

3.2.3 Cumulative Innovation Case 3: Combining Multiple Inventions So far we have considered cases where a single 2G invention builds on a single 1G discovery. However, many inventions proceed by combining multiple discoveries. Conventional microeconomics predicts that this will not be a problem so long as firms can negotiate licenses. The reason is that 1G patent owners understand that demanding excessive royalties will block the project, so that they earn nothing at all. That said, there are good theory reasons to believe that independent owners will collectively demand higher royalties than a single monopolist would charge. This further increases deadweight loss.59 These generally reassuring conclusions are challenged by the extreme conditions of the New Economy, where a single microprocessor, say, can sometimes infringe a million patents. In the polar case where each patent has a separate owner, we can be certain that the average patent owner will earn very little from her licenses—​if she did, the product would be unaffordable. But in that case, she also cannot afford to negotiate individual licenses. Instead, the best she can do is announce take-​it-​or-​leave-​it demands. Fortunately, this is a traditional problem with familiar remedies. These include, for example, using clearinghouses to negotiate master agreements for large bundles of patents, swapping access through patent pools, or publicly declaring that entire technologies will be made available at “Fair, Reasonable, and Non-​Discriminatory” terms with the exact royalties to be determined later. Finally, Heller and Eisenberg’s “Anticommons” hypothesis argues that negotiations could still fail even when microeconomic theory predicts licensing.60 The hypothesis has received a sympathetic hearing from lawyers and legal scholars who tend to assume patent owner irrationality. That said, there is still no clear theory of why such frictions exist. For the most part, Heller and Eisenberg argue that the usual microeconomic assumptions are violated, that is, that players are not profit-​maximizers or possess “cognitive biases” that make them overvalue their own inventions.61 Later scholars have suggested still more heterodox 59  The basic logic is straightforward. Suppose that there are two patents and two owners and that each owner starts by charging exactly one-​half the price that a single monopolist would charge. Then the first patent owner to demand higher royalties receives 100 percent of the added revenue from consumers who continue to buy the product but loses just 50 percent of the revenues associated with consumers who leave the market. The second patent owner has similarly pathological incentives to raise prices higher than a single monopolist would. In this perverse situation, permitting cartelization actually reduces royalties and benefits consumers, A Cournot, Recherches sur les Principes Mathématiques de la Théorie des Richesses (L Hachette 1838), translated by NT Bacon (1897). Recent Supreme Court cases acknowledge this logic by holding that so-​called “vertical agreements” between companies in the same supply chain must be judged on a case-​by-​case (“rule of reason”) basis: Leegin Creative Leather Products, Inc v PSKS, Inc 551 US 877 (2007). 60  MA Heller and RS Eisenberg, “Can Patents Deter Innovation? The Anticommons in Biomedical Research” (1998) 280 Science 698. The term “Anticommons” is a play on Garrett Hardin’s celebrated “Tragedy of The Commons,” which argued that shared resources like the “commons areas” of many eighteenth-​century villages encouraged wasteful over-​consumption since no single user had any incentive to conserve: see G Hardin, “The Tragedy of the Commons” (1968) 162 Science 1243. 61  Heller and Eisenberg (n 60). Heller and Eisenberg also suggest that deadlock can occur because of “strategic behaviors” in which actors veto profitable offers in hopes of receiving still higher royalties.

Intellectual Property Incentives    159 assumptions.62 Despite this, economists have found surprisingly little evidence that Anticommons failures actually occur.63 This hints that negotiators can usually talk patent owners out of whatever irrationality they bring to the table.

3.3 How Well Does Patent Law Implement Theory? Economists have learned a great deal over the past 50 years. But knowledge only matters when it is implemented. It would be a miracle if legal doctrine had correctly anticipated everything that economic theory teaches, particularly for subtle and advanced topics like cumulative innovation. This section concludes by asking how often patent law departs from economic teaching, and suggests reforms to close the gap.

3.3.1 Current Law We have stressed that an ideal patent statute would fine-​tune reward for each invention. This, however, would force courts to estimate R&D costs. Patent law avoids this result by using each invention’s cleverness as a proxy for inventive effort. Doctrinally, this usually means asking whether (in US parlance) a “Person Having Ordinary Skill in the Art” or “PHOSITA” would have considered the invention obvious.64 Patent law deploys variants of the standard in most situations where economic theory invokes R&D costs, notably including such questions as when patents should be granted in the first place (“non-​ obviousness”/​“inventive step”), defining breadth (“doctrine of equivalents”),65 and special defenses that protect unusually clever advances from infringement claims (eg, “reverse doctrine of equivalents”).

Unlike their other conjectures, this explanation is amenable to conventional microeconomic arguments based on our profit maximizing assumption. Here, the saving grace is that even the most recalcitrant players will receive nothing until they eventually agree to a license. This suggests that many and probably most transactions will eventually go forward. 62 

Examples include bounded rationality, imperfect information, and various opportunistic behaviors, L Vertinsky, “An Organizational Approach to the Design of Patent Law” (2012) 13 Minnesota Journal of Law, Science and Technology 211. 63  See, eg, T Magerman, B Van Looy, and K Debackere, “In Search of Anti-​Commons: Patent-​ Paper Pairs in Biotechnology, An Analysis of Citation Flows” (2011) ; JP Walsh, WM Cohen, and C Cho, “Where Excludability Matters: Material Versus Intellectual Property in Academic Biomedical Research” (2007) 36 Research Policy 1184; CM Holman, “Clearing a Path Through the Patent Thicket” (2006) 125 Cell 629. 64  Graham v John Deere Co 383 US 1 (1966); Warner Jenkinson Co v Hilton Davis Chemical Co 520 US 17 (1997). 65  Judges have given the doctrine of equivalents remarkably little attention. Indeed, the Supreme Court only seems to have recognized the doctrine’s connection to patent rewards in the last twenty years: Warner Jenkinson Co v Hilton Davis Chemical Co 520 US 17 (1997). The case law is also remarkably ambiguous: While most commentators argue that the doctrine is PHOSITA-​like, the matter is not entirely free from doubt, SM Maurer, “Ideas into Practice: How Well Does U.S. Law Implement Modern Innovation Theory” (2013) 12 (4) John Marshall Review of Intellectual Property 681.

160   Stephen M. Maurer We should expect the PHOSITA standard, like most proxies, to be imperfect. Despite this, the concept provides a facially sensible way to track relative costs. This is particularly true for brute force inventions in which large industrial labs search through thousands of candidates before finding a successful product.66 Conversely, the PHOSITA approach’s main weakness is that it includes inventions that arrive in a “blinding flash of inspiration.”67 According to our profit-​maximizer assumption, these inventions cost nothing so that inventors should normally be willing to disclose them for a modest reward.68 Given these caveats, patent law plausibly implements our Section II arguments. This notably includes avoiding double-​reward (and deadweight loss) where the inventor would have proceeded even without a patent. Here, the PHOSITA’s “ordinary skill” requirement insists that patentable invention must be cleverer (implicitly, more costly) than at least half the innovations in its industry.69 While this specific test seems arbitrary—​why not insist that the patentable invention be cleverer than two-​thirds of all inventions?—​it is at least simple and convenient. On the current state of knowledge, it is probably as good a test as any. The situation for cumulative innovation is more doubtful. We have already argued that an ideal patent statute should implement two goals: (i) reward 1G inventors for the option value of their invention in making successor discoveries possible, but also (ii) ensure that 2G inventors cover their full R&D costs. The most obvious implementation rule is for courts to divide revenues from the 2G product so that the 2G inventor just barely covers her R&D costs and the 1G inventor receives everything else.70 That, however, requires knowing the invention’s absolute costs, whereas the PHOSITA approach only captures relative amounts. This leads to the very real danger that at least one inventor will fail to cover her costs so that the 2G invention is never developed. The situation is even worse for long cumulative innovation chains, since a hoped-​for 10G invention, say, has ten chances to fail. Policymakers who fear this outcome will normally decide that it is better to over-​reward inventors.71 This is another example of how cumulative innovation models increase deadweight loss.

3.3.2 Reforms Patents have become so central to the modern economy that interest groups call for reform more or less perpetually. The trouble in practice is that most proposals are disturbingly 66   Examples include Thomas Edison’s celebrated search for an acceptable light bulb filament or, more recently, pharmaceutical searches that typically test 10,000 chemicals for each new drug discovered: Maurer (n 65). 67   Cuno Engineering Corp v Automatic Devices Corp [1941] 314 US 84. 68  One possible counterargument is that rewards can encourage inventors to think more about a topic and to that extent increase the possibility of discovery. As Pasteur said, “Chance favors the prepared mind”: Maurer (n 65). 69  I thank the late John Barton for this insight. Strangely, the PHOSITA standard is endogenous. The reason is that inventors who find themselves just shy of the fifty percent mark understand that working slightly harder will qualify them for patent protection. But once they do qualify, some other inventor will have dropped below fifty percent and starts to work harder also. The resulting race presumably includes most inventors to some degree, including many who never receive a patent. 70  O Tur-​Sinai, “Cumulative Innovation in Patent Law: Making Sense of Incentives” (2010) 50 IDEA 723. The process would be repeated if there were additional generations in the chain. 71  SM Maurer, “Open Source Drug Collaborations: A Rational Design Approach” (2013) 5 (8) Future Chemistry 895.

Intellectual Property Incentives    161 ad hoc. For example, reformers who complain that the patent system encourages baseless litigation typically advance a grab-​bag of proposals including higher pleading standards, limits on pre-​trial discovery, and “losers pay” rules for attorneys’ fees.72 Any one of these would surely limit lawsuits. But what of unintended consequences? We have seen that the logic of cumulative innovation almost always favors strong 1G patent rights. Thus, no one really knows what the new proposals would do on net, and policymakers are right to worry. Reformers should be more systematic than this. The most obvious strategy is to exploit the coherence and consistency of economic theory. This can be done by identifying and fixing instances where patent law departs from economic insights. Following our earlier discussion, candidate reforms include: Independent Invention. We have argued that an independent invention defense would provide a market test for R&D cost, and therefore reward. By comparison, the principal counterarguments mostly turn on the practicalities of detecting cheating. Shapiro has persuasively argued that these problems disappear in the limited-​but-​ important case where the infringer completes its R&D before the underlying patent application is published.73 Damages Standards. US patent law initially used an “unjust enrichment” standard to measure damages. However, Congress changed this to a “lost profits” standard after the Second World War. Schankerman and Scotchmer present detailed game-​ theoretic arguments showing that each test under-​rewards 1G inventors in some circumstances.74 Rewriting patent law so that litigants can choose whichever measure offers the most reward would immediately fix the problem. While legal scholars have occasionally proposed similar reforms, their reasons are largely ad hoc.75 Understanding the deep connection to cumulative innovation provides a simpler and more transparent case for reform. Laches and Estoppel. Patent owners who are slow to enforce their rights open themselves to laches and estoppel defenses. Existing law invariably analyzes these doctrines in terms of “unfairness” to the infringer. However, Schankerman and Scotchmer show that the defenses actually operate to allocate reward between 1G and 2G inventions.76 This leads to the unexpected insight that the defenses should be easier to establish when the patent owner is a large or cash-​rich company, or the 2G product has limited sales potential.

72  JC Boggs, JH Burdman, and WJ Sauers, “Debate on Patent Reform Legislation Continues in Congress: What You Need to Know” Bloomberg—​BNA (12 August 2015) . 73  Shapiro (n 19). 74  Schankerman and Scotchmer (n 28). 75  CL Roberts, “The Case for Restitution and Unjust Enrichment Remedies in Patent Law” (2010) 14(2) Lewis and Clark Law Review 653. 76  Schankerman and Scotchmer (n 28).

162   Stephen M. Maurer

4.  Extending the Model: Copyright, Trademark, and Competitions Policy Previous sections have examined IP through the motivating example of patents. We now briefly address other types of IP as variations on a theme. We close by reminding readers that reward also depends on competitions policy.

4.1 Copyright Copyright extends the IP concept to cultural goods like books, movies, and games. This context gives Congress much more room to fine tune rewards compared to patent law. At the same time, cultural markets are deeply imperfect. This forces policymakers to consider the idea that IP should fund marketing as well as creation. We close by noting the rise of open source software collaborations that paradoxically use licenses to exclude copyright claims by would-​be improvers.

4.1.1  Improving the Monopoly-​Innovation Trade-off Section 2 argued that long, narrow rights can often improve the monopoly/​innovation trade-off. Copyright takes this logic to heart by extending duration for 70 years beyond the life of the author.77 This is offset by a minimalist monopoly that gives imitators wide latitude to copy stereotypes, themes, and genres. This is consistent with our profit-​maximizing hypothesis that clever ideas (“inspiration”) cost nothing and require very little reward. Similarly, copyright also recognizes an independent invention defense that provides a safe harbor for authors who incur the cost of writing competing works de novo.78 Probably the best response to these arguments is that literature depends on cumulative innovation which, as we have seen, favors broad rights. But that is only true when licensing is possible. This is unlikely for cultural goods where (i) the number of authors who seek to build on successful works is large, (ii) the profits available from book revenues are too small to support massive licensing programs, and (iii) it is nearly impossible to predict which authors possess, and are capable of executing, high quality ideas.79 We have also argued that policymakers can improve the innovation/​deadweight loss trade-off by tailoring the IP monopoly for each individual industry. This is nearly impossible 77  This is only possible, of course, because some cultural goods are indefinitely valuable. This situation is the direct opposite of our “quality ladders” discussion of cumulative innovation. 78  Sheldon v Metro-​Goldwyn Pictures Corp 81 F 2d 49 (2nd Circuit 1936). 79  Copyright law provides an exception by providing that the 2G authors of so-​called derivative works that copy very specific features (eg, named characters) from a 1G title, cannot claim copyright unless they first obtain a license from their predecessor. This may represent a legislative judgment that the number of 2G authors interested in making close copies will usually be tiny, so that licensing becomes feasible after all. Interestingly, patent law takes the opposite view by letting improvers obtain 2G patents even without licenses. This may reflect the much greater breadth of patent rights, which sweep up so many advances that the 1G inventor cannot possibly manage them all.

Intellectual Property Incentives    163 in patent law, since policymakers would have to make judgments across the entire economy. By comparison, the number of industries producing cultural goods is comparatively small. This has allowed policymakers to tailor monopolies to the special needs of books, movies, digital audio, and other platforms. Finally, we have argued that the innovation/​deadweight loss trade-off disappears where manufacturers can charge each customer a different price. While price discrimination is typically hard to implement, book markets offer a striking exception to the rule. Readers of a certain age will recall that mid-​century publishers routinely brought out new bestsellers twice—​first as expensive hardbacks and again as cheap “mass market” paperbacks. This led to the happy result that publisher profits and readership increased simultaneously. The fact that e-​books serve the same market as traditional paperbacks (loosely: “throwaway titles”) provides a broad hint that similar schemes could be possible in the Digital Age. The trouble, for now, is that price discrimination is only possible where copyright holders can set content prices across all available platforms. This condition is routinely violated by tech firms like Amazon that sell e-​books to consumers below cost. Policymakers who take price discrimination seriously would be well advised to block such practices.80 Needless to say, antitrust authorities have so far resisted this outcome.81

4.1.2 Reimagining Reward We have analyzed IP as a reward for invention.82 Historically, however, most copyright rewards have instead flowed to publishers. The fact that authors often continue to churn out titles even where copyright royalties are derisory suggests that other incentives (eg, the pleasure of creation, gains to reputation) are already adequate. This argues that policymakers could safely narrow copyright to reduce high book prices and deadweight loss. But what if copyright serves some other purpose? Unlike patented inventions, which can usually be summarized by simple objective criteria like “miles per gallon,” customers find it nearly impossible to predict the quality of cultural goods in advance. This means that books often propagate by personal endorsement from readers who know each other. Scholars have shown that such word-​of-​mouth markets are deeply flawed so that mediocre titles routinely outsell better ones. Publishers damp this randomness by identifying and advertising the most promising titles.83 This benefits consumers, who read better books on average and then

80  This might even include letting Amazon, which wants low e-​book prices to increase e-​reader sales, compensate publishers for their lost hardcopy sales. 81  In early 2010 five large publishers created an alliance to take away Amazon’s power to sell e-​books at below-​cost prices. The US Southern District of New York found them liable on the theory that the publishers wanted higher e-​book prices to protect their hardback sales: United States v Apple, Inc. 952 F Supp 2d 638 (District Court (Southern District of New York) 2013), aff ’d United States v Apple, Inc., 791 F3d 290, 299 (2d Cir. 2014). Crucially, no one seems to have asked whether price discrimination might be good for society. 82  But see the short discussion of the Bayh-​Dole Act earlier. 83  Computer simulations show that which titles become “hits” sensitively depends on who is included in early audiences: F Deschattres and D Sornette, “Dynamics of Book Sales: Endogenous Versus Exogenous Shocks in Complex Networks” (2005) 72 Physical Review 016112. Researchers studying artificial online music markets have similarly shown that the songs that emerge as “hits” differ dramatically each time the experiment is performed: MJ Salganik, PS Dodds, and DJ Watts,

164   Stephen M. Maurer pay for the privilege through higher prices. As usual, the cost is deadweight loss. Modern books typically sell for five or six dollars above cost. It seems obvious that readerships would increase if books were cheaper. There is also a second problem. Copyright currently lets publishers suppress older titles including, in the US, the overwhelming majority of titles published by “big name” publishers since 1923. Furthermore, they have every reason to do so, since many consumers would prefer to buy older books priced at, say, two dollars above cost. This would undercut or, in the conventional business jargon “cannibalize” publishers’ profit on new books.84 The dynamic explains the otherwise bizarre observation that very few mid-​twentieth-​century titles are available as e-​books while Victorian titles are plentiful.85

4.1.3 Open Source IP gives inventors the power to exclude, but what they do with the power is up to them. In the late 1980s, open source software collaborators began writing licenses that prevented users from claiming copyright in future improvements. According to our usual deadweight loss arguments, this makes sense. Given that most early open source enthusiasts wrote software for love, adding a copyright reward would have increased deadweight loss to no purpose. The licenses also stabilized the system against the obvious problem that each collaboration member (i) was happy to accept free software, but (ii) knew that he could make himself still better off by selling his improvements back to the community. This would have led to the usual Prisoners Dilemma result in which more and more improvers demanded royalties until free software disappeared entirely.86 These simple welfare arguments became more nuanced in the early 2000s after commercial firms began paying employees to write open source software that made that their proprietary products (eg, applications programs, mobile phones) more valuable. Following our racing discussion, this was probably a good thing to the extent that open source let companies avoid redundant investments in conventional software. The reason is that inventing these “plain vanilla” operating systems a second time would have offered very few benefits. That said, there was also a second problem. By definition, open source guarantees that every user will receive exactly the same software as every other user. This suppresses firm incentives to invest in open source much as a formal cartel would.87 Fortunately, the

“Experimental Study of Inequality and Unpredictability in an Artificial Cultural Market” (2006) 311 Science 854. 84  SM Maurer, “The Economics of Memory: How Copyright Decides Which Books Do (And Don’t) Become Classics” (2015) 14(4) John Marshall Review of Intellectual Property Law 521. For a formal analysis of why monopolists frequently suppress low-​quality versions of their products, see E Maskin and J Riley, “Monopoly with Incomplete Information” (1984) 15(2) RAND Journal of Economics 171; M Mussa and S Rosen, “Monopoly and Product Quality” (1978) 18 Journal of Economic Theory 301. 85  PJ Heald, “How Copyright Keeps Works Disappeared” (2013) Illinois Program in Law, Behavior and Social Science Paper No. LBSS14-​07 . 86  It is not entirely clear that viral licenses were necessary. In many cases, transactions costs are already high enough so that members could not license improvements even if they wanted to. 87  ML Katz, “An Analysis of Cooperative Research and Development” (1986) 17 RAND Journal of Economics 527.

Intellectual Property Incentives    165 effect is limited as long as the open software faces significant competition from proprietary and other open products.88 Finally, open source pioneered a fundamentally new way to organize effort. From this standpoint, the fact that the method is usually limited to a single product, software, should trouble us. Naively, at least, open methods seem especially natural to literature, where masterpieces like The Odyssey have traditionally emerged from accumulated audience suggestions and successive authors’ retellings. More speculatively, open source could provide a new and better template for organizing certain steps along the drug discovery “pipeline.”89

4.2 Trade Secrets and Sui Generis Statutes Patents and copyright do not begin to exhaust the IP universe. Instead, smaller so-​called sui generis statutes provide additional targeted rights for everything from fiberglass boat hulls to databases. The question in all these cases is whether adding an IP reward yields enough additional R&D effort and new inventions to justify the corresponding monopoly and deadweight loss. One threshold issue should be to demand evidence that copyists actually exist and pose a threat to the industry.90 Europe notably enacted database protection despite knowing that the Americans had built a thriving industry with no formal protection at all. In these circumstances, the policy case for creating new IP rights probably reflected protectionism at least as much as innovation. Finally, we note that laws letting firms sue to protect trade secrets also create monopolies in knowledge. Uniquely, trade secrets have no set duration but persist indefinitely until rivals develop the invention themselves, often by “reverse engineering” the product in question.91 Following our earlier independent invention argument, this seems reasonably efficient so long as licensing is possible. The trouble is that outsiders may not know that a secret exists, and hence that there is anything to license.

4.3 Trademark So far we have considered IP as an incentive to promote innovation. The question remains whether trademarks—​Nike’s well-​known “Swoosh” logo, for example—​should also qualify as inventions. And if so, should anyone believe that larger rewards will generate “better” logos that leave consumers happier than before? For many years, trademark avoided these issues by insisting that innovation was beside the point. In this view, marks are empty vessels that become valuable if—​and only if—​ consumers who have purchased products in the past learn to associate them with value. 88 

SM Maurer, “The Penguin and the Cartel: Rethinking Antitrust and Innovation Policy for the Age of Commercial Open Source” (2012) Utah L Rev 269. 89  Maurer (n 71). 90  P Samuelson and S Scotchmer, “The Law and Economics of Reverse Engineering” (2002) 111 Yale LJ 1575. 91  National Conference of Commissioners on Uniform State Laws (1985) and Comment to § 1 (trade secret law).

166   Stephen M. Maurer More specifically, trademarks cure the information deficit that grows out of consumers’ inability to fully detect shoddy or low-​quality goods. This enables repeat transactions that build trust so that the parties can enrich each other through still more mutually beneficial exchanges. Like other forms of IP, the main drawback is deadweight loss. Because consumers have limited information, they are willing to pay more for trademarked goods which are then priced above marginal cost. Secondary distortions can also include excessive proliferation of brands and increased cost for competitors trying to enter the industry.92 These monopoly effects are plainly inefficient, though presumably less so than leaving consumers ignorant. If this were all, the economics of trademark would be straightforward. But marketing experts often claim that trademarks are inherently valuable without regard to underlying products. The result is that policymakers have increasingly enacted “anti-​dilution” statutes that protect marks, even when there is no danger of confusion. Scholars have strained to rationalize these laws. Some make the empirical claim that letting a peanut vendor, say, use the name “Rolls Royce” will clutter the mark with irrelevant associations that make the name less valuable for automobiles.93 In principle, psychologists should be able to test this. More interesting answers cut to the heart of microeconomic theory. The principle of “consumer sovereignty” teaches that voluntary purchases provide conclusive evidence of value. This implies that we should resist the urge to question whether consumers who pay a premium for shirts that advertise, say, “Chevy” or “Microsoft” are truly better off.94 But that does not end the inquiry. The deeper question is why consumers buy such shirts. Given that the reasons often violate normal microeconomic assumptions, conventional IP theory encourages skepticism.95

4.4 Competition Policy This chapter has so far addressed reward in terms of IP law. But IP only creates a monopoly. Reward equally depends on how cleverly that power is exercised, that is, on business strategy. And modern competitions policy96 holds that many of the most lucrative strategies are illegal. A really principled attempt to balance reward against deadweight loss needs to be consistent across both bodies of law. We should be encouraged that IP and competitions policy seek identical ends, namely, maximizing welfare in the presence of deadweight loss. This permits significant unification for problems that can be analyzed using simple supply-​and-​demand models of how monopolists set prices. For example, legal scholars have long suggested that licensing terms 92 

NS Economides, “The Economics of Trademarks” (1988) 78 Trademark Reporter 523. W Landes and R Posner, “Trademark Law: An Economic Perspective” (1987) 30(2) Journal of Law and Economics 265. 94  Economides (n 92). 95  One popular suggestion is that consumers use scarce and expensive logos to signal wealth, so that letting poor citizens copy the mark would reduce welfare: see Landes and Posner (n 93). But this implies that conspicuous consumption derives from envy, that is, that rich consumers gain more utility from scarcity than poor citizens lose. This kind of argument is well outside conventional microeconomic theory, which insists that interpersonal utility comparisons are unmeasurable and meaningless. 96  See also the discussion by Scott Hemphill in Chapter 31 of this volume. 93 

Intellectual Property Incentives    167 should be acceptable where they yield no more reward than a patent owner could earn by exploiting her technology in-​house.97 Here formal mathematical models represent a marked improvement over the verbal formulae that judges usually invoke to describe the economy.98 Unfortunately, most competitions policy problems cannot be modeled so simply. These theory gaps are especially common for information goods: Schumpeterian Competition. New Economy industries often follow a ‘Schumpeterian’ dynamic in which firms periodically compete for dominance with the winner collecting monopoly profits until the next contest. In principle, the welfare goal is easily stated: Competitions policy should only intervene where ‘the likely gain in static efficiency exceeds the present discounted value of any probable loss in dynamic efficiency.’99 But when is that? Economists have long known that firms need some monopoly reward to, for example, subsidize consumers’ switching costs in moving to the new standard.100 However, there is still no general theory that judges can turn to. Network Effects. Finding that firms have violated the antitrust laws is one thing. Figuring out how to correct the damage is generally much more difficult. Following the US Supreme Court’s Standard Oil decision101, courts have often turned to “structural relief ” by breaking up offending firms to restore competition. However, the Court almost immediately added that splitting large firms can also destroy important scale economies.102 This hints that consumers may sometimes be better off under monopoly. Network effects present the dilemma in even starker form and are ubiquitous in the New Economy. Relief. The most obvious strategy for reconciling competition with network effects is to order patent owners to license IP so that rivals can compete within a common standard. The difficulty, as we have seen, is that courts must then specify reward in a way that covers R&D cost and preserves incentives to innovate. Unlike American judges, European courts claim that they are prepared to do this.103

97 

HF Furth, “Price Restrictive Patent Licenses Under the Sherman Act” (1958) 71 Harvard L Rev 814; Maurer and Scotchmer (n 18). 98  Maurer and Scotchmer (n 18). 99  H Shelanski and JG Sidak, “Antitrust Divestiture in Network Industries” (2001) 68 University of Chicago L Rev 1. 100  ML Katz and C Shapiro, “Systems Competition and Network Effects” (1988) 8 Journal of Economic Perspectives 93. 101  United States v Standard Oil 221 US 1 (1911). 102  United States v Terminal Railroad Association 224 US 383 (1912). 103  Existing interventions have been limited to relatively easy cases (eg, APIs) where the underlying invention costs little or nothing to develop. See SM Maurer and S Scotchmer, “The Essential Facilities Doctrine: The Lost Message of Terminal Railroad” (2014) 5 California Law Review Circuit 287.

168   Stephen M. Maurer

5. Conclusion IP rights embody a striking wager that accelerated innovation will repay society for what Thomas Jefferson famously called “the embarrassment of an exclusive patent.”104 Economists have spent the past half-​century exploring this trade-​off. On the one hand, IP offers a necessary default choice for funding inventions that policymakers cannot possibly learn about, much less fund. In this sense, markets do indeed supply useful coordination across inventors. On the other, monopoly and deadweight loss imply that IP’s “strong medicine” must be administered carefully. Principled proposals for aligning current IP law more closely with theory include limited independent invention defenses, improved damages rules, and greater deference to price discrimination.

104 

Graham v John Deere Co 383 US 1 (1966).

Pa rt  I I I

E M E RG E N C E A N D DE V E L OP M E N T

Chapter 7

T he Em ergenc e a nd Devel opm e nt of In tellectual Prope rt y L aw in Weste rn E u rope Catherine Seville * 1. Introduction The phrase “intellectual property” conveys something reasonably clear to a contemporary lawyer. But this modern concept has developed from many diverse sources, and the path that it has taken was in no sense predetermined. The individual rights now familiar to us changed considerably as they evolved; their subject matter, the rights granted, their method of administration all show significant alteration through the centuries. The shape and boundaries of each right, and the boundaries between the various rights, were all contested. More generally, the nature of intangible property was not clearly defined, nor even universally accepted. Laws were often enacted in response to particular problems, and were also subject to the more general political and economic thinking of their time. The balance between private and public interest was frequently a consideration, as it is today. But its evaluation was approached in the light of the pressures and views then prevailing. As a result, although many of the individual rights have long histories, it is hard to see an “intellectual property law” which a modern lawyer would recognize with any certainty before the mid-​nineteenth century. The brief for this chapter—​the emergence and development of intellectual property (IP) in Western Europe—​is a broad one, full of fascinating stories and detail. Inevitably, though, choices have had to be made. The chapter will address each of the main areas of modern IP law—​patents, copyright, trademarks, and designs—​and will sketch their emergence and development via the relevant national histories. The final substantive section will give a sense * 

Catherine Seville has asserted her moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified.

172   Catherine Seville of the advance of international coordination within Western Europe. This is a key aspect of modern IP law. An examination of its roots reveals, as with the histories of the individual rights, that the development of IP law is not one long inevitable trajectory from the past to the present.

2. Patents Patent law’s origins lie in privileges granted by states in the late middle ages. Generally, these gave an exclusive right to exploit something, whether temporarily or permanently. They could be given to attract new skills and industries, with an eye to broader economic benefits for the state. Or they could be given as favors to reward personal loyalty. Within these broad characteristics, privileges display a wide variety of particular expressions. The interaction of states with medieval guilds is also an important backdrop to this area of law. The guilds developed a proprietary attitude to craft knowledge, and were supported in that by many states. Craft knowledge was regarded, in effect, as intangible property of commercial value. Invention and innovation were not essential aspects of this. It was a way of regulating trades, for the mutual benefit of guild members and states. Historically, then, privileges were not given as entitlements, even if their grant later became more systematized. In the eighteenth century it began to be argued that inventors had an inherent right to their inventions, and even that this was a natural right. Industrialization provided a further significant challenge to existing arrangements. The practical need for coherent and efficient national patent systems became increasingly obvious, but agreement on their nature and characteristics was difficult to reach. Gradually, however, the patent system developed a more structured nature, and began to adopt patterns and practices recognizable as forming the basis of modern patent law.

2.1 Patent Law’s National Origins Guilds, both craft guilds and trading guilds, were a powerful force in medieval Europe. They controlled trades in particular localities, regulating conditions and standards within particular trades, and often enforcing local monopolies. They had special privileges, often granted in letters patent (open letters, for public instructions) by the monarch or state. They were influential in local government, and contributed to the economic stability and growth in towns and regions. But they were also conservative and self-​interested, hostile to outsiders and to challenges to their own interests. Their influence gradually declined during the Renaissance and Reformation: The emergence of wider markets and the growth of mercantilism saw economic power shift away from the merchant guilds, and the far swifter transfer of technology began to undermine the ability of the craft guilds to control particular trades. However, as the powers of national governments increased, the value of granting monopolies in some circumstances was still appreciated. The roots of modern patent law can be traced during a long transitional period when both medieval feudalism and mercantilism were influential. Modern patent law’s direct origins lie in monopolies offered by European states during the Renaissance.

Intellectual Property Law in Western Europe    173

2.1.1 The Venetian Model Early examples can be seen in Italy, particularly in Venice. Venice was a dominant sea power from the Middle Ages, which brought great trading strength also. The Venetian economy was highly regulated, and many products could only be made and sold by one of the local guilds. For instance, Venetian glass was highly prized throughout Europe, and its production was carefully controlled by guilds, which were in turn regulated by the Venetian commune. Export of the craft skills was prohibited, and unauthorized disclosure of trade knowledge was severely punished. It was well understood that there were particular skills within the wider craft, and these too were prized and kept secret, even within the guild. There was thus little need for a separate patent system. During the mid-​fifteenth century, the Republic of Venice granted a small number of individual privileges granting limited term monopolies covering a variety of subjects. Several of these were granted to foreigners, and would have allowed their holders to compete with local guild members. In 1474 the Senate issued a general Act, providing that when “any person in this city who makes any new and ingenious contrivances not made heretofore in our Dominion” it could be protected “as soon as it is perfected so it can be used and exercised” for ten years.1 These privileges clearly resemble modern patents in a number of respects; they grant a limited monopoly, there is a requirement of novelty (at least on the local market), the device must be workable, and so on. Over the next decades, grants increased significantly in number, and the rules set out in the Act were applied with considerable consistency (notwithstanding some variations in the grants, particularly in their term).

2.1.2 Elsewhere in Continental Europe Similar grants of privileges can be seen elsewhere in continental Europe, generally with the aim of encouraging new inventions valuable within the territory. The Venetian model was certainly influential, particularly as Venice’s power gradually declined from the early sixteenth century, leading to the migration of Venetian artisans and craftsmen to other European states. However, its influence should not be overstated, since there were local systems already in place, adapted to local circumstances. In Germany in the fourteenth and fifteenth centuries, privileges were regularly granted by local sovereigns (such as the Elector of Saxony) and by the Emperor. They varied in subject, and seem to have been granted more for inventions than for the importation of inventions. A number of well-​established requirements were customarily fulfilled before any grant was made. This system was destroyed in the seventeenth century by the ravages of the Thirty Years’ War, and was not re-​established for a considerable time.2 Following the war, Germany was politically very fragmented, with each local institution (whether a single city or a state such as Bavaria or Prussia) determining how inventions should be protected. Principles were laid down for the Zollverein (German customs union) in 1842. Germany was eventually

1 

“Venetian Statute on Industrial Brevets, Venice (1474)” in L Bently and M Kretschmer (eds), Primary Sources on Copyright (1450–1900), (hereafter Primary Sources). 2  H Pohlmann, “The Inventor’s Right in Early German Law: Materials of the Time from 1531 to 1700” (1961) 43 Journal of the Patent Office Society 121.

174   Catherine Seville united in 1871 under Otto von Bismark, and in 1877 the first German patent law for the Empire was passed.3 From 1589, “patents for inventions” were granted and recorded in the deed books of the States General of the United Provinces of the Netherlands. Novelty was required (which included the introduction of a new industry into the Netherlands), and it had to be workable. The early seventeenth century saw the region enjoying great industrial and trading strength—​the Dutch Golden Age—​and a considerable number of patents were granted. The first Patent Act in the Netherlands came into force in 1817, with patents valid for five, ten, or 15 years. Complete descriptions were required, and fees were considerable. The Act was abolished in 1869, in response to the anti-​patent feeling which bubbled up strongly during this time. There was then no patent legislation in the Netherlands until 1910.4 In medieval France, as in much of Europe, there was a well-​established and highly regulated guild structure. Again, the mechanism of privileges was used to provide incentives and protection from local regulation. Privileges were granted by the king, but had to be registered by the Parlement de Paris—​which did on occasions modify the term and other conditions of the grant. During the seventeenth century it became customary to consult the Académie des Sciences on the merits of any application, a procedure formalized in 1699 when Louis XIV gave the academy formal status as L’Académie Royal des Sciences. The Académie was required to advise on novelty and utility, if asked to do so. The Parlement, and later the Bureau de Commerce, assessed the likely commercial success of the invention. Their interest was in a buoyant and stable market for investors.5 In 1762, Louis XV made a declaration concerning trade privileges “whose purpose is to reward the skills of inventors, or to stimulate those skills which languish in a period of unmatched competition.”6 Various problems were noted, so freedom was undermined “without providing the public with the resources which it should expect.” To address this, the basic term of privileges was restricted to 15 years, unjustified failures to work the privilege were to result in revocation, transfers were restricted, and all privileges were to be registered centrally and published locally. Thus, the privilege system was significantly formalized, though this did not amount to endorsement of a property right as such. As the eighteenth century progressed, various political and cultural factors led to a strengthening of the public perception of inventions and inventors:  The work of the encyclopédistes in promoting the advancement of science, the more general thinking of Enlightenment philosophers such as John Locke, and the line of argument linking authors and their works in the form of a natural property right were all influential. This was recognized in the practices of the French royal administration in the 1780s, which facilitated the issuing of privileges; although these remained limited in term, and still required examination and deposit of the invention. After the Revolution, strong lobbying by inventors led to the passage of a patent law (1791), which granted a property right in “any discovery or new

3 

Patentgesetz vom 25 Mai 1877. See G Doorman (abridged and translated by J Meijer), Patents for Inventions in the Netherlands During the 16th, 17th and 18th Centuries (Martinus Nijnoff 1942). 5  G Galvez-​Behar, A Beltran, and S Chauveau, Des brevets et des marques. Une histoire de propriété industrielle (Fayard 2001) 28. 6  “Royal declaration on privileges granted to inventors, Paris (1762)” in Primary Sources. 4 

Intellectual Property Law in Western Europe    175 invention, in any kind of industry,” without examination.7 As these were stated to be granted as a matter of natural right, they were called “brevets d’invention” to distinguish them from privileges. In practice, however, few were granted; they were costly to obtain and defend. Numerous efforts to reform patent law were unsuccessful until finally the Act of July 5, 1844 was passed (which governed French patent law until 1968). Protection was granted to inventions which were new, and had industrial character. This law made no reference to natural right, but, equally, what was granted was a patent and not a privilege.

2.1.3 Britain In medieval England, as elsewhere, trade and craft guilds were powerful. The Crown regulated trade using prerogative powers, and would grant charters and patents to guilds and corporations. Additionally, individuals could be granted protection and privileges, usually relating to particular commodities, or to encourage particular industries.8 In 1449, Henry VI granted a 20-year monopoly to John Utyam of Flanders, a glass maker who had come to produce glass for the windows of Eton College and King’s College, Cambridge. The grant stated that “the said art has never been used in England” and that Utyam would instruct apprentices in this and “many other arts never used in the realm.” This is an early example of a limited-​term monopoly granted for a new skill in return for its disclosure.9 Under the Tudors, however, patents were used to signal royal favor, and to raise money. During the reign of Elizabeth I, in the hands of her first minister William Cecil, Lord Burghley, patents were used systematically to found a policy of monopoly, ostensibly to stimulate domestic industry. However, the patentee received essentially an unlimited and uncontrolled monopoly within the scope of the grant. This was tremendously desirable for petitioners, and exceedingly vulnerable to abuse. Towards the end of the sixteenth century, public and Parliamentary concern grew as the system became more and more blatantly a mechanism for rewarding court favorites, rather than stimulating new industries and skills. Complaints had to be directed to the Crown, so there was little hope of redress; even bringing a challenge was regarded as indicating lack of respect for the Queen’s authority. In 1601 a Bill was debated in Parliament, entitled “An Act for the Explanation of the Common Law in Certain Cases of Letters Patents.” The Queen described the prerogative touching monopolies as “the chiefest flower in her garden” and did not concede it, but did promise “that they shall all be examined to abide the tryal and true touchstone of the law.”10 The Bill was therefore withdrawn. Thus, although individual cases were now subject to review by the common law courts, the Royal prerogative of granting patents remained. In the first case to be heard, Darcy v Allin, the Court of King’s Bench found for the defendant, against the patent holder. Although the case was argued extensively (in 1602), there was no judicial opinion issued; simply the finding. It has become a landmark 7 

The Preamble states that “ce serait attaquer les droits de l’homme dans leur essence, que de ne pas regarder une découverte industrielle comme la propriété de son auteur.” 8  These date from the fourteenth century: see EW Hulme, “The History of the Patent System Under the Prerogative and at Common Law” (1896) 12 LQR 144. 9  Cal Pat Rolls, Hen VI, vol 255 (3 April 1449). 10  S D’Ewes, A compleat journal of the votes, speeches and debates, both of the House of Lords and House of Commons throughout the whole reign of Queen Elizabeth, of glorious memory (Bowes 1693) 547.

176   Catherine Seville case in IP law, often presented as the judiciary taking a firm position against “odious monopoly,” although in fact the basis of the decision remains unclear. Historically, Edward Coke’s Report was widely accepted as a true picture, though the evidence is against this.11 Even Allin’s counsel conceded in argument that there was a proper place for monopolies. Elizabeth’s successor, James I, also issued many monopolies to court favorites, and complaints continued. In response to one, he issued a proclamation known as The Book of Bounty (1610), which declared monopolies to be “things contrary to our laws,” with the exception of “projects of new inventions” that were not “contrary to law or mischievous to the State, by raising prices of commodities at home, or hurt of trade, or otherwise inconvenient.” Nevertheless, abuses continued, and in 1624 the Statute of Monopolies was passed. Fundamentally, this restated the common law position and reflected current administrative practices. Monopolies were declared void, but letters patent could be granted under the Crown’s prerogative for “the sole working or making of any manner of new manufactures within this realm, to the true and first inventor . . ., so as also they be not contrary to the law or mischievous to the state, by raising prices of commodities at home, or hurt of trade, or generally inconvenient.” The term was limited to 14 years. The Statute of Monopolies, though an important declaratory instrument, had little immediate effect. Letters patent continued to be granted under the Crown’s prerogative (and this continued, at least in form, until the 1977 Patents Act). Many patents contained a proviso for revocation by the Privy Council, which continued to hear questions of validity. It was not until the mid-​eighteenth century that patent litigation was regularly heard in the common law courts, when the Privy Council gave up jurisdiction. Modern patent law began to develop from this time. During the eighteenth and nineteenth centuries, many important concepts were better defined, and some important changes in procedure made, both by statute and judicially. Patent law began to be seen as a discrete area of law. But serious problems remained unaddressed: The system was costly, unwieldy, and uncertain. Nevertheless, attempts at reform continued to fail well into the industrial age.12 Patenting was made easier by the Patent Law Amendment Act 1852, but one consequence was extended and expensive litigation in contested cases. A vocal anti-​patent movement was eventually silenced by the drive for international patent cooperation.13 A gradual tightening of requirements followed, particularly regarding the specification, and also examination. Eventually, the 1977 Act made significant changes to the UK’s patent system, many of them necessary to meet international obligations. One notable (if symbolic) change relevant to this present history was that patents were no longer granted under the royal prerogative, but were now purely statutory rights.

11 

Darcy v Allin (1603) 72 ER 830 (Moore 671); 74 ER 1131 (Noy 173); 11 Coke Rep 84b Coke labelled his report “The Case of Monopolies,” and this name has descended in history. See also M Fisher, “The case that launched a thousand writs, or all that is dross? Re-​conceiving Darcy v Allen: the Case of Monopolies” (2010) 4 IPQ 356. 12  See further B Sherman & L Bently, The Making of Modern Intellectual Property Law (CUP 1999) 101–​110; S Bottomley, The British Patent System and the Industrial Revolution 1700–​1852: From Privilege to Property (CUP 2014). 13  See, eg, R Macfie, Recent discussions on the abolition of patents for inventions in the United Kingdom, France, Germany, and the Netherlands (Longmans, Green, Reader, and Dyer 1869).

Intellectual Property Law in Western Europe    177

3. Copyright Privileges were granted to encourage and control printing from the fifteenth century onwards, and they resemble other early privileges in many ways. Attention was directed initially towards promoting use of the technology. Later, there was focus on the production of individual titles. As with patents, guilds and trade interests were a significant force in the development of the law. The aspect of state censorship, particularly religious and political control, is something unique to the print medium, however. In these various national histories we can trace a transition from privileges granted by the state, and regulations linked in one way or another to the book trade and its customs, to the protection of literary works, with much greater acknowledgment of the creative contribution of the author. Still, though, the economic value of copyright works is a powerful element in the shaping of copyright law. Cultural context and influence also remain significant, though perceptions of the nature of authorship change considerably. A public interest in the output of the copyright system begins to be acknowledged. With these developments comes also the expansion of copyright subject matter beyond printed books, to encompass an increasingly broad range of creative works.

3.1 The Invention of Printing and the Early Management of Printing Some forms of printing date back to ancient history. Mesopotamian cylinder seals were used for administrative purposes, and art. Woodblock printing also dates from early times, and in Europe was commonly used for printing from the fourteenth century. Moveable type existed in China from the eleventh century, although was not widely used. In Europe, moveable type printing technology was developed in Germany in the late 1440s. It is popularly associated with Gutenberg, but others were also pioneers. The superior flexibility and quality of this process, as well as its speed, durability, and affordability, led to the rapid spread of the printing press across Europe during the 1460s. This in turn swiftly led to commercial printing and book production, and a revolution in the spread of knowledge. Because so much depended on the technology, it is unsurprising that the first rights protecting printing were very similar to those protecting other new skills and inventions. The first known printing privilege in Europe was granted to Johannes of Speyer, in 1469. The Venetian Republic was accustomed to granting privileges for industries and inventions which would benefit the state. Printing was recognized as being “an innovation, unique and particular to our age,” and therefore something to be encouraged, “in the same manner as usual in other arts.” Speyer was therefore granted a five-​year monopoly of printing throughout Venice and its dominions.14 This very extensive monopoly did not run nearly to its full term, however, as Speyer died within months of its grant. No further printing privileges were granted for well over a decade, and none were ever again granted of such breadth.

14 

“Johannes of Speyer’s Printing Monopoly (Venice 1469)” in Primary Sources.

178   Catherine Seville In the next 20 years, Venice’s already flourishing book trade expanded vigorously, and established itself at the head of the European book market in the fifteenth century. Printing was an expensive trade to be in, and competition was fierce. The unregulated expansion in Venice was such that it outstripped demand, and printers struggled to recoup their investments. A new approach emerged. In 1493, the Venetian state granted a ten-​year exclusive privilege to Daniele Barbaro to publish a particular title. The precedent was soon copied, and by the mid-​sixteenth century hundreds of similar privileges had been granted. Gradually, the regime was tightened, and once the supply of classical texts had been thoroughly exploited, attention turned to contemporary works. Whereas the focus had often been on material aspects of the book (such as format or font), the content of the book now received attention. Authors were now also regular recipients of privileges. This should not be seen too simplistically as a recognition of “authors’ rights,” however; authors’ petitions spoke of economic risk and public benefit, just as those of printers and publishers. It should be noted that the Venetian Guild of Printers and Booksellers was not chartered until 1549, and even after this, the granting of printing privileges remained essentially ad hoc.15 Elsewhere in Europe printing privileges were also granted, with the aim both of encouraging and controlling the new technique. Both religious and political content could be regulated in this way, but it is important to note that this aim ran (often somewhat uneasily) in parallel with economic drivers. Privileges, licensing, and censorship may often therefore be legally separate, though in practice closely intertwined; and this was an enduring phenomenon. This is seen very clearly in England. Printing had been encouraged in England since the time of Caxton’s press, though once the trade was established, domestic protection (both particular and general) was a priority, particularly under Henry VIII. Privileges, both for specific works and for classes of works, were granted under the royal prerogative. Henry had other preoccupations, also. His disagreements with the Pope led him to break with the Church of Rome and establish himself as Head of the Church of England. A number of Acts and proclamations reinforced this position in various ways, including regulation of the press. Later in the sixteenth century, Mary I, though fervently Roman Catholic, was likewise concerned to supress religious opposition. In 1557 she granted the Stationers’ Company a Royal Charter, which gave them authority over the organization of the printing trade, and also power to seek out and destroy any books printed contrary to any act, statute or proclamation.16 This gave the Stationers’ Company, in effect, exclusive control over printing in England. Only members of the Company, or those holding a printing patent granted under the royal prerogative, could print books lawfully. All lawfully printed books had to be entered in the Stationers’ Register. Initially, an entry signified that a book had been licensed, but it soon was understood as connoting a quasi-​proprietary right to what was called the “copy.” This came to indicate the sole right of printing, publishing, and selling

15  See further J Kostylo, “From Gunpowder to Print: The Common Origins of Copyright and Patent” in R Deazley, M Kretschmer, and L Bently (eds), Privilege and Property: Essays on the History of Copyright (OpenBook Publishers 2010). 16  “Stationers’ Charter, London (1557)” in Primary Sources.

Intellectual Property Law in Western Europe    179 the listed work—​thus, the “copy-​right.” The mechanism of control was maintained by Elizabeth, and later by the Stuarts. Star Chamber decrees reinforced the powers of the Stationers’ Company, whose commercial interests ran alongside the state’s interests in censorship and control. Similar tensions can be seen in France. Early privileges were granted to booksellers and authors as a matter of royal favor, but their justification was essentially economic, and the system developed rapidly in response to the same kind of market pressures felt in Venice and elsewhere in Europe.17 But in the sixteenth century, religious tensions between the Catholics and the Protestant Huguenots led Henri II to establish a regime of pre-​publication censorship and permissions. This affected the system of privileges, also, altering their originally economic character. In the early seventeenth century, the Parisian book trade grew increasingly disturbed by the behavior of certain publishers and printers, who did not acknowledge the restrictions of the existing system (both guild rules and those associated with privileges and royal control), publishing unauthorized books and pamphlets. In 1618 the Parisian booksellers were incorporated, and detailed regulations laid down. Admission to the profession was tightly controlled, and authors were not permitted to print or sell their own works. Books “contre l’honneur de Dieu, bien et repos de l’Etat” were to be confiscated, and those responsible fined. The Court of the King’s Council continued to assert exclusive control over the book trade, ignoring the objections of the Parlement de Paris, and confirming the Parisian booksellers’ advantages regarding privilege, to the detriment of the provincial trade. The system was again confirmed by further regulations in 1687. It was to the Parisian guild’s political and economic advantage to acknowledge and administer a market structure which allowed the Crown to retain control over the publication of works. The Parisian trade’s advantage was reinforced by further regulations in 1701 and 1723, and the dispute with the provincial trade—​France’s “battle of the booksellers”—​became increasingly heated and acrimonious. The contribution of the Parisian booksellers’ lawyer, d’Héricourt, is notable for its argument that the privileges granted to the book trade were founded on an author’s right of property in his work.18 Diderot, in his letter on the book trade (1763), later argued similarly. In both examples, though, the intention was to use the author’s case as a foundation for booksellers’ rights. In 1777 a further decree on the duration of privileges declared that an author who applied for a privilege could retain it in perpetuity (including transmission to his heirs). In contrast, booksellers’ privileges were to be limited in term.19 The nature of these reforms of the licensing system, in particular the position of the author and authorial property, was fiercely contested.20 Of course, the French licensing system would fall entirely before long; one of many changes brought by the Revolution. There are interesting comparisons to be made with the fall of licensing in England, which preceded it.

17 

E Armstrong, Before Copyright: The French Book-​Privilege System 1498–​1526 (CUP 1990). “Louis d’Héricourt’s memorandum, Paris (1725–​1726)” in Primary Sources. 19  “French Decree of 30 August 1777, on the duration of privileges, Paris (1777)” in Primary Sources. 20  C Hesse, “Enlightenment Epistemology and the Laws of Authorship in Revolutionary France, 1777–​1793” (1990) 30 Representations 109; L Pfister, “Author and Work in the French Print Privileges System” in Deazley et al. (n 15), especially 133. 18 

180   Catherine Seville

3.2 England—​Beyond Licensing—​The Statute of Anne and Successors In England, although the licensing system survived the Civil War and a time after the Restoration, it was allowed to lapse in 1679. Briefly revived under James II, Parliament refused to renew it in 1695. The book trade’s customary modes of doing business were severely threatened, and it lobbied hard to remedy the problem. On 5 April 1710, the first English copyright statute was passed—​in fact the first copyright statute anywhere. Commonly known as the Act of Anne, it granted a 14-year term to all books registered with the Stationers’ Company, and an additional 14 years if the author was still living at the expiry of the initial term. The right was granted to “authors and their assigns.” Under the licensing system, in combination with trade practices, rights had almost always been held by stationers. Although the Act was largely grounded in commercial interest, the novel reference to authors was hailed as significant in subsequent debates regarding the nature of literary property. Also notable was that early campaigning for the Bill had sought to present the stationers’ right as a common law right, asking for it to be “preserved” and “secured,” without limitation as to term. But what was passed was more restricted; an Act “for the Encouragement of Learning, by Vesting the Copies of printed Books in the Authors or Purchasers of such Copies, during the Times therein Mentioned.” Although the Act of Anne addressed the stationers’ immediate commercial needs, various important matters were unclear; notably, whether any common law right survived the Act. The question was vigorously debated in the “battle of the booksellers,” expressed in two famous eighteenth-​century cases. Millar v Taylor (1769) confirmed a common law right of literary property; Lord Mansfield’s renowned speech insisted that it was “just” that an author should reap the profits of his ingenuity and labor. But this position was reversed by the House of Lords in Donaldson v Beckett (1774), Lord Camden warning vehemently of the dangers to the public of sanctifying the booksellers’ monopoly.21 Following the decision, legally, copyright was understood to be a statutory right, its boundaries to be determined by the legislature. Yet, in more general discussion, particularly as the Romantic movement grew stronger, there was an increasing sense in some quarters that an author’s mental labor deserved particular and proper recognition. In 1837, Thomas Noon Talfourd brought in a Bill to extend copyright term to the author’s life plus 60 years—​a proposal he regarded as a concession, though an inevitable one. Talfourd’s campaign produced significant public interest and debate. However, the proposal failed in Parliament following Thomas Babbington Macaulay’s speech describing copyright as a monopoly, which had to be regulated with an eye to the public good, and thus should be carefully limited. In one sense, the 1842 Copyright Act represented a compromise on copyright’s term; 42 years, or the author’s life plus seven years, whichever was longer.22 Yet there is no real middle ground between those who start from what they regard as principles, and those who look to do what is necessary. The symbolic power of the argument for authors’ rights remained, therefore, particularly in continental Europe. The Berne 21 

Millar v Taylor (1769) 98 ER 201 (4 Burr 2303); Donaldson v Becket (1774) 1 ER 837 (4 Burr 2408). See C Seville, Literary copyright reform in early Victorian England: the framing of the 1842 Copyright Act (CUP 1999). 22 

Intellectual Property Law in Western Europe    181 Union would subsequently drive Britain to adopt a copyright term of the author’s life plus 50 years—​an approach little different in spirit from Talfourd’s. Another significant development in the eighteenth and nineteenth centuries was the expansion of British copyright law beyond “books” to cover a wider range of subject matter (including engravings, sculptures, paintings etc).

3.3 France—​The end of Licensing—​The Rise of Droit d’Auteur? In August 1789 the National Assembly abolished all privileges of the Ancien Régime, and declared the freedom of the press. The mechanisms of censorship were dismantled, and the book trade’s guild abolished. A flood of pirated literature followed, and also anonymous, libellous, seditious ephemera. A temporary measure proposed by Sieyès to address this included an acknowledgment that an author’s work should be his property, but, given considerations of distributive justice (particularly the “progress of the enlightenment”), only for life and ten years after.23 This measure did not pass. A protest by playwrights was mounted against the Comédie-​Française’s privileges covering theatrical works, which had not been affected, and could only be held by theatre directors and not the authors of plays. This resulted in a law abolishing all past privileges (breaking the Comédie-​Française’s monopoly on the performance of plays, including, notably, those of Corneille, Molière, and Racine), and gave dramatic authors exclusive property in their works, for life and five years afterwards. The often-​quoted words of Le Chapelier regarding the uniquely sacred nature of an author’s property in his work must be seen in context, and referred to unpublished works.24 Pressure from authors in other genres followed, and in 1793 resulted in further legislation.25 This covered all literary and artistic works, giving authors a property right for life plus ten years. Again, the author’s exclusive right is not perpetual but limited, thereby acknowledging the wider interests of the Republic. This brief law (a mere seven articles) governed the law of French copyright for well over half a century. Following difficulties of interpretation, an attempt was made to draft a more detailed law, and a number of reform efforts followed. A series of fervent and sometimes hostile debates saw advocates of authors’ rights and authorial property (such as Lamartine) set against campaigners for the public domain (such as the legal commentator Renouard). However, attention became fixed largely on term. This was extended to the author’s life plus 50 years in 1866—​a considerable period at that time. The narrow focus of the 1866 Act ensured that the 1793 Act continued to be applied in case law, and that the opinions of judges and other commentators on wider matters of interpretation of copyright law had particular significance. The law was codified in 1957. Droit d’auteur has sometimes been set on a pedestal, as possessing a near-​sacred character in its acknowledgment of the unique relationship between an author’s personality and his works; a relationship which is argued to be necessarily indissoluble.26 Certainly, it 23 

“Sieyès’ report, Paris (1790)” in Primary Sources. “Le Chapelier’s report, Paris (1791)” in Primary Sources. 25  “French Literary and Artistic Property Act, Paris (1793)” in Primary Sources. 26  See, eg, H Desbois, Le droit d’auteur en France (3rd edn, Dalloz 1978). Contra P Recht, Le droit d’auteur, une nouvelle forme de propriété (LGDJ 1969). 24 

182   Catherine Seville is easy to overstate the expression of this position in modern droit d’auteur, and to overplay its historic influence. Nonetheless, in the nineteenth century in particular, the importance of the author’s personality is something which is very much discussed, both within the law and beyond it. Droit moral, as something distinct from droit patrimoniale, developed late in the nineteenth century in France, by which time it was hard to argue that droit d’auteur was a property right flowing directly from natural law. Droit moral emerged unsteadily and in a haphazard fashion from case law. Not until 1902, in Lecocq, is the now-​familiar dualist conception of the author’s right really even recognizable.27 Yet, even though the historical antecedents of droit moral are not as antique as some have sought to claim, it should be acknowledged that continental Europe has been far readier than the Anglo-​American legal tradition to embrace the concept presently.

3.4 German-​speaking Territories The political fragmentation of Germany had a significant effect on the development of its copyright law. Privileges could be obtained from the late sixteenth century, and even well into the nineteenth century, but they had to be obtained for each jurisdiction (which in the eighteenth century meant 300 different states). Reprinted books could be readily traded across German-​speaking markets, and some jurisdictions (notably Austria) actively encouraged reprinting. The reprint trade was damaging to the North German publishers, particularly in its most important centers such as Leipzig (Saxony) and Berlin (Prussia). Sixteenth-​century Saxon Acts were concerned with good regulation of the local book trade, particularly preventing the circulation of offensive religious and political material. Seventeenth-​century Saxon Acts show, additionally, emphasis on seeing privileges respected, and the prevention of reprints.28 Following competition over the works of the popular author Gellert, in 1765 the Leipzig publishers formed a cartel of those (including Prussians and others who wished to join) willing to take action against pirates reprinting other members’ works.29 Although the initial Prussian response was indignant, well-​ placed connections later led to a general (though somewhat ambiguous) ban on reprints, promulgated in 1766 by the Prussian Cabinet and signed personally by the Prussian King, Frederick the Great. A Saxonian Statute in 1773 reiterated the ban on reprints, covering both privileges and rights directly acquired from the author. It protected native publishers and also foreign ones, though the latter had to arrange for local printing and show that Saxon printers would be reciprocally protected in the foreign territory (in practice only Prussia). Reprinting remained very much a live issue, and received the attention of eminent German philosophers, including Kant and Fichte. This raised also questions of the nature of the publisher’s right and the author’s right. One approach is seen in the provisions of the Prussian Statute Book 1794 which govern publishing contracts. The author’s right is not 27 

Cinquin v Lecocq (Court de Cassation 1902). “Electoral Saxon Printing and Censorship Acts from 1549 to 1717, Leipzig (1724)” in Primary Sources. 29  See “Philipp Erasmus Reich and the Leipzig publishers’ cartel, NN [Leipzig] (1765)” and the commentary on it, both in Primary Sources. 28 

Intellectual Property Law in Western Europe    183 thought of as a property right, and what is transferred to the publisher (Verlagsrecht) is an exploitation right for a particular edition. Although these provisions were originally intended to replace book privileges, privileges continued to be issued, and indeed were regarded as offering a stronger form of protection. The provisions also reveal their historical roots: The enduring importance of the book trade and its practices; and a persisting focus on the material book (here, in the form of an edition). By the time of the 1837 Prussian Copyright Act, however, things had changed considerably, and features of modern copyright law are visible. This Act had a number of new elements: Protection stemmed from the author, whose life defined the term (with 30 years post mortem for heirs); subject matter was broadened beyond printed books, to cover literary, artistic, and musical works; acts of infringement related to an abstractly conceived work, rather than the material work, and were more broadly defined than previously. Prussia was instrumental in achieving a federal law covering all the German states. The absence of common standards on copyright was regarded as an impediment to the book trade by the big publishing houses in both Prussia and Saxony. Between 1827 and 1829, Prussia entered into bilateral agreements (based on national treatment) with most of the bigger Member States of the German Confederation, and many of the smaller ones. A number of copyright directives followed in the 1830s, as the Confederation adopted first a general principle of national treatment, and then agreed a significant degree of harmonization of copyright law. The Directive of 1837 specified a minimum term of protection of ten years following publication.30 The first copyright act for the German Reich was the Copyright Act of 1870, adopted by the new German Empire on 1 January 1871, the day that it was officially constituted. It followed the existing legislative tradition with its focus on the concept of “reprinting” the physical act of copying, rather than a positive right vested in the author. Developments in the publishing and printing industries overtook this methodology, as a number of important decisions of the German Supreme Court (Reichsgericht) acknowledged. The Copyright Act of 1901 took a different approach, based on the relationship of the work and its author.31

4. Trademarks Trademarks are ubiquitous in modern life. Many are avidly sought by buyers, and the goods to which they are applied can command huge premiums in the market. Their economic significance, and their power over consumers, have led to criticism as well as appreciation. The appropriate extent of their legal protection is a contested matter. In reviewing the history of this area, it is important to keep two aspects of it separate, at least conceptually. One is the use of marks on goods; a phenomenon of considerable antiquity. The other is the legal protection of marks. This is a different history, although it necessarily runs beside (and often within) the social history of marking things. The modern concepts of trademark law did not crystallize until well into the nineteenth century. 30  “Commentary on: Directive for reciprocal copyright protection within the German Confederation (1837)” in Primary Sources. 31  See “Commentary on: Copyright Act for the German Empire (1870)” in Primary Sources.

184   Catherine Seville

4.1 The Early Uses of Marks Marks have been used on livestock since prehistoric times, it is assumed, to indicate ownership. Marks were used extensively during the Roman Empire, on all sorts of items (particularly pottery and metal items). They are thought to have indicated various things; ownership, the maker, and in some cases official approval or recognition. Since trade flourished during this period, and over a considerable geographic area, some commentators have suggested that these marks did have features of modern trademarks, in that they were “symbols of good will identified with a single source.”32 These claims should be treated with some caution, particularly before detecting close parallels with modern practices. Although it is evident that personal marks and makers’ marks were used, it is hard to be certain how they were used and understood in these very different contexts. During the Middle Ages, particular trades were required to mark their work; weavers, metalworkers, goldsmiths, for example. Guilds kept books or registers of these marks, and in important market towns these would list foreign trademarks also. Within the guild, this ensured control and accountability. Disputes were usually resolved internally, though infringers outside the guild might face severe punishment. In the sixteenth century, Flemish tapestries had such a high reputation that Charles V protected the trade with a special edict. All Flemish tapestries had to be marked with the mark of the master who made them, and also the mark of the city of Flanders. Infringers faced loss of their right hand.33 In France, by an edict of Charles IX in 1564, imitators of marks were punished as counterfeiters, so faced capital punishment or the galleys.34

4.2 The Industrial Revolution and Other Forces for Change As the power of the guilds waned, patterns of trade altered. Local markets could no longer be confined and controlled in the same way. In the late eighteenth century production processes began to change, also, as craftsmen and hand production methods were increasingly replaced by mechanized methods of manufacturing. The Industrial Revolution transformed business, and brought a period of unprecedented change and growth. As markets expanded, traders continued to use marks to identify the origin of their goods and to indicate quality, but in this new context. Buyers now understood signs as a reliable indication of the source of goods. A particular manufacturer might come to be associated in buyers’ minds with goods of a particular quality; a factor likely to affect purchasing decisions. This period also brought a considerable increase in the reading public, and mass media blossomed to serve their needs. Goods could now be advertised on a scale which would previously have been impossible. These changes brought with them the rise of the brand, which allowed advertisers to distinguish their products not simply by their objective characteristics, 32 

TD Drescher, “The Transformation and Evolution of Trade marks—​From Signals and Symbols to Myth” (1992) 82 The Trademark Reporter 301, 310. 33  Ordonnance statut et edict sur le fait et conduyte du stil et mestier des taipissiers du 26 mai 1544. 34  ES Rogers, “Some Historical Matter Concerning Trade-​marks” (1910) 9 Michigan L Rev 29, 33.

Intellectual Property Law in Western Europe    185 but on the basis of what Drescher has called “mythic appeal”: the brand name began to represent a bundle of values, expressed and intended to appeal to a particular group of buyers in the market. The mark thus became more than a simple signal indicating the source of goods, and developed into “a symbol, a poetic device, a name designed to conjure up product attributes whether real or imagined.”35 This power of branding is one that we see acting strongly on today’s consumers, who use marks in the construction of their own identities.

4.3 The Beginnings of Modern Trademark Law The formal legal protection of marks emerges quite late on from this wider history of the use of marks. Although, as has been seen, penal sanctions were provided for by states, often the rules concerning the use of marks were set out and enforced by guilds or their equivalent.

4.3.1 Britain In historical accounts of the British law protecting trademarks, the sixteenth-​century case JG v Samford (1584) is often noted as significant. The case was not reported, but it was referred to in Southern v How: Samford was said to be a case in which the Court of Common Pleas had held that an action was maintainable by a Gloucestershire clothier with a reputation for selling very good cloth, against someone who deliberately put that clothier’s mark on poor-​ quality cloth.36 Samford is a somewhat obscure authority and cannot be regarded as a watershed. Nevertheless, it was built on during the seventeenth and eighteenth centuries, and as Bently says, “it seems clear that by the late eighteenth century the common law courts were prepared to permit traders to bring actions based on intentional, damaging, misrepresentations of this sort.”37 The action on the case for deceit was the mechanism generally used.38 Later, injunctive relief became available in the courts of equity to restrain infringement of a trademark.39 Thus trademark law was originally grounded firmly in fraud, although gradually the use of proprietary language has come to prevail. But notwithstanding the availability of these general actions at common law and in equity, in the first half of the nineteenth century, protection for British trademarks was somewhat piecemeal. As in other European countries, there was statutory control and protection of various trades, which included the prohibition of false marking. Acts covered aspects of the cutlery and metal working trades, various textile manufacturers, marks on gun barrels, and the hallmarking of precious metals. Use of heraldic insignia was also controlled. Some misuses of marks could fall within the criminal law, as forgery or conspiracy to defraud, for instance. It was possible to attempt to use design law to protect labels. But there was “no

35 

Drescher (n 32) 330, 338. (1617) 79 ER 402 (Cro Jac 471); also (1617) 79 ER 1244 (Pop 144). 37  L Bently, “From Communication to Thing: Historical Aspects of the Conceptualisation of the Trade Mark as Property” in GB Dinwoodie and MD Janis (eds), Trademark Law And Theory: A Handbook of Contemporary Research (Edward Elgar 2008) 3, 7. 38 See Sykes v Sykes (1824) 3 B & C 541. 39  Millington v Fox (1838) 40 ER 956 (3 Mylne & Craig 338). 36 

186   Catherine Seville (coherent) law of trade marks.”40 This caused increasing difficulty for those attempting to protect their marks. In 1862, a Select Committee was appointed. William Hindmarsh QC, who was closely involved in the proposals being considered, reported that fraud was ever more extensive; he called it “a sort of gangrene which is eating the vitals of our manufactures.” It was felt that there was in practice no available remedy for these frauds, since chancery proceedings were so lengthy and expensive. Hindmarsh also observed that the current law “is a law to prevent cheats generally,” but did not give a right to a name or mark.41 This was a very fair synopsis, showing that British trademark law had still not adopted its modern shape. Another problem often mentioned was that British manufacturers were facing deliberate and damaging counterfeiting of their marks abroad. This issue was not simple to address, since the fragmentary nature of British law, and the expense of its enforcement procedures, made negotiation of international agreements difficult. The outcome of the Select Committee was the 1862 Merchandise Marks Act, which created various criminal offences for the use of mis-​descriptions in trade with intent to defraud. This very limited improvement did not address the need for a clear exposition of the principles of modern trademark law. Case law had to suffice until the 1875 Trade Marks Registration Act. Registration was now equivalent to public use, so litigants no longer had to establish this. The 1875 Act took a cautious and narrow view of the definition of a trademark, which was different from both that adopted by the criminal regime (the 1862 Act), and the existing common law regime (later to be called “passing off ”). The two statutory regimes were eventually brought into harmony in 1887. The definition of registrable signs had been widened in 1883, though difficulties in interpretation in practice caused considerable frustration, and a further revision followed in 1888. The trend was to widen the statutory definition, but to be more explicit regarding exclusions. It was also confirmed that the statutory and common law schemes ran side by side. Trademarks were now widely regarded as property, and not merely as a mechanism for preventing fraud. Thus, by the early twentieth century, British trademark law had adopted a shape recognizable in the modern law.

4.3.2 Continental Europe In terms of the development of modern trademark law, similar general patterns and trends to those seen in Britain can be detected elsewhere in Europe. That is, an existing patchwork of regimes (often of considerable long standing) governing particular trades and localities, and a system of criminal penalties for fraud and deception in marking or marketing falsely marked goods. Although some form of protection for marks was widespread, there was usually nothing we would recognize as a modern trademark law until well into the second half of the nineteenth century. The detailed regimes were, naturally, often very particular to their context. Only a very selective and high-​level sketch will be attempted here.

40  L Bently, “The Making of Modern Trade Mark Law: The construction of the legal concept of trade mark (1860–​1880)” in L Bently, J Davis, and JC Ginsburg (eds), Trade Marks and Brands: An Interdisciplinary Critique (CUP 2008) 3, 4. 41  “Select Committee on Trade Marks Bill and Merchandize Marks Bill, Report, Proceedings and Minutes of Evidence” (1862) 12 Parliamentary Papers 431, 2754, 2757.

Intellectual Property Law in Western Europe    187 In France, during the Ancien Régime, marks were often used to indicate the provenance of articles such as textiles, or those made by metalworkers. Many trades were regulated by guilds and corporations under the broad control of the monarchy. The rules served to guarantee the quality of products and to prevent counterfeiting, but were also resented as restricting freedom of trade and as a tax on industry. The guilds and corporations in France were abolished in 1789, following the Revolution, and all these regulations fell with them. This freedom brought with it unwanted consequences, and it was recognized that a total lack of constraint was harmful to industry. The rules on hallmarking for gold and silver items were reinstated, though a sharp line was drawn under former practices. Criminal penalties for counterfeiting trademarks were enacted by Consular decree in 1803, and these provisions were later incorporated in the Criminal Code. However, the severity of the penalties (including being condemned to the galleys) is said to have deterred their use, and these were somewhat relaxed in 1824.42 Also in 1824, it was made a civil offence to affix a business name or place to goods without justification. Writing in 1872, Nestor Treitt, the legal advisor to the British Embassy in Paris, described France’s rules prior to 1857 as “heterogeneous, incongruous, and sometimes contradictory.”43 They were the focus of considerable complaint, but one attempt to modernize the law was halted by the February Revolution in 1848. After considerable further study and debate, the Law of 23 June 1857 was adopted, which Treitt described as “marked with the stamp of wisdom and enlightenment.”44 It was the first modern trademark system in Europe. Property in a mark was established by use, and collective marks were recognized. A register was established the following year, though entries were received without examination, and were declarative only.45 Also notable is that foreigners with commercial establishments in France enjoyed exactly the same rights as French nationals under this Law. The trademark system ran in parallel with the law on unfair competition, introduced into the Civil Code in 1832. In Germany, protection of trademarks began in individual states, during the nineteenth century. Some law affecting trademarks was contained in the Criminal Code of the North German Confederation (31 May 1870), which was taken over by the German Empire. The first German trademark law (Gesetz der Markenschutz) was enacted in 1874, putting in place a registration system. In this it was typical of many states by this time.46 Even before the Paris Convention of 1883, almost all countries protected trademarks in one way or another, and most had a registration system of some sort. It was widely acknowledged that both commercial interests and the public interest required such mechanisms.

42  Loi du 22 germinal an XI du 12 avril 1803; Code penal, art 142; loi du 28 juillet 1824 relative aux altérations ou suppositions de noms sur les produits fabriqués. See E Pouillet, Traité des marques de fabrique et de la concurrence déloyale en tous genres (6th edn, Marchal et Godde 1912), 1–​12. 43 “hétérogènes, disparates, et quelquefois contradictoires”: “Reports Relative to Legislation in Foreign Countries on the subject of Trade Marks C-​596” (1872) 54 Parliamentary Papers 586, 26. The interest was in the availability of protection for British marks in these important markets, which was a significant concern. 44  “. . . frappée au coin de la sagesse et des lumières,” (n 44) 27. 45  G Galvez-​Behar, A Beltran, and S Chauveau, Des brevets et des marques. Une histoire de propriété industrielle (Fayard 2001) 91. 46  See further SP Ladas, Patents, Trade Marks and Related Rights (Harvard UP 1975) vol I, 31–​32.

188   Catherine Seville

5. Designs The history of design law presents a very fragmented picture. Design has become an important area, both culturally and in commerce. But within legal systems, it seems to have no inevitable location. Viewed from certain perspectives it may be seen as lying at the boundaries of both patent and copyright law. But copyright protection can seem too generous, particularly its term. Patent law presents hurdles which seem inappropriately high. Utility models and petty patents have other drawbacks. Potentially, designs may be protected with trademarks, and via unfair competition rules. Specific protection is also a possibility. Sui generis design protection has the advantage that it can offer a somewhat less generous protection than copyright, and impose more moderate formalities. It can therefore address concerns about unfair competition, whilst choosing how much protection to grant, thus tempering the dangers of monopoly. Nevertheless, the conceptual difficulties persist. The breadth of the field is a particular challenge. The concept of design covers useful or functional items as well as aesthetic creations. This leads to arguments for different forms of protection for different parts of the design domain—​registered and unregistered regimes, and short and longer terms of protection, for example. This also generates significant disagreements on policy. Should design protection be included in the field of existing rights where possible? If the decision is to adopt a sui generis design regime, what subject matter should it cover? Should formalities be required? What approach should be taken to novelty and originality? Should overlapping protection of several regimes be encouraged, permitted or prevented? This final question is highly controversial. A policy of cumulation gives dual protection to articles which are both ornamental and useful, under both copyright and design laws. Inclusion of such articles within copyright challenges the basic principles of copyright, and perhaps reduces the incentive to use special design regimes. Non-​cumulation compels the demarcation of a clear boundary, a task which no system has managed with complete success. Partial or limited cumulation is a partial but limited solution. Such are the seemingly inevitable trials of drafting design law. The history of design law in many countries shows evidence of having been developed in response to particular problems, whether specific or general. There is often a bewildering variety of schemes, which may well overlap or even contradict each other.

5.1 France, and Elsewhere in Continental Europe France was something of a pioneer in the design field. Acknowledged as a leader in the quality of design, she was also prompt to seek to protect it. The formal legal protection of designs in France dates from the early eighteenth century, when a number of laws were promulgated to prevent the copying of designs in the silk industry. This was one of France’s most important industries, the luxury fabrics it produced being much loved by the nobility and royalty both in France and elsewhere. The first law was an ordinance of the Lyon consulat, in 1711; Lyon was the leading town for silk weaving at this time. The ordinance prohibited anyone working in the Lyon silk trade from taking a design entrusted to them

Intellectual Property Law in Western Europe    189 for manufacture. In 1787 similar regulations were applied to the silk trade throughout the kingdom.47 These regulations were overturned by the Revolution, falling with the abolition of trade guilds and corporations. The subsequent law of 1793 governing rights of literary and artistic property was worded sufficiently broadly to cover fabric designs, but it was not clear that it did so, and it certainly was not passed with them in mind. The complete lack of regulation had deleterious effects in the silk trade, including allowing the unscrupulous to exploit others’ design work. In 1806 a new law was put in place, establishing a Conseil de Prud’hommes in Lyon. Embedded in this general scheme was a section covering property in designs (“la propriété des Dessins”).48 Any manufacturer who wished to be able to claim property in a design (un dessin de son invention) had to deposit a signed and stamped sample of it in the archives of the Conseil. In case of a dispute between two manufacturers, the two packets would be opened by the Conseil, which would then issue a certificate stating which had priority in terms of date. The law of 1806 also provided for further conseils to be set up in other factory towns. This was done, and the law was gradually extended and applied to other things than silk (wallpaper, carpets, etc), and eventually to industrial models more widely. There was much contradictory and confusing case law, however, as the courts struggled to determine whether a particular design should be protected by the law of 1793, and/​or that of 1806. The general difficulty was the now familiar conceptual one: whether (and, if so, how) to distinguish an artistic design from an industrial design. Following that determination, what consequences for the legal protection of the design should follow? Should a sharp boundary be drawn, or could protections overlap? Another tough question was the standard of novelty required.49 The difficulty of resolving the various issues of principle is attested in the nineteenth ­century by the three separate attempts to reform French design law, all of which failed to pass. During a debate on one of these proposals in the Chamber of Peers (1846), Victor Hugo pointed out that Bernard Palissy was a potter, Benvenuto Cellini was a goldsmith, and that Michelangelo had made ecclesiastical candlesticks. Hugo asked, who would dare to say that the things they had produced were not works of art? Although Hugo was in favor of protection for designs and industrial models, he was not in favor of assimilating their protection to that of literary property, considering that both were art, but of different levels.50 Later, the legal theorist Eugène Pouillet went further. He saw no benefit in distinguishing between art “proprement dit” and industrial art. Art took many forms, but it remained one single thing in essence.51 It was this theory of the unity of art (l’unité d’art) which led in 1902 to the extension of the law of 1793, so that the exclusive property rights in Article 1 were given also to sculptors and designers of ornaments, whatever the merit and purpose of their work.52 The law of 1806 was repealed by a new design law in 47 

See E Pouillet, Traité Théorique et Pratique des Dessins et des Modèles de Fabrique (3rd edn, Marchal et Billard 1899) 3–​10. 48  Titre II, Section III. 49  For a summary see C Ducreux, “La législation sur les Dessins et Modèles en France” in Annuaire de l’Association internationale pour la protection de la propriété industrielle (1898) vol 1 350–​356. 50  V Hugo, “Propriété des oeuvres d’art” in V Hugo, Actes et Paroles, vol 1 (J Hetzel & Cie 1846). 51  “Il rest un dans son essence”: Pouillet (n 47) 73. 52  “. . . aux sculpteurs et dessinateurs d’ornement, quels que soit le mérite de la destination de l’oeuvre”: loi du 11 mars 1902.

190   Catherine Seville 1909, which stated explicitly that the rights it conferred were granted without prejudice to rights held under other legal provisions, in particular, the law of 1793.53 This was the foundation of the system of cumulative protection for designs and models, which is still in place in France today. The French law of 1806 was influential, in that other countries began to adopt sui generis design laws. However, significant modifications were adopted, and the “unity of art” approach was not widely accepted. The French law of 1806 had been extended to Belgium when it was annexed by Napoleon, and Belgium retained this law for a considerable time after independence. In 1935 Belgium did in effect adopt the unity of art approach by including designs (additionally) within the protection of its Copyright Law of 22 March 1886, and defining designs very broadly. However, the Uniform Benelux Designs Law, in force 1 January 1975, requires designs to have “marked artistic character” (“un caractère artistique marqué”) before they can be protected by design and copyright law. In Europe generally, the legal protection available for designs remained fragmented and often inadequate.54 Some German states had adopted decrees prohibiting the copying of designs, but the first specific national protection was the Registered Designs Act (Geschmacksmustergesetz), passed in January 1876. The German systems of copyright law and design law were initially quite distinct, with specific provision in the Copyright Law of 1876 that a work of art would lose copyright protection as soon as it was applied to an industrial product. The Copyright Law of 1907 softened this approach somewhat, providing that designs for products of the industrial art could be considered as works of art. This therefore introduced some cumulation of protection, but only in a limited number of cases. Italy, also, took the position of “duality of art,” regarding ornamental designs as normally ineligible for copyright protection. From this perspective, such designs are dependent on useful articles, and so primarily objects of commerce. Thus, they lack the independent existence judged an essential attribute of true works of art.

5.2 Britain In Britain, the earliest design laws were passed at the end of the eighteenth century. Again, they arose out of the needs of a specific industrial sector—​one very important in British trade. In 1787 the House of Commons received a petition from a number of “Callicoe Printers, Artists, Designers of Drawings, Engravers and other Proprietors of original Patterns for printing Linens, Cottons, Callicoes, and Muslins.” Others had “taken the liberty of the copyright, printing and publishing, great quantities of base and mean copies and imitations thereof, to the great detriment of the petitioners and other artists, and to the discouragement of the said arts and manufacture.”55 A similar complaint by artists and engravers had resulted in the Engravers’ Copyright Act 1735, and this petition asked for the same sort of limited term protection for their property. A Bill was brought in, though opposed by country manufacturers, arguing that it would be detrimental to British manufacture, and also that textile manufacture was by nature imitative. The 1787 Act was, presumably as a result of 53 

Loi du 14 juillet 1909, art 1. For the countries with special design laws before the Paris Convention see Ladas (n 46) 28–​30. 55  Petition of 15 March 1787, Journal of the House of Commons vol 42, 546. 54 

Intellectual Property Law in Western Europe    191 such arguments, very cautious in its terms. Every person “who shall invent, design, and print . . . any new and original Pattern or Patterns for printing Linens, Cottons, Callicoes, or Muslins” was granted the right to print and reprint it, but for two months only. This was significantly shorter than the 14 years granted to engravings. Protection was automatic, and did not require registration. The Act was drafted to remain in force only temporarily, but was renewed in 1789. In 1794, the term of protection was extended to three months, and the measure was made permanent. Wider design protection followed in the nineteenth century. In part, this stemmed from a desire to improve British design. Although British manufacturing was strong in terms of cost and rate of production, it was thought to fall short in terms of its aesthetic qualities. French goods were considered to be superior in design quality, and therefore preferred by the public at the upper end of the market. In 1835–183​6, a Select Committee on Arts and Manufactures took evidence on wide-​ranging aspects of design. Manufacturers expressed their frustration at the piracy of high-​quality design work, and the lack of adequate legal protection. Following this, the 1787 Calico Printers’ Act was replaced by two new acts. The 1839 Copyright of Designs Act was similar to the 1787 Act, in that it provided three months’ automatic protection, though for a wider range of fabrics. The 1839 Designs Registration Act offered protection for the shape and configuration of any article of manufacture, conditional on registration, for a period between one and three years. The Register can be seen as “the first modern registration system for intellectual property.”56 The 1839 Acts were quickly replaced by the 1842 Ornamental Designs Act and the 1843 Utility Designs Act. This conceptual division into ornamental and utility designs marked a significant change. As elsewhere, the definition of these categories, and the response to overlapping protection (including copyright and patent law), was to prove problematic. Subsequent statutory interventions display a variety of policy approaches, none of which has resolved the persisting difficulties and anomalies.

6.  Towards a European Perspective 6.1 The International Context As trade in goods of all kinds became increasingly global, national protection for IP rights became ineffective in protecting the holders’ interests. Right holders began to look for protection where their markets were. Initially, countries would seek mutually advantageous agreements with other countries on an individual basis. A variety of bilateral treaties, conventions, agreements, and declarations were tried. Sometimes these were limited to a specific right, particularly for literary property or copyright. In other cases, mutual protection (particularly of trademarks and names, and designs) was written into general commercial treaties. Until well into the second half of the nineteenth century, mutual arrangements for industrial property were generally included in a commercial treaty or treaty of amity. The aim was to protect home trade and industries. The focus of these agreements was usually trademarks, with some including industrial designs also. The objective was to ensure that 56 

Bently and Sherman (n 12) 67.

192   Catherine Seville trademarks could be acquired and enforced by non-​nationals. The standard strategy was to provide for national treatment, usually subject to compliance with local requirements. The Paris Union was thus a real watershed. No agreements of real significance protected patents on a reciprocal basis until the 1881 Treaty of Commerce between Germany and Austria-​ Hungary (by which time a draft of the Paris Convention had already been adopted). Whatever the content of these agreements, such arrangements could only achieve a certain amount. Differences in the scope of national laws could cause significant problems for those attempting to rely on them. Differences in the treatment of citizens and foreigners often persisted, even in agreements purporting to offer reciprocal protection. A foreigner might well find it harder to comply with local formalities, or to bring an enforcement action, for example. Agreements were also liable to denunciation by either party. By the middle of the nineteenth century, these difficulties were sharply felt. This eventually led to the formation of the Paris Union in 1883; the first international agreement on IP. The achievement that this represented should be clearly acknowledged. International harmonization is extremely challenging, because national laws have grown out of local conditions, both legal and commercial. Changes to established regimes and entrenched traditions can feel uncomfortable and unwelcome. They are certainly hard to negotiate. Further challenges stemmed from the fact that modern IP law was, in many ways, barely formed. Rapid changes in the commercial environment seemed to necessitate changes to the various IP regimes. But decisions as to the nature of those changes were hard to achieve, even in a national context. The practical reality of the lack of adequate international protection of foreign patents and inventions was seen when the government of Austro-​Hungary invited countries to an international exposition, to be held in Vienna in 1873. Foreign inventors were dubious—​even suspicious—​as to whether to exhibit their inventions, given the inadequacy of the likely protection. In response, a special law was passed offering temporary protection to foreigners exhibiting at the Exposition from infringements of their inventions, trademarks, and patterns or models. This led to further discussions, first in Vienna (1873), and then in Paris (1878). The Paris Congress covered all industrial property; patents, trademarks, designs and models, photographic work, trade names, and industrial rewards. Various sorts of agreement were considered, including uniform legislation. But it was impossible to agree on the substantive content of such a scheme, and an agreement based on the principle of national treatment seemed to be the only pragmatic possibility. Following the conference, although a detailed universal law was drafted, it was a politically more realistic Projet d’une Union Internationale pour la Protection de la Propriété Industrielle which was circulated by the French government. This formed the basis of the discussions at a further conference in Paris in 1880. The proposal was to create a union which, without unduly intruding on national laws, would lay down a number of principles directed at securing the protection of industrial property, both nationally and internationally. A draft Convention was agreed. The final text of the Convention for the creation of the Union for the protection of industrial property was approved (with various reservations) and signed by 11 countries in Paris in March 1883. It was ratified in June 1884 (a further three countries acceding at the same time), and came into effect one month later. Founded on the principle of national treatment, the Convention represented a very significant step in the international protection of industrial property. From this small base of membership, the number of contracting parties has grown steadily, and now includes most countries of the world and all European countries.57 57 

Ladas (n 46) 59–​68.

Intellectual Property Law in Western Europe    193 Many more international conventions concerning IP have followed—​far too many to list here. But the advent of the foremost of these will be noted briefly in relation to the main rights. There are also several more modern international organizations of significance for IP in Western Europe. The World Intellectual Property Organization (WIPO) was established, in 1967, within the framework of the United Nations. It administers many key treaties, including the Paris Convention, the Berne and Rome Conventions on copyright and neighboring rights, and the Madrid Agreement on trademark registration. Also important is the World Trade Organization (WTO), created in 1994 as part of the General Agreement on Tariffs and Trade. The WTO’s main significance for IP is that it administers the Agreement on Trade-​Related Aspects of Intellectual Property Rights, including Trade in Counterfeit Goods (TRIPS). Most states have joined the WTO, and under TRIPS there is a requirement for mutual recognition of IP rights (IPRs) at a higher level of protection than is found in the WIPO conventions. The consequences of this are beyond the scope of this chapter, but the very existence of the TRIPS Agreement indicates the power of global trade. This pressure towards the global harmonization of IPRs is not universally welcomed in the present day, as several of the other chapters in this volume make clear. These contemporary political and philosophical debates have roots in the earlier historical debates discussed throughout this chapter.

6.2 Patents It should be understood that the achievement represented by the Paris Convention seemed far from inevitable at some points. Between 1850 and 1875, a strong anti-​patent movement grew up in several European countries, calling not just for reform of the patent system but for its abolition. For a time, it seemed likely to prevail.58 However, the political tide turned, and support for patent protection returned. In terms of patents, the Paris Convention was very significant in establishing the principle of national treatment. Also very important is the “right of priority” which ensures that an application in one contracting state does not prejudice an application in another. However, the Paris Convention did not establish minimum substantive standards of protection for patents, and also left untouched the diverse procedural provisions. The Convention also provides a framework for a number of international patent agreements, including the Patent Cooperation Treaty (PCT) and the European Patent Convention (EPC). The PCT was signed in 1970. Its aim is to centralize and simplify international patent applications, and thus to reduce costs. Again, it is essentially procedural rather than substantive, providing for a system of international application and preliminary examination. Applicants can use one procedure to make many national applications, but the grant remains a matter for each national patent office (including the European Patent Office). A patent for the European Economy Community was first proposed in the early 1960s. Later, a two-​part plan emerged, which envisaged both a EPC and a unitary Community patent. The first limb of this was intended to provide a centralized granting system which offered a more rigorous

58  F Machlup and E Penrose, “The Patent Controversy in the Nineteenth Century” (1950) 10 Journal of Economic History 1.

194   Catherine Seville system of examination than the PCT, though still to result in a bundle of national patents. The EPC was signed in 1973, and has proved very successful. The vision of a Community patent has taken far longer to materialize. After decades of controversy, an EU Unitary Patent Package has now been agreed. It will establish a Unitary Patent and a Unified Patent Court. Initially scheduled for 2016, implementation of the Package has been repeatedly delayed by political and legal events in the UK and Germany, including Brexit and most recently a challenge to the Package’s constitutionality in Germany.

6.3 Copyright In response to widening markets for copyright works, a network of bilateral treaties grew in Europe from the late 1820s. By the mid-​1870s, many of the important publishing markets in Europe were covered, at least to some extent, by a significant network of bilateral treaties. However, their terms were not uniform, and the protection afforded could be inadequate in practice. Efforts began to achieve a harmonized solution. A congress of authors and artists met in Brussels in 1858. In 1878 an international literary congress was organized in Paris by the Société des gens de lettres. It passed a resolution stating that an author’s right was a form of property, and a perpetual right. The Congress also established the International Literary Association, later expanded to include artists, becoming l’Association littéraire et artistique international (ALAI)—​which is still an important body. From these small beginnings emerged the 1886 Berne Convention on the Protection of Literary and Artistic Works. During the negotiations, there was tension between those countries (particularly France) seeking a high level of protection for authors, and those favoring a less-​demanding agreement which would attract more signatory states.59 Pragmatism eventually prevailed. The Convention was based on the principle of national treatment. Term of protection was an important exception, and this was subject to a rule of national reciprocity. Ten states, largely European, signed the Convention in 1886, and it came into force the following year. It was a major achievement, which continues to form an important foundation for international copyright protection, with now a much-​expanded membership. Its minimum requirement for copyright term is 50 years from the author’s death. The Universal Copyright Convention  (UCC) (1952) offered a less demanding standard of protection, though it formed a useful entry point for many countries then unwilling to meet Berne requirements. It is as a result of the UCC that the copyright symbol © became widely known, as its use on copies of a work (with the name of the copyright proprietor and the year of first publication) signified that necessary formalities had been complied with. The Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations (1961) addresses “neighbouring rights.” There was opposition to the inclusion of these in the Berne Convention, particularly from authors’ societies in continental Europe, who regarded such rights as non-​creative and derivative. Much more recently, the two WIPO Internet Treaties (2002) have addressed challenges created by the impact of new technologies on IPRs. Within the European Union (EU) itself, there have been a number of significant legislative interventions affecting copyright. Most of these are quite specific in terms of their subject matter (computer programs, rental and lending rights, satellite and cable transmission, 59 

For full details see C Seville, The Internationalisation of Copyright Law (CUP 2006) ch 3.

Intellectual Property Law in Western Europe    195 databases, e-​commerce, resale rights, orphan works). The Information Society Directive harmonizes three basic exclusive rights of copyright holders and attempts some harmonization of the exceptions to copyright within the EU. The Term Directive adopts a basic term of life plus 70 years.

6.4 Trademarks As the second half of the nineteenth century progressed, demands from traders for the international protection of their trademarks grew significantly. This flowed directly from their business needs. In Britain, for example, the 1862 Select Committee heard a good deal of evidence from manufacturers describing the problems they faced as a result of counterfeiting abroad (particularly in Prussia and Germany). It was also noted that foreigners perceived British law to be uncertain and unclear (with no statute to point to), and that the remedies available were hard to obtain and unsatisfactory.60 The same was broadly true elsewhere in Europe. Every country had a similar jumble of laws and regulations aiming to protect the public against fraud, and to protect business interests. There was a general requirement that marks be distinctive, but beyond that the approaches could display significant differences. Differences in detail were legion. Approaches to foreign marks varied, but they were not usually recognized without some sort of reciprocal protection from the home state. It was not until the second half of the nineteenth century that countries began to have consolidated trademark legislation, and the pressure from users of the system was a factor in that change. It was easier to negotiate agreements if one’s own national law was coherent, and displayed recognizably standard features. A substantial number of bilateral treaties were negotiated. Given the significant differences between national laws, and the fact that the trademark laws in many European countries were newly-​established, it was not possible to agree a single, common definition of “trademark” at international level. The solution adopted by the Paris Convention (1883) was the so-​called telle quelle clause. This provided that every trademark duly registered in a signatory country had to be protected, in the form originally registered, in all the other countries in the Union. Trade names did not have to be registered in order to secure protection.61 Although the Paris Convention gave a four-​month period of priority (Article IV), in many countries this did not allow sufficient time for filing, given the practical difficulties of foreign registration. A proposal for an international registration system was first discussed at the 1886 Rome Conference, leading subsequently to the Madrid Agreement of 1891. This enabled a trademark owner to apply (via its national trademark office) for an international registration, recognized by all Madrid Agreement signatories, ensuring the same protection in each contracting country as if the mark had been deposited there directly. The Madrid Agreement is thus essentially a procedural convention, and not one which attempts substantive harmonization. The idea of an international classification of trademarks was also discussed at the 1886 Rome Conference as part of a wide proposal which would have covered patents, trademarks, and designs. It was not enthusiastically received. 60 

“Select Committee on Trade Marks Bill and Merchandize Marks Bill, Report, Proceedings and Minutes of Evidence” (1862) 12 Parliamentary Papers 431. 61  Paris Convention for the Protection of Industrial Property 1883, as amended (Paris Convention) 828 UNTS 205, arts VI and VIII.

196   Catherine Seville The International Bureau of Berne adopted an informal classification, and attempted to insert this into the Madrid Agreement at the Brussels Conferences (1897–​1900), but without success. The problem dragged on for decades. A further informal classification was adopted by the International Bureau in 1934, later adopted by a number of countries. This was the basis of the Nice Agreement (1957), included in the Madrid Agreement in the same year. The EU’s interest in trademark protection has much the same drivers as motivated nineteenth-​century reformers. One concern is eliminating barriers to trade within the single market. Strong trademark protection is also seen as offering essential protection against counterfeiting and product piracy. The first step was to harmonize national laws, via the 1988 Trade Mark Directive. This harmonizes the requirements for obtaining and holding a registered trademark, but Member States remain free to determine procedural provisions concerning registration, revocation, and invalidity of marks. There is also a u ­ nitary Community Trade Mark which provides protection throughout the EU with a single registration procedure. Applications are dealt with by the EU Intellectual Property Office, previously known as the Office for Harmonization in the Internal Market, which opened in 2006.

6.5 Designs The rapid development and increased importance of the field of design, both from the manufacturer’s and the consumer’s point of view, ensured that focus remained on the nature of design protection. Use of a “patent approach” implied formalities, examination, expense, and often deposit. Increasingly, countries responded to the quality of many artistic designs, and applied art, by including these within the definition of copyright. This soon led to the argument (from some) that all designs, whether “pure” art or “industrial” art, should be protected in the same way. Attitudes to overlapping protection differed in national laws. All these factors made international harmonization problematic. As discussed above, there was a muddle of national laws, and many countries did not protect designs at all. A few states allowed foreigners to register designs, though compliance with formalities was often more difficult in practice for non-​nationals. A few reciprocal arrangements concerning designs and models were negotiated, but usually as part of an agreement which also dealt with trademarks. Designs were included in the 1883 Paris Convention in the sense that Article II referred to industrial designs and models, and guaranteed national treatment. They were also included in the right of priority in Article IV. However, nothing was required of member countries in terms of the protection of designs, and many had little or no protection. This was not a requirement of the Paris Convention until the Lisbon revision of 1958.62 Whether to include designs with an artistic element within copyright remained a very controversial matter. At the Berlin revision of the Berne Convention in 1908, there was a (strongly French-​backed) proposal to include applied art within the definition of “literary and artistic works.” This failed, but instead “works of art applied to industry” were protected insofar as national legislation permitted. Thus there was no requirement to protect such works, but if they were protected, national treatment was guaranteed. After 62  Art 5quinquies provided that “industrial designs shall be protected in all countries in the Union,” but laid down nothing about the nature of such protection.

Intellectual Property Law in Western Europe    197 the 1948 Brussels revision, applied art was included in Article 2(1), but subject to a right to limit the term of protection granted, and to treat a particular item as an industrial design or model if that is how it would be treated in national law. Although there has been general acceptance that applied art should fall within the sphere of copyright, there is no longer any appetite for including industrial art within copyright at international level. Sui ­generis laws are felt to offer more flexibility in defining suitable protection and appropriate safeguards. Nevertheless, it was not until the late twentieth century that countries began to look hard at reform of their national provision for design protection. International coordination remains much less advanced than in the other fields of IP. A deposit system for the international registration of designs has been established under The Hague Agreement.63 The EU again took a two-​pronged approach to the problem. The 1998 Designs Directive harmonized the design protection laws of Member States, focusing on those which most affected the functioning of the internal market. Conditions for obtaining registration, the extent and term of protection, and conditions for refusal or invalidation were all addressed. Sanctions, remedies, and enforcement remain matters for national law. The principle of cumulation of protection is obligatory, meaning that registered design protection cannot preempt copyright protection, though Member States remain free to determine the extent of copyright protection, and the conditions under which it is acquired. The 2001 Design Regulation established a Community-​wide scheme of design protection, with both registered and unregistered varieties.

7. Conclusion This survey of the emergence and development of IP law in Western Europe offers some intriguing individual histories. It also reveals a shift from the earlier systems, developed to address local (often private) interests and needs. By the nineteenth century there was perceived to be a need for a more international and more harmonized approach, reflected in a considerable body of new treaties and conventions. These sought to draw national approaches and practices together, and to rationalize and stabilize international protection for the holders of IPRs. There are certainly strong arguments for a goal of coherent global coverage for IP law, and well-​administered effective systems. But there are dangers in seeking convergence for its own sake, or in imposing homogeneity where there are objective reasons for differences. So it should not be assumed that the destination is inevitably a uniform, global system. As the introduction to this chapter cautioned, the trajectory of IP law is not preordained. IP law has always been a product of its social, cultural, and economic contexts. Future legislative developments should take care to acknowledge the diversity of these contexts as expressed in the modern world.

63  The Hague Agreement concerning the International Deposit of Industrial Designs (adopted 6 November 1925, revised 2 July 1999) 2279 UNTS 3.

Chapter 8

The Em erg e nc e a nd Devel opm e nt of the Internat i ona l Intellec t ua l Propert y Syst e m Sam Ricketson * 1.  Introduction: What is Meant by the Word “System”? In general terms, “system” refers a connection or relationship between different things or concepts. Hence, according to the Oxford Dictionary of English (2nd edition), “system” means: 1. a set of things working together as parts of a mechanism or an interconnecting ­network, a complex whole . . .  2. a set of principles or procedures according to which something is done; an organized scheme or method: a multiparty system of government/​the public school system. These definitions suggest that there is a wholeness or integrity in the physical or conceptual phenomena under consideration, that is, a series of links or connections that follow through in a logical and ordered progression. In the case of the various national or regional laws that are the subject of many of the other chapters of this book, the word “system” is clearly apt to describe the successive stages through which different intellectual property rights (IPRs) come into existence, are protected and exploited, and then die—​the connections and relationships here are readily discernible, particularly in the case of registered rights. These matters are less obvious at the international level, as there are many gaps and inconsistencies * 

Sam Ricketson has asserted his moral right to be identified as the author of this contribution.  All websites were last accessed in February 2018, unless otherwise specified.

the International Intellectual Property System    199 that arise. Nonetheless, it is still possible to identify a “system” by which IPRs are internationalized and exploited, and the purpose of this chapter is to set out and describe its basic components. It begins with a brief account of the objectives of the system and its principal organizing features. It then moves to a consideration of the principal system actors and the means by which protection is achieved, namely through a series of international conventions or treaties of varying content and particularity. These make up the sinews of a complex, though incomplete, system that is subject to a number of pressures, both internal and external. These matters are noted briefly by way of conclusion.

2.  The Objectives of the International Intellectual Property System Ideally, it would be helpful to be able to say that the international intellectual property (IP) system provides a series of analogues to the IPRs that can be obtained at the national or regional levels, that is, a global patent, trademark, design, copyright, and so on, recognized as single titles that are enforceable universally without regard to national boundaries. While in earlier times it was possible to see such ideas advanced,1 the objectives of international IP protection have been set somewhat lower, and have been restricted to what can be achieved at the political and diplomatic level. Thus, they are principally directed towards providing access for rights owners from one national system to enter into other national systems and to provide a guaranteed level of protection once they are there. As noted above, the principal means by which these objectives are achieved is through a series of multilateral international treaties or conventions, which are obviously only binding as between the countries that are party to them. So far as forming part of a “system” is concerned, the adjective “multilateral” is important here, as it only became relevant to speak of a coherent means by which international protection could be obtained for IPRs where this could be done on a multilateral, rather than a bilateral, basis, and this did not occur until towards the end of the nineteenth century. While membership of these multilateral agreements grew slowly at first, they were generally envisaged as “unions” of states with a common purpose—​the protection of industrial property, of literary and artistic works, and so on—​and were open to all states to join, without restrictions as to geography, language, level of economic development, or the like. By the end of the twentieth century, however, membership of the most important conventions had become nearly universal, while being extensive in the case of most of the others. The consequence today is that only a few countries stand outside and therefore unconnected to the international IP system. 1  Perhaps the most idealistic instance of this is to be seen in the proposals for a universal law of literary property that were advanced by an international congress in Brussels in 1858: E Romberg, Compte-​rendu des travaux du congrès de la propriété littéraire et artistique (Flateau 1859). A later and somewhat less ambitious example is to be found in the recommendations in relation to various industrial property rights that were adopted by the international industrial property congress that was held in Paris in 1878 at the time of the International Exhibition of that year in that city: Congrés international de la Propriété Industrielle tenu à Paris du 5 au 17 septembre 1878, Comptes-​rendus sténographiques, No 24 de la Série (Imprimerie Nationale 1879) Annexe 11, 498–​501.

200   Sam Ricketson As will be seen, the number of conventions dealing with IPRs is large; these conventions all vary considerably as to subject matter, scope, and purpose. Nonetheless, for the most part, there are some significant organizing or “system principles” that are to be found in each, and which provide links between them. These system principles are discussed in the next section, but we must first say something about the way in which these agreements may be classified for purposes of exposition. It is useful to begin by distinguishing between conventions dealing with registered and unregistered rights. In the case of registered rights, the most venerable, yet least complete, instrument is the Paris Convention for the Protection of Industrial Property 1883 (Paris Convention), which deals with patents, utility models and industrial designs, and trademarks. It also covers a number of unregistered rights, including trade names, service marks, and indications of source or appellations of origin (although in this last instance, this is done in the most peripheral fashion), as well as providing for protection against acts of unfair competition. However, the principal conventions dealing with unregistered rights are the Berne Convention for the Protection of Literary and Artistic Works 1886 (Berne Convention), the WIPO Copyright Treaty 1996 (WCT), and the various related treaties dealing with neighboring rights, in particular the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations 1961 (Rome Convention), and the WIPO Performances and Phonograms Treaty 1996 (WPPT). In the area of registered rights, the Paris Convention also has associated with it a number of specific subject matter treaties that provide for the creation of what are rather misleadingly described as international registrations in the cases of trademarks (the Madrid Agreement for the International Registration of Trade Marks, as revised) and designs (The Hague Agreement concerning the International Deposit of Industrial Designs 1925, as revised), and a more truly “international right” in the case of appellations of origin (the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration 1958). In addition, there are some important treaties of a procedural kind that facilitate access into national systems. The most important of these is the Patent Cooperation Treaty 1970 (PCT), but also of some significance is a suite of treaties dealing with patent and trademark application processes (the Budapest Treaty on International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure 1977, the Patent Law Treaty 2000, the Trade Mark Law Treaty 1994, and the Singapore Treaty on the Law of Trademarks 2006), as well as the various classification agreements that are crucial in the searching and filing of trademarks (the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks 1957, as revised, and the Vienna Agreement establishing an International Classification of the Figurative Elements of Marks, 1973), designs (the Locarno Agreement Establishing an International Classification for Industrial Designs 1968), and patents (the Strasbourg Agreement Concerning the International Patent Classification 1974). Sitting alongside these conventions is another important one that concerns the protection of plant breeders’ rights (the International Convention for the Protection of New Varieties of Plants (UPOV Convention)), but an even more significant development of recent years has been the linking of IPRs to trade disciplines under the General Agreement on Tariffs and Trade (GATT), and the imposition of more coherent substantive standards of protection through the medium of the Agreement on Trade-​Related Intellectual Property Rights 1994 (the TRIPS Agreement), one of the annexed agreements to the World Trade Organization (WTO), together with an effective means of enforcing

the International Intellectual Property System    201 national compliance through the WTO dispute settlement machinery.2 As will be seen, it is possible now to discern the principal legal contours of an overall international IP system, although some significant—​indeed, glaring—​gaps in its coverage remain and should be noted, including in the area of international exploitation of rights. These matters are taken up in section 3.4.

3.  Organizing or System Principles There are a number of organizing or system principles that underpin the overall international IP system. For the most part, these are to be found in each of the principal treaties mentioned above.

3.1 Achieving Access: Points of Attachment and Priority Periods Fundamental to each of the major treaties in this area (the Paris, Berne, and Rome Conventions) is that they provide access for individuals and entities from one contracting party (a country or state3) into the legal systems of other contracting parties for the protection of a particular subject matter in those countries: These agreements are not concerned, for the most part, with the kind or level of protection that is accorded in relation to these subject matters within the territory of each contracting party to its own citizens or residents.4 Therefore, a critical issue is how each treaty defines or designates those who are entitled to seek protection under its provisions. In general, this is done by reference to the criteria of nationality, domicile, or residence in the case of persons,5 and to similar criteria in the case of juristic persons.6 With literary and artistic works and related rights, there is a further territorial criterion that looks to the place of first publication or making of the work or subject matter,7 although some complexity may arise in relation to determinations of the “country 2   Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS) (opened for signature 15 December 1993, entered into force 1 January 1995) 1869 UNTS 299, art 64 and Marrakesh Agreement Establishing the World Trade Organization (opened for signature 15 April 1994) 1867 UNTS 3, annex 2 (Understanding on Rules and Procedures Governing the Settlement of Disputes) (entered into force 1 January 1995). 3   The term “country” is used mostly in the international IP treaties, but is generally understood to refer to entities that are “states” in public international law terms. 4   This point is expressly underlined in the Berne Convention for the Protection of Literary and Artistic Works (adopted 9 September 1886, revised 24 July 1971) 828 UNTS 221 (hereafter Berne Convention) art 5(3): “Protection in the country of origin is governed by domestic law. However, when the author is not a national of the country of origin of the work for which he is protected under this Convention, he shall enjoy in that country the same rights as national authors.” 5  Paris Convention for the Protection of Industrial Property, as revised (opened for signature 20 March 1883, revised 14 July 1967) 828 UNTS 305 (hereafter Paris Convention) arts 2 and 3; Berne Convention, art 3(1)(a) and (2). 6  Paris Convention, art 2. 7  Berne Convention, art 3(1)(b).

202   Sam Ricketson of origin” of a work under the Berne Convention.8 However, the chief point for present purposes is that once one of these applicable criteria is satisfied in relation to a claimant from one of the contracting parties to the treaty in question, that person can then seek protection in the territories of other contracting parties to that treaty. In the case of registered rights, this right of access is supplemented by a system of priority periods that provide for a period of time from first filing in the applicant’s country within which further filings may be made, without prejudice, in other contracting parties.9 Once within the other national system, the question of what level of protection should be given is then dealt with under the next major organizing principle, which is that of national treatment.

3.2 National Treatment and Substantive Reciprocity This is perhaps the most important—​and certainly the most time-​honored—​system principle. Once admitted to the national legal systems of other contracting parties, claimants are to be treated in the same way as those entitled to protection under those laws, that is, nationals and residents of the country where protection is claimed. The principle may be formulated in varying terms from one treaty to another, but Article 2(1) of the Paris Convention is typical: Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; all without prejudice to the rights specially provided for by this Convention . . .

Similar wording is to be fund in Article 5(1) of the Berne Convention, with the variation that the word “rights” is substituted for “advantages.” Both Conventions then spell out the consequences of national treatment. Thus, in the case of the Paris Convention, Article 2(1) goes on to state: Consequently, they [the nationals of any country of the Union] shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon nationals are complied with . . .

Likewise, Article 5(2) of the Berne Convention provides: . . . Consequently, apart from the provisions of this Convention, the extent of protection, as well as the means of redress afforded to the author to protect his rights, shall be governed exclusively by the laws of the country where protection is claimed.

The effect of these provisions is to assimilate persons and entities claiming under the Conventions to the position of local claimants—​a promise of non-​discrimination that is to apply not only to present advantages or rights, but also to advantages and rights that may be conferred in the future. In this regard, national treatment is to be contrasted with a principle of substantive reciprocity under which protection would only be granted to the foreign claimant where the same level of protection is accorded to the nationals of the 8 

Berne Convention, art 5(4).

9 

Paris Convention, arts 4A–​4I.

the International Intellectual Property System    203 protecting country in the foreigner’s own country. Substantive reciprocity only applies in a small number of cases under the international IP conventions, notably in relation to the comparison of terms rule and the protection of droit de suite under the Berne Convention.10 Otherwise, national treatment operates without regard to the corresponding level of protection in the claimant’s country of origin: he, she, or it will receive whatever is available in the protecting country, which may be greater or less than in their own country. Famously, in the case of the Netherlands, for some time this enabled claims to be made by Dutch nationals for patent protection in other Paris Union countries, even though the Netherlands at that time had no patent system.11 A more contemporary instance arises in relation to protection against acts of unfair competition under Article 10bis of the Paris Convention: This may enable protection in some Paris Union countries for acts of unfair competition, such as theft of trade secrets, that are not recognized as such in other Union countries. National treatment has had a long and honored history under the international conventions. Indeed, it may be said that it was the chief means by which it was possible to achieve multilateral agreements such as the Paris and Berne Conventions in the late-​nineteenth century. These agreements superseded the previous extensive but uneven web of bilateral agreements;12 however, they also ensured that nationals of the Member States of each of the Paris and Berne Unions could gain protection, whatever it was, in each other’s territory without having to be concerned with difficult issues of equivalency as required under a reciprocity approach. Better some protection than none at all was the pragmatic approach of the early treaty negotiators. The principle of national treatment is further supplemented or qualified under both the Paris and Berne Conventions in the following ways. First, national treatment in each instance is supplemented with respect to such rights as are “specially granted by this Convention”—​ with the implication that these are to be accorded regardless of whether they are already given to local claimants. The effect of this requirement is discussed further in the following section. Secondly, under Article 2(3) of the Paris Convention there is an express reservation to the law of the protecting country with respect to a number of matters of a procedural character, including the question of jurisdiction, which has implications so far as private international law issues are concerned, and on which both the Paris and Berne Conventions generally remain silent: This is further discussed in section 3.4. Finally, there may be arguments, at the boundaries, as to how far the obligation to accord national treatment extends. In each of the Berne and Paris Conventions, the obligation applies to the rights (or advantages) applied to the protection of literary and artistic works or industrial property respectively, and the question may arise as to whether this extends to all national laws and regulations pertaining to those subject matters and their creators. In the case of works, for example, is the national treatment obligation breached by the grant

10 

Berne Convention, arts 7(8) and 14ter(2). See further JJ Bos, “The Netherlands and the Paris Convention for the Protection of Industrial Property” [1984] Industrial Property 383. The Netherlands was an original member of the Paris Union, but only adopted its own patent law in 1911, having abolished it in 1869. 12  See further S Ricketson and J Ginsburg, The International Protection of Copyright and Related Rights: Berne and Beyond (2nd edn, OUP 2006) (hereafter Ricketson and Ginsburg) ch 2; S Ricketson, The Paris Convention for the Protection of Industrial Property: a Commentary (OUP 2015) (hereafter Ricketson) ch 2. 11 

204   Sam Ricketson of a public lending right that applies only to national authors? And, in the case of patents, would this include a taxation advantage granted to national patentees, but not to foreigners? Under the national treatment requirement adopted in the TRIPS Agreement, the following ­clarification in an accompanying interpretation may make the boundaries of the obligation more precise: “[P]‌rotection” shall include matters affecting the availability, acquisition, scope, maintenance and enforcement of intellectual property rights as well as those matters affecting the use of intellectual property rights specifically addressed in this Agreement.

3.3 Harmonization of Substantive Standards and the Process of Revision From the inception of the Paris and Berne Conventions—​and indeed of almost all the other IP treaties—​the process of regular revision has been built in.13 The clear understanding was that each text was simply a starting point, with national treatment providing the ground floor protection which was to be supplemented by additional substantive standards of protection adopted in successive revisions and “designed to improve the system” of each of the Unions established by both Conventions. Revision, or attempts at revision, of both the Paris and Berne Conventions occurred at fairly regular intervals for most of the first century of their existence: In the case of the Paris Convention, there were revision conferences in Rome (1886) and Madrid (1890) (both unsuccessful), Brussels (1897 and 1900), Washington (1911), The Hague (1925), London (1934), Lisbon (1958), Stockholm (1967), and Geneva and Nairobi (1980–​82 and 1984)  (again, unsuccessful), while the Berne Convention was revised at conferences in Paris (1896), Berlin (1908), Rome (1928), Brussels (1948), Stockholm (1967), and Paris (1971). In terms of substantive additions, the Berne Convention has been the more successful (see further 5.2.2.1 below), while the Paris Convention has added relatively little, other than in a few areas (notably with respect to unfair competition and protection of State emblems). Nonetheless, the notion of “rights specially granted” indicates a continuing commitment to the harmonization, at least at a general level, of the substantive standards of protection that are to be accorded to claimants under these conventions. This task now seems to be at a halt, or is being pursued in other ways or in different forums (such as the WTO), and this issue is also taken up further in section 5.4.

3.4 Independence of Protection and Territoriality If the effect of the application of the principle of national treatment is to assimilate foreigners to locals in each country where protection is claimed, the logical corollary to this must be that the protection so secured should stand free of that received by the foreign claimant in his or her country of origin. In other words, the foreign claimant should 13 

Paris Convention, art 18; Berne Convention, art 27.

the International Intellectual Property System    205 receive separate and independent treatment in each country for which protection is applied and this should bear no relation to what he or she may or may not have received in his or her country of origin. This principle is expressly enshrined in Article 5(2) of the Berne Convention, which provides that protection under the Convention is to be “independent of the existence of protection in the country of origin of the work.” A similar principle, somewhat differently expressed, applies under the Paris Convention in relation to patents,14 and, in a less complete way, to trademarks.15 In the case of other rights protected under the Paris Convention, there is no express requirement of independence of protection, which gives rise to the inference that there are no restrictions on making the availability of protection dependent upon some kind of reference to the legal position in the country of origin, or, indeed, in any other country. Where it applies, as in the cases of patents, trademarks, and literary and artistic works16, the principle of independence of protection underscores an important point, namely that the Paris and Berne Conventions effectively envisage the creation of a series of territorially limited rights in respect of each Union country. This has implications for the way in which rights secured under these Conventions can be enforced and exploited globally, and raises difficult issues of private international law which are not addressed, other than very indirectly, in either Convention. (On the private international law of IPRs in general see the chapter in Part IV of this volume by Eun-​Joo Min and Johannes Christian Wichard.) Thus, nothing is said as to whether it is possible to consolidate proceedings involving rights arising in two or more Convention countries in one forum country, rather than having to proceed separately in each country where protection arises—​a particular issue in the case of online infringements of copyright and trademarks. While Article 2(3) of the Paris Convention suggests that questions of jurisdiction remain an issue for the private international law rules of each Paris Union country, there is no express rule in either the Paris or Berne Convention requiring the acceptance of jurisdiction in such cases.17 Nor is there is any provision of either Convention that points to a particular choice of law rule to be applied in the event that jurisdiction with respect to an IPR situated in another Paris or Berne Union Member State is accepted. Independence of protection also has implications for the question of when, and in what situations, rights may be treated as exhausted, as the argument may be made that this constitutes an implicit prohibition upon a Paris or Berne Union country adopting an international exhaustion approach in relation to imported goods that are protected by a patent, trademark, or copyright under its law (on the basis that this would require a reference to what has been done under the law of their country of origin, as in the case of alleged “legitimate” parallel imports).

14

15  Paris Convention, art 6.   Paris Convention, art 4bis. The Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations (opened for signature 26 October 1961, entered into force 18 May 1964) 496 UNTS 43 (hereafter Rome Convention) and other related rights conventions do not contain any reference to independence of protection. 17  In this regard, consider the majority decision in Voda v Cordis Corp 476 F3d 887 (Federal Circuit 2007) to the effect that such a prohibition did arise under the Paris Convention in the case of a series of identical national patents. Note, however, the dissenting judgment of Newman Circuit Judge, who discerned no such prohibition under the Paris Convention. 16 

206   Sam Ricketson

3.5 Most Favored Nation Treatment A novel feature (for international IPRs) is the principle of most favored nation, which was introduced in Article 4 of the TRIPS Agreement. This provides that: With regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members.

From an international trade perspective, where it has long been established, the principle is unexceptional as it seeks to preserve the multilateral character of trade agreements and to exclude the possibility of “special deals” between pairs or groups of countries. So far as the TRIPS Agreement is concerned, it is subject to a number of exceptions under both Articles 4 and 5, with the effect that it applies only incompletely in the context of the international IP system. Furthermore, under the general provisions of the GATT itself, it appears arguable that it does not apply in any event to the plethora of bilateral and regional free trade agreements that have proliferated in the post-​TRIPS period.18

3.6 Implementation at the National Level Unlike regional instruments, such as the EU Trade Mark or Designs Regulations, which embody truly supranational rights, the obligations under the various international IP conventions require implementation at the national level by Member States. The way in which this occurs may vary significantly, depending upon whether the state in question adopts a monist approach to international obligations, under which these may be directly incorporated into domestic law upon the relevant act of accession or ratification, or a dualist approach, which requires the adoption of implementing measures at the domestic level, usually through the passing of legislation.19 There are two important points to note here. First, regardless of the national approach to treaty implementation, there will be a need for each state to interpret carefully the scope of the international obligations which it is 18 

General Agreement on Tariffs and Trade (opened for signature 14 April 1994, entered into force 1 January 1995) 1867 UNTS 187 (hereafter GATT Agreement) art XXIV. See further CJ Westberg, “An Overview of the WTO Principle of MFN and Bilateral/​Regional Agreements: How does it work?” (27 February 2012); H Grosse-Ruse Khan, “The International Law Relation between TRIPS and Subsequent TRIPS-​plus Free Trade Agreements: Towards Safeguarding TRIPS Flexibilities?” (2011) 18 Journal of Intellectual Property Law 1. 19  See generally on these questions, L Wildhaber, Treaty-​Making Power and Constitution. An International and Comparative Study (Helling and Lichtenhai 1971) ch 7; A Aust, Modern Treaty Law and Practice (3rd edn, CUP 2013) ch 10. See also the brief comparative survey in AE Evans, “Self-​Executing Treaties in the USA” (1954) XXX BYIL 179, 195–​205. For more recent treatments see D Hollis, R Blakeslee, and LB Ederington (eds), National Treaty Law & Practice (Martinus Nijhoff 2005), in particular ch 1 (D Hollis, “A Comparative Approach to Treaty Law and Practice”); D Sloss, “Domestic Application of Treaties” in D Hollis (ed), Oxford Guide to Treaties (OUP 2012) ch 15, in particular 368–​76; J Crawford, Brownlie’s Principles of Public International Law (8th edn, OUP 2012) ch 2.

the International Intellectual Property System    207 undertaking. In the case of a monist country, this will generally be a court, while in the case of a dualist country, it will initially be the legislators who are seeking to implement the obligation, and subsequently the courts that may have to interpret the relevant legislation in a particular case. Treaty interpretation can be a delicate and somewhat imprecise exercise (an art rather than a science), but is an inescapable consequence of the present system of international IP conventions, and is something that countries are bound to undertake in a spirit of good faith.20 The second matter relates to the nature of the interpretation and implementation task. Almost all of the obligations contained in the international IP conventions leave considerable latitude as to how they are to be applied—​much is left to the good sense and judgement of contracting countries. In some instances, all the relevant provision may do is to provide for a facility for national laws to do (or not to do) something, and set certain conditions that need to be satisfied (as in the case of permissible exceptions and limitations under the Berne Convention). In other instances, the scope for national implementation may be wide open, so long as the object of the provision is achieved. A good example here is provided by the generous leeway that appears to be left under the WCT as to the way in which the exclusive communication right under Article 8 is to be implemented. Quite apart from questions of treaty interpretation, “flexibility” may also have a political dimension, particularly in ­relation to developing countries, and this is specifically enshrined in the terms of the TRIPS Agreement.21 A final point to note about the implementation of international obligations is short, but important. Historically, the international IP conventions contained no effective mechanisms for enforcement on a state to state basis. Even though reference to the International Court of Justice is provided for in a number of conventions,22 this is subject to the making of reservations as to jurisdiction and has never been invoked in practice. This gap is now solved through the TRIPS Agreement and its incorporation of the dispute resolution machinery of the WTO. The result has been the development of a small but growing body of jurisprudence on the interpretation of a number of Berne and Paris Convention provisions by WTO panels and by the WTO Appellate Body.

4.  Principal Actors in the System Before considering the specific agreements, as well as the way in which they relate to each other, it is useful to describe briefly the principal actors involved in the international IP system. Enough has been said to indicate that rights owners are the prime beneficiaries of the various agreements: The individuals and entities from each country who are seeking protection of their rights in other Member States. These are the “system users,” but, as in national

20 

The principle of pacta sunt servanda as embodied in the Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331, art 26 (“Every treaty in force is binding upon the parties to it and must be performed by them in good faith.”). 21  TRIPS, art 1.1. 22  See, eg, Berne Convention, art 33; Paris Convention, art 28; PCT, art 59.

208   Sam Ricketson and regional systems, they are dependent upon these rights and the procedures for obtaining them being secured by the next level of actors in the system, namely states. States are obviously the “makers” of the system, as it is usually only states that can formulate and enter into binding international obligations, as subjects of public international law, through the making of treaties. While some of the more recent IP treaties provide for membership by regional groupings, such as the European Union (EU),23 there is no capacity for sub-​national units, such as provinces or states in a federal country, to become contracting parties, let along international organizations. This fundamental aspect of the international IP treaties therefore means that the role of IP users (rights owners) becomes muted in the context of treaty formulation, in that states will generally have other interests and concerns at play than simply those of national rights owners. International organizations, however, have a very important role to play in the fostering and development of these international agreements. Central here has been the World Intellectual Property Organization (WIPO), which is the successor of the two international bureaus (later called the United International Bureaux for the Protection of Industrial Property or BIRPI) that were set up to act as the secretariats of the Paris and Berne Unions, and which also acted as the registering authorities for the early Madrid and Hague Agreements. The bureaus, and now WIPO, have had a critical part to play in preparations for the various revision conferences, as well as a crucial role in the operation of the patent application system set up under the PCT. WIPO, through its various standing committees, also continues to have an important function in what is sometimes described as “norm formulation” activities in relation to patents, copyright, designs, trademarks, traditional knowledge, and cultural expressions. While the work of these committees, which operate through state representatives (with widespread observer participation from relevant interest groups), has been fitful and slow in many areas, it has led to the successful convocation of diplomatic conferences and the adoption of new international treaties in others.24 Another important forum for the development and adoption of new international IP norms, both in terms of substantive rules and the adoption of enforcement measures, has been the WTO, to which the TRIPS Agreement is one of the annexed agreements. A number of other international organizations also now have a direct interest in IPRs, usually with respect to particular areas of concern, such as public health (WHO), food and agriculture (FAO), development issues (UNCTAD, World Bank), education and cultural issues (UNESCO), and human rights (UNCHR). As regards the involvement of outside observers, for most of their history the international IP treaties appeared to exist in a kind of vacuum: Relevant meetings were generally confined to a small clique of government officials from national industrial property and

23 

See, eg, WCT, art 17(2) and (3); WPT, art 26(2) and (3). In recent years, consider the adoption of the Singapore Treaty on the Law of Trademarks 2006 (opened for signature 28 March 2006, entered into force 16 March 2009) UKTS No 32 (2012), the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled (opened for signature 28 June 2013, entered into force 30 September 2016) WIPO Doc VIP/​DC/​8 Rev, the Beijing Treaty on Audiovisual Performancs (opened for signature 26 June 2012) WIPO Doc AVP/​DC/​20, and a new 2015 Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications (opened for signature 21 May 2015) IOPW Doc LI/​DC/​19. 24 

the International Intellectual Property System    209 justice departments and the like, an equally small group of legal practitioners, and a handful of rights owners’ organizations (several of which, in fact, frequently had a significant influence on the national delegations that were present at the early diplomatic conferences and conferences of revision).25 However, the number of “interest groups” that participate as observers at international meetings, both at full diplomatic conferences and at the ongoing standing committee and other meetings at bodies such as WIPO, is now extremely wide and varied, and includes other international organizations, all manner of non-​governmental organizations representing rights owner and industry groupings, academics, and civil society groups. The influence of these bodies is difficult to assess; however, they have a high profile and presence in most international meetings today, particularly within WIPO. In particular, the concerns of “consumers” of IPRs are being heard in these meetings in addition to those of the users of the IP system, that is, rights owners.

5.  Principal Components of the System: Treaties Adopting the broad division suggested above between registered and unregistered rights, this section outlines the principal components of the international treaties that are relevant here.

5.1 Registered Rights The Paris Convention is the oldest of the multilateral agreements relating to “industrial property.” Of the four kinds of registered IPRs contemplated by this instrument—​patents, utility models, industrial designs, and trademarks—​the Paris Convention provides for protection in the following four stages: (i) by specifying the persons and entities from each Union country who will be entitled to claim protection in other Union countries; (ii) the period from first filing in which applications for registration in other Union countries will have to be made without the risk of invalidity arising from intervening events, such as publication or public use; (iii) national treatment, once entry to the legal systems of other Union countries chosen has been obtained; and (iv) in addition, the conferring of such “rights specially granted” by the Convention. In the first of these stages (persons entitled to seek protection), the Paris Convention applies in a uniform way for each of the rights in question: Thus, the specification of nationality and domicile requirements applies equally to all “industrial property.” Although not specifically mentioned, it has always been accepted that “nationals” included legal entities as much as individuals, while domicile or establishment within the country where protection is claimed is not required.26 25 

Historically, the most significant of these have been the International Literary and Artistic Association (ALAI) in the case of the Berne Convention, and the International Association for the Protection of Industrial Property (AIPPI) in the case of the Paris Convention. 26  Paris Convention, art 2(2).

210   Sam Ricketson In the second stage, the rules of priority access are defined with some particularity: 12 months in the case of patents and utility models and six months for industrial designs and trademarks.27 Specific rules governing such matters as multiple priorities28 and division of applications29 are also covered, and there can be little doubt as to what protecting countries must provide in relation to these foreign applicants. At the third stage of national treatment, however, marked differences emerge as to the level of protection the foreign applicant will receive. As a starting point, it may be observed that the Convention almost entirely lacks any indication as what subject matter falls under the labels of patents, industrial designs, utility models, or trademarks respectively. With one limited exception (patents), this is left entirely to each national law to determine for itself, meaning that the foreign applicant will receive only what is available under the protecting law, subject to the qualification that this must be aligned with whatever is accorded to local claimants. But even the provision dealing with patents is less than helpful, providing that this “shall include the various kinds of industrial patents recognized by the law of the countries of the Union, such as patents of importation, patents of improvement, patents and certificates of addition, etc.”30 There is no indication in the English text that patents must relate to “inventions,” although this may be taken for granted and is, indeed, evident in the authoritative French text of the Convention (“les brevets d’invention”). This, of course, leaves open the real question of what is meant by “invention.” In the same way, there is no definition of “utility model,” “industrial design,” and “trademark.” So far as compliance with the national treatment requirement is concerned, this means that each Union country is only obliged to give to nationals from other Union countries whatever protection it gives under its own laws to its own nationals in respect of these different subject-​matters, and as defined under those laws. In the case of patents, for example, this may exclude protection for pharmaceutical patents or for medical treatment patents; in the case of trademarks, this may mean exclusion of shape, sound, or smell marks; and, in the case of industrial designs, exclusion of designs that are purely functional in character. National treatment also has a more far-​reaching implication in that it does not expressly require protection of the subject matter at all, as long as this denial applies equally to locals. As noted, this was a contentious issue early in the life of the Paris Convention with respect to the Netherlands, which did not have a patent system until 1911, but which had been a Paris Union member from its inception in 1884. At the same time, it was readily accepted by Union countries that positive obligations to protect did not flow from the obligation to accord national treatment. For this to arise, a specific obligation to accord protection was required. In the cases of unfair competition and industrial designs, these obligations are to be found in Articles 10bis and 5quinquies, respectively. Note, however, that there is no corresponding obligation in relation to utility models, which remain recognized only in a minority of Union countries today. Oddly enough, with the early exception of the Netherlands noted above, the issue of non-​recognition does not ever appear to have been a live issue in relation to patents or trademarks, where there have never been explicit obligations to protect.

27 

29 

Paris Convention, art 4A and C.    28 Paris Convention, art 4F. 30  Paris Convention, art 1(4). Paris Convention, art 4G.

the International Intellectual Property System    211

5.1.1 “Rights Specially Granted” It is at the fourth stage that differences as to the level of protection to be accorded become even more evident under the Paris Convention text. National treatment is only the starting point for protection: Its effect is supplemented by the “rights specially provided for by this Convention.” Thus, in the words of Article 2(1), national treatment is to be enjoyed by nationals of any Union country “all without prejudice” to the rights so specially provided. This reflects the dynamic character of the Paris Convention as an instrument subject to revision, which has meant that subsequent Acts have added to the specific matters that protecting countries must provide for in their protection of claimants under the Convention, irrespective of what is already provided for under national laws (and so subject to the obligation of national treatment). Unlike the Berne Convention, these “rights specially provided” are nowhere as detailed or as wide ranging as the rights provided in that instrument; nonetheless, they constitute a significant corpus of matters that must be provided for in relation to claimants from other Union countries. On the face of it, this may appear to represent a clear discrimination in favor of foreigners and against locals—​indeed, Ladas in his commentary uses the label “unionist treatment” to distinguish it from national treatment.31 In practical terms, however, the acceptance of such special treatment represents pragmatic compromises by Member States, underpinned by de facto reciprocity in the sense that the benefits extended to nationals of other Union countries in one country will typically be extended to its own nationals. Thus, no country, as a general proposition, will be prepared to ratify or accede to an Act of the Convention which embodies such discrimination unless it has already decided that the same position should apply to its own nationals—​in other words, the decision to extend such protection to Union nationals will almost invariably be accompanied by a corresponding decision that this protection should also apply to locals. In consequence, this has often meant significant delays before all current members of a particular Act of the Convention have ratified or acceded to the next Act that has been adopted at a conference of revision. Accordingly, revisions of the text of the Paris Convention have tended to be incremental, rather than great “leaps forward.” Nonetheless, six substantive revisions of the Convention have seen the list of “rights specially provided” grow in a generally upwards trajectory, albeit sometimes at a frustratingly slow pace and even though, as will be seen, significant, even yawning, gaps remain in their coverage. As regards patents, as already noted, one does not find in the Paris Convention any explicit statement as to the subject matter to be protected; this also extends to such other matters as the conditions for protection, its scope and duration. The specific obligations that do arise tend to be on the periphery: a limited species of moral right in the requirement for mention of the inventor in the patent (Article 4ter); a prohibition on the refusal of the grant of a patent because of restrictions under local law (Article 4quater); a prohibition on forfeiture for non-​working where the patentee has relied on importation of patented products and limitations on the grant of compulsory licenses and forfeiture for non-​working (Article 5A); no requirement of marking on patented products (Article 5D); the provision of grace periods for payment of fees and restoration of lapsed patents (Article 5bis); limitations on the scope of infringement where patented devices are used on ships, aircraft, and vehicles temporarily 31  SP Ladas, Patents, Trademarks, and Related Rights: National and International Protection (2nd edn, Harvard UP 1975) 271.

212   Sam Ricketson entering the territory of Union countries (Article 5ter); provisions concerning process patents and imported products (Article 5quater); and temporary protection for patented goods exhibited at official or officially recognized international exhibitions (Article 11). The crucial provisions of the Paris Convention, therefore, are those dealing with access (eligibility requirements and priority periods); substantive standards of the protection to be granted are largely left to the application of the obligation to accord national treatment. With regards to utility models, all depends here on national treatment, including, most importantly, whether such protection exists in the country where protection is claimed. If so, then a number of provisions of the Paris Convention cut in, including: the right of priority (Article 4A, B, C, D, and E); the prohibition on forfeiture for non-​working where the holder of a utility model has relied on importation of patented products, and limitations on the grant of compulsory licenses and forfeiture for non-​working (Article 5A(5)); the prohibition on any requirement of marking on goods covered by a utility model (Article 5D); the provision of grace periods for payment of fees (Article 5bis(1)); and temporary protection for utility models for goods exhibited at official or officially recognized international exhibitions (Article 11). As with patents, there is no indication of what is actually covered by the term “utility model” or what should be the conditions for obtaining protection or its scope or duration. However, the option of according no protection at all as a matter of national treatment does not apply to industrial designs, in view of the specific obligation to protect under Article 5quinquies. Having said this, there is no further guidance provided as to how this protection is to be accorded, the conditions for it, its scope, and its duration. Indeed, it seems that protection need not be through a registration system, and this obligation could be satisfied through the application of artistic copyright or even unfair competition laws. But, in the event that registration is required, then priority periods apply under Article 4A, B, C, D, and E, and there are limitations on forfeiture either by reason of failure to work or by reason of importation (Article 5B); a prohibition of marking on goods also applies (Article 5D); a grace period is provided where there is a failure to pay maintenance fees (Article 5bis(1)); and there is a requirement to accord temporary protection for industrial designs for goods exhibited at official or officially recognized international exhibitions (Article 11). There is nothing further as to the substantive content of the protection to be accorded. In addition to priority periods and national treatment, the provisions of the Paris Convention dealing with trademarks are more extensive than those dealing with other registered IPRs, although, like those, they mostly do not touch upon substantive issues relating to the rights to be protected, for example, as to subject matter, conditions for registrability, scope, or duration. Specific obligations cover: the refusal or cancellation of marks well known in other Union countries (Article 6bis); provisions concerning armorial bearings, flags, and other state emblems of Union countries (Article 6ter); the effect of assignments without goodwill of business to which mark is attached (Article 6quater); the acceptance for registration of marks in the form in which they are registered (telle quelle) in other Union countries and the  circumstances in which registration may be denied (Article 6quinquiesA–​F, an important provision which points indirectly to the standards of registrability that might be otherwise expected generally in Union countries); the protection of service marks, though not subject to any requirement of registration (Article 6sexies); the right to oppose registration where registration is applied for by a representative or agent of owner without the latter’s consent (Article 6septies); the nature of goods to which the mark

the International Intellectual Property System    213 is applied to be no obstacle to registration (Article 7); the protection of collective marks (Article 7bis); and, subject to certain qualifications, the seizure on importation of goods unlawfully bearing a trademark (Article 9).

5.1.2 Ancillary Protections Under Associated or Special Agreements: Facilitating Access While the provisions of the Paris Convention contain relatively limited prescriptions as to the standards of protection, substantive or procedural, to be accorded to registered IPRs in each Union country where protection is claimed (in addition to the general application of national treatment), there is provision in Article 19 for countries of the Union “to make separately between themselves special agreements for the protection of industrial property, insofar as these agreements do not contravene the provisions of this Convention.” This facility has been used for each of trademarks, patents, and industrial designs, and has led to the creation of a number of “special unions” comprising smaller memberships of “interested” Paris Union Members. These are now supplemented by a series of further special agreements in the areas of trademarks and patents, and there are proposals for further agreements now under consideration by the relevant standing committees of WIPO. In chronological terms, these are as follows.

5.1.2.1 Special Agreements on Trademarks: The Madrid System and Other Agreements The Madrid Agreement on the International Registration of Marks 1891 (Agreement) is the most venerable of the special agreements, and was adopted at the second (and otherwise unsuccessful) revision conference of the Paris Convention that was held in Madrid in 1890.32 The Agreement provides for an “international trademark registration,” but this term needs careful qualification in this context: the international registration obtained under the Agreement is dependent upon an initial registration of the mark in the country of origin,33 and is subject to disallowance within certain time limits within the other countries covered by the registration.34 While this is called an “international registration,” it does not provide for a unitary registration that is automatically valid and that contains the same set of rights throughout all member countries—​a true international right akin to the present day Community Trade Mark and Design Rights within the EU, considered by Catherine Seville in her earlier chapter in this volume. The rights gained through the international registration under the Madrid Agreement are only those rights accorded under each country to which the international registration extends. The international registration, once effected, is valid for renewable periods of 20 years,35 but is vulnerable to what is called “central attack,” that is, if the original registration in the country of origin ceases to apply within a period of five years from registration, this will lead to the invalidity of the registration in all other countries of the Special Union.36 Notwithstanding these limitations, the Agreement provides a common entry point for achieving registration in other member countries, and its system of application and international registration has become 32 

See further Procès-​Verbaux de la Conférence de Madrid de 1890 de l’Union pour la protection de la propriété industrielle (Imprimerie Jent et Reinert 1892) (hereafter Procès-​Verbaux 1890). 33  Madrid Agreement, art 1(2). 34  Madrid Agreement, art 5. 35  Madrid Agreement, arts 6(1) and 7.    36 Madrid Agreement, art 6(2) and (3).

214   Sam Ricketson more refined in the course of successive revisions of the Agreement.37 For many years, membership of the Special Union remained relatively limited, as the time limits and fee structures were not readily compatible with national systems that had pre-​grant examination or opposition procedures. It is noteworthy, however, that even as early as 1886, the prospect of a truly unitary international trademark registration had been foreshadowed, albeit then described as something which might only “perhaps be achieved one day,” in an explanatory memorandum prepared by the Swiss Government in support of its proposals at the first Paris Convention revision conference at Rome in 188638 (and which was repeated in a similar memorandum submitted to the Madrid Conference in 189039). This pessimism correctly mirrored the many differences then existing in national laws,40 but there was still scope for a more modest project, which required the starting point for the system of international registration to be a national registration which, through a subsequent international registration, could be given the effect of national registrations in the other contracting countries.41 The Madrid Protocol 1989 (Protocol) has retained the central features of the system established under the Madrid Agreement of 1891, which has never advanced to the higher level of a unitary registration. Nonetheless, some of the flaws in the Agreement were rectified in the Protocol.42 The major change made to the Agreement by the Protocol is that the international registration may be based on an initial application in the country of origin, rather than registration.43 Central attack still remains a possibility, but its effects have been reduced, and it is easier for applicants to limit the number of countries in which they are seeking protection.44 As a piece of international law reform, the Protocol was achieved relatively painlessly at the time of the centenary of the senior agreement,45 and has proved successful, as witnessed by the larger number of states that have now adhered to the Protocol as distinct from the Agreement;46 it is possible for states to adhere to the Protocol without being signatories to the Agreement, although membership of the Paris Convention remains a requirement.47 In consequence, the Madrid system has become much more popular among applicants (with a resultant flow of fees to WIPO as the international registering authority), although in scale it is not in the same league as the PCT (see Section 5.1.2.3). While the Madrid system now offers a more streamlined entry into other national systems, none of the other Paris Convention special agreements has been successful in advancing the cause of substantial harmonization of the standards of protection to be accorded to the trademarks of claimants in other Union countries. New treaty making under the auspices of 37

  At Brussels 1900, Washington 1911, The Hague 1925, London 1934, Lisbon 1958, and Stockholm 1967 respectively. 38   Conférence de l’Union pour la Protection de la Propriété Industrielle (Imprimerie Héritiers Botta 1886) 43. 39 40   Procès-​Verbaux 1890 30.   Procès-​Verbaux 1890. 41   See further 1891 Madrid Agreement Centenary 1991, WIPO Publication No 880(E) (1991) 37. 42   Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks 1989, as amended (hereafter Madrid Protocol). 43 44  Madrid Protocol, arts 3 and 3bis.   Madrid Protocol, art 2. 45  It is worth noting that there had been a number of attempts to achieve revisions of the Madrid Agreement prior to this, as well as proposals for the adoption of separate agreements: see further Ricketson, paras 12.113–​12.118. 46  100 members as at 15 January 2018, compared with 55 members of the Madrid Agreement: . 47  Madrid Protocol, arts 1 and 14(1)(a).

the International Intellectual Property System    215 WIPO has occurred, but this has been mostly limited to procedural or adjectival, rather than substantive, matters. In this respect, the Nice Classification Agreement, which provides for a regularly revised but non-​mandatory system of classification of goods and services for the purposes of searching and deciding on the scope of registrations is of great practical significance.48 The two most recent special trademark treaties—​the Trade Mark Law Treaty 1994 and the Singapore Treaty on the Law of Trade Marks 2006—​are likewise of some practical significance. But while both of these seek to harmonize or streamline application procedures at the national level—​a worthy goal in itself—​they have very little to say about the substantive norms of protection to be applied. So far as there has been any progress in that direction, this has occurred outside the scope of the Paris Convention and its associated agreements through the provisions of the TRIPS Agreement (see further in section 5.4).

5.1.2.2 Special Agreements on Industrial Designs The Hague Agreement Concerning the International Registration of Industrial Designs (Hague Agreement) is another special agreement that was adopted at The Hague Revision Conference of the Paris Convention in 1925, and which has been through a number of revisions since then, most recently in 1999.49 Notwithstanding these revisions, The Hague system still embodies the essential elements adopted by The Hague Revision Conference 1925, and is a system of international registration based on one central or international application that designates a number of countries in which it is to have effect,50 and that proceeds with only formal examination, subject to disallowance at the national level within a prescribed period.51 In this respect, it has a clear advantage over proceeding through the “Paris route,” that is, making separate applications, within the six-​month priority period under the Paris Convention, in each country in which protection is sought. The registration, once achieved, is for an initial period of five years, renewable for up to 15 years.52 The Hague Agreement contains no prescriptions as to the substantive content of the protection to be accorded to the design protected under the international registration—​the scope and content of this protection remains a matter for national laws.53 As noted above, this is not a matter dealt with under Paris itself. Furthermore, efforts at the formulation of new treaty norms within WIPO have been concerned with matters of procedural harmonization at national level, in particular at the application and processing stages, as well as in the practically important area of product classification (see, eg, the Locarno Agreement Establishing an International Classification for Industrial Designs 1968). Some substantial norm formulation, however, has occurred through the medium of the TRIPS Agreement (see further in section 5.4).

48   Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks 1957, as revised and amended. A further but less-​widely used system for the classification of the figurative elements of trademarks is to be found in the Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks 1973, as amended. 49  London 1934, Hague 1960, Stockholm 1967, Geneva 1999. 50  Hague Agreement, arts 3–​5. 51  Hague Agreement, art 12. 52  Hague Agreement, art 17. 53  Hague Agreement, art 14(1).

216   Sam Ricketson 5.1.2.3 Special Agreements on Patents The most significant Paris Convention special agreement in this area is the Patent Cooperation Treaty (PCT), which was adopted at a Diplomatic Conference that was held in Washington from 25 May to 19 June, 1970. By the late 1960s, the backlog of applications building up in national patent offices had become a major cause of concern, and the purpose of the Conference was to develop some form of streamlined application procedure across offices that would reduce this backlog. This was the culmination of a process that had begun in 1966, with extensive preparatory work being carried out by BIRPI and no less than five intergovernmental committees of experts.54 Ultimately, the PCT has proven to be a very successful initiative, with over half of patent applications worldwide for protection outside the applicant’s country reported as using the PCT route in 2014.55 Essentially, this consists of the making of one “international application” that is lodged at a PCT receiving office and that nominates the various countries in which the applicant desires protection, thereby making it unnecessary to file individual applications in each country as would be required under the Paris Convention. This is followed by an “international search” that is carried out by one of the major patent offices that has been appointed as an International Searching Authority,56 and that provides an international search report that lists citations of relevant published documents that might affect the patentability of the invention for which protection is sought in the international application. Although not part of the PCT as originally adopted, a preliminary and non-​binding written opinion is now provided on whether the invention meets the patentability requirements in light of what the international search report reveals.57 These documents (the search and opinion) are then communicated to the applicant who can consider whether to proceed with the application, to withdraw it, or to seek to amend its claims. At this stage, the applicant may decide to go on with selected national applications, but receives the benefit of extended time in which to initiate these steps. Alternatively, the applicant may request a “preliminary international examination” which, again, is non-​binding, but which may be very persuasive when the application goes back into the national phase in each country where protection is sought. It is important to note that such offices may well accept the international preliminary examination report, but each country has the option of further examination and imposing additional requirements under its own laws. A significant central clearing house here is WIPO, which receives and publishes the international application and obtains fees for these activities (providing a significant share of that organization’s income). The PCT is open to all Paris Union Members and as of 54  See the account of this preparatory work by Dr Bodenhausen, the Director of BIRPI, in his speech at the first plenary session of the Conference on 25 May 1970: see World Intellectual Property Organization, Records of the Washington Diplomatic Conference on the Patent Cooperation Treaty 1970 (1972) (hereafter Records PCT) 555. It appears that the driving force behind this work was Dr Arpad Bogsch, then Deputy Director of BIRPI. 55  In 2014 PCT applications made up 57 percent of all non-​resident applications that were filed worldwide (up from 24 percent in 1995): WIPO Facts and IP Figures 2015 (WIPO 2016) 22. 56  These are the Patent Offices of Australia, Austria, Brazil, Canada, Chile, China, Egypt, Finland, India, Israel, Japan, the Republic of Korea, the Russian Federation, Spain, Sweden, the Ukraine, and the US, together with the European Patent Office and the Nordic Patent Institute: . 57  See Regulations under the Patent Cooperation Treaty (opened for signature 19 June 1970, entered into force 24 January 1978) 1160 UNTS 231 (hereafter PCT Regulations) rule 43bis.

the International Intellectual Property System    217 January 2018, has a membership of 152.58 In principle, it contains no substantive requirements as to patentability standards, but in practice it has been very influential in this regard, as the standards applied in the international search and preliminary examination are high and are generally accepted by national offices. The key benefit, of course, is that an applicant needs only to make one application initially and need not decide upon which national routes to pursue until it has the benefit of the search report, the written opinion, and possibly the preliminary examination report. In financial terms, this not only is ultimately a benefit for patentees, but it also provides a rich source of income for the WIPO, which is one of the few self-​financing entities in the UN system. While the provisions of the PCT and its regulations are largely of a technical character, it now plays a critical role in the international patent system and must be regarded as one of the most significant achievements flowing out of the Paris Convention. Along with the PCT, there are several other special agreements under Paris dealing with procedural issues in relation to the obtaining of patents. Of these, the Budapest Treaty on International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure 1977 (the Budapest Treaty) has particular significance for inventions involving microorganisms. This provides a useful procedure for compliance with description requirements under national patent laws where the subject of the application for patent protection is a microorganism in relation to which description requirements cannot be so easily met, if at all. Deposit of the microorganism in some place where it is open for public inspection is one solution, and the Budapest Treaty avoids the need for this to be done in each country where protection is sought by providing that deposit in a recognized international depository authority under the Treaty will suffice for all purposes involving proceedings before national or regional patent offices (such as the European Patent Office). There are now 46 of these recognized authorities,59 and as of January 2018, there were 80 contracting parties to this Treaty.60 Another important international agreement with relevance to searching and categorization of subject matter is the Strasbourg Agreement Concerning the International Patent Classification 1971, which, like its Nice and Locarno counterparts, offers a non-​binding classification system that is widely applied by national offices and applicants for searching and drafting purposes. For various reasons, including sharp differences between developed and developing countries, attempts at more substantive harmonization of patent standards within the framework of the Paris Convention have been unsuccessful, although it is noteworthy that there was a major initiative by WIPO at the end of the 1980s to do so. This led to a diplomatic conference in The Hague in 1991,61 but this fell down upon differences between countries over the issue of entitlement to file for protection, that is, whether it should prescribe that this should be the first person to file or the first person to invent. There were, of course, 58 

See . Seven in the UK, four in the Republic of Korea, three in China, Italy, and the US, two each in Australia, India, Japan, Poland, the Russian Federation, and in Spain, and one each in Belgium, Bulgaria, Canada, Chile, the Czech Republic, Finland, France, Germany, Hungary, Latvia, Mexico, the Netherlands, Slovakia and Switzerland: . 60  See . 61  See further Records of the Diplomatic Conference for the Conclusion of a Treaty Supplementing the Paris Convention as far as Patents are Concerned, Vol I: First Part of the Diplomatic Conference The Hague, 1991 (WIPO 1991). 59 

218   Sam Ricketson other differences, particularly those that arose from the diverging perspectives of developed and developing countries,62 and the ultimate international instrument that emerged from further consultations and negotiations, the Patent Law Treaty 2000, is something of a misdescription insofar as it is directed only at matters of procedure relating to the making of applications. While discussions within the WIPO Standing Committee on patents continue fitfully with respect to more substantive matters, such as patentability and disclosure requirements, the main international norms in relation to these matters are to be found in the TRIPS Agreement (see further in section 5.4).

5.1.2.4 Special Agreements on Indications of Source and Appellations of Origin Although indications of source and appellations of origin are included as the “objects” of industrial property protection under the Paris Convention,63 and therefore subject to national treatment, there are no other provisions of the Convention dealing with them other than in respect of a series of optional measures that Union Members may take in relation to the importation of goods bearing “false indications of source”64 and a more general requirement to provide “appropriate legal remedies” to repress such activities.65 These obligations are enhanced to some extent by the Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods 1891. This Agreement has received relatively minor revisions since this time, and still has only a limited membership.66 Although the terms “indications of source” and “appellations of origin” are used as alternatives in Article 1(2) of the Paris Convention, the latter term has a more specialized meaning under some national laws as referring to a particular sub-​category of indications of geographic origin, rather than of source generally, and reflecting a close link between the natural and human inputs associated with a particular region and products that emanate from that place. Apart from Article 2(1), the term “appellation of origin” does not appear anywhere else in the Paris Convention, although it is possible that one legal vehicle for protecting this kind of “group right” shared by the producers in a particular region might be comprehended by the obligation under Article 7bis for Union countries to protect “collective marks.” Specific protection for appellations of origin, however, was established in a special agreement that was adopted between likeminded Paris Convention Members at the Lisbon Revision Conference in 1958. This is the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration 1958, which provides for a system of international registration of appellations through the medium of WIPO, and which creates an enforceable right in all member countries of the Special Union, with the possibility of disallowance at national level within prescribed time limits.67 The right so recognized has particular significance for local trademark registrations, and confers a significant area of immunity for the registered appellations against the risk of genericism arising through local usages.68 Membership of the Special Union has remained small (only 28 countries at present),69 62 

See further the discussion in Ricketson, ch 10, paras 10.108–​10.113. 64  Paris Convention, art 10.   Paris Convention, art 1(2). 65  Paris Convention, art 10ter. 66  As of January 15, 2018 there were 36 Contracting States: . 67  Lisbon Agreement, art 5. 68  Lisbon Agreement, art 6. 69  See . 63

the International Intellectual Property System    219 and, historically, consisted mainly of European countries with long-​established appellation systems for wines and foods. There are now some significant outliers outside Europe70 while the appellations registered range far beyond wines and foods to all kinds of products, both agricultural and manufactured. Recently, the Lisbon Agreement has been subject to revision with the adoption of a new Act of the Agreement in May 2015. This was accompanied by some controversy, particularly as to the role of WIPO and the refusal of the revision conference to allow non-​Lisbon Member States to participate equally in the revision process.71

5.2 Unregistered Rights Discussion of unregistered rights is typically concerned with authors’ rights in literary and artistic works and rights related to these (“neighboring rights”). As already noted, these are the subject of the Berne and Rome Conventions, as well as a number of later agreements. However, several kinds of unregistered or potentially unregistered rights are covered by the Paris Convention, namely the protection of trade names, service marks, and the repression of acts of unfair competition, and these are considered here first, before moving on to authors’ and neighboring rights.

5.2.1 Unregistered Industrial Property Rights: Paris Convention Obligations Under Article 8 of the Paris Convention, there is a general obligation to protect trade names, whether registered or not, and whether or not it forms part of a trademark. This is a positive obligation that supplements national treatment, in that the latter on its own would not require any protection of trade names at all, so long as this protection was also withheld from locals. This Article, almost unchanged, has been in the Convention from the beginning, and is directed essentially at the names of businesses and traders, as distinct from any protection that might otherwise be available under trademark law. As an object of industrial property, service marks are subject to protection under national treatment, and are also the subject of a specific requirement to protect under Article 6sexies, but without any obligation to provide for registration. If registration, indeed, is provided for at the national level, the foreign claimant will enjoy this as an aspect of the application of national treatment, but there is no obligation on Union Members to extend priority periods for filing to foreign applicants, as the provisions of the Convention dealing with this refer only to trademarks (for goods).72 This lacuna has been corrected under the TRIPS Agreement,73 but

70

  Namely, Algeria, Tunisia, Burkina Faso, Costa Rica, Cuba, Mexico, Peru, Israel, Iran, and Democratic Peoples’ Republic of Korea. 71   See here the strong statement of opposition to this decision by the US Permanent Representative to the United Nations and Other International Organizations in Geneva, delivered at the Conference in the WIPO headquarters in Geneva, 11 May 2015, and entitled “All WIPO Members Should Be Able to Participate Equally in Lisbon Agreement Diplomatic Conference”: at . 72  Paris Convention, art 4A(1). 73  TRIPS, art 62(4).

220   Sam Ricketson there are a number of other specific obligations under the Paris Convention as “rights specially granted” that apply only to trademarks and not service marks.74 The obligations under Article 10bis in relation to unfair competition go beyond what might be loosely described as protection of industrial property, that is, the protection of traders’ goodwill, and also contain an element of consumer protection. Entering the Convention at the time of the Brussels Additional Act in 1900, the specific obligation to repress acts of unfair competition was crystallized in the Washington Act 1911 and then elaborated upon by the specification of instances of unfair competition in the succeeding revisions at The Hague (1925), London (1934), and Lisbon (1948). These are, in fact, the most prescriptive of the protections that Union Members must comply with under the Convention, beginning with an overall definition of “unfair competition” as “any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition” (Article 10bis(2)). The following acts to be prohibited are then specified in Article 10bis(3):

(i) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; (ii) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; (iii) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods. These are only stated to be an inclusive list, meaning that there is considerable scope for national laws to provide for additional kinds of acts of unfair competition that are to be prohibited. In this regard, the TRIPS Agreement has added a further important obligation for WTO Members to provide protection for undisclosed information and regulatory approval data submitted to governments or their agencies as part of their general obligation under Article 10bis.75

5.2.2 Unregistered Rights: Authors’ and Related Rights The range of substantive obligations or “rights specially granted” to claimants under these agreements is more extensive than those embodied in the Paris Convention and its special agreements. Indeed, in the case of the Berne Convention, it may be said that this contains an almost complete set of norms for the pre-​digital, hard copy environment, in the sense that they provide a useful checklist of the principal provisions that any national authors’ rights law should contain. These obligations have now been supplemented by further obligations under the WCT that are relevant to the online environment.

74  See, eg, Paris Convention, arts 6bis (well known marks), 6ter (State emblems and flags) and 11 (international exhibitions). 75  TRIPS, art 39(1).

the International Intellectual Property System    221 5.2.2.1 Authors’ Rights: Berne and Beyond The second most venerable of the “traditional” IP conventions is the Berne Convention, which has been regularly revised since its adoption in 1886. From an original membership of nine states (mainly European), the “Berne Union,” as it is known, comprises 175 states as at January 2018, including all the states of the EU, Japan, the US (since 1988), the People’s Republic of China (since 1992), the Russian Federation (since 1995), and the vast majority of developed and developing countries.76 Like the other major IP conventions, the Berne Convention is based upon the principle of national treatment, but it now embodies a considerable corpus of basic rights that Member States must extend to the authors of other Member States. The principle of national treatment, however, still remains the keystone of the Convention,77 and is buttressed by the principle of independence of protection,78 which underlines the territorial character of the Convention as giving rise to a series of independent copyrights in the territories of each of its Member countries. Entitlement to seek protection is based on either the personal criterion of nationality of a Berne Union country or residence in such a country (not really an issue these days as Berne membership is now so widespread) or the geographic criterion of first publication in a Berne country in the case of published works where the personal criterion is not satisfied.79 As in the case of the Paris Convention, protection under the Berne Convention is not concerned with what happens in the author’s own country (the “country of origin”80) but rather with what occurs in all other Berne Union Members. This is subject to a further qualification which may begin to pose difficulties in the online environment in that protection in the country in which protection is claimed under the Convention is not to be subject to any kind of formality.81 This means that no requirement of registration, deposit, notice, or the like can be imposed upon foreign claimants (although it would be open for the laws of the country of origin to retain such requirements for local claimants—​as still happens in US law). As the subject matter of the Berne Convention is the rights of authors in their “literary and artistic works,” it may seem odd to find that there is no definition of “author” (just as there is an absence of any definition of “inventor” or “designer” under the Paris Convention). However, the term “literary and artistic works” is defined in broad and inclusive terms to include all the traditional categories of such works, which range from books, plays, musical compositions, paintings, and sculptures, through to works of architecture, dramatic works, cinematographic films, works of choreography, and works of applied art.82 In more general terms, it is provided that the expression “literary and artistic work” includes “any production whatsoever in the literary, scientific, or artistic domain.”83 No specific mention is made in this definition of such subject matter as computer programs but, in the absence of any other guidance on this point, it is arguable that they are embraced under the general heading of productions “in the literary, scientific, or artistic domain;” this is a point that has now been clarified in later agreements.84 The convention also contains 76 

See further . 78  Berne Convention, art 5(2). Berne Convention, art 5(1). 79  Berne Convention, art 3(1)(a) and (b). 80  A term defined at some length in Berne Convention, art 5(4). 81  Berne Convention, art 5(2). 82  Berne Convention, art 2(1). 83  Berne Convention, art 2(1). 84  WCT, art 4; TRIPS, art 9.1. 77 

222   Sam Ricketson a list of the exclusive rights that Member countries must accord to the authors of works claiming protection under it (or to their successors in title, for example, assignees or beneficiaries.)85 These “rights specially granted” apply regardless of what may otherwise be accorded as a matter of national treatment, and include the exclusive rights of reproduction (Article 9), translation (Article 8), public performance and public recitation (Articles 11 and 11ter), broadcasting (Article 11bis), adaptation (Article 12), and cinematographic and related rights (Article 14). Furthermore, there is a requirement in Article 6bis that Member States should protect the moral rights of attribution of authorship and protection of the integrity of works. Other provisions of the Convention deal with exceptions that Member States may make to the protection that they accord in such areas as news reporting, quotation, and review, and certain educational uses.86 There is also a more general provision that exceptions may be made to the basic reproduction right where such exceptions are limited to “certain special cases,” do not conflict with the normal exploitation of the work, and do not unreasonably prejudice the legitimate interests of the author. This is often referred to as the “three-​step test,”87 and it is under this exception that fair dealing exceptions and statutory reprographic reproduction licensing schemes and the like at the national level are to be justified. Finally, the Berne Convention contains strict requirements as to the duration of the protection that must be accorded to works that claim protection. The general rule is that this is the life of the author plus 50 years,88 but there are shorter special terms applicable in the case of certain categories of works, such as photographs and cinematographic films: See generally Articles 7(2)–​(8) and 7bis. While the Berne Convention still has gaps in some significant areas, such as issues of entitlement and ownership, with the advent of digital technologies and networked communications many of its existing formulations appeared incomplete or uneven in this new environment, and in 1996 this led to the negotiation and adoption of two new treaties dealing with both authors’ rights (the WCT) and related rights (WPPT). In the case of authors’ rights, the WCT clarified a number of perceived deficiencies of the Berne Convention, for example, in the extension of protection to computer programs89 and compilations of data90, and the scope of the reproduction right.91 It also reformulated the existing broadcasting and communication right under the Berne Convention to embrace a broader right of communication to the public, including the right of making available to the public at any time and place chosen by the recipient,92 as well as extending exclusive rights in hard copies to cover distribution to the public93 and rental of copies (in some instances).94 More controversially, it adopted a formulation based on the three step test in Article 9(2) of Berne to apply to exceptions more generally in the online environment,95 as well as providing for certain collateral protections that contracting parties are required to provide in relation to circumvention measures adapted to bypass technological protection measures96 and to prevent alterations to copyright management information.97 To date, the WCT comprises more than half the membership of the Berne Union (96 contracting

85 

86  Berne Convention, arts 10 and 10bis. Berne Convention, art 2(6). 88  Berne Convention, art 7(1). 89 WCT, art 4. Berne Convention, art 9(2). 90 WCT, art 5. 91  WCT, agreed statement concerning, art 1(4). 92 WCT, art 8. 93 WCT, art 6. 94 WCT, art 7. 95  WCT, art 10. 96  WCT, art 11. 97  WCT, art 12 and agreed statement. 87 

the International Intellectual Property System    223 parties as of January 2018),98 and has significantly raised the level of substantive protection that these countries are obliged to accord to foreign claimants. There are always pullbacks where levels of IP protection are enhanced, and this is certainly true in the case of the WCT, where opposition or resistance to a number of its obligations have been raised by developing countries and civil society groups. There is an inevitable conflict here that is accentuated by the potentialities offered by digital technologies and online communications, where rights owners feel particularly vulnerable to the risks of limitless reproduction and communication of their works, and users feel equally threatened by the specter of new and extended exclusive rights and collateral forms of protection. These issues have been regularly played out in the forums of WIPO and other interested international organizations (and continue to be so), but have found recent expression in the adoption of a special treaty dealing with more refined and mandatory exceptions that may be made in favor of blind and visually impaired readers: the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled 2012.99 These are intended to sit within the existing framework of exceptions under the Berne Convention and the WCT, but highlight a loud and continuing debate occurring at the international, regional, and national levels about the proper scope of exceptions to authors’ rights protections. To comment further is beyond the scope of this discussion other than to say that this field is rich in research opportunity for the political scientist, economist, sociologist, and cultural studies theorist.

5.2.2.2 Related Rights: Rome Convention and Beyond The protection of related or neighboring rights internationally has followed a more uneven and even haphazard trajectory. The initial claimants for protection were phonogram producers, performers, and broadcasting organizations, each of which was firmly rebuffed from seeking protection within the framework of the Berne Convention at the Rome Revision Conference in 1928,100 and in the course of preparations for the next revision conference in Brussels that occurred during the 1930s.101 The view of Berne Convention purists was that none of these activities resulted in the production of literary or artistic works, although they were usually based on or used such works. Different reasons for denying their claims were advanced: in the case of performances, these were of too transient or ephemeral a character to be regarded as “authorial productions”; in the case of phonograms, these were usually the result of a corporately organized industrial process; and, in the case of broadcasters, it was difficult to characterize the signals that were transmitted as being literary or artistic in themselves. Rejection from the Berne Convention therefore led to the development of several projects for protection of a sui generis kind that might be embodied in separate international instruments. This work, which commenced in the 1930s, occurred largely outside the purview of the Berne International Office (though with its benign assistance), and the bodies 98 

See at . This treaty entered into force on 30 September 2016 and now has 33 states that are contracting parties: see at . 100  See further Actes de la Conférence réunie à Rome du 7 mai au 2 juin 1928 (BIRPI 1929) (hereafter Actes 1928) 94, 263–​64 (phonogram producers), 78, 256, 260, 350 (performers) and 226–​7 (broadcasters). 101  Because of the intervention of the Second World War, this revision conference did not occur until 1948. 99 

224   Sam Ricketson involved were various, including: the International Institute for Intellectual Cooperation, a League of Nations body that ultimately became UNESCO; the International Labour Organization (ILO), which had a particular interest in performers as a group of intellectual workers; and the International Institute for the Unification of Private Law (UNIDROIT).102 Following the Second World War, further discussions within UNESCO, the ILO, and BIRPI led to the adoption of The Rome Convention 1961 (for the Protection of Performers, Phonograms and Broadcasts) (Rome Convention). The protection to be granted under the Rome Convention is somewhat uneven. Thus, in the case of performers, it is provided simply that protection should “include the possibility of preventing” certain acts, including unauthorized broadcasting and communication to the public, unauthorized fixation of performances, and unauthorized reproductions of fixations that have been made without their consent.103 Contracting parties may provide this protection by any means they consider to be appropriate, whether by the grant of a copyright, the use of other civil remedies, or through criminal sanctions. By contrast, the protection accorded to phonogram producers and broadcasting organizations is framed more strongly, in that it is required that these should be given “the right to authorise or prohibit” certain acts, such as reproduction and fixation.104 However, reservations and exceptions are permitted to many of the requirements of the convention,105 and the minimum term of protection is only 20 years.106 The level of international protection for performers and phonogram producers has now been increased significantly through the adoption of two special agreements:  the WIPO Performers and Phonograms Treaty (WPPT) in 1996 and the Beijing Treaty on the Protection of Audio-​visual Performers in 2012. The WPPT was negotiated at the same time as the WCT, and grew out of the work of the initial committee of experts on a possible protocol to the Berne Convention that had begun meeting in 1991; this was then carried forward by a second committee of experts. The final text contains a number of significant provisions that enhance the protection of both performers and phonogram producers, and which go significantly further than the obligations contained in the Rome Convention. These take the form of exclusive rights that are to be accorded to both performers and phonogram producers, including rights of fixation and reproduction, distribution of fixations, broadcasting and public communication, and making available to the public;107 most significantly, moral rights of attribution and integrity are to be accorded to performers.108 Minimum terms of 50 years post performance or publication are stipulated,109 and there are specific obligations with respect to collateral forms of protection for technical protection measures110 and copyright management information.111 As under the Berne Convention, protection under the WPPT is to be free of formalities,112 and membership of the treaty is now the same as that 102  This work culminated in the adoption of a series of draft treaties on the rights of phonogram producers, performers, and broadcasting organizations by a committee of experts meeting at Samedan in Switzerland in July 1939: reported in [1940] Droit d’Auteur 109–​11, 121–​125 and 133–​138. 103  Rome Convention, art 7. On the Rome Convention, generally, see further S Stewart, International Copyright and Neighbouring Rights (2nd edn, Butterworths 1989) ch 8; Ricketson and Ginsburg, ch 19. For the text of the Convention and its membership, see . 104  See generally Rome Convention, arts 9–​13. 105  See Rome Convention, arts 15 and 16. 106  Rome Convention, art 14. 107  WPPT, arts 4–​10 (performers) and 11–​14 (phonogram producers).    108 WPPT, art 5. 109  WPPT, art 17. 110  WPPT, art 18. 111  WPPT, art 19. 112  WPPT, art 20.

the International Intellectual Property System    225 of the WCT.113 The major omission from the WPPT relates to audio-​visual performers, but these are now covered by the Beijing Treaty, adopted in 2012 and which entered into force on 30 September 2016.114 This provides for a similar level of protection for this group of performers, including moral rights.

5.3 Other Treaties The various treaties discussed fall within what may be called the general purview of WIPO, either as special agreements under the Paris or Berne Convention, or more generally as the result of diplomatic conferences and negotiations organized by WIPO or its standing committees. There are several other treaties administered or initiated by WIPO that should be noted in any general overview of the present kind. For the most part, these treaties deal with sui generis rights that sit outside the traditional framework of the Paris, Berne, and Rome Conventions. One is the Nairobi Treaty on the Protection of the Olympic Symbol 1981, which provides for protection that may well cut across that provided by trademark and unfair competition laws. Another, which never entered into force, concerns the protection of layouts for integrated circuits, and sought to establish a tailor-​made regime for this kind of subject matter.115 It failed to gain acceptance because of differences between countries such as the US and those in Europe, but enjoys an interesting half-​life through its incorporation within the TRIPS Agreement (this incorporation is discussed later). A further, and more significant, international agreement that sits outside WIPO, although in practice it is administered in close co-​ordination with that body, establishes the Union for the Protection of Plant Varieties (UPOV).116 This provides for an international regime for the protection of plant breeders’ rights, which are monopoly rights akin to those granted through a patent for invention, but with their own particular threshold standards. Membership of this convention now stands at 75, and covers most countries with significant agricultural sectors.117 There are no formal links between protection obtained under this convention and the Paris Convention and its associated agreements, but indirect recognition of the role of plant breeders’ rights occurs under the TRIPS Agreement (discussed later), where contracting parties may refrain from according patent protection to plants and seeds provided that they have in place an effective sui generis protection regime, which would clearly include a plant breeders’ law that met the requirements of UPOV.118

113 

As of 15 January 2018 there were 96 contracting parties: . Membership of the WCT stood at 96: . 114  The sticking point here in relation to audio-​visual performers concerned their relationship with film studios, which is now addressed in art 12 of the Treaty which deals with transfers of performers’ rights (there is no corresponding provision in the WPPT). 115  Treaty on Intellectual Property in Respect of Integrated Circuits (opened for signature 26 May 1989) 28 ILM 1477. 116  International Convention for the Protection of New Varieties of Plants 1961, as revised (opened for signature 2 December 1961, entered into force 24 April 1998) 815 UNTS 89. 117  See at . 118  TRIPS, art 27(3)(b).

226   Sam Ricketson Finally, there is a multilateral agreement in the area of authors’ rights, the Universal Copyright Convention 1952 (UCC) (revised in 1971), which bore an enormous significance for three decades up to the 1990s in providing a bridge between registration countries outside the Berne Union and non-​registration countries within the Berne Union.119 Under the auspices of UNESCO, the UCC provided a means by which nationals and residents of Berne Union countries could obtain protection within countries with registration systems, most notably the US, by the expedient of attaching a prescribed copyright notice to works.120 The UCC also provided a gateway to protection in many Latin American countries with similar systems of formalities, as well as within the former USSR. Following the accession of the US to the Berne Convention in 1989—​a momentous change in the law of that country as it required the removal of registration requirements for non-​US works claiming protection under the Berne Convention—​membership of the UCC no longer became so necessary, particularly as other significant countries then joined the Berne Convention, such as China and the various new states created through the breakup of the former USSR. The UCC still remains in force, but with a static membership, as membership of the Berne Convention is now almost universal.121 The continuing importance of Berne is also underscored by the incorporation of its basic norms as part of the TRIPS Agreement (discussed later). Indeed, while the substantive standards of the UCC did not fall too far below those of the Berne Convention—​with the exception of issues of formalities—​the Berne standards were nonetheless higher, and the move into the Berne Union by the US in 1989 appears to have been triggered by a recognition that it was easier to argue for the adoption of Berne Convention standards within the emerging TRIPS Agreement as a Berne Union Member, rather than as an outsider.

5.4 The TRIPS Overlay Since 1994, a further overlay to the WIPO agreements discussed previously is found in the provisions of the TRIPS Agreement, which is one of the annexed agreements of the WTO. The TRIPS Agreement, which was adopted as part of the Uruguay Round of the GATT, embodies a series of standards both as to the substantive norms of IP protection and enforcement measures that WTO Members are required to adopt in their national laws, and, for the first time, is linked to a significant international enforcement mechanism (the WTO dispute settlement procedures) that Members may invoke against their recalcitrant fellows. Underlying the TRIPS Agreement is the notion that respect for the IPRs of nationals of Member States is a vital part of the overall objective of the promotion of fairer and freer trade between those countries. Beginning with the bedrock obligation of national treatment,122 coupled with the trade law principle of most favored 119 

See further Ricketson and Ginsburg, ch 18, in particular para 18.12 ff. Universal Copyright Convention 1952, as revised (opened for signature 6 September 1952, entered into force 10 July 1974) 943 UNTS 178, art III. 121  As of February 2018, there were 100 contracting parties to the 1952 Act and 65 contracting parties to the 1971 text, with the last state to join being the newly independent Montenegro in 2007: see . 122  TRIPS, art 3.1. 120 

the International Intellectual Property System    227 nation,123 the TRIPS Agreement then proceeds to incorporate the substantive provisions of both the Paris Convention (Articles 1–​12 and 19)124 and Berne Convention (Articles 1–​21 and the Appendix, with the exception of Article 6bis, which deals with moral rights),125 as well as supplementing the provisions of the Rome Convention with respect to related rights126 and adopting the majority of the substantive provisions of the 1989 Washington Treaty on Integrated Circuits.127 The effect of these provisions is that WTO Members become bound to apply the substantive provisions of these other conventions, even if not contracting parties themselves (the reality, of course, is that the vast majority of WTO Members will, in fact, be contracting parties to these treaties or have become so in the years following the creation of the WTO in 1994). But the TRIPS Agreement does not stop here. In a series of supplementary provisions, it enunciates certain substantive standards in relation to each of the principal IPRs that Members must adopt in their laws. These are, in effect, further rights “specially granted” that must be accorded by each Member to nationals from other Members in addition to what they will already receive via national treatment and/​or those rights specially granted under the Berne or Paris Convention. In the case of the Berne Convention, these “Berne-​plus” rights are relatively limited, given that the most recent revisions of the Berne Convention had already provided a reasonably comprehensive set of substantive norms, at least so far as the hard copy environment was concerned. However, the requirement to protect computer programs as literary works may resolve an uncertainty that previously existed as to whether their protection was required under the Berne Convention;128 likewise, the extension of protection for compilations of data that are not themselves literary or artistic works is of some significance.129 Standards in relation to neighboring or related rights are also more specifically articulated than under the corresponding provisions of the Rome Convention, which, unlike the Berne Convention, is not incorporated but is simply elaborated upon in free-​standing TRIPS provisions.130 In the case of the Paris Convention, however, the TRIPS “Paris-​plus” provisions are more extensive and can be seen as achieving a level of substantive harmonization of standards that had proved impossible to achieve under that Convention. Thus, there is some limited definition of the subject matter to be protected in the cases of patents,131 industrial designs,132 and trademarks,133 threshold requirements for protection are laid down, albeit in general terms,134 the scope of these rights is set out in some detail,135 minimum terms of protection are specified,136 and criteria for the making of exceptions and the imposition of compulsory licenses (in the case of patents) are set out.137 Some of these provisions bite hard, particularly in the case of developing countries, where, for example, the scope for limiting patentable subject matter is now reduced, and, for national laws more generally, where the specification of minimum terms of protection has brought about greater uniformity. The 123 TRIPS, art 4.

124 

125  TRIPS, art 9.1. 126  TRIPS, art 14. TRIPS, art 2.1. 129 TRIPS, art 35. TRIPS, art 10.1.   TRIPS, art 10.2. 130   See further TRIPS, arts 14.1 (performers), 14.2 (producers of phonograms), 14.3 (broadcasting organizations), 14.4 (rental rights), 14.5 (term of protection), and 14.6 (retrospectivity). 131  TRIPS, art 27.1. 132  TRIPS, art 24.1. 133  TRIPS, art 15.1. 134  TRIPS, arts 15 (trademarks), 25.1 (industrial designs) and 27 (patents). 135  TRIPS, arts 16 (trademarks), 26.1 (industrial designs) and 28.1 (patents). 136  TRIPS, arts 18 (trademarks), 26.3 (industrial designs) and 33 (patents). 137  TRIPS, arts 13 (copyright), 17 (trademarks), 26(2) (industrial designs), 30, 31 and 31bis (patents). 127 

128 

228   Sam Ricketson TRIPS Agreement also provides expressly, for the first time at the international level, for the protection of undisclosed information and regulatory approval data, in the form of a de facto extension of the scope of Article 10bis of the Paris Convention (requiring protection here under the general rubric of unfair competition).138 As mentioned, the TRIPS Agreement further requires the protection of designs for integrated circuits, through the somewhat unusual device of requiring compliance with the provisions of the WIPO treaty in this area, which never came into force.139 Finally, and perhaps of most significance for IPR owners, the TRIPS Agreement fills a gap that had never been met by the earlier conventions in the area of minimum enforcement and procedural measures that must be adopted by Members.140 This met a particular concern of certain developed countries that there were many other countries, particularly in the developing category, that were Members of both the Berne and Paris Conventions, but had failed to provide adequate protection of the rights they had undertaken to protect under those conventions. In short, the TRIPS Agreement provides a significant overlay to the international IP protection system contained in the traditional IP conventions, both by way of important supplementary norms relating to matters of substance, procedure, and enforcement, and by the provision of a meaningful inter-​state compliance mechanism through the WTO dispute resolution process. From the perspective of IPR owners (who were mostly from developed countries), it can be seen as something of a landmark achievement, particularly given the difficulties that had arisen in seeking revision of the principal conventions of the Paris and Berne Conventions in earlier decades. In crude terms, the removal of IPRs into the sphere of trade and away from the more contentious forum of WIPO represented the creation of a new paradigm, while the utilization of existing Paris and Berne Convention standards as a starting point was a clever, if not inspired, piece of creative treaty making. On the other hand, and as some of the other chapters in this part of the volume illustrate, it left a number of important matters unresolved or unaddressed, as well as sowing the seeds for severe discontent, specifically on the part of developing countries that found themselves bound to move towards the adoption of higher standards of protection if they were to obtain the benefits that might otherwise be available through WTO membership. Detailed consideration of these matters lies outside the scope of the present chapter, but a number may be noted briefly: • From the perspective of IPR owners, while the TRIPS Agreement is successful in achieving a significant degree of substantive harmonization, this can be seen as something of a one-​off achievement—​securing agreement on matters on which there was already fairly general agreement at national level. In any event, many of these provisions, notably in the areas of patents, designs and trademarks, are dealt with only in the most general, “in principle,” manner, which still leaves a great deal of flexibility for implementation at the national level. Furthermore, in the area of authors’ rights, there is nothing that addresses the issues of online and digital uses—​as seen previously, these matters have moved back into the sphere of WIPO, most notably through the development of the WCT and WPPT. • In several substantive areas, the TRIPS Agreement was only able to make very limited and tentative provision. Geographical indications are one example, as they were 138 

TRIPS, art 39.1.

139 

TRIPS, arts 35–​38.

140 

See generally TRIPS, Part III.

the International Intellectual Property System    229 effectively left as a subject for further negotiations,141 which have proceeded only fitfully and without result within the TRIPS Council over the succeeding two decades. Exceptions to patentability are another example. • It would also be wrong to see the TRIPS Agreement as representing a complete victory for the interests of IPR owners. While its requirements for intending WTO Members are significant, there is nonetheless a fair margin of latitude left to national lawmakers as to how and when they give effect to these requirements. Sometimes referred to as “flexibilities,” there is a number of ways in which countries can implement their TRIPS obligations, including specific transitional arrangements for developing and least-​ developed countries,142 and express recognition that Members must do so within their own legal system and practice.143 Further scope is provided in relation to exceptions to protection,144 and there is express recognition of wider public policy concerns that Members may take into account, for example, in relation to matters of public health.145 The width and scope of these various flexibilities is, of course, open to contestation and hard fought compromises, as in the case of pharmaceutical patents and treatment of epidemics.146 The simple point to make here, by way of conclusion, is that the TRIPS Agreement is not all one way, and scope remains for some kinds of kickback, particularly on the part of developing countries that feel that their interests are unreasonably prejudiced by too high standards of IPR protection. One consequence has been that the TRIPS Agreement, as part of the international IP system, is now set in aspic, as initiatives to change or extend that system have shifted to other forums. This tendency is discussed further in the chapter.

6.  Other Pressures on the Present International IP System It will be clear from the foregoing account of the international IP system, and its various components and layers that the system so described falls short of providing a complete and seamless mechanism for the protection of IPRs from creation to termination, and in all countries concurrently without regard to national frontiers. Important policy questions obviously arise as to whether such an outcome, even if otherwise attainable, would be desirable: The issues at the international level are as complex and as difficult as they are at the national or regional level, and fall outside the scope of the present chapter. However, it is useful to note several developments that have important potential consequences for the international IP system, as well as for the owners and users of IPRs. These developments cut both ways and involve: the increasing move from multilateral approaches towards bilateral and regional solutions; the increasing engagement of IPRs with other international treaty 141 

142  TRIPS, Part VI. 143  TRIPS, art 1.1. See generally TRIPS, arts 22–​24. See further TRIPS, arts 13 (copyright), 17 (trademarks), 26(2) and 30 (patents). 145  TRIPS, arts 7 and 8.   146  TRIPS, arts 31 and 31bis (not yet in force). 144 

230   Sam Ricketson arrangements, notably bilateral investment protection treaties; and the impact of human rights concerns.

6.1 Moves Away from Multilateralism Our account of the international IP system has had multilateralism at its heart: From the Paris and Berne Conventions through to the WTO, multilateral agreements open to all states, without regard to geography, language, or stage of development have been seen as a notable advance on the previous webs of uneven and incomplete bilateral agreements. An obvious criticism, however, is that this kind of approach may become identified as one of the lowest common denominator, and this is certainly borne out by a study of the successive revisions of the principal IP agreements, most notably the Paris Convention, where change has been only of the most incremental kind. Ironically enough, the notion that individual states might enter into further agreements between themselves has always been acknowledged in both the Paris and Berne Conventions, subject to the caveat that these agreements should not be contrary to provisions of those Conventions. This facility has been used to promote the various special agreements discussed above, such as the Madrid and Hague Agreements, and the PCT, although these have been multilateral, rather than bilateral or regional agreements. Regional agreements and arrangements have also been adopted in some areas, notably within the EU147 and in Africa,148 and within the Commonwealth of Independent Nations.149 However, bilateralism has returned in significant ways in the last two decades through free-​trade agreements which have usually embodied obligations to accord higher levels of protection of IPRs that are “TRIPS-​plus,” rather than just Paris-​ or Berne-​plus, particularly in the sphere of enforcement. While the US has been the most prominent promoter of such agreements,150 many other countries have followed the same path,151 usually with other trade objectives in mind, but with significant impacts with respect to IPRs. More recent attempts to promote regional arrangements with a particular emphasis on enforcement measures intended to combat international piracy and counterfeiting have proved controversial, such as the Anti-​Counterfeiting Trade Agreement (ACTA), but others continue to be negotiated among likeminded groups of nations.152 From a “system” perspective, while such agreements may well serve the interests of particular nations or groups of nations, they also have the effect of undermining the traditional multilateral conventions 147 

Notably the EU Trade Marks and Designs Regulations. Notably through the regional arrangements operated by the African Intellectual Property Organization (OAPI) (see further at ) and the African Regional Intellectual Property Organization (ARIPO) (see further at ). For further discussion see the chapter by Caroline Ncube in this volume. 149  Eurasian Patent Organization (EAPO) at . 150  See the list of bilateral free trade agreements listed on the website of the US Trade Representative at . 151  In the case of Australia, see ; in the case of the EU, see . 152  Most recently the now delayed Trans Pacific Partnership Agreement, which contained a chapter (Chapter 18) on IPRs. In the case of the EU and the US, the Trans-​Atlantic Trade and Investment Partnership is another. 148 

the International Intellectual Property System    231 which sought, however incompletely, to provide for universally applicable standards. Good or bad, this is a significant change in the way things have been done historically.

6.2 Connecting IPRs with Other International Arrangements Connected with the move away from multilateralism is the linking of IPRs to bilateral investment treaties. This is a development that has only recently become discernible and arises from obligations under such agreements for each country to protect the investments made there by the other contracting party: More and more, it is recognized that such investments include IPRs, and the potential limitation for each state is that it may find that limitations or restrictions it may wish to impose on the exercise of certain IPRs within its territory will become subject to the terms of the relevant investment treaty. This may even arise where the country in question would otherwise be within its rights to take such actions under the general IP agreements such as the Paris Convention, the Berne Convention, or the TRIPS Agreement. A striking instance of this has occurred in the case of Australia and its recent tobacco plain packaging legislation.153 Potentially, this involved a restriction or even taking of valuable Australian trademark rights of companies located in Hong Kong, which then sought restitution under the terms of a bilateral investment treaty of 1993.154 While this claim was ultimately dismissed for want of jurisdiction by the Permanent Court of Arbitration,155 the proceeding serves to illustrate the potential difficulty facing a sovereign government that wishes to take action on such grounds as public health, environment, or consumer protection, but then finds that it becomes subject to suit under the terms of a relevant bilateral investment agreement where the nationals of the other contracting country have IPRs that might be affected by such measures. This possibility clearly will provide another significant wrinkle in the international IP system.

6.3 The Human Rights Overlay A final important matter affecting the development and operation of the international IP system is to be seen in the growing awareness of human rights concerns that has occurred over the past two or more decades, and which is eloquently discussed by Laurence Helfer in his chapter in this Volume. In a sense, there is nothing new about this interface, as successive revision conferences of the Paris and Berne Conventions,156 and more recently the 153 

Tobacco Plain Packaging Act 2011 (Australia) s 28. Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments 1993, in particular, art 6 (protection against expropriation). As to whether such measures required compensation for appropriation without just compensation under Australian constitutional law, see S Ricketson, “Plain Packaging Legislation for Tobacco Products and Trade Marks in the High Court of Australia” (2013) 3 Queen Mary Journal of Intellectual Property 224–​240. 155  Phillip Morris Asia v Commonwealth of Australia, 18 December 2015. 156  Notably during the Stockholm Revision Conference in 1967, leading to the adoption of the Protocol Regarding Developing Countries in the case of the Berne Convention: see further Records of the Intellectual Property Conference of Stockholm, June 11 to July 14, 1967 (WIPO 1971) 1313–​1319. So far 154 

232   Sam Ricketson various consultative bodies within WIPO and the WTO, have provided the forums in which differences between countries at different stages of development have come to the fore and been hotly debated. The most notable flashpoint has been in relation to compulsory licenses for patents, where the sharply diverging views of the developed and developing blocs of nations led to the failure of the Paris Convention revision process in the early 1980s.157 These differences have continued, coming to the fore again in the early 2000s with the emergence of the Development Agenda within the WIPO.158 It is also possible to see a growing counter-​ narrative to the international protection of IPRs as scholars, activists, and governments have begun to consider the relationship between international human rights and IPRs.159 Thus, arguments for access to material protected by IPRs have found a principled support in widely adopted human rights claims, both aspirational160 and binding as public international law obligations,161 such as rights to health,162 education,163 food, and an adequate standard of living,164 freedom of expression,165 and self-​determination and development.166 These arguments have only been clearly articulated relatively recently,167 and certainly would have appeared alien to delegates at earlier Paris and Berne Convention revision conferences. On the other hand, in the case of the Paris Convention, there is nothing in its text, as revised, that is intrinsically opposed to or inconsistent with notions of human rights—​or, indeed, with as revision of the Paris Convention is concerned, there were four sessions of an ultimately unsuccessful revision conference held between 1980 and 1984: see further Ricketson, paras 5.02–​5.11. 157 

See further Ricketson, paras 5.02–​5.11. See further WIPO, Report of the Provisional Committee on Proposals Related to a WIPO Development Agenda, (2007) General Assembly A/​43/​13 Rev; C Correa and S Musungu, “The WIPO Patent Agenda: The Risks for Developing Countries.” TRADE Working Paper No 12 (2002) 1–​27; J de Beer (ed), Implementing the World Intellectual Property Organization’s Development Agenda (Wilfred Laurier UP 2009). 159  See, eg, the Washington Declaration on Intellectual Property and the Public Interest adopted by the Global Congress on Intellectual Property and the Public Interest, 25–27 August 2011, involving over 180 experts from 32 countries and six continents convened “to help re-​articulate the public interest dimension in intellectual property law and policy,” available at and the draft Access to Knowledge Treaty, 9 May 2005, prepared by a wide range of individuals and civil society groupings, available at . For an excellent overview of the issues involved here, see LR Helfer and GW Austin, Human Rights and Intellectual Property: Mapping the Global Interface (CUP 2011). See also the various selected articles on these issues in LR Helfer (ed), Intellectual Property Rights and Human Rights (Edward Elgar 2013), in particular those by P Yu (“Rediscovering the Historic Understanding of Creators’ Rights in International Instruments”), LR Helfer (“Towards a Human Rights Framework for Intellectual Property”), A Chapman (“Towards an Understanding of the Right to Enjoy the Benefits of Scientific Progress and Its Applications”), and RC Dreyfuss (“Patents and Human Rights: Where is the Paradox?”). 160  In the case of the United Nations Universal Declaration of Human Rights, GA Res 217A (III), UN Doc A/​810 (1948) (hereafter UDHR). 161  As progressive obligations, as in the case of the International Covenant on Economic, Social and Cultural Rights (opened for signature 16 December 1966, entered into force 3 January 1976) 993 UNTS 3 (hereafter ICESCR). 162  UDHR, art 25(1); ICESCR, art 12. 163  UDHR, art 26; ICESCR, art 13. 164  UDHR, art 25; ICESCR, art 11. 165  UDHR, art 19. 166 ICESCR, art 1. 167  See further the reports of the Special Rapporteur in the field of cultural rights: F Shaheed, The right to enjoy the benefits of scientific progress and its applications (Human Rights Council, 20th session, A/​ HRC/​20/​26) (14 May 2012); and F Shaheed, Copyright policy and the right to science and culture (Human Rights Council, Twenty-​eighth session, A/​HRC/​28/​57) (24 December 2014). 158 

the International Intellectual Property System    233 viewing the operation of industrial property rights in a broader social, economic, and cultural context.168 Unlike the Berne Convention, which is specifically directed at the protection of the “rights of authors” and which may call in aid its own human rights claim based on protection of the material and moral interests of authors,169 the Paris Convention is not a convention for the protection of the rights of inventors, designers, and traders. Rather, it is a “Convention for the protection of industrial property,”170 a term that lacks a coherent thread to link its varied objects under Article 1(2) other than as a general label under which these objects are grouped. Given the limitations of the Paris Convention discussed in this chapter—​its basic requirement of national treatment and its very restricted list of “rights specially granted”—​there is a great deal of flexibility that is left in the way in which its obligations are to be carried into effect at national level. This leaves considerable latitude to national legislators to balance the IPRs protected under the Paris Convention against concerns arising from human rights claims in such areas as the definition of subject matter and scope of rights, exceptions, term of protection, and so on. This space for movement is now somewhat constrained by the TRIPS Agreement, but, as noted, that Agreement contains “flexibilities” which may be informed and elaborated upon by human rights considerations. The Berne Convention, with its more strident declaration that it is a convention for the “rights of authors” is clearly more circumscribed, but even here the need for balance is implicit in the scope given for the making of exceptions and limitations, which acknowledge such matters as freedom of reporting and educational uses. “Balance,” however, is expressly acknowledged in the preamble to the WCT, and, more recently, concerns about access and the needs of visually impaired readers lay behind the adoption of the Marrakesh Treaty. More generally, human rights concerns are to be found at play in the continuing discussions within WIPO’s standing committees in relation to patents (for example, in relation to issues of disclosure in the use of genetic resources), copyright (libraries and other exceptions), and trademarks (online uses). If human rights concerns now enter into consideration of the principal components of the international IP system and its operation, it should also be noted that human rights issues and IPRs are also increasingly being raised in subject-​specific international forums, such as the WHO, the Food and Agricultural Organization, and the UN Human Rights Council. Discussion of these significant developments lies outside the scope of the present chapter, the simple point being that they provide another important influence on the way in which the international IP system will operate in the future, as other contributions to this volume illustrate.

168  This careful qualification is made because the original preamble to the Paris Act 1883 did refer to the need to contribute to “ensuring the rights of inventors and the security of commercial transactions”: see Actes 1883 32. This preamble, however, was deleted in later versions of the 1883 Act and in all subsequent revised Acts: see, eg, Actes 1911 3. 169  ICESCR, art 15(1)(c), under which States recognize the right of everyone “to benefit from the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.” But such a claim is limited, in turn, to “authors” and not legal entities: see further United Nations, Economic and Social Council, General Comment No 15 (2005) on art 15(1)(c), paras 7–​8. 170  Insofar as protection is required for inventors as the authors of “any . . . scientific production” under art 15(1)(c), the only specific provision of Paris that addresses this is art 4ter (mention of the inventor).

234   Sam Ricketson

7.  Concluding Comments: an Evolving and Multifaceted System This chapter has sought to provide a broad overview of the system by which IPRs can be recognized and protected internationally. As systems go, it is far from complete, but, at its most basic, it provides for the following: access for claimants from one country into the legal systems of other countries, with the benefit of priority periods for doing so in the case of registered rights; non-​discriminatory treatment, along with that accorded to locals, on arrival, with the absence of formalities in the case of authors’ and related rights; an uneven spread of further protections above and beyond national treatment, depending on the nature of the IPR, with the most developed set of norms applying, once again, to authors’ and related rights, and a more general harmonization in relation to substantive and enforcement measures that has occurred through the medium of trade agreements, notably the TRIPS Agreement; and some more detailed procedural agreements, such as the PCT, that ease and simplify the pathways into protection abroad. None of these international arrangements provides for the creation of global IPRs in the sense that has occurred in several regional contexts, such as within the EU; nor do they provide ready mechanisms for the protection and exploitation of IPRs internationally, in matters such as jurisdiction and choice of law—​ these remain pre-​eminently matters for domestic rules of private international law. As we have noted, the international IP system is also subject to significant pressures from outside, notably through trade and investment treaties, as well as competing human rights claims. Nonetheless, for all its shortcomings, it does constitute a “system,” with various moving parts that progress to a common end: The attaining of protection for IPRs beyond the borders of a creator’s own country. This is a significant achievement, all the more so as it has been done over the course of a century and a quarter, and has occurred through the adoption of multilateral agreements, the most important of which now attract nearly universal state membership.

Chapter 9

T he Em ergenc e a nd Devel opment of U ni t e d States Intel l e c t ua l Propert y L aw Oren Bracha * 1. Introduction The field of intellectual property (IP)  is rapidly growing in significance and exposure. Recent anecdotes such as claiming exclusive rights in the “persona” of a sparsely dressed singing cowboy, ownership of the structure of computer software interfaces, control of the use of a swipe gesture to unlock cellphones, and patents for genetic sequences are merely surface signs of a deep and long process of expansion. During the last two centuries, the various legal fields collectively known today as IP have evolved from a handful of esoteric doctrines into a vast universe of elaborate legal constellations, extending into almost every area of social and economic life. The expansion has advanced in multiple dimensions including protected subject matter, the scope of the rights and their duration. This chapter surveys in very broad strokes the emergence and development of IP law in the United States from its early modest beginning to the present. In modern usage, the overarching category of IP encompasses numerous legal fields held loosely together by the common feature of creating exclusive legal entitlements in intangible resources. For reasons of feasibility this chapter is limited to three of those areas that have a reasonable claim for seniority in terms of importance and longevity: patents, copyright, and trademarks. Like all legal regimes, these did not develop in a vacuum. Understanding their development requires an understanding of the changing social contexts in which they emerged and changed:  economic, technological, political, and ideological. The account offered here places the genealogy of these legal fields in such contexts. It rejects, however, a functionalist perspective in which law is simply the unmediated product of any of these social *  Oren Bracha has asserted his moral right to be identified as the author of this Contribution. All websites were last accessed in February 2018, unless otherwise specified.

236   Oren Bracha forces. IP is analyzed instead as a legal institution that possess its own partial-​autonomy and takes part in shaping technological, economic, political, and ideological processes even as it is being shaped by them. Consequently, elaborating the history of American IP requires first a brief canvasing of this contextual social web of which it is a part.

2.  Intellectual Property’s Contextual Web What determines the shape and change of IP rights? One common answer is technology. For example, one could easily tell the history of copyright as a march of technological innovations accompanied by matching legal forms.1 In this narrative, successive developments of information technologies stretching from the printing press to the Internet and encompassing everything in between has created new, valuable, information goods as well as means for their enjoyment and exploitation. Exclusive legal rights in the new valuable resources followed in the wake of the technologies that had produced them. A similar story could be told about economic factors. Following an account of the development of property rights suggested long ago by Harold Demsetz, one could argue that IP rights emerged whenever the economic value of relevant information goods reached the level where the social benefit of property rights outweighed their cost.2 Trademark law, for example, emerged in the second half of the nineteenth century, as the growth of commerce beyond the limited sphere of strictly local and inter-​personal transactions increased the value of efficient semiotic mechanisms for identifying the source of goods and services.3 Politics too played a conspicuous role in the growth of American IP. A  brief gaze at any part of this history will quickly reveal a trail of interest groups aggressively lobbying legislatures, strategically litigating in courts, and campaigning to win public opinion, all in the service of shaping IP rights in ways consonant with their preference.4 Noah Webster is perhaps the name best known in this context, owing to lobbying efforts that stretched over 40 years. These efforts began in the 1780s with the aggressive solicitation of state legislatures for exclusive privileges in his grammar book.5 They ended with a campaign that resulted in the 1831 Copyright Act and featured a public appearance in Congress by Webster and a vigorous action by his son-​in-​law William Ellsworth in his capacity as the chair of the Judiciary Committee.6 Webster’s efforts were, of course, a colorful early instance of a much broader and persistent phenomenon. 1  See, eg, P Goldstein, Copyright’s Highway: From Gutenberg to the Celestial Jukebox (rev edn, Stanford UP 2003). 2  See H Demsetz, “Toward a Theory of Property Rights” (1967) 57 American Economic Review Papers & Proceedings 347. 3  RG Bone “Hunting Good Will: A History of the Concept of Goodwill in Trademark Law” (2005) 86 Boston University L Rev 547, 576. 4  See RP Merges, “One Hundred Years of Solicitude: Intellectual Property Law” (2000) 88 California L Rev 2187 (2000); RP Merges, “Intellectual Property Rights and the New Institutional Economics” (2000) 53 Vanderbilt L Rev 1857, 1867–​1874. 5  See BW Bugbee, Genesis of American Patent and Copyright Law (Public Affairs Press 1967) 106–​108. 6  See D Micklethwait, Noah Webster and the American Dictionary (McFarland 2000) 211–​221.

United States Intellectual Property Law    237 Finally, extensive parts of IP rights are informed by ideology. Values, beliefs, and fundamental assumptions about such things as the origin and justification of property rights, or the nature of the creative process, were the elements driving public deliberation about the proper content and scope of IP rights. The legal forms produced by these deliberations and debates bear clear marks of those underlying ideologies. Consider, for example, the pamphlet published in 1792 by Joseph Barnes under the title Treatise on the Justice, Policy, and Utility of Establishing an Effectual System for Promoting the Progress of Useful Arts, by Assuring Property in the Products of Genius.7 Barnes was the brother-​in-​law of the inventor James Rumsey. He wrote the pamphlet not as an abstract philosophical tract, but as an ideological argument aimed at obtaining statutory revisions amenable to the interests of patentees. It is possible to organize the factors just mentioned in a particular causal hierarchy. Technological conditions might be seen as the fundamental driving force that constitutes intellectual resources and determines their economic value. The changing economic value of intellectual resources increases, in turn, the benefit of property rights in respect of such resources. When the economic benefits of property rights significantly outweigh their cost, private actors who stand to internalize large parts of the value form interest groups and lobby lawmakers to create or reshape IP rights. Finally, as these interests struggle for victory and legitimacy in various public fora, they and those who work on their behalf adapt dominant ideological strands in ways that justify the newly claimed legal forms. One could fit into this mold, for example, the development of copyright in photographic works. When photographic technology was first developed towards the middle of the nineteenth century, it brought into being a new and valuable intangible resource. As this technology developed—​first in the form of better quality and more cost-​effective photographs, and then in more disruptive ways, such as photographic duplication in print—​the economic value of the new resource grew and together with it the value of property rights in respect of it. The rising value of photographs produced professional photographers and, later, business firms in this area. These firms lobbied for the extension of copyright, previously limited to printed texts, to photography. As the economic stakes grew, so did the political power of the economic actors who stood to profit from photographic copyright and the resources available to them. These actors won victories, first in Congress that extended copyright to photographs in 1865, and then in the courts that in the last decades of the century gradually began to supplant an initially hostile approach with one friendlier to copyright in photographs.8 In their legislative and court battles the agents of those with business interests in securing photographic copyright devised ideological arguments that smoothened its acceptance. As a result of these efforts, photographic technology, originally seen by many as “the pencil of nature,” a mechanical art for exact reproduction of natural reality, came to be seen as a creative tool.9 Photographers gradually ceased being seen as mere technicians 7 

J Barnes, Treatise on the Justice, Policy, and Utility of Establishing an Effective System for Promoting the Progress of Useful Arts, by Assuring Property in the Products of Genius (Francis Bailey 1792). 8  Act of 3 March 1865, 13 Stat 540, §1. See C Farley, “The Lingering Effects of Copyright’s Response to the Invention of Photography” (2004) 65 University of Pittsburgh L Rev 385, 438–​446. 9  See WH Tablot, The Pencil of Nature (Da Capo Press 1969) (first published in 1844–​1846).

238   Oren Bracha engaged in a mechanical task and were reclassified as a brand of creative authors entitled to property in respect of the original product of their mind.10 This ideological shift facilitated the gradual extension of copyright to photography. In this particular version, then, causation producing IP rights ran from technological innovation to economic change, to political economy, and finally to ideology. It is possible to reshuffle the sequence or the order of importance of the social factors producing IP rights. It is also possible to produce more or less sanguine versions of the story. In the optimistic version, the causal chain produces an optimal format of IP rights, which is in line with efficient social allocation of resources or some other desirable goal. The historical narrative of the democratization of invention in the nineteenth century has just such an optimistic subtext. According to this interpretation, the patent and copyright regimes changed from elitist privileges conferred on the few to open, universal rights protected on an equal basis and capable of harnessing and rewarding the creative energy of all individuals.11 In grimmer versions of the story, something goes wrong along the way. Perhaps there were significant economic externalities that disrupted the economic efficiency of the arrangements; or “market failures” in the political process such as collective action problems, which led to inefficient and unjust results.12 In some versions the causal chain may even have worked to reflect and perpetuate the domination of some groups over others.13 The brief summary offered here of the history of American IP shares much with the perspectives just described, but it also breaks with them in some important respects. There is no doubt that technological, economic, political, and ideological factors played a crucial role in shaping IP law. It is questionable, however, that there was a uniform, stable, causal hierarchy between these factors. The relative importance of the forces changed with context and over time. It is better to dispense with the assumption that any particular force was more fundamental than others and stands at the root of IP history. Technological or economic determinism should be replaced with a framework in which all factors were mutually constitutive. Each of them (to different degrees in different contexts) shaped and constrained the others, even as it was being shaped by them.14 As importantly, law was not simply the end product of these social forces, nor a passive and reactive field that merely reflected the social processes happening elsewhere. IP law exhibited its own relative autonomy as an internal force not entirely reducible to external influences and sometimes resistant to them. IP law, in short, was part of the causal web. It shaped and channeled technology, economic forces, politics, and ideology, just as it was shaped by them. For example, shortly after creating the Union, when Americans launched their first federal copyright and patent regimes, they were motivated by ideological assumptions 10 

Farley (n 8) 416–​425. See B Zorina Khan, The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790–​1920 (CUP 2005). 12  See J Boyle, The Public Domain: Enclosing the Commons of the Mind (Yale UP 2008) 236. 13  See, eg, DF Noble, America by Design: Science, Technology and the Rise of Corporate Capitalism (Knopf 1977); CL Fisk, Working Knowledge: Employee Innovation and the Rise of Corporate Intellectual Property 1800–​1930 (University of North Carolina Press 2009). 14  See O Bracha “Copyright History as History of Technology” (2013) 5 WIPO Journal 45, 49. 11 

United States Intellectual Property Law    239 about the moral worth of authorship and inventorship, the nature of property rights, and the role of government in promoting technological and social progress.15 The legal developments were also advocated by interested parties such as authors, inventors, and their representatives who stood to gain from them.16 Yet causation flowed in the opposite direction as well. Far from writing on a clean slate, the legal forms that were adopted were heavily based on British and local precedents.17 These existing legal forms embodied deep assumptions about authorship, property rights, and the role of government in promoting progress. Much of the preexisting ideological discourse about those subjects was developed in legal texts and fora. Ideology was thus as much a product of IP law as it was an originator of that law. The same is true of interests. The preexisting legal forms identified those who would benefit from IP regimes and have an interest in lobbying for them. They also offered a basis for a common group identity and channels of recognition for future interest groups. Playwrights were not an interest group in the America of 1790, but in 40 years they would form one, in part modeled after the existing concept of authors and the legal benefits extended to them.18 IP law and social forces were thus locked in a mutually constitutive relationship, with the former being an integral part of the causal web rather than its exogenous product. What follows is a brief history of IP rights in the United States told from this perspective.

3. Origins Early American IP rights originated from two sources: British institutions and local colonial or state practices.

3.1  British Origins Patents existed in England as a form of ad hoc royal grants of monopoly privileges at least since the fifteenth century.19 By the early seventeenth century, patents for inventions began to emerge as a unique class of grants regulated by specific legal norms under the common law and the Statute of Monopolies.20 Early English copyright developed in two parallel tracks: the 15  See, eg, MD Birnhack, “The Idea of Progress in Copyright Law” (2001) 1 Buffalo Intellectual Property LJ 3, 17–​21; SM O’Connor “The Overlooked French Influence on the Intellectual Property Clause” (2015) 82 The University of Chicago L Rev 733, 803–​808. 16  See Bugbee (n 5) 131–​142. 17  O Bracha, “The Adventures of the Statue of Anne in the Land of Unlimited Possibilities: The Life of a Legal Transplant” (2010) 25 Berkeley Technology LJ 1427, 1453–​1456. 18  CE Foust, The Life and Dramatic Works of Robert Montgomery Bird (Knickerbocker Press 1919) 147–​150; J Litman, “The Invention of the Common Law Play Right” (2010) 25 Berkeley Technology LJ 1381, 1402–​1403. 19  See, eg, M Frumkin, “The Origin of Patents” (1945) 27 Journal of the Patent Office Society 143; RA Klitzke, “Historical Background of the English Patent Law” (1959) 41 Journal of the Patent Office Society 615; EC Walterscheid, “The Early Evolution of the United States Patent Law: Antecedents” (pt 1) (1994) 76 Journal of the Patent Office Society 697. 20  See C MacLeod, Inventing the Industrial Revolution: The English Patent System 1660–​1800 (CUP 1988) 10–​39.

240   Oren Bracha printing patent and the stationers’ copyright. The printing patent was a brand of a royal patent grant that conferred ad hoc exclusive privileges on a publisher covering the printing of a specific text or a class of texts.21 Since the late sixteenth century, the Stationers’ Company (the London book trade guild) developed an internal system for allocating perpetual exclusive publishing rights among its members known as the stationers’ copyright.22 By the beginning of the eighteenth century, the array of royal regulations and licensing system that supported the Company’s practice declined and together with it, so did the stationers’ copyright. In 1710 Parliament legislated the Statute of Anne that was the first general copyright act to confer rights on authors.23 None of these legal norms and bureaucratic practices applied to the North American British colonies. This state of affairs is hardly surprising. Compared to the imperial center, the colonies were economically, technologically, and culturally underdeveloped backwaters. They attracted little attention in the metropole either as a possible producer of technological and cultural goods or as a significant market for them. As in many other respects, for a long time the colonies were left to run their own business.

3.2 Colonial Practices Locally too the social and economic forces driving demand for legal rights in intangible resources were limited or non-​existent. There were differences among colonies and across time, but this remained true for most of the colonial period. As a result, colonial antecedents of IP rights were sparse, but they did exist. On the technological side, the interest of the mostly agrarian colonies in technological innovation grew only gradually. Even when a nascent home manufacture movement appeared in the mid-​eighteenth century, and industrial policy became one of the main points of contention with the empire, the emphasis was not on promoting invention as such. Ideologically, invention and inventors did not occupy their later heroic status.24 Some colonies did employ various mechanisms for encouraging innovation, increasingly so during the late colonial period. These were rudimentary local versions of the English patent grant: acts by colonial legislatures conferring on specific innovators various benefits, including rights of exclusivity.25 Colonial grants were not patent rights, but rather privileges conferred on a discretionary basis as part of ad hoc bargains with specific entrepreneurs or artisans.26 Technological innovation played at most a secondary role. Whether a technological invention was present was beside the point. The emphasis was on providing an actual useful economic activity to the colony: The erection of a mill, or as in the case of an early Massachusetts 21  See J Feather, Publishing, Piracy and Politics: An Historical Study of Copyright in Britain (Mansell 1994) 10–​14. 22  See LR Patterson, Copyright in Historical Perspective (Vanderbilt UP 1968) 42–​7 7. 23  8 Ann 19. 24  NL York, Mechanical Metamorphosis: Technological Change in Revolutionary America (Greenwood Press 1985) 44–​46. 25  See Bugbee (n 5) 57–​83; PJ Federico, “Colonial Monopolies and Patents” (1929) 11 Journal of the Patent Office Society 358. 26  O Bracha, “Geniuses and Owners: The Construction of Inventors and the Emergence of American Intellectual Property” in DB Hamilton and AL Brophy (eds), Transformations in American Legal History: Essay in Honor of Professor Morton J. Horwitz (Harvard UP 2009) 372.

United States Intellectual Property Law    241 grant to Samuel Winslow, the manufacturing of salt.27 The consideration given by the grantee and his object of legal protection were not conceptualized in informational terms as new ideas. The focus was on the actual practice of the useful activity with the knowledge either embodied in a physical device or personified by the artisan providing the services. This was reflected in colonial patent grants that often included working clauses that required actual construction and operation of the useful innovation, and that occasionally demanded the training of local apprentices.28 This practice of ad hoc legislative privileges was grounded in a common local “commonwealth” ideology that endowed government with both the power and obligation of promoting the public good by conferring on selected individuals specific encouragements and privileges.29 It was also well rooted in the English patent grant practice and the political thought of which it was part. This was evidenced not only in the specific features of the colonial grant, but also in the fact that several colonies legislated mini-​versions of the Statute of Monopolies, as did Massachusetts as part of its 1641 “Body of Liberties.”30 Colonial precursors of copyright followed a similar pattern. Following the arrival of the printing press to their territory, different colonies developed various combinations of support and suppression. Printing was treated both as a dangerous threat to be tightly controlled and as a public resource to be supported by the authorities.31 Restrictions could include a complete ban, a strict permit requirement, or measures for the licensing of content. Encouragement included a myriad of ad hoc measures such as positions of official printer, a governmental commitment to purchasing printed works, or even land grants. Occasionally, there were also grants of exclusive printing privileges. Local conditions account for the scarcity of these grants. Since nothing like the English book trade guild existed in the colonies, even when a small and unorganized book trade gradually developed in some of them, there was no institutional context in which the equivalent of the stationers’ copyright could arise. There was also no persistent demand for individual publishing privileges. In many cases the risk of competition was limited. Physical, economic, and cultural barriers prevented the development of a robust inter-​colony book market. Any concerns of exclusivity could be addressed by means such as trade norms and various contractual arrangements among booksellers. Still, there were a few legislative grants of printing privileges. The most famous, the 1671 grant by the Massachusetts Bay General Court to John Usher, was for printing the colony’s laws.32 These printing privileges were a brand of other colonial grants. They conferred ad hoc privileges on a publisher in return for undertaking a useful economic activity. Authorship was irrelevant. 27 

N Shurtleff (ed), Records of the Governor and Company of Massachusetts Bay in New England (W White, Printer to the Commonwealth 1853–​54) 1: 331. 28  Bracha (n 26) 373. 29  See O Handlin and MF Handlin, Commonwealth: A Study of the Role of Government in the American Economy: Massachusetts 1774–​1861 (New York UP 1947). 30  See “The Body of Liberties—​1641; A Copie of the Liberties of the Massachusetts Colonie in New England” in WH Whitmore, The Colonial Laws of Massachusetts, Reprinted from the edition of 1660, with the supplement to 1672 (Rockwell and Churchill 1889) 34–​35. 31  O Bracha, “Early American Printing Privileges: The Ambivalent Origins of Authors’ Copyright in America” in R Deazley et al (eds), Privilege and Property: Essay in the History of Copyright (OpenBook Publishers 2010) 90–​91. 32  Shurtleff (n 27) 4:527.

242   Oren Bracha

3.3  State Antecedents After American independence, activity on the state level was marked by both continuity and change. Underlying the change were several developments. The conflict with Britain and an American home manufacture movement brought with it a nascent growing interest in technological innovation as a condition for collective prosperity and power.33 Similarly, the growth of domestic literature and learning came to be seen as an important element in establishing the new nation’s status.34 Widespread republican values were marked by a belief in government’s ability and duty to promote material and moral progress by pursuing appropriate policies.35 A new ideology began to appear that associated technological and cultural innovation with individuals generating new ideas: inventors and authors.36 This was accompanied by intensified solicitation of legal protection by authors and inventors and a growing public recognition of claims by such individuals. In public discourse, justification of legal entitlements in inventions and writings took a new dimension: The traditional appeal to the promotion of the public good was now often accompanied by claims for natural property rights grounded in the intellectual labor of the creator. In the area of patents the expression of these developments was intensification of legislative grants and a subtle change in their emphasis.37 Legislative state grants for invention began to emerge as a special subset of privileges. The grants started to emphasize technological innovation, to exhibit occasional concern about original invention, and even about written disclosure of the invention.38 A similar shift occurred in individual printing privileges. Those were now bestowed on authors rather than on publishers and the grants as well as grant petitions gradually started to emphasize original authorship.39 The more significant development, however, was the enactment of general copyright acts by 12 of the states during the 1780s.40 These acts, all variants of the Statute of Anne, created for the first time in America a general regime of authors’ rights. The significance of the brief period of state dominance in this area was more institutional and ideological than practical. The developing grant practice and especially the general copyright statutes served as a training ground for future developments. They created institutional precedents as well as practices and ideological justifications that prepared the ground for the federal regimes. The creation of the new federal form of government in 1789 also marked a significant rise in the importance of IP rights that were transposed to the national level. The US Constitution contained a grant of power to Congress “[t]‌o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”41 Much has been written about the exact meaning of the clause that in later times played an important role in the development of patent and

33  See DS Ben-​Atar, Trade Secrets: Intellectual Piracy and the Origins of American Industrial Power (Yale UP 2004) 24–​43. 34  See BT Spencer, The Quest for Nationality: an American Literary Campaign (Syracuse UP 1957) 12. 35  See Birnhack (n 15) 19. 36  See Bugbee (n 5) 104–​114; Bracha (n 26) 374–​375. 37  See Bugbee (n 5) 84–​103. 38  Bracha (n 26) 374–​375. 39  See Bracha (n 31) 110–​111. 40  See F Crawford, “Pre-​Constitutional Copyright Statutes” (1975) 23 Bulletin of the Copyright Society of the USA 11. 41  US Constitution, art I, §8, cl 8.

United States Intellectual Property Law    243 copyright doctrine.42 The main concern underlying its creation, however, was the increasingly apparent difficulties of decentralized, state-​level rights in the context of an emerging national market and culture. The clause transferred the practices familiar from the state experience to the national level, and it was grounded in the by-​then common justifications of public utility and creators’ rights. Soon after the national power was created, Congress made use of it and launched new federal patent and copyright regimes.

4. Copyright Law 4.1 Early Copyright Law The federal copyright regime combined the new and the old. The 1790 Copyright Act was clearly modeled after the Statute of Anne, despite several modifications.43 Following the state statutes, copyright was established as a general right rather than an ad hoc privilege. Authors, rather than publishers, were the immediate recipients of the right and authorship was firmly established as the ideological basis of copyright. Yet in many respects, copyright still exhibited the features of the traditional publisher’s privilege, now generalized and conferred on authors. Receiving copyright necessitated several formal procedures, including registration. The duration of the right was limited to 14 years once renewable by the author. Copyright was limited to the traditional domain of the book trade. Its subject matter encompassed and was limited to any new printed text. The narrow scope of the right was well within the traditional concept of the trade privilege of printing a book. It was limited to printing, importing, and vending a specific text. Early copyright jurisprudence that was gradually developed by the courts exhibited similar patterns. For decades, there was no authorship or originality criterion regulating the kind of texts eligible for copyright protection.44 Formalities were strictly enforced as a precondition for the validity of copyright.45 Infringement was extremely limited in its coverage. Copyright was generally seen as restricted to verbatim reproduction in print of the protected text or such reproduction with only trivial changes.46 This meant that the right operated strictly within the realm of print. Dramatization of a copyrighted book, for example, did not infringe the right. Even within the realm of print a broad swath of activities and secondary uses of texts remained untouched by copyright. Translations, adaptations, abridgments, and other derivative uses were seen as infringing only if found to be evasive attempts at 42  See eg, EC Walterscheid, The Nature of the Intellectual Property Clause: A Study in Historical Perspective (WS Hein 2002); M. Pollack, “What Is Congress Supposed to Promote? Defining ‘Progress’ in Article I, Section 8, Clause 8 of the U.S. Constitution, or Introducing the Progress Clause” (2002) 80 Nebraska L Rev 754; D Oliar, “Making Sense of the Intellectual Property Clause: Promotion of Progress as a Limitation on Congress’s Intellectual Property Power” (2006) 94 Georgetown LJ 1771. 43  Bracha (n 17) 1453. 44  See O Bracha “The Ideology of Authorship Revisited: Authors, Markets and Liberal Values in Early American Copyright” (2008) 118 Yale LJ 186, 199. 45  See S Van Gompel, Formalities in Copyright Law: An Analysis of their History, Rationales and Possible Future (Wolters Kluwer Law & Business 2011) 83–​85. 46  See Bracha (n 44) 225–​226.

244   Oren Bracha reproduction. These features of copyright would transform in a gradual process of statutory amendments and developing case law that started toward the middle of the nineteenth century and stretched into the next one. These features of early thin copyright fitted the social context within which the regime operated. At the end of the eighteenth century an established publishing industry was only beginning to take root in several urban centers. A robust national market for books was still a thing of the future and later sophisticated methods of exploiting texts as market commodities were yet to appear.47 Copyright was a device for underwriting a particular publishing project rather than for enabling broader market control and exploitation. During this era, copyright was limited to the book trade and included its periphery such as prints, map making, and music publishing. This was in part because other expressive commodities did not yet exist or were in low demand. But the traditional understanding of copyright as the book trade’s unique regulation was also partly responsible for this limited coverage. When creative producers external to the book trade, such as artists, lobbied for protection of their work, their efforts had little traction and no success. Even within the book trade, copyright was the exception rather than the rule. The limited scope of the right, the high procedural barriers for its attainment, and the absence of international copyright meant that most of the material printed in the US, including newspapers, pamphlets, and British books, was outside the realm of formal copyright.48 The self-​interest of many publishers who engaged heavily in reprinting practices in thin copyright was accompanied by a matching ideology. Dominant strands of republican ideology emphasized the role of the free press as an instrument for broad and egalitarian dissemination of information to the citizenry.49 As a result, reprinting was shrouded in a mantle of moral and political ideals. The weight of long-​standing practices and institutions exerted its own inertia. As a matter of common sense, copyright was understood as conferring the limited entitlement of reprinting a text, not ownership of an intellectual object. Thus, even when in the 1830s interested parties tried to obtain broader copyright on the basis of an absolutist natural property rights ideology, their targets were limited to the duration of the right and loosening of the formal prerequisites.50 That copyright was a narrow right to reprint a text was not doubted.

4.2 Modern Copyright Law The institutional form of copyright and the fundamental concepts embedded in it began to change in the 1830s in a gradual process that extended into the twentieth century. Through a series of extensions to new subject matter such as photography, drama, and fine arts, copyright broke out of the book trade realm and was reconceived as a universal regime based on an abstract principle of expressive authorship. The scope of the right underwent a similar 47 

See JN Green “The Rise of Book Publishing” in RA Gross and M Kelly (eds), A History of the Book in America: An Extensive Republic: Print, Culture, and Society in the New Nation, 1790–​1840 (The University of North Carolina Press 2010) 75–​119. 48  See ML McGill, “Copyright” in Gross and Kelly (eds), A History of the Book in America: An Extensive Republic 200. 49  See Bracha (n 44) 243–​245. 50  See O Bracha, “The Statute of Anne: An American Mythology” (2010) 47 Houston L Rev 877, 899.

United States Intellectual Property Law    245 process of expansion. A combination of statutory amendments and case law developments abandoned the narrow concept of copyright as a right to reprint in favor of a growing array of entitlements, including public performance, translations, and adaptations. In a parallel move, the analysis of infringement was gradually extended to higher levels of abstraction and more remote degrees of similarity.51 The appearance of the modern fair use doctrine that is today considered one of the central restrictions on copyright’s scope (and discussed in detail by Jane Ginsburg in this volume) was part of this process of expansion. A host of secondary uses of copyrighted works outside of the scope of reprint that were previously immune from liability came to be exempted only if found to be fair under a complex legal test.52 Other important features of copyright developed during this era. The 1834 Wheaton v Peters litigation generated a belated American version of the British literary property debate and public deliberation of the fundamental justification of copyright.53 Following the decision in this case, the accepted rule became that unpublished works were protected by a common-​law property right and that the statutory regime with its formalities and limited duration sprang into action at the moment of publication. Originality doctrine developed gradually in the case law as copyright’s litmus test for a protected work of authorship. Around the middle of the century different strands of cases stated the doctrine on varying levels of stringency. By the end of the century, however, the question was settled. Originality came to be seen as a fundamental, even constitutionally mandated, feature of copyright. At the same time, however, the originality bar was set extremely low, allowing the vast majority of works admittance to the realm of copyright.54 The transformation of copyright from the book trade’s narrow reprint right to a universal regime of authors’ expansive property rights was part of a broad social change. By the middle of the nineteenth century there emerged a vast and lucrative American market for books.55 Several developments consolidated to create this mass national market:  the transportation revolution first in the form of canals and then railroads, the advancement of printing technology, the ability to deploy national distribution networks, and high literacy rates. By the 1850s the first modern bestsellers began to appear and sales of books reached unprecedented levels. The changing market entailed a changed book trade which encompassed a growing number of competitors but also the emergence of a few large and dominant publishing houses. There also appeared sophisticated methods for the exploitation of books as commodities, such as product differentiation, serializations, and translations.56 For the established players copyright became an increasingly important tool for attaining predictability, managing turbulent competition, and employing new market exploitation techniques. Later in the century, actors outside the book trade discovered these uses of copyright and worked to extend it to other areas. Some of those areas such as photography, and later motion pictures, recorded music, and advertisement, were newly emerging and rode

51 

See Bracha (n 44) 226–​235. Bracha (n 44) 229–​230; J Tehranian, “Et Tu, Fair Use? The Triumph of Natural-​Law Copyright” (2005) 38 UC Davis L Rev 465, 481. 53  33 US 591 (1834). See C Joyce, “ ‘A Curious Chapter in the History of Judicature’: Wheaton v. Peters and the Rest of the Story (of Copyright in the New Republic)” (2005) 42 Houston L Rev 325. 54  Bracha (n 44) 207–​209. 55  See J Tebbel, A History of Book Publishing in the United States (RR Bowker Co 1972) 1: 206–​207. 56  See Bracha (n 44) 211–​212. 52 

246   Oren Bracha on the coattails of new technologies and market practices. Others, such as fine arts and theatre, were not new, although they experienced growth in demand and changing patterns. For these newcomers, copyright was both an instrumental tool and a constitutive influence that helped define common interests and purposes. As for ideas, in the later part of the century strands of republican ideology that celebrated unhindered reprinting declined. Broad and unhindered dissemination of ideas and information remained a strong widespread commitment, but the emphasis had shifted to commodification and ownership as the standard way for achieving this goal.57 Copyright law itself developed conceptual mechanisms for reducing the dissonance between the ideological commitment to the free flow of ideas and information and the dramatic increase in private control of them. The most important example was the modern rule that limited ownership to expressions and denied it in regard to ideas.58 After the Civil War, copyright was also shaped by the centralization of the economy and the rise of big business. Various rules came under pressure because of the fact that a growing amount of expressive creation shifted to the employment context, often within the settings of a bureaucratized corporation. The clearest mark left by these developments was the change in copyright ownership rules that under the so-​called “work for hire doctrine” shifted initial ownership from creators to employers.59 Copyright law was not simply a reflection of these various social developments. It was within legal discourse that a new set of ideas of what it meant to own copyright was developed and disseminated. Beginning in the middle of the nineteenth century, lawyers, courts, and most directly treatise writers developed this new modern idea of IP and the rules within which it was instantiated. No longer the narrow trade entitlement to reprint a text, copyright came to be understood as a general legal power to control an abstract intellectual entity in all its many concrete forms and in all the various markets in which it could be exploited.60 The 1909 Copyright Act consolidated many of the legal changes of the preceding decades.61 Its structure, including a broad coverage of subject matter and entitlements, marked a shift in copyright legislation from traditional to modern patterns. The most important innovation of the Act, however, was the legislative process that preceded it. In preparation for the legislative reform, the Library of Congress held three conferences attended by representatives of the major relevant industries and interests. Copyright legislation was always fueled by lobbying of interested parties. Yet the 1909 Act legislative process established new patterns, characteristic of a new industrial age interest group pluralism. The central features of the Act were compromises negotiated between associations representing the main industries and other interest groups with large stakes in the relevant rules. This process produced complex statutory arrangements that reflected the tapestry of interests who got a seat at the table, and those who did not. Copyright acquired the paradoxical character of universal particularism. Its new inclusive universalism brought a growing array of interests within the sweep of the regime, which resulted in complex and industry-​specific statutory rules. 57  See RJ Zboray, A Fictive People: Antebellum Economic Development and the American Reading Public (OUP 1993) 4–​5. 58  See Bracha (n 44) 235–​238. 59  See CL Fisk, “Authors at Work: The Origins of the Work-​for-​Hire Doctrine” (2003) 15 Yale Journal of Law & the Humanities 1. 60  See Bracha (n 44) 232. 61  Act of 4 March 1909, ch 320.

United States Intellectual Property Law    247 For all its attentiveness to industry interests, the 1909 Act was outdated almost as soon as it was minted. It failed to take into account several nascent or soon-​to-​appear technologies, as well as the markets that would be built around them. These included motion pictures, radio, and television. Nevertheless, the 1909 Copyright Act remained the statutory framework of American copyright for over 60 years. In this period, much of the development of copyright and its adaptation to changing social and technological conditions was done through adjudication. Courts continued to develop the concepts and rules that emerged by the beginning of the twentieth century, including the infringement test, the idea/​expression dichotomy and other subject matter restrictions, the originality doctrine, fair use, and the concept of infringing derivative works.

4.3 Later Developments The 1976 Copyright Act was the result of over a decade of efforts at copyright reform.62 The legislative process leading to the Act was an amplified version of that preceding the 1909 Act. Statutory arrangements were again the product of negotiated compromises between represented interest groups.63 The result was a complex array of industry-​specific technical statutory arrangements. On the other hand, many general elements of copyright law were left to the courts. This was the case with the fair use doctrine that was codified and left for further judicial development, and with the originality doctrine and the infringement test, which were left untouched. The 1976 regime adopted and systemized the 1909 Act’s broad approach to subject matter and entitlements. The most important addition to copyright’s subject matter that followed a few years after the legislation of the 1976 Act was computer software. Many of the new features of the 1976 regime were directly related to the increasing internationalization of copyright. For most of the nineteenth century, the United States stayed out of the emerging international copyright system. Being a net-​importer of cultural goods, an array of local interests who benefited from the freedom to reproduce foreign works, republican ideology that celebrated reprinting, and a system of trade custom that served as a partial substitute for formal copyright accounted for the entrenched resistance to international copyright. For half a century, wave after wave of lobbying for international copyright by shifting coalitions of foreign publishers and authors, local authors, and increasingly large American publishers met with no success.64 Finally, in 1891 the United States made its first hesitant step toward international copyright with the Chase Act, which authorized limited international copyright, subject to many restrictions and conditions.65 In the twentieth century, the United States gradually expanded its international copyright relations. It was only in 1989, however, that the balance of interests and concerns was tipped and the United States joined the Berne Convention almost a century after its creation. Partly in anticipation of this development, or in response to it, the 1976 Act and its early amendments introduced 62 

Pub L No 94-​553, 90 Stat 2541 (1976). See JD Litman, “Copyright, Compromise, and Legislative History” (1987) 72 Cornell L Rev 857. 64  See C Seville, The Internationalisation of Copyright Law: Books, Buccaneers and Black Flag in the Nineteenth Century (CUP 2006) 146–​227. 65  Act of 3 March 1891, c 565, 26 Stat 1106. 63 

248   Oren Bracha significant changes to traditional American copyright. Formalities such as registration and notice were scaled back and then made optional. Common-​law copyright was almost entirely abolished. And the traditional dual fixed term of the right was abandoned for a term lasting from creation of the work for 50 (later extended to 70) years after the death of the author. During the last two decades, the main driving force behind the development of American copyright has been its interaction with the challenges of the digital age: challenges that have impacted each of the factors in copyright’s causal web. Ubiquitous computer technology and a global information network enabled new models for creating and disseminating information goods. The technology placed in the hands of users powerful tools that generated both the possibility of massive copyright evasion and new opportunities for decentralized creation. The industry, for its part, tried to adapt the technology to achieve new levels of control over access and use of information and to create new distribution and consumption models. The digital economy saw new players coming into existence:  powerful intermediaries controlling technological and distribution chokepoints; upstarts trying to introduce new innovative business models, often disruptive of those of incumbents; and new patterns of symbiosis between market and non-​market oriented production, as in the case of open-​source software. The political economy of copyright was affected, too. As entrenched incumbents worked in legislatures and courts to repel threats to their dominance, new powerful players such as technology firms, sometimes with countervailing interests, improved their lobbying capacity and started to exert influence. Copyright’s politics has been deeply influenced by the shifting arrays and alliances of these various actors. Interestingly, a new class of actors began to appear in copyright’s interest groups’ politics: various public interest organizations and coalitions advocating for consumers’ or users’ rights. On the ideological front the traditional concepts of public utility and claims of natural property rights continued to exert influence. These were supplemented, however, by first signs of new kind of arguments in public debate that emphasized the importance of the public domain, the informational commons, and free access to information. In part, copyright law interacted with these various forces through its familiar forms: adaptation and interpretation of the broad array of copyright entitlements; imposition of sometimes harsh civil remedies and in some cases criminal sanctions; and compromises struck through judicial application of the fair use doctrine or an occasional statutory intervention. In two main respects, however, copyright law began to reflect the digital age. The first was in its growing focus on the application of copyright law to intermediaries who function as gatekeepers capable of regulating the behavior of end users, including communication service providers, the makers of platforms, and the operators of various informational services. This happened both through judicial development of direct and secondary liability doctrines, and under the statutory framework of the Digital Millennium Copyright Act (DMCA) safe havens.66 The second was the growing importance of the direct legal regulation of technology. By extension of existing doctrines and by enactment of special statutory arrangements, most importantly the DMCA’s anti-​circumvention provisions, copyright law started to shape directly the technology available to users and competitors and the degrees of freedom and constraint created by the technological background rules.67 The extent to 66 

Pub L No 105-​304, 112 Stat 2860 (1998) §202.

67 

Pub L No 105-​304, §103.

United States Intellectual Property Law    249 which the dynamic of the digital age will change fundamental patterns of copyright law remains to be seen.

5. Patent Law 5.1 Early Patent Law The 1790 Patent Act created for the first time a general patent regime in America.68 In contrast to the ad hoc legislative privileges previously awarded in the states and colonies, the Act put in place a uniform framework for a patent system. By this time unequivocally focused on technological innovation, the Act defined general categories of patentable subject matter as any “useful art, manufacture, engine, machine, or device.”69 It specified general substantive criteria of patentability based, to a large extent, on English common law. Novelty of the invention and a deposit of a written description of it were the two most important requirements. The Act also defined uniform patent entitlements: “[T]‌he sole and exclusive right and liberty of making, constructing, using and vending to others to be used” the invention.70 On the procedural side, standard procedures for granting patents were established. Despite laying down these foundations of a new patent system, patents did not lose their character as ad hoc state-​granted privileges overnight. Under the 1790 regime, the institution in charge of granting patents was the Patent Board. Its members were the Secretary of State, the Secretary of War, and the Attorney General. Any two of them were authorized to issue a patent of a term no longer than 14 years “if they deem the invention or discovery sufficiently useful and important.”71 As evidenced by the high rank of its members, the Board’s patent role was envisaged as a version of that played by the organs of royal power in Britain or by American state legislatures. The Board was expected to weigh the public benefits offered by a particular invention and decide whether they justified awarding monopoly privileges. During its three years of operation the Board developed some uniform rules to guide its patentability decisions and standardized both the content and form of patent grants. Yet the surviving, fragmentary record suggests that its power was exercised and understood by both petitioners and members as a broad discretion to award privileges on the basis of case-​specific judgements of social benefits.72 The first patent regime was, in short, a hybrid between the traditional patent privilege and the modern system of general patent rights. The 1790 patent regime survived for less than three years. The main reason for its demise was that the members of the Board were overwhelmed by the load of patent applications streaming in from the entire nation. The new 1793 Patent Act abandoned the approach of close scrutiny of patents in favor of a registration system.73 The Patent Board was replaced with low-​level clerks of the State Department and, beginning in 1802, by the Patent Office that was established as a subdivision of the Department. With these officials having no 68 

69  Act of 10 April 1790, §1. Act of 10 April 1790, ch 7, 1 Stat 109. 71  Act of 10 April 1790, §1. Act of 10 April 1790, §1. 72  O Bracha, “The Commodification of Patents 1600-​1836: How Patents Became Rights and Why We Should Care” (2004) 38 Loyola of Los Angeles L Rev 177, 222–​226. 73  Act of 21 February 1793, ch 11, 1 Stat 318. 70 

250   Oren Bracha power to refuse a patent on substantive grounds, patents were issued almost on demand to any applicant who asserted that he met the legal requirements. Substantive review of patents was left to infringement or repeal proceedings in the courts. In practice, this meant that only a small number of patents were reviewed. The new arrangement also created a strong force toward the standardization of patents and their de facto treatment as rights. By virtue of their institutional habits, courts were much more inclined to scrutinize patents for meeting general legal requirements such as novelty or proper disclosure of the invention than to make discretionary judgements on whether the social benefits of a specific invention justified a patent. Nevertheless, residues of the traditional privilege form of patents survived. This mainly happened in the context of the statutory requirement that a patentable invention needed to be “useful.”74 Courts developed two approaches to what came to be known as the utility requirement. Some early decisions interpreted the requirement as investing the court with a broad discretion to inquire after the social benefits of the patented invention. Judges who adopted this approach saw themselves as entering the shoes of the defunct Patent Board. They understood their role as not limited to certifying that general legal criteria were satisfied, but rather as encompassing a power and a duty to assess whether the substantive social benefits of a particular invention justified the grant of a patent monopoly.75 A second strand of early decisions took a very different approach to utility. Courts taking this approach read the requirement as conferring upon them a narrow and limited power to scrutinize inventions. Patents were to be denied for lack of utility only in rare and extreme cases where a particular invention was found to be utterly immoral or destructive in its effects.76 Substantive considerations of relative social utility were seen as being outside the province of the courts. Whenever the uniform patentability requirements were met, a valid patent was equally conferred and upheld and left all consideration of social utility and fair remuneration to the market. The battle between these two approaches persisted for decades. Both survived even as the statutory patent framework changed. Gradually, however, the old privilege approach declined and the minimalist approach based on judicial neutrality won the day.77 Toward the end of the century utility became a relatively marginal element of patent law and the concept of a patent as a state-​sponsored privilege it once expressed completely faded away. The 1793 registration regime existed for almost half a century. From the start, however, it was surrounded by discontent which grew in intensity with time. Tracking general economic growth, patenting activity steadily increased. The nearly two thousand patents issued in the 1810s was double the number in the previous decade, and there was a more modest but steady increase in patents per capita.78 The registration system was ill-​equipped to deal with patenting on such a scale. The main problem was insecurity. Issuance on demand with scrutiny done by courts rarely and after the fact meant low-​quality patents, uncertainty, abuse, and even fraud. Purchasers of patented goods were harassed with dubious patents, and patentees often found that their patents were invalid, insecure, or overlapped with other patents. This system produced many patents that were described as “frivolous absurd and 74 

75  Bracha (n 72) 230–​233. 76  Bracha (n 72) 233–​235. Act of 21 February 1793, §1. Bracha (n 72) 235. 78  C Beauchamp, Invented by Law: Alexander Graham Bell and the Patent That Changed America (Harvard UP 2015) 18. 77 

United States Intellectual Property Law    251 fraudulent” or simply “useless.”79 The 1836 patent reform responded to these difficulties. It created what is often described by historians as the first modern patent system. This new system was based on the prior examination of patents by a newly organized Patent Office with a core of professional examiners.

5.2 The Examination System However, the 1836 Patent Act was not just the result of economic needs and lobbying by interests affected by the increasingly dysfunctional registration system.80 Ideology played an important role, too. The new examination system was shaped in the Jacksonian image of its time.81 Concerned about growing inequalities in emerging American capitalism, Jacksonians emphasized equal opportunity in the distribution of wealth and power. The role of government, they argued, is to foster the ability of all to prosper and pursue their own welfare on an equal basis, and not to confer special privileges on members of the elite who are singled out as best situated to contribute to the public good. Above all, Jacksonians deplored privileged oligarchies, “cabals,” and special class legislation. Patent privileges in the traditional format seemed to embody all of that. But the Jacksonian reform never considered abandoning patents. It aimed at a “general law, to secure to all descriptions of persons, without discrimination, the exclusive use and sale, of the thing invented.”82 Much like corporate charters that were replaced with general incorporation statutes, patents were standardized and generalized. Patents were described as property earlier and frequently would be referred to as monopolies later, but the new 1836 system marked the moment when patents stopped being seen as state patronage and were established as property rights. The new bureaucratic system was based on the ideal of reviewing standard patentability criteria equally applied to all and generating a secure, uniform title to those who met these criteria. While the patent statute established the basic patentability criteria, such as novelty, disclosure, and utility, much of the details of patent doctrine were developed by the courts. Similar to copyright, early patent jurisprudence charted a limited scope to the right, based on a semi-​materialist concept of the owned invention. State and colonial grants were framed not in terms of ownership of an intangible idea, but as an exclusive privilege to pursue a specific economic activity.83 The growing focus on technological innovation at the end of the eighteenth century entailed reimagining patents as conferring ownership of an intangible invention. The machine was the dominant concept that informed this early understanding. The invention was seen as a template that allowed reproduction of identical physical embodiments of a mechanical design.84 Legal doctrine embodied this concept. Infringement was construed as limited to exact copying of the protected mechanical design and an additional thin penumbra of fraudulent or evasive attempts to imitate the original with colorable changes. Beginning in the 1820s, courts began to gradually expand the 79 Beauchamp 19.

80  Act of 4 July 1836, ch 357, 5 Stat 117. S Lubar, “The Transformation of Antebellum Patent Law” (1991) 32 Technology and Culture 932, 941. 82  “1836 Senate Committee Report” (1936) 18 Journal of Patent Office Society 853, 855. 83  Bracha (n 26) 372–​373. 84  A Pottage and B Sherman, Figures of Invention: A History of Modern Patent Law (OUP 2010) 23. 81 

252   Oren Bracha concept of invention. Some judges and lawyers began to speak of the “modus operandi” of the machine as the protected heart of the invention.85 Others started to develop the concept of “mechanical equivalents” as encompassing a variety of specific designs that embodied the same invention.86 Within this jurisprudence the patent model—​a three-​dimensional representation deposited with the Patent Office—​played an important role. As long as the patent scope was limited to a low degree of abstraction and the constitutive image of invention was that of the machine, the model was a natural way of making the abstract concept of the invention concrete.87 An important development of the gradually maturing patent system was professionalization. Following the establishment of an examination system in 1836, a new brand of patent professionals began to appear. The increasingly bureaucratized patent application procedure, previously handled mostly by applicants or their relatively informal representatives, shifted to the hands of patent agents or “patent attorneys” as they were commonly called.88 These were mostly non-​lawyers. Their expertise consisted typically of some background in the mechanical arts and experience with the emerging federal government bureaucracy. The Patent Office, clinging to the ideal of low barriers to entry, tried to resist at first, but eventually accepted and even encouraged the practice. Later, when lawyers entered the area of patent prosecution in greater numbers, they tried to exclude the non-​legal professionals, but this endeavor was never completely successful.89 By the middle of the nineteenth century, patent prosecution was firmly in the hands of a distinct professional class. Inventing and obtaining a patent came to be seen as two distinct practices. Prosecution grew to be an increasingly bureaucratized procedure. It took the form of formalized communication between bureaucrats and professionals over the text of the patent and related documents. Patent litigation and enforcement witnessed a similar process. In the early decades of the system patent cases were often litigated by generalist elite members of the legal profession. Yet patents proved to be an increasingly lucrative area of legal practice involving a growing body of complex and technical rules. The result was legal specialization. An organized patent bar would only be established toward the end of the century, but in the 1840s and 1850s there started to emerge lawyers who built successful practices specializing in patent litigation.90 Like patent agents, patent lawyers developed a specialized set of skills for dealing with patents as legal texts. A prominent phenomenon with important implications for the patent system and beyond was a patent litigation explosion that lasted roughly from the mid-​ 1840s to the mid-​1880s.91 Its scale was so great that at some point patent cases accounted for a significant part of the entire federal docket. Mass patent enforcement campaigns started around the 1830s and gathered momentum. They involved widespread new technologies such as Thomas Balnchard’s lathe patent, Parker’s reaction water wheel patent, and Goodyear’s vulcanized rubber patent.92 Enforcement campaigns were enabled by various 85

 See Whittemore v Cutter 29 FCas 1120, 1124 (District Court (Central District of Massachusetts) 1813). 86   See eg, Parker v Stiles 18 FCas 1163 (District Court (Central District of Ohio) 1849). 87  Pottage and Sherman (n 84) 32–​36. 88  See KW Swanson, “The Emergence of the Professional Patent Practitioner” (2009) 50 Technology and Culture 519. 89  Swanson 537–​547. 90  See Beauchamp (n 78) 31–​32. 91  See C Beauchamp, “The First Patent Litigation Explosion” (2016) 125 Yale LJ 796. 92  See Beauchamp (n 78) 22–​27.

United States Intellectual Property Law    253 factors, including a growing ability to monitor and detect infringement nationwide and the deployment of networks of local licensees. Patentees also relied on an assortment of legal tools, including administrative and legislative extensions of patents that enabled control of mature and widespread technologies, reissues of patents that allowed strategies of extension to new technologies and markets, and the rise of equity jurisprudence that allowed relatively efficient and certain mass enforcement.

5.3 Modern Patent Law Around the middle of the nineteenth century, the rules defining the scope of patents and the concept of the protected invention embodied in them began to change. Moving away from the narrow idea of controlling a particular mechanical design, the owned invention was redefined at growing levels of abstraction.93 One manifestation of this process was the struggle to expand the doctrine of equivalents. The major debate of mid-​nineteenth century patent law, however, was over the patentability of principles. The term “patents in principles” had many meanings that would often be used interchangeably and confusingly, but the main division in the debate was clear. One camp maintained that patent protection needed to be confined to a limited range of variation on a concrete design and that extending its scope further would be to confer unacceptable private ownership of fundamental ideas. The opposing camp maintained that inventors who made foundational contributions, laying the ground for broad new “arts,” should enjoy control over the entire areas enabled by their discoveries. The metaphysical debate had immediate, concrete implications for the fate and scope of specific patents and the business strategies built on them. In the 1850s the debate concentrated around the Telegraph Case.94 This was, in fact, a series of cases litigated by various firms associated with Samuel Morse’s telegraph enterprise as part of an effort to achieve national control of the market through an assertion of an extremely broad patent scope. After a bitter fight, Morse’s interests lost when a divided Supreme Court rejected the claim to a patent for a principle. Following O’Rielly v Morse it became a settled rule that natural principles were unpatentable and direct claims for patents in principles declined. This, however, hardly stopped the trend of expansion and abstraction. After the Civil War, patentees devised new strategies for asserting an extensive patent scope, including artful patent drafting, broad reading of patent claims, flexible application of the rules that limited patentable subject matter, and use of method patents. Overall, courts proved increasingly hospitable to such strategies. The 1888 decision of the Supreme Court in the Telephone Cases is iconic of this trend.95 The Court’s decision in this monumental legal battle adhered to the ban on the patentability of principles, but upheld a broad interpretation of Bell’s telephone patent, giving it a practical coverage similar to that of Morse’s condemned claim. The background for the late nineteenth-​century abstraction of the patent scope was the rise of patents as a basis for business strategies of predictability and control. The 1860s saw the highest rate of growth in patenting in US history.96 In the following decades patents came to play an important role in new technological areas, such as in the electrical, chemical, and

93 

95 

See Pottage and Sherman (n 84) 65–​84.    The Telephone Cases 126 US 531 (1888).   

94 

96 

O’Rielly v Morse 56 US 62, 112 (1854). See Beauchamp (n 91).

254   Oren Bracha communication industries. Unlike in copyright, the new subject matter did not cause clear legal fragmentation. Innovations in new industries were absorbed into the broad and flexible categories of patentable subject matter. Rather than industry-​specific norms, the new contexts were accommodated by developing rules of general applicability or by adapting existing ones. A prime example of this process was the development of rules that precluded the patenting of natural principles and products of nature.97 The crucial development of the late nineteenth century was the concentration of economic activity and the rise of strategic uses of patents by big business. Firms learned to use patents not simply as means for recouping investments in specific inventions, but as tools for market control and stabilization, through building patent portfolios, patent pooling, and cross-​licensing arrangements.98 The early twentieth-​century shift by dominant actors to in-​house research and development further enabled such strategic use of innovation policies backed by patents.99 These trends generated constant pressure for broad and strong patents. Not all developments in late nineteenth-​century patent law were pro-​patentee. In the last decades of the nineteenth century, both Congress and the courts reined in what had been two of the most important strategic tools in the arsenal of patentees: extensions of term and reissues.100 At least in part, this was done in response to lobbying and litigation battles mounted by adversely affected interests. The period saw some strange coalitions of patent-​skeptics, including both railroad companies that regarded patents as a threat on their technological systems and grangers who opposed what they saw as the use of patents for the harassment and exploitation of farmers by industrialist interests.101 Another important legal development of the period was the non-​obviousness doctrine. The rule that required a patented invention to demonstrate a substantial degree of innovation beyond that of the “mere mechanic” is traceable to an 1851 decision.102 But it was only in later decades that the principle spread and came to be seen as a distinct and fundamental requirement for patentability.103 The non-​obviousness rule resonated with the dominant ideology of the inventor as a creative genius. It also responded to widespread concerns about the harmful proliferation of patents for useless or trivial innovations. Courts applied the new non-​ obviousness requirement on varying degrees of stringency. Whether or not it raised the patentability bar compared to previous jurisprudence, non-​obviousness created a new vocabulary that would be used by courts to regulate entry to the realm of patents. Another major development in patent law was the rise of patent claims. One feature of patent law that had set it apart from copyright from the outset of the American regime was the patent document. Unlike copyright, patents were embodied in an official formal text that 97 

See C Beauchamp, “Patenting Nature: A Problem of History” (2012) 16 Stanford Technology L Rev 257. 98  See P Israel, From Machine Shop to Industrial Laboratory: Telegraphy and the Emerging Context of American Invention, 1830-​1920 (Johns Hopkins UP 1992) 121–​151. 99  See LS Reich, “Research, Patents, and the Struggle to Control Radio: A Study of Big Business and the Uses of Industrial Research” (1977) 51 Business History Rev 208 (1977). 100  See Beauchamp (n 78) 30, 71. 101  See SW Usselman, “Patent Politics: Intellectual Property, the Railroad Industry, and the Problem of Monopoly” (2006) 18 Journal of Policy History 96. 102  Hotchkiss v Greenwood 52 US 248 (1851). 103  KJ Burchfiel, “Revising the ‘Original’ Patent Clause” (1989) 2 Harvard Journal of Law and Technology 155, 204–​208 (1989).

United States Intellectual Property Law    255 contained a description of the invention. From the first patent act onward, the submission of a specification that properly disclosed the patented invention was a fundamental requirement for patentability.104 Although for a long time proper disclosure accessible to the public was more theoretical than practical, the conceptual effect was profound. Patents were based on a formal authoritative text that mediated between technological reality and legal ownership. Gradually there appeared a distinction between the written description of the invention and the claims—​a formalized distinct part of the text that defined the scope of legal protection of the patent. Claims developed organically in the early nineteenth century and were required by the 1836 Patent Act.105 Yet it was only in the last decades of the century that claims were first given a special status in determining the scope of a patent. This was the beginning of what is known as “peripheral claiming,” an approach under which the text of the claims is seen as defining the outer limits of the patent scope. The establishment of peripheral claiming would extend well into the twentieth century, but it was in the last quarter of the nineteenth century that several Supreme Court decisions established the special status of claims.106 The rise of claims both reflected and fueled the professionalization and bureaucratization of patent practice. For the Supreme Court, focusing on the text of claims was an advanced technique for obtaining efficiency. The formal text was the precise tool of an advanced rational bureaucracy for communicating with trained professionals representing private parties, thereby imposing the order and predictability necessary for business activity. The legal profession, in turn, internalized the legal shift. As claims grew in importance, the art of drafting and interpreting their technical language became a central skill for patent professionals, and set them further apart from other legal practitioners. One author of a practical guide called this new body of knowledge “claimology.”107

5.4 Later Developments In the first half of the twentieth century, the patent system was mainly shaped by the ebb and flow of anti-​monopoly sentiment. The new strategic uses of patents by corporate business, especially en masse, kindled the old fear of monopolies. Patents were mainly seen through the lens of antitrust. By the late Progressive era, courts that had previously been friendly to uses of patents as tools for industrial control started to take a more critical approach. Patent pooling schemes and other tying arrangements based on patents were subjected to various limitations.108 Later, during the New Deal, this trend continued. The “abuse of patents” became a major target of antitrust enforcement. A series of commissions and reports criticized various anti-​ competitive uses of patents and recommended measures for preventing 104 

1 Stat 109, §1. 5 Stat 117, 119, §6. See KB Lutz, “Evolution of the Claims of U.S. Patents” (pt 1) (1938) 20 Journal of Patent Office Society 134, 134–​142. 106 See Merrill v Yeoman 94 US 568 (1876); Keystone Bridge Company v Phoenix Iron Company 95 US 274 (1877). 107  JF Robe, Patent Essentials for the Executive, Engineer, Lawyer and Inventor: A Rudimentary and practical treatise on the nature of patents, the mechanism of their procurement, scientific drafting of patent claims, conduct of cases and special proceedings, including forms (Funk & Wagnalls Company 1922) 201. 108  See S Wilf, “The Making of the Post-​War Paradigm in American Intellectual Property Law” (2008) 31 Columbia Journal of Law and the Arts 139, 193–​196 (2008). 105 

256   Oren Bracha them.109 Some suggested reforms threatened to change the basic framework of patents through measures such as restrictions on licensing, limitations on patent pooling, extensive compulsory licensing, forfeiture of patents, and even regulation of prices.110 At the end patents weathered the storm with little fundamental change. The 1952 Patent Act signaled a return to more conventional patterns of patent thought.111 It was a restatement and consolidation of existing patent jurisprudence that did not resemble the more radical reform proposals from the previous decades. Hostility to patents remained fairly common in the courts from the 1940s through the 1960s, and the number of issued patents per capita remained low compared to the previous half-​century. Even patent skeptics, however, relied on the standard concepts and principles of patent jurisprudence, such as strict application of the non-​obviousness standard. The point marking the rehabilitation of patents was the establishment of the federal Court of Appeals for the Federal Circuit in 1982. The official purpose of establishing this Court with a nation-​wide appeal jurisdiction over patent cases was the harmonization of patent doctrine. What followed its establishment, however, was also the strengthening and expansion of certain aspects of patent rights.112 As Dan Burk details in this volume, in the four decades since, the patent system has faced challenges from several industries, some of which are rooted in new technologies. Difficult questions have arisen in the context of the pharmaceutical industry because of the interface between patent law’s innovation policy and the regulatory regime governing the safety and efficacy of drugs. Many of these issues have produced industry-​specific statutory compromises such as the 1984 Hatch-​Waxman Act that governs the area of generic drugs development.113 Biotechnology has brought about another set of challenges pertaining to the patenting of living organisms and DNA sequences. Despite some industry-​specific statutory amendments, these challenges have been dealt with mainly through application and adaptation of existing patent rules. The most important landmark in this area has been the 1980 Diamond v Chakrabarty decision by the Supreme Court that opened the gate for the patenting of genetically engineered organisms.114 Information and computer technology has been a third area to exert pressure on the patent system. An initially suspicious approach to software patents was replaced in the 1990s by a more hospitable one by both the Patent Office and the courts. The result was the opening of the floodgates and an influx of software and computer technology patents as well as so called “business method patents,” often with a computer or Internet implementation aspect. Since the beginning of the 1990s there has been a persistent trend of increase in issued patents per capita as well as in patent litigation.115 These trends have brought with them a new wave of skepticism about a “patent failure” and a “broken patent system.”116 Complaints have proliferated about a “patent litigation explosion,” “patent thickets” that hamper innovation, and patent hording, as well as frivolous enforcement by non-​practicing entities 109

  T Arnold, “The Abuse of Patents” Atlantic Monthly (Washington, July 1942) 14. 111   See Wilf (n 108) 200–​202.   Act of 19 July 1952, ch 950, 66 Stat 792. 112   See PR Gugliuzza, “The Federal Circuit as a Federal Court” (2013) 54 William & Mary L Rev 1791, 1803. 113  Pub L No 98-​417, 98 Stat 1585 (1984). 114  447 US 303 (1980). 115  See Beauchamp (n 91). 116  AB Jaffe and J Lerner, Innovation and Its Discontents: How Our Broken Patent System Is Endangering Innovation and Progress, and What to Do About It (Princeton UP 2004); J Bessen and MJ Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (Princeton UP 2008). 110

United States Intellectual Property Law    257 (popularly known as “patent trolls”). Many of these complaints, again considered by Dan Burk, are very similar to those of the late nineteenth century. There has been some response by courts and legislatures. In the last decade, the Supreme Court has attempted to tighten legal restrictions on patents, most importantly by adjusting the non-​obviousness standard and breathing life into the rules of unpatentable subject matter.117 Congress has legislated the America Invents Act that came into effect in 2011.118 Meant to be a comprehensive reform, the Act introduced several important changes to United States patent law. These included:  abandoning the unique American “first to invent” system for a standard that awards the right to the first inventor to file for a patent; other technical changes to the novelty standard; a limited prior-​use defense; strengthening of the examination process including post-​grant reexamination procedures; and other doctrinal changes. To date, these limited statutory and judicial responses have not quieted the wave of criticism of the patent system or the debate surrounding it.

6.  The Law of Trademarks and Unfair Competition 6.1 Early Trademark Law Trademark law had deep roots in English common law and even earlier origins in medieval guild practices. Modern trademark law began to appear in the United States, however, in the early nineteenth century, and the first reported American trademark case was in 1837.119 It was followed by a thin trickle of cases in subsequent decades. Only in the second half of the century did the quantity of cases increase, and only in its last quarter did it become a steady flow to make a robust body of case law. There was also an assortment of state statutes regulating certain aspects of trademark use enacted around the middle of the century. These, however, tended to be limited in scope and had little broad impact. Trademark law was predominantly a creature of the common law. The germs of the dualities that would continue to accompany trademark law for centuries to come were there from the start. One such duality was between property and tort. It originated in the divide between common law and equity. Common law courts usually described trademark actions as based on deceit or fraud perpetrated by a defendant who had used another’s mark. When plaintiffs turned to courts of equity seeking an injunction, or for other reasons, a claim of fraud could not trigger the court’s jurisdiction. The common solution was to describe trademarks as a species of property, thereby creating a ground for equitable jurisdiction. Thus, courts of equity usually described trademarks as property, although they remained silent or vague on the question of what exactly the property consisted of.120 Early American courts inherited this duality from their English 117 See KSR International Co v Teleflex, Inc 550 US 398 (2007); Bilski v Kappos 130 SCt 3218 (2010); Mayo Collaborative Services v Prometheus Laboratories, Inc 132 SCt 1289 (2012); Alice Corp Pty Ltd v CLS Bank International 134 SCt 2347 (2014). 118  Pub L No 112-​29, 125 Stat 284 (2011). 119  Thomson v Winchester 36 Mass 214 (1837). 120  See Bone (n 3) 561.

258   Oren Bracha counterparts. A general concept of trademark law loosely unified the tort and property branches. The law, according to this concept, was rooted in the protection against unfair competition. It protected the mark’s owner from illegitimate diversion of his trade by another who, through the use of the owner’s mark, confused consumers.121 Embedded in this rationale was, however, another duality. The protected interest was that of the mark owner in preventing illegitimate diversion of his trade. But it was the deceit of consumers that made the diversion illegitimate. The primary protected interest under the unfair competition rationale was that of the mark owner. As Rebecca Tushnet notes in her chapter in this volume, some courts even refused to find infringement where consumer confusion was likely, but where no trade was diverted from the mark owner. But an uneasy coexistence between the mark owner’s interest and the consumers’ interest was built into the heart of the trademark concept. The humble beginnings of American trademark law were rooted in the low importance of and demand for such rights. In the early nineteenth century, most transactions were local and interpersonal. Many of the products bought by consumers were made locally, and an even larger share of products was purchased locally from a specific seller, but without reference to the particular source or manufacturer of the product. What mattered in such commercial relations was the personal reputation of the seller and the consumer’s previous transactions with him. Such personal reputation was built through the personal interaction of the buyer with the seller, and required little resort to standardized commercial symbols.122 In this commercial setting advertising was rare and sparse. Producers and sellers seldom advertised, and when advertisements did occur they tended to be limited in form and restricted to basic informational content.123 There were exceptions to this rule, but manufacturers and consumers typically had little use for trademarks. Trademark disputes were thus rare and the stakes of trademark law low.

6.2 The Rise of Trademark Law These circumstances began to change in the second half of the century and transformed more dramatically after the Civil War. Transportation and communication networks enabled the development of robust national markets. Population grew, as did income and purchasing power, that supported a larger quantity and variety of products. Competition intensified and much of it shifted from a local to a national scale.124 This was also when the modern advertisement industry emerged. Advertisement, often in nationally circulating magazines, became more common and more elaborate. Marketing and advertising methods were gradually refined as evidenced by such techniques as individual packaging and product differentiation.125 In a setting of non-​personal transactions between consumers and a large number of remote anonymous businesses, the trademark function as an identifier of the source of goods became more important, as did its function as a conveyor of meaning that

121 

See MP McKenna, “The Normative Foundations of Trademark Law” (2013) 82 Notre Dame L Rev 1839, 1858–​1860. 122  Bone (n 3) 575–​576. 123  Bone (n 3) 575. 124  Bone (n 3) 576. 125  Bone (n 3) 577.

United States Intellectual Property Law    259 established the connection between the information and persuasion in advertisements and the products encountered in the marketplace. The result was an increase in the use of marks and a considerable growth in trademark law. The bulk of this growth happened in the courts. The number of reported trademark decisions grew in leaps and bounds in the last decades of the century and the courts developed many aspects of this area of the law. Congress’s legislation of the first national trademark act and the creation of a federal registry in 1870 marked the growing national importance of this area.126 However, the federal act was struck down by the Supreme Court in 1879 as unconstitutional.127 It found that Congress lacked power under the IP constitutional clause to create legal protection for trademarks, unmoored from considerations of authorship and originality. In 1881 Congress passed a limited act pertaining to marks used in international commerce.128 Only in 1905 did Congress legislate another federal trademark act, and this time its power was based on the commerce clause of the Constitution, which therefore limited the coverage to marks used in interstate commerce.129 The 1905 Act and the national registration system under it were limited in scope in various significant ways. As a result, while creating an additional layer of protection useful for some businesses and a national registration system, the federal statute left to the courts the primary responsibility for shaping and developing trademark law under the common law. Despite its growth, late nineteenth-​century trademark law was restricted in scope in several important dimensions. At the heart of this body of law was a sharp distinction, based on the period’s highly conceptualist dominant theory of natural property rights. Technical trademarks—​meaning fanciful terms having no meaning and terms whose meaning was arbitrary in relation to the product—​were classified as property and protected by the tort of trademark infringement.130 Trade names, such as marks describing the product or its geographic origin, were not seen as property, but were protected under a distinct tort of passing off, now seen in a more technical and limiting sense as part of unfair competition law. This tort was based on the idea of fraud, and as a result, it required the showing of secondary meaning, which meant that a plaintiff had to show that consumers actually came to understand the mark as designating the source of his goods. It also required an intention by a defendant to deceive, although in practice this often meant showing the effect of confusion by consumers.131 Commentators and courts of the time developed a theory that unified the two branches of the law under the common purpose of protecting the goodwill of a business. Goodwill was a concept that had long been employed in trademark and other branches of the law. It referred roughly to all the factors that contributed to consumers’ preference for a particular business or product. The elasticity of the term made it useful and it would play a central role in developing trademark thought. In this period, goodwill defined the intangible object of property in trademark law, sometimes referred to through the metaphor of the soul or spirit of the tangible business.132 Goodwill also unified the two branches of trademark law. According to the conventional wisdom of the time, while trademark infringement protected against direct ways of appropriating the goodwill of a business, use of tradenames involved more indirect, fraudulent techniques for harming goodwill.133 126 

127  Trademark Cases 100 US 82 (1879). Act of 8 July 1870, ch 230, 16 Stat 198. 129 Act of 3 March 1881, 21 Stat 502.   Act of 20 February 1905, 33 Stat 724. 130  See Bone (n 3) 564–​565. 131  See Bone (n 3) 565–​566. 132 See Smith v Davidson 31 SE2d 477, 479 (Georgia 1944). 133  Smith v Davidson 572. 128 

260   Oren Bracha Although the two branches of trademark law differed in some important respects, rights under both were substantially restricted. Most importantly, trademark protection was limited both geographically and in terms of the relevant market. A trademark owner could only receive protection in the geographic area where he used the mark in conjunction with the sale of a product. Similarly, he could only receive protection against the use of the mark in a product market identical to his own. For example, using a mark identical to the one used by the owner for milk in order to sell ice-​cream was not actionable.134

6.3 The Expansion of Trademark Law Early in the twentieth century, a pressure for expansion became apparent. Several developments underlay this trend. Vertical integration of firms together with growing investment in the advertising and cultivation of brands created a demand for expanding trademark protection beyond the immediate markets for products with which they were used.135 Another important development was the rise of psychological advertising. Increasingly, advertising was used not only as a medium for conveying information, but also as an instrument of psychological manipulation. The goal of new advertising techniques was to create emotional appeal and trigger desires. No longer merely a tool of capturing demand, advertising became a means for generating it.136 The rise of behavioral sciences supplied scientific support for this trend, with some notable academics working with industry to perfect techniques for the psychological manipulation of consumers.137 Firms, in turn, began to invest heavily in their brands, using advertisements as means for creating prestige and attraction power to their products. Trademarks functioned as the repositories of this brand value and firms came to expect protection for it beyond the traditional limited zone. Lawyers supplied their own justifications for such expansion. The slippery concept of goodwill as the locus of legal protection could be easily stretched beyond a particular product to apply to different markets, or even more broadly, to any source of firm attraction.138 Other new legal theories cut in a similar direction. Most famously, Frank Schechter’s rational theory of trademarks advocated protecting the distinctiveness of marks, their “hold upon the public mind,” which was valuable quite apart from their signification of source function.139 Developments in trademark law in the first decades of the twentieth century reflected these influences. The general trend was expansion of the zone of protection to allow trademark owners to control broader aspects of their investment in advertisement and the branding value embodied in their marks. In the 1920s, courts began to expand trademark protection beyond the immediate market of a given product. Within a decade this new rule became widespread despite some bumpy road that lay ahead for its general adoption.140 Trademarks remained geographically bound under the common law, but the territorial 134

  Borden Ice Cream Co v Borden’s Condensed Milk Co 201 F510 (7th Circuit 1912). See Bone (n 3) 594. 136  See M Bartholomew, “Advertising and the Transformation of Trademark Law” (2008) 38 New Mexico L Rev 1, 14–​15. 137  Bartholomew 23–​24. 138  See Bone (n 3) 551–​512. 139  FI Schechter, “The Rational Basis of Trademark Protection” (1927) 40 Harvard L Rev 813, 825. 140  See Bone (n 3) 594–​596. 135 

United States Intellectual Property Law    261 boundaries became more dynamic. Courts relaxed the territoriality rule by allowing protection in a natural zone of expansion and where reputation had been established by advertisement.141 The most radical break with traditional trademark thought was a new argument that the value of marks should be protected with no regard at all to deception of consumers or proximity of markets. This cause of action, later to be named “dilution” (discussed in detail by Rebecca Tushnet and Dev Gangjee in their chapters in this volume), started to find some limited support in the courts.142 The decades from the 1930s onward experienced mixed trends. Expansionist trends under broad theories of protecting the mark’s value or the goodwill of a business came under scathing attack from legal realist scholars.143 The realists, most famously Felix Cohen, attacked the “thingification” of trademarks.144 They saw the use of property arguments justifying broader protection of a mark’s value as empty and dangerous conceptualism. Protecting a business right for patronage, they argued, was at odds with the principle of free competition. Thus, the emphasis in “unfair competition” had to be on “unfair,” that is, articulated policies that justified prohibiting certain forms of diverting business in limited circumstances. Demanding that legal rules be based on concrete policies rather than on empty, abstract concepts, they pointed at consumer protection as the policy underlying trademark law. This marked the beginning of a subtle shift in the core justification of trademarks, where prevention of consumer confusion moved to the fore, and the more traditional rationale of diversion of trade faded somewhat into the background. Perhaps also related to the realist influence was the decline in the 1930s of the sharp and formalist distinction between technical trademarks and trade names. A related strand of trademark skepticism was developed by some economists and economically oriented legal scholars, who, based on hostility to advertisement, took a suspicious approach to trademarks.145 In contrast to the earlier celebratory approach of academics, these economists emphasized the effect of psychological advertising as designed to create artificial product differentiation, which resulted in market power and waste. The conclusion, similar to that of the realist attack, was that trademark law should be restricted to the core of protecting the flow of commercial information by preventing consumer confusion, and not expanded to support forms of advertising and branding designed to cultivate demand. There were, however, other developments in the post-​New-​Deal era that were much friendlier to the growth of trademark law. Both the New Deal and Keynesian economic theory helped solidify a sense that stimulating consumption was key for the nation’s economic wellbeing.146 Consumerism in general enjoyed an aura of legitimacy, and it was seen as the basis of individual choice that separated America’s “consumer republic” from totalitarian societies.147 Trademarks as an essential part of the machinery for stimulating consumption shared in these positive connotations. It was in this atmosphere that in 1946, after an eight-​ year legislative process, Congress passed the Lanham Act.148 The Act completely reformed 141

  See Wilf (n 108) 157. Tiffany & Co v Tiffany Productions, Inc 264 NYS 459 (New York Supreme Court 1932). 143  See Bone (n 3) 585–​588. 144  See F Cohen, “Transcendental Nonsense and the Functional Approach” (1935) 35 Columbia L Rev 809. 145  See Wilf (n 108) 155–​156. 146  Wilf (n 108) 165. 147  Wilf (n 108) 164–​165. 148  Pub L 79–​489, 60 Stat 427. 142 

262   Oren Bracha federal trademark law. By and large, it codified on the federal level the developments of the common law in previous decades. This meant that many of the highly restrictive limitations of the 1905 Act were removed, which opened the door for federal trademark registration and law being an attractive option for many firms. For the first time, federal law was on its way to taking the leading role in the American trademark system. Meanwhile, at the state level trademark law was firmly pushed beyond the borders of consumer confusion. A new cohort of scholars took up Schechter’s ideas, coined the term “dilution,” and advocated the cause of general trademark protection detached from confusion or proximity of markets.149 After the failure of an attempt to include such a cause of action in the Lanham Act, a coalition of business interests picked up the scholarly argument and launched a lobbying campaign in states. The effort benefited from the fact that the well-​organized interests faced dispersed or non-​existent opposition. Furthermore, potentially hostile federal actors such as the Justice Department that feared the monopolistic effects of broad trademarks had no say at the state level. In 1947, Massachusetts legislated the first state anti-​dilution statute, which was followed by many other states in the succeeding decades.150 In 1965, the United States Trademark Association added anti-​dilution to its Model State Trademark Bill.151

6.4 Later Developments After a period of a circumscribed and cautious approach to trademarks by the courts in the 1950s and 1960s, a new era of expansion started in the 1970s and continued throughout the following decades. Commentators have described this process as the “propertization” of trademarks.152 It continued earlier trends by moving beyond both the consumer confusion and diversion of trade restrictive rationales and pushing trademarks in the direction of a property right that excludes others from the use of a valuable resource. The intellectual backdrop for these legal developments was a rehabilitation of the image of advertisement. Economists came not only to celebrate advertising’s information dissemination function, but also to doubt earlier fears of monopolistic power and artificial product differentiation.153 This was linked to the more general popularity of a subjectivist approach to human welfare, which was based both on the assumption of consumer sovereignty as well as a deep reluctance to second-​guess individual preferences or critically examine the process of their formation. On the ground, firms and advertisers took the practices of branding to new levels and invested prodigious amounts in cultivating their brands and perfecting the techniques for their exploitation. Schemes of monetizing brand value, such as licensing and sponsorship, began to yield substantial profits, and in some cases surpassed those from products or services whose origin the mark designated.154 149 

See RG Bone, “Schechter’s Ideas in Historical Context and Dilution’s Rocky Road” (2007) 24 Santa Clara Computer and High Technology LJ 469, 498–​501. 150  Bone (n 149) 497. 151  See BW Pattishall, “The Dilution Rationale for Trademark-​Trade Identity Protection, Its Progress and Prospects” (1976) 71 Northwestern University L Rev 618, 620. 152  See MA Lemley, “The Modern Lanham Act and the Death of Common Sense” (1999) 108 Yale LJ 1687, 1696 (1999). 153  Lemley, 1690–​1962. 154  See DR Desai, “From Trademarks to Brands” (2012) 64 Florida L Rev 981, 994–​1000.

United States Intellectual Property Law    263 The legal fronts of the new phase of trademark expansion were many. The media eligible for legal protection and for federal registration expanded well beyond traditional text or image marks. It encompasses today anything capable of designating the source of goods or services including, for example, colors, sounds, scents, and slogans.155 By developing the established rule that allowed the treatment of product packaging as a mark, courts extended trademark protection to a much broader zone of analogous “trade dress,” such as the decor of a restaurant or the architectural design of a building.156 Pushing this doctrine further, protection was also extended to distinctive features of the product itself, such as a unique shape of a computer screen.157 These developments created increasing friction between trademark law and the fields of patent and copyright law, which are the traditional domains of rights in aesthetic and functional subject matter. Courts also extended in multiple directions the meaning of the element of consumer confusion that stands at the heart of the conventional trademark infringement cause of action.158 The result has often been a convoluted concept of consumer confusion, which sometimes has only a precarious relationship to the confusion-​ based rationale of trademark law. In some cases, most prominently the merchandizing right that allows sports teams an exclusive right to exploit their marks on various consumer items, courts came close to simply discarding the confusion requirement altogether.159 The dilution doctrine that suffered from suspicious and restrictive application by courts in previous decades has made a comeback. Especially important in this regard was the 1995 addition of a federal dilution cause of action to the Lanham Act, albeit one which was limited to “famous marks.”160 Recently, and as several of the chapters in this volume demonstrate, many of these and other developments have attracted scholarly criticism, and in some cases, concerns from courts, the public, and more rarely, legislators. The effect of this resistance on trademark law is still in the making. To date, it has not resulted in any major scaling back of the expanded doctrines defining the scope and strength of trademarks. It has produced, however, an assortment of doctrines and defenses, mostly judge-​made, which are designed to mitigate or avoid the possible harmful effects of expanded trademark rights on competition and expression.

7. Conclusion Today IP is a burgeoning field that extends to areas well beyond the three surveyed here. These areas, some of which are of a more recent vintage, include trade secrets, publicity rights, misappropriation doctrine, and design patents, as well as an assortment of other satellite legal regimes. The development of each of them comprises a story every bit as rich and complex as that told here about patents, copyright, and trademarks.

155 See Qualitex Co v Jacobson Products Co, Inc 514 US 159 (1995). 156 See Two Pesos, Inc v Taco Cabana, Inc 505 US 763 (1992).

157 See Wal-​Mart Stores, Inc v Samara Brothers, Inc 529 US 205 (2000).

158 

160 

See Bone (n 3) 606–​614.    Pub L No 104-​98, 109 Stat 985.

159 

Bone (n 3) 614–​615.

264   Oren Bracha These genealogical stories resist simplistic reductionism. The trajectory of none of the fields of IP was predetermined by the march of unavoidable technological or economic forces. The influences and forces at work diverged somewhat from one area to the other. At the same time, some general patterns are discernable. On a very abstract level, these patterns adhere roughly to the following form. As new technological and social conditions enabled new forms of information and opportunities for their commercial exploitation, demand for exclusive rights in respect of those resources rose. Interests lobbied legislatures, litigated in courts, and launched public campaigns. The outcomes of these efforts were often compromises between different interests, but these compromises also tended to reflect the dominance of those who had higher stakes, were better organized, or enjoyed other systematic advantages. Prevailing ideological strands were mobilized and developed to justify and legitimate the outcomes advocated. Existing legal forms and institutions were appropriated and adapted. Despite this overall pattern, causation ran in all directions and there were many feedback loops. Ideology helped constitute interests, even as it was used by them. Law was as much the locus for manufacturing ideology as it was the ideology’s product. Even as new technologies and economic interests exerted pressures on the law, legal rules helped create economic power and influenced the direction of technological change. The growth of IP had a self-​perpetuating quality. IP rights, once established, tended to entrench the business models that relied on such rights and the economic interests who lobbied for them. Once a set of rights was adopted it created the legal forms and the ideological assumptions that would pave the way for the next wave of expansion. The bad news for those who are skeptical of at least some of the aspects of the growth of IP is that, after over 200 years of this self-​perpetuating dynamic, the process is hard to stop. We can expect to see the growth of IP continue in various ways. The slightly better news for such skeptics is that this growth is not determinist. As various episodes in the long history of American IP history demonstrate, the process is complex and porous enough to allow dynamics of change to sprout, sometimes in unexpected places.

Chapter 10

T he Em ergenc e a nd Devel opm e nt of In tellectual Prope rt y L aw in Ca na da Daniel Gervais * 1. Introduction Canada is unique in several ways. From coast to coast to coast, its land is home to several Aboriginal peoples, oceans and high mountains, two official languages and, last but not least, two legal systems. Hence, the Supreme Court of Canada is, to paraphrase Maxence Rivoire and Richard Gold, a comparative law laboratory.1 Since 1949, three of its nine justices must come from Quebec, a civil law jurisdiction. Those judges can and do opine on all cases, including those pertaining to the interpretation, application, and evolution of the common law. The other six judges can and do the same in civil law cases. This can lead to unusual situations, at least when looking in from the outside. For example, in the case of Galeries d’art du Petit Champlain v Théberge,2 a copyright case in which the court had to decide whether transferring ink from paper posters of works of art by Canadian artists Claude Théberge onto a canvas (without the artist’s or copyright owner’s authorization) was a reproduction, the three Quebec judges upheld the Quebec Court of Appeal finding that it was. The majority (all judges from common law provinces) overruled the finding. Binnie J., writing for the majority, noted this in his opening paragraphs: [T]‌here are some continuing conceptual differences between the droit d’auteur of the continental civiliste tradition and the English copyright tradition, and these differences seem to lie at the root of the misunderstanding which gave rise to the present appeal.3 *  Daniel Gervais has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  M Rivoire and ER Gold, “Propriété Intellectuelle, Cour Suprême Du Canada et Droit Civil” (2015) 60 McGill LJ 381. 2  Galerie d’art du Petit Champlain Inc v Théberge 2002 SCC 34 (hereafter Théberge). 3  Théberge.

266   Daniel Gervais The common law/​civil law dichotomy applies in at least two major ways. First, it allows courts to consider foreign court cases as persuasive not just from the United Kingdom (UK) or other common law jurisdictions but also from France. Here, Quebec lawyers, who typically read cases in both English and French, may have an advantage over many Canadian lawyers from common law provinces whose knowledge of French is insufficient to research French-​language materials, and who would in any event not be naturally inclined to do so. To paraphrase Rivoire and Gold again, bijuralism in Canada is often a one-​way street.4 An example of this admixture of civil and common law sources may be found in another Supreme Court of Canada opinion in which the court crafted a “Canadian” version of the notion of originality common to most if not all countries around the world.5 McLachlin CJC, writing for a unanimous Court, reviewed American, British, and French law before reaching her conclusion. Second, laws and doctrines in which intellectual property (IP) is embedded are different in Quebec, from contract and tort law, to labor relations, for example for musicians. This may affect several key points such as who owns rights, how they can (or cannot) be transferred, who has standing to sue for infringement, and who can inherit rights, etc. Canada is also a former colony. As such, its  first IP statutes were all based on British statutes. Though as we shall see in the following pages in the past few decades Canada has moved away from the British system—which itself was at least until recently pulled in a different direction due to European common market harmonization—​citing British and other Commonwealth precedents is still quite common, even in Quebec. For example, in interpreting various provisions of the Canadian Copyright Act, the Quebec Court of Appeal6 looked at the origins of the text in British statutes, namely the Fine Art Copyright Act 1862,7 the Copyright Act 1911,8 and the Copyright Act 1956.9 It is also important to remember the policy elephant in the analytical room, namely the fact that Canada shares the world’s longest border with the United States (US). As such, courts and lawmakers are familiar with US jurisprudence. They must also consider international norms, including those contained in, for example, the North American Free Trade Agreement (NAFTA).10 A recurring theme in IP cases at the Supreme Court of Canada is the extent to which US cases could be relevant in interpreting Canadian law. Typically, the Court has done so with utmost caution. Proximity to the US has had other significant policy impacts in both copyright and industrial property. To mention but two examples, because so many books purchased in Canada are imported from the US, Canada has struggled to maintain some level of protection for books printed in Canada, in part as a matter of cultural policy.11 Its pharmaceutical products are mostly imported as well, leading to a competing policy of maintaining low prices for

4 

Rivoire and Gold (n 1) 429. CCH Canadian Ltd v Law Society of Upper Canada 2004 SCC 13. 6  Lapierre-​Desmarais v Edimag inc [2003] JQ 3067, 26 CPR (4th) 295. 7  Fine Art Copyright Act 1862 (25 and 26 Vict c 68).    8 Copyright Act 1911 (1 and 2 Geo 5 c 46). 9  Copyright Act 1956 (4 and 5 Eliz 2 c 74). 10  See D Gervais, “The Role of International Treaties in the Interpretation of Canadian Intellectual Property Statutes” in O Fitzgerald (ed), The Globalized Rule of Law: Relationships between International and Domestic Law (Irwin Law 2006) 549–​572. 11  Copyright Act, s 27.1. 5 

Intellectual Property Law in Canada    267 public health systems and spurring homegrown research in the area. Indeed, the Patent Act itself establishes a mechanism to control prices of pharmaceuticals: the Patented Medicine Price Review Board. This chapter is divided into two major sections: copyright and industrial property. In both sections, it identifies the main sources and policy considerations that informed the emergence and development of Canada’s IP legislation.

2. Copyright In Canada, copyright is a matter of federal jurisdiction.12

2.1 Impact of the Berne Convention The UK joined the Berne Convention for the Protection of Literary and Artistic Works 1886 (the Berne Convention) on 5 September 1887. (For a discussion of the Berne Convention see Sam Ricketson’s chapter in this volume.) Before then, colonial copyright had been a one-​way street. Britain had extended copyright protection to British works in the Colonies but did not protect colonial works in Britain or in other colonies.13 A Bill introduced in the British Parliament in March 1886 allowing Britain to join the Berne Union had the effect, once the ratification of the Berne Convention had been extended to the Colonies (including Canada), of requiring the protection of colonial works not just in the UK but throughout the Berne Union. As a memorandum prepared by Edward Jenkins, the Parliamentary draftsman of the Bill, noted: [I]‌t seems obviously unnecessary to dwell on the advantages of making the Empire one for the purposes of copyright. Indeed any other system seems to lead to what may be termed inter-​ colonial piracy, and would tend to create as between the colonies the same difficulties which the Berne Conference has sought to remove as between all civilised States.14

This allowed the UK to ratify the Convention (and thus join the Berne Union) in September 1887, more or less one year after signing the text of the original Convention in Berne on 9 September 1886. A first conference of revision of the Berne Convention was held in Paris in 1896 at the French Ministry of Foreign Affairs. Thirteen Members of the Union and 14 non-​member delegations (including the US) attended, with the noted absence of the Austro-​Hungarian and Russian empires.15 A new Additional Act and Interpretative Declaration were adopted,16 giving Member States of the original 1886 text the option to remain bound only by the original version or to adopt the new 1896 text. Eleven Members of the Union ratified the new Act, but only ten ratified the Declaration. This was relevant for Canada because the Member 12 

Constitution Act 1867 (30 and 31 Vict c 3) s 91 (23).    13  Routledge v Low (868) LR 3 (HL). 15  Seville (n 14), 72. C Seville, The Internationalisation of Copyright Law (CUP 2006) 71. 16  S Ricketson and JC Ginsburg, International Copyright and Neighbouring Rights: The Berne Convention and Beyond (OUP 2006) vol 1, 87–​91. 14 

268   Daniel Gervais that ratified the former but not the latter was the UK. In fact, it was precisely because of opposition by the UK to the content of the Declaration that those provisions were put in a separate text. The UK’s opposition was directly linked to the issue of colonial copyright. The Interpretative Declaration made it clear that protection throughout the Union depended on the accomplishment of formalities in the country of origin of the work (lex originis) and not in the country where protection was sought (lex loci protectionis). The UK thus ratified the Additional Act but not the Declaration by Order in Council (because no change to legislation was required) also on behalf of Canada.17 Hence, through those British ratifications, Canada was an early party to, and Canadian authors arguably beneficiaries of, the Berne Convention. The change to the rule concerning formalities was significant because many Union Members imposed no formalities of any kind. As discussed by Catherine Seville in her chapter on the emergence and development of IP law in Western Europe, France considered authors’ rights as natural rights, and thus did not require the completion of administrative formalities as a precondition for their recognition. This meant that French works would be protected from the point of creation in all Union Members bound by the 1896 text. The 1896 Berne Additional Act also extended the notion of infringement beyond reproduction to include adaptations.18 The Canadian Government was not, however, particularly happy with this state of affairs. As a policy matter, it was more preoccupied with obtaining books from its southern neighbor than those crossing (after long shipping delays) the Atlantic Ocean. It was also preoccupied with American authors and publishers using Canada’s participation in the Berne Union to seek protection throughout the Union. Although Canada did assent to being included in the Berne Union by ratification of the Convention by the UK in 1887, Canadians were concerned that American publishers had an unfair advantage, as they were able to produce copies of foreign books not subject to copyright in the US. Indeed, in May 1889 a Copyright Act was passed limiting copyright to persons domiciled in Canada or a British possession, and to citizens of a country having an international copyright treaty with the UK. This was meant to prevent American authors and publishers from seeking copyright protection in Canada (and thus throughout the Berne Union). Not being able to get Berne Convention protection through the Canadian back door might, it was thought, prompted the US to join the Convention itself. The Canadian Government felt rather strongly about this. It even threatened to leave the Berne Union. The tension was caused in large part by the fact that, at the time, foreign nationals (including Canadians) could not get any protection under the US copyright statute of 1790. The matter was somewhat diffused by the adoption in March 1891 in the US of an Act giving copyright in that country to foreigners on condition that their works were manufactured in North America (the so-​called “Manufacturing Clause”), thereby including Canada.19 This did not fully soothe Canadian opposition, however. In October 1891, 17 

Seville (n 14) 74. See D Gervais, “The Derivative Right, or Why Copyright Protects Foxes Better than Hedgehogs” (2013) 15 Vanderbilt Journal of Entertainment & Technology Law 785. 19  As explained in a Panel Report of 15/​16 May 1984 (L/​5609—​31S/​74), the Manufacturing Clause was added to United States copyright law by the Chace Act of 3 March 1891. That Act also permitted foreign nationals to obtain copyright protection in the United States for the first time. The Manufacturing Clause prohibited, with certain exceptions, the importation into or public distribution within the United 18 

Intellectual Property Law in Canada    269 the Canadian Parliament sent an address to Her Majesty asking for power to legislate on Canadian copyright matters, and for notice to be given of Canada’s possible withdrawal from the Berne Union. Although Canada ultimately did not leave the Union, it continued to apply pressure in relation to a situation it viewed as unfair, namely that American authors could game the international system by publishing simultaneously in Canada while only granting protection in the US for books manufactured in North America. The American publishing industry, which had emerged essentially by reprinting British books, was flourishing. American authors and publishers wanted to obtain international protection (otherwise American books could be reprinted cheaply in Canada and exported to other countries). The need to find a solution was thus felt by at least some stakeholders on both sides of the border, and a number of high-​level negotiations were held in Canada and the US by British envoys, but, alas, without success. Major changes were made to the Berne Convention at the 1908 Berlin revision conference. One such change was the prohibition against formalities; another was the introduction of a minimum term of protection consisting of the life of the author plus 50 years thereafter. Britain somewhat reluctantly participated in the Berlin revisions. Indeed, opposition from Canada to various features of Imperial copyright rules (discussed in the next section) made the UK’s role difficult. There were also rumblings in the UK itself. The need for a “reform of the entire British copyright framework” was expressed in many quarters.20 This was arguably confirmed by the fact that the UK only ratified the 1908 Berlin Act of the Berne Convention after adopting its new 1911 Copyright Act (to replace a tapestry of existing statutes) on 4 June 1912.

2.2 Colonial Statutes The history of copyright in Canada before Confederation and until the adoption of the first full “Canadian” Act in 1921 is inextricably linked to the availability of British books in the Colony. By 1821, the population of British North America (722,000) was too small to sustain a major publishing industry. European immigrants were, however, used to and interested in reading newspapers and books. They had easier access to American books, including, as noted above, many reprints of British books not protected by copyright in the US—​and typically much cheaper than original British editions. London tried to impose customs duties on US books at the Canadian border, but Canadian authorities often looked the other way and did not really enforce the duties.21 That picture changed when the Legislature of Lower Canada (essentially what is now the Province of Quebec) adopted a copyright statute in 1832.22 After the Act of Union of 1840, the new Province of Canada adopted a new statute along similar lines, which provided States of a copyrighted work consisting preponderantly of non-​dramatic literary material in the English language, the author of which was a United States domiciliary, unless the portions consisting of such material had been manufactured in the United States or Canada. As a result of amendments in 1909, 1919, 1949, 1952 and 1976, the coverage of the Manufacturing Clause was progressively reduced. It was extended by Congress for a last time in 1982 despite a Presidential veto, and expired in 1986. 20  22 

21  Seville (n 14) 79. Panel Report of 15/​16 May 1984, 77. An Act for the protection of Copy Rights 1832 (2 Will IV c 53).

270   Daniel Gervais copyright protection only for residents of the Province. That protection applied to books, maps, charts, musical compositions, prints, and engravings.23 Although British authors were protected under Imperial copyright rules, the early Canadian statutes expressly extended their (duplicative) protection to British authors as of 1847. Until 1887, Imperial copyright statutes can be seen as trying to remedy at least some of the problems felt by colonists in accessing copyright material. As already mentioned, the 1842 UK Copyright Act extended copyright protection to books first published in the UK throughout the Colonies, but not the other way around. In other words, colonial publications, though few in number, were protected neither in Britain nor in the rest of the Empire. The British Act was thus not particularly popular with the colonists. It was seen as basically protecting higher prices for British books. Indeed, British books were much more expensive than American reprints. The Times of London even published a letter in 1843 in which the price of British books was said to be so high that it “amounted to a prohibition.”24 Adding insult to injury, books published in Britain took a very long time to cross the Atlantic. It is against this backdrop that what has been described as a “jumble of colonial laws”25 was passed. This followed the adoption by the British Parliament of the 1847 Foreign Reprints Act, which allowed Colonies to regulate the importation of foreign books, but with preferential treatment for British books. Canada protested by adopting its own Copyright Act in 1847, which sent a signal that it wanted to bring copyright (and book importation) policy back to Canada.26 The Canadian Act protected British authors, but only if they printed and published their works in Canada. This text could not legally supersede the existing Imperial Act adopted by Westminster, however, and thus had little practical legal effect. Other North American Provinces adopted Colonial Acts on the basis of the Foreign Reprints Act, which regulated the import of foreign books (typically for a duty not exceeding 20  percent).27 Despite all of this, however, the Foreign Reprints Act was ineffective in stemming the tide of American books in Canada and, conversely, in making a significant impact on the sale of (expensive) British books in Canada.

2.3 Copyright after Confederation Shortly after Confederation, Parliament adopted the Copyright Act of 1868.28 The Constitution Act of 1867 gave legislative authority to the Federal Government to regulate copyright. Essentially, the 1868 statute continued previous arrangements. It permitted the import of foreign reprints (in particular from the US), but did not allow local reprints of British books.29 In that same year was heard the famous British case of Routledge v Low, in which the House of Lords decided that an American author could benefit from protection under the 1842 British Act for a book published in the UK, provided the author was residing (even temporarily) in any of the British Dominions. This meant that American authors could obtain 23 

An Act for the protection of Copy Rights in this Province 1841 (4-​5 Vict c 61). 25  Seville (n 14) 88. Seville (n 14) 81. 26  In 1858 Canada imposed a ten percent duty on British books and maintained the existing 12.5 percent duty on cheaper American editions. 27  Seville (n 14) 87. 28  Copyright Act 1868 (31 Vict c 54). 29  Seville (n 14) 90. 24 

Intellectual Property Law in Canada    271 Imperial copyright (later, this would include protection under the Berne Convention) by sojourning even very briefly in Canada.30 Canadians were (still) unhappy with the colonial copyright regime because it prohibited reprinting and thus greatly limited the availability of British books in Canada. It made Canadians dependent upon the availability of American reprints or forced them to wait for higher-​priced British editions. In 1872, a Bill was tabled in Parliament to allow reprints of British books subject to a flat duty of 12.5 percent31—​something we might today call a compulsory license—​that was reminiscent of the system put in place later in the 1971 Appendix to the Berne Convention. There was, however, significant opposition to the Bill in Britain. Indeed, it was disallowed as conflicting with Imperial copyright.32 Clearly the fight for access was on.33 Three years later a new Act was passed that changed the Canadian copyright situation rather considerably.34 It protected in Canada works published or produced in Canada, whether for the first time or simultaneously with publication elsewhere, for a term of 28 years—​with a possible 14-​year extension35—​but subject to official registration in Ottawa and deposit of three copies of the work. The Act did not, however, deprive British authors of Imperial copyright in Canada if they had registered their works at the Stationers Company in London (that is, they were protected in Canada without an additional obligation to register in Ottawa).36 The 1875 Act also established the jurisdiction of the Federal Court. It gave jurisdiction to the Exchequer Court (the Federal Court’s predecessor) in cases of conflicting claims on the Copyright Register,37 and prohibited the importation into Canada of foreign editions of books. It did not, however, supersede the Imperial Act of 1842, which still applied in Canada and could, at least in theory, be used to prohibit the importation of books. Not coincidentally, in 1875 the first Canadian Royal Commission on Copyright was appointed.38 It was no surprise when the Commission objected to the stringency of rules concerning reprints in Canada of foreign books and proposed the (re)introduction of a licensing regime.39 However, debates continued about the constitutional authority of the Canadian Parliament to legislate on copyright matters beyond the strictures of Imperial copyright laws. At that time, copyright was protected in Britain by a series of discrete bills40 that made it more difficult to reconcile with the interests expressed by the Colonies 30 

31 Seville (n 14) 92–​93.   Seville (n 14) 103.   JS McKeown, Fox on Canadian Law of Copyright and Industrial Designs (4th edn, Carswell 2003) 30. 33   Eventually, an Act often referred to as the Fisher Act was passed in Canada in July 1900. It offered better conditions for Canadian publishers within the Empire but did not address the problems caused by the US manufacturing clause. 34   38 Vic c 88, ratified by 38-​39 Vic c 53, vi of addendum to the Statutes of Canada, 1876. It became c 62 of the Revised Statutes of Canada, 1886 and with few changes became c 70 of the Revised Statutes of Canada, 1906. 35   The term of protection in Canada could not be longer under the 1875 Act than the copyright in the country of origin, however. 36   As confirmed by the Ontario Court of Appeal in Smiles v Belford [1877] 1 OAR 436. 37 38 39  Seville (n 14) 110–​111.  S 21.   Fox (n 32) 30. 40  After the Statute of Anne of 1709, some of the most important bills are the Literary Copyright Act of 1842 (5-​6 Viv c 45); four Acts protecting engravings and prints (8 Geo II c 13; 7 Geo III c 38, 17 Geo III c 57 and 6-​7 Will IV c 59); the Sculpture Copyright Act (54 Geo III c 56); the Dramatic Copyright Act 1833 (“Bulwer Lytton’s Act”) (3-​4 Will IV c 15); the Copyright (Musical Compositions) Act 1882 (45-​46 Vict c 40); the Fine Arts Copyright Act 1862 (25-​26 Vic c 68) and of course the International Copyright Acts 1844 (7-​8 Vict c 12), 1852 (15-​16 Vict c 12) and 1886 (49 and 50 Vict c 33). Only some of these extended 32

272   Daniel Gervais for clear and fair rules for all categories of protected works. As noted earlier, this made the situation at the 1908 Berlin revision conference of the Berne Convention difficult for the British Government. Indeed, two years after Berlin, an Imperial copyright conference was held at the Foreign Office in London. The Canadian Minister of Agriculture, Sydney Fisher,41 objected to the extension of Imperial copyright to the Colonies without the assent of each Dominion’s legislature. An agreement was reached according to which ratification of the Berlin Act of the Berne Convention on behalf of a Dominion would not be sent to Geneva without the consent of the Dominion concerned, as expressed by its legislature. This was a major victory for Canadian negotiators, who brought back greater legislative authority to enact a solution to the continuing problems posed by books crossing their southern border. “Outsourcing” copyright policy to Canadian authorities also allowed the UK to adopt its “own” statute, the Copyright Act 1911,42 which did not extend to self-​ governing Dominions43 until and unless they adopted it as their own. That 1911 Act was eventually adopted without major substantive changes in Canada in 1921,44 where it entered into force on 1 January 1924. Canada then acceded independently to the Berne Convention.45 The 1921 Act was a “blank slate.” It repealed previous Canadian statutes and copyright statutes passed by the Parliament of Great Britain operative in Canada.46 The 1911 Act extended copyright protection to all Canadian authors throughout the Empire from 1 January 1924 without requiring compliance with any formalities.47 It also abolished common law copyright in unpublished works, essentially creating a single copyright “code” instead of the plethora of statutes and common law rules that had applied up to that point in time.48 When Canada “rejoined” the Berne Convention as an independent nation, it did so by using the restriction allowed under the 1914 Berne Additional Protocol.49 While the 1896 Act extended the benefits of the Berne Convention to authors from non-​member countries who first published their works in a Union country, the 1914 Protocol, drafted specifically at Canada’s request, allowed Member countries to restrict the protection afforded to authors by non-​member countries if the author’s country of origin failed to protect Union authors “in an adequate manner.”50 Canada is the only country that ever made use of this facility.51

to Canada. See Fox (n 32) 37–​38. For example, the Act of 1882 concerning musical compositions was extended to Canada in Francis Day & Hunter Ltd v Twentieth Century Fox Corp [1939] 4 All ER 192, 196 (PC). 41

  After whom a Bill passed in 1900 was named. See (n 33). 43  Copyright Act 1911, s 25.   Copyright Act 1911 (1-​2 Geo V c 46). 44  SC 1921 c 24; RSC 1931 c 32. 45  Canada had been bound by Berne since the UK ratification in 1887, but it filed a Declaration of Continued Application on 10 April 1928. 46  Fox (n 32) 38. 47  Certificate of Secretary of State for the Colonies, 6 December 1923, Statutory Rules and Orders 1923, at 168. 48  L Bently and B Sherman, Intellectual Property Law (OUP 2001) 29. The Canadian (1921) Act provided for a transitional period for unpublished works in existence prior to the entry into force of that statute on 1 January 1924. See SC 1921 c 24, ss 41 and 42. 49  Ricketson and Ginsburg (n 16) vol 1, 102–​103. 50  The text of the 1914 protocol was included in the convention proper at the Rome Revision in 1928 where it became the art 6, which is still in the Convention today (Paris Act 1971). 51  C Masouyé, Guide to the Berne Convention (WIPO 1978) 39. 42

Intellectual Property Law in Canada    273 The issue of protection of US works was mostly resolved when protection under the 1921 Act was extended to citizens of the US by a certificate from the Minister of Trade and Commerce dated 26  December 1923.52 It was more formally and bilaterally settled when Canada adhered to the Universal Copyright Convention 1952 on 10 May 1962.53 The US, which had been a major promoter of that Convention as an alternative to the Berne Convention, had already ratified it on 6 December 1954.54

2.4 Changes to the 1921 Act (1924–​1997) A number of changes to the 1921 Act were made.55 In 1927, provisions were introduced to allow the parallel importation of books “lawfully printed in Great Britain or in a foreign country that has adhered to the [Berne] Convention or the Additional protocol thereto,” which excluded Americans. The provision remained in force, though with amendments, until the trade agreements of the 1990s, namely the North American Free Trade Agreement (NAFTA) and the Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS).56 A number of other amendments were made to the 1921 Act to deal with musical works. The 1936 Act to amend the Copyright Act,57 for example, required Collective Management Organizations (CMOs) to file a list of musical works administered by them and provided that tariffs had to be certified by a new administrative agency, the Copyright Appeal Tribunal, before coming into force.58 The Tribunal issued its first decision within six months. This was followed by a change in 1938 to the scope of the public performance right for musical works.59 In a rather important 1943 case, Duff CJC expressed the view that those amendments reflected the fact that contracts between a performing rights society and users were a matter of public interest in need of governmental supervision and/​or regulation.60 A new subsection 69(2) was added to address complaints by small business owners who 52  Canada Gazette, 29 December 1923. As already noted, the 1921 Act entered into force three days later, on 1 January  1924. 53  (1962) 23 Fox Patent Cases 245. 54 . 55  The complete list is as follows (until but not including the 1988 amendments discussed below): SC 1923 c 10; SC 1931 c 8; SC 1935 c 25; SC 1936 c 27; SC 1938 c 27; SC 1950 c 50; consolidated as RSC 1952 c 55; further amended by SC 1966–​67 c 25; SC 1968–69 c 28; SC 1969​–70 c 47; consolidated as RSC 1970 c C-​30; further amended by RSC 1970 c 4 (2nd Supp) c 10 (2nd Supp); SC 1974–75–76 c 50; SC 1976–77 c 28; SC 1980​–81–82–​83 c 47 and c 111; SC 1984 c 40; consolidated as RSC 1985 c C-​42, as amended by RSC 1985 c 10 (1st Supp). 56  RSC 1970 c C-​30, s 28; RSC 1985 c C-​42, s 45. See 1987 c 49, s 119; SC 1993 c 44, s 67; SC 1994 c 47, s 67; and SC 1997 c 24, s 28. 57  1931 (1 Ed VIII c 28). 58  An Act to Amend the Copyright Act 1931 1936 (1 Edw VIII c 28) s 2. For additional information, see M Bouchard, “Collective Management in Canada” in D Gervais (ed), Collective Management of Copyright and Related Rights (Kluwer Law 2016). 59  An Act to amend the Copyright Act 1931 and the Copyright Act (2 Geo VI c 27). See also Vigneux v Canadian Performing Rights Society [1943] SCR 348, reversed by [1945] 1 All ER 432 (PC) (hereafter Vigneux v CPRS), and Composers, Authors & Publishers Assn (Canada) v Western Fair Assn [1951] SCR 596. 60  Vigneux v CPRS.

274   Daniel Gervais used radio receiving sets on their premises and had been asked to pay a public performance royalty. The first major effort to modernize the 1921 Act emerged in 1954 when a Royal Commission (known as the Ilsley Commission) was established. It published its report three years later, suggesting significant changes,61 but it did not lead to major reforms. That report is still relevant and interesting, however, in that it was cited in a number of later reports and reform recommendations. In 1971, after the publication by the Economic Council of Canada of a report suggesting increased attention to copyright issues, the Minister of Consumer and Corporate Affairs commissioned a number of studies on various aspects of IP policy.62 As part of this effort to structure the debate, a major report on copyright reform was produced in 1977 by Alan Keyes and Claude Brunet, known as the Keyes/​Brunet Report.63 It was followed by a White Paper, infelicitously entitled From Gutenberg to Telidon.64 The Keyes/​Brunet Report and White Paper suggested a major overhaul of Canadian copyright policy, in part to reflect the rapid expansion of global communications technologies. While neither the Report nor the White Paper led to significant legislative changes, the recommendations they contained served as the basis for a set of proposals that can be seen as the first real attempt at crafting Canada’s own copyright policy. These proposals emerged in the 1985 report entitled A Charter of Rights for Creators.65 Both phases of copyright law reform adopted after 1985 have their origin in this report,66 which the Government accepted in 1986.67 Another input into the process were obligations undertaken in trade agreements, in particular the 1987 Canada–US Free Trade Agreement, and later NAFTA, particularly with respect to the retransmission right. The two phases of reforms based on the Charter of Rights for Creators were promulgated in 198868 and 1997, respectively.69 As discussed later, an informal “third phase,” based on a different set of reports and recommendations, was completed in 2012.70 But let us turn for now to the two “official” phases. Phase I (1988), effected by Bill C-​60, addressed the protection of computer programs;71 added new rights (for example, an exhibition right for artistic works72); reinforced criminal penalties for copyright infringement; abolished compulsory licenses for the recording of musical works;73 established a Berne-​Convention compliant moral right;74 changed 61 

Royal Commission on Patents, Copyright, Trade-​marks and Industrial Designs: Report on Copyright (Queen’s Printer 1957). 62  Fox (n 32) 39. 63  AA Keyes and C Brunet, Copyright in Canada—​Proposal for Revision of the Law (Minister of Supply & Services Canada 1977). 64  Department of Communications and the Department of Consumer and Corporate Affairs (Supply & Services Canada 1984). See also Fox (n 32) 40–​41. 65  Report of the House of Commons Sub-​Committee on the Revision of Copyright, Standing Committee on Communications and Culture (Supply & Services Canada 1985). 66  Phase I was contained in RSC 1985 c 10 (4th Supp) and Phase II in SC 1997 c 24. See D Vaver, “Copyright Phase 2: The New Horizon” (1990) 6 Intellectual Property Journal 37. 67  Government Response to the Report of the Sub-​Committee on the Revision of Copyright (Ottawa, 7 February 1986). 68  RSC 1985 c 10 (4th Supp), which received Royal Assent on 8 June 1988. 69  SC 1997 c 24. 70  SC 2012 c 20. 71  RSC 1985 c 10 (4th Supp) ss 1(2), 2 and 5. 72  RSC 1985 c 10 s 2 (public exhibition right). 73  RSC 1985 c 10 ss 7 and 23. 74  RSC 1985 c 10 ss 4 and 6.

Intellectual Property Law in Canada    275 the status and powers, and name of, the Copyright Appeal Board of Canada;75 introduced licenses (granted by the Copyright Board of Canada) to enable the use of some so-​called “orphan works” (works whose copyright owners could not be located); and established a new retransmission regime. Bill C-​60 was introduced into the House of Commons in May 198776 and received Royal Assent on 8 June 1988.77 Phase II (adopted in 1997) began on 25 April 1996, when Bill C-​32 was introduced in the House of Commons,78 and concluded a year later when the Bill was enacted.79 Phase II is remembered mostly for having introduced neighboring rights protection and a private copying regime. The Conservative Government of the 1980s was able to enact the first phase of copyright reform in just over a year. The Liberal Government of the 1990s enacted the second phase of amendments in even less time. Considering the infrequency of major copyright reforms and the fact that those amendments represented the first major copyright reform in Canada since 1921, many observers felt that this was too fast and that the Government had a duty to ensure that the reforms were achieved only after a thorough and methodical process of consultation.80 One of the major problems with Phase I had been that the 1985 report upon which the reforms were based (the Charter of Rights for Creators) did not include a draft bill for consideration.81 The inclusion of a draft bill could have allowed an opportunity for interested parties to analyze recommended provisions and provide comments to the Government before a bill was introduced in Parliament. Once a bill is introduced, critical review is often curtailed. Indeed, as just noted, the Phase I Bill passed quickly through the House of Commons. The facts that a draft bill was unavailable before the introduction of Bill C-​60, and that the hurried nature of its legislative journey, may have negatively affected the overall quality of the Bill. The Bill was said to lack “thematic unity”82 and to deal with the recommendations of the 1985 Report in a piecemeal fashion.83 Had there been more time for study before the introduction of the Bill, as well as during its passage through Parliament, the Government may not have had to introduce so many late amendments.84 The Bill also suffered from the fact that the French and English texts were not always consistent.85 The two phases were not the exclusive vector for copyright reform. While the Phase II amendments were being planned, a few additional changes were made in 1993 to redefine the category of protected “musical works” (to include written and acoustic representations)

75   See D Gervais, “A Uniquely Canadian Institution: The Copyright Board of Canada” in Y Gendreau (ed), A New Intellectual Property Paradigm: The Canadian Experience (Edward Elgar 2009). 76   An Act to amend the Copyright Act and other Acts in consequence thereof, 2nd Session, 33rd Parliament, 1987 (1st reading 27 May 1987). 77   An Act to amend the Copyright Act and other Acts in consequence thereof (SC 1988 c15). 78   An Act to amend the Copyright Act, 2nd Session, 35th Parliament, 1996 (1st reading 25 April 1996). 79   An Act to amend the Copyright Act 1997 (SC 1997 c 24). 80   See D Vaver, “The Canadian Copyright Amendments of 1988” (1988) 4 Intellectual Property Journal 121, 122, 148. See also D Vaver, “The Copyright Amendments of 1997: An Overview” (1997) 12 Intellectual Property Journal 53, 55. 81  D Vaver, “The Canadian Copyright Amendments of 1988” (1988) 4 Intellectual Property Journal 121, 155. 82  See Vaver (n 81) 148–​149. 83  See Vaver (n 81) 149. 84  See Vaver (n 81) 151–​152. 85  See Vaver (n 81) 153.

276   Daniel Gervais and expand the definition of “performance” to ensure that all transmitters—​whether broadcasters, specialty or pay services, or cable systems—​were liable to pay royalties.86 The period ending in 1997 also saw the adoption and implementation of international IP and/​or trade agreements. First, the Intellectual Property Law Improvement Act87 extended copyright protection to authors in the countries party to either the Universal Copyright Convention or the Berne Convention. The Canada–US Free Trade Agreement and then the NAFTA, which entered into force on 1 January 1994 and was implemented by the North American Free Trade Agreement Implementation Act, come to mind.88 The NAFTA implementation legislation added to or modified a number of definitions in the Canadian statute (including the definitions of “compilation” and “communication to the public”), extended the rights in audiovisual works and computer programs, and added a rental right. A year later, Parliament adopted the World Trade Organization Agreement Implementation Act.89 While fairly similar in substance to NAFTA, the TRIPS Agreement obliged Canada as a WTO Member to extend protection to all WTO members.

2.5 More Recent Reforms (1998–​present) On 22 June 2001, the two federal Departments responsible for copyright policy, Industry Canada and Canadian Heritage, jointly launched a public consultation on copyright reform, thus initiating an informal “third phase” of copyright reform.90 This informal phase included a report tabled in 2002 under section 92 of the Act, and a Government Response.91 The process led to the adoption of the Copyright Modernization Act (also known as Bill C-​11) in 2012.92 This major reform of the Canadian statute added (or clarified the scope of) the rights conferred by copyright in an effort to adapt copyright to the Internet environment, including by introducing intermediary (Internet Service Provider) liability, a notice and notice procedure (as opposed to notice and takedown procedures93), and the creation of a cause of action against parties providing online services primarily designed to infringe. 86 

Copyright Amendment Act 1993 (SC 1993 c 23). Intellectual Property Improvement Act 1993 (SC 1993 c 15). 88  North American Free Trade Agreement Implementation Act 1993 (SC 1993 c 44). 89  World Trade Organization Agreement Implementation Act 1994 (SC 1994 c 47). 90  The first two phases of the process were planned as such. The third “phase” is not an official designation. See Industry Canada and Canadian Heritage, “Consultation Paper on Digital Copyright Issues” (Ottawa 2001) ; and Industry Canada and Canadian Heritage, “A Framework for Copyright Reform” (Ottawa 2001) . 91  Supporting Culture and Innovation: Report on the Provisions and Operation of the Copyright Act (October 2002). Concerning the Government Response, see . 92  SC 2012 c 20. This followed several bills that died on the order paper following prorogations: Bill C-​60 introduced on 20 June 2005 (failed due to general election held in January 2006; Bill C-​61, introduced on 12 June 2008 (failed due to general election held in October 2008); Bill C-​32 introduced on 2 June 2010 (failed due to election held in March 2011). Bill C-​32 in particular was the subject to several parliamentary committee hearings. 93  Which only came into force on 2 January 2015. This may have to be modified if the Trans-​Pacific Partnership Agreement is implemented. 87 

Intellectual Property Law in Canada    277 The Bill also modified the legal regime governing photographs; expanded the fair dealing exceptions to copyright infringement expressly to include education, parody, and satire; introduced new exceptions to infringement for user-​generated content,94 format-​shifting, time-​shifting, and back-​ups; provided greater library and educational use privileges; and protected technological protection measures (TPMs) and rights management information. During the informal third phase but before the adoption of Bill C-​11, a number of smaller amendments were made to copyright policy, although not always in the Copyright Act. For instance, in June 2007 Parliament introduced and quickly passed Bill C-​59 to add section 432 to the Criminal Code95 in order to address the unauthorized recording of films in movie theatres. Among other notable changes, a notion of “new media retransmitter” was added to section 31 in 2002.96 After Bill C-​11, changes continued apace. For example, in 2014 further changes to the Act created civil causes of action with respect to commercial dealings with infringing copies and counterfeit trademarked goods, and enacted new border enforcement measures enabling customs officers to detain goods that they suspect infringe copyright.97 Changes were also made by regulations, especially concerning the definition of local/​distant signals and limits to the remuneration right for nationals of certain foreign countries.

2.6 The Emergence of the Supreme Court of Canada as Key Policy Player Courts often contribute to IP policy debates. In the field of copyright, however, the Supreme Court of Canada has gone beyond the simple call of duty by playing a key role in defining copyright policy. In Hollywood-​esque fashion, it issued, first, a trilogy of decisions:  Théberge v Galerie d’Art du Petit Champlain inc,98 CCH Canadian Ltd v Law Society of Upper Canada,99 and Society of Composers, Authors & Music Publishers of Canada v Canadian Assn of Internet Providers (CAIP).100 This was followed by a pentalogy (five decisions) all issued on the same day.101 As far as the trilogy goes, Théberge set the tone:

94   See D Gervais, “User-​Generated Content and Music File-​Sharing: A Look at Some of the More Interesting Aspects of Bill C-​32” in M Geist (ed), From “Radical Extremism” To “Balanced Copyright”: Canadian Copyright and The Digital Agenda (Irwin Law 2010). 95   RS 1985 c C-​46. The Bill received Royal Assent and came into force on 22 June 2007. 96 97  SC 2014 c 32, ss 2 to 6.   SC 2002 c 26, s 2. It came into force on 21 March 2003. 98  Théberge. 99  CCH Canadian Ltd v Law Society of Upper Canada 2004 SCC 13, [2004] 1 SCR 339 (hereafter CCH). See D Gervais, “Canadian Copyright Law Post CCH” (2004) 18 Intellectual Property Journal 131. 100  Society of Composers, Authors and Music Publishers of Canada v Canadian Assn of Internet Providers 2004 SCC 45 (hereafter SOCAN v CAIP). 101  Entertainment Software Association v Society of Composers, Authors & Music Publishers of Can. 2012 SCC 34 (hereafter ESA v SOCAN); Rogers Communications v Society of Composers, Authors & Music Publishers of Canada 2012 SCC 35 (hereafter Rogers v SOCAN); Society of Composers, Authors & Music Publishers of Canada v Bell Canada 2012 SCC 36 (hereafter SOCAN v Bell); Alberta (Education) v Canadian Copyright Licensing Agency (Access Copyright) 2012 SCC 37; Re:Sound v Motion Picture Theatre Associations of Canada 2012 SCC 38.

278   Daniel Gervais 30. The Copyright Act is usually presented as a balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator (or, more accurately, to prevent someone other than the creator from appropriating whatever benefits may be generated). [ . . . ] 31. The proper balance among these and other public policy objectives lies not only in recognizing the creator’s rights but in giving due weight to their limited nature. In crassly economic terms it would be as inefficient to overcompensate artists and authors for the right of reproduction as it would be self-​defeating to undercompensate them. Once an authorized copy of a work is sold to a member of the public, it is generally for the purchaser, not the author, to determine what happens to it. 32. Excessive control by holders of copyrights and other forms of IP may unduly limit the ability of the public domain to incorporate and embellish creative innovation in the long-​term interests of society as a whole, or create practical obstacles to proper utilization. This is reflected in the exceptions to copyright infringement enumerated in ss. 29 to 32.2, which seek to protect the public domain in traditional ways such as fair dealing for the purpose of criticism or review and to add new protections to reflect new technology, such as limited computer program reproduction and “ephemeral recordings” in connection with live performances. While the court was split in Théberge (4-​3), which might have signaled that the policy shift was temporary, in CCH a unanimous court interpreted fair dealing liberally and described exceptions as “users” rights’.102 In the third instalment of the trilogy, SOCAN v CAIP, the Court found that Internet Service Providers that act as mere conduits of content are not liable for infringing uses made of their services by third-​party subscribers. Three of the five decisions in the more recent pentalogy were not particularly controversial. First, the Court’s finding in Re: Sound v Motion Picture Theatre Association of Canada that sound recordings embedded in movie soundtracks were not (or no longer) to be treated as sound recordings under the Copyright Act seems eminently reasonable in light of the definition contained in section 2 of the Act. Second, the Court’s conclusion in Rogers v SOCAN that a series of point-​to-​point on-​demand transmissions of works constitute a form of communication to the public, even if each individual transmission is not, at least colloquially speaking, “public” seems correct, and, moreover, in keeping with the WIPO Copyright Treaty103 and its “making available” provision. Third, in SOCAN v Bell, a unanimous court agreed with the Copyright Board of Canada that listening to previews of a song before deciding whether to make a purchase (download) was fair dealing for research, again a reasonable outcome. The two other decisions were less well received. First, in ESA v SOCAN, the Court’s majority separated the rights of communication and reproduction (that is, a reproduction cannot also be a communication) and held that music downloads did not, therefore, implicate the right of communication to the public by telecommunication. According to the majority opinion, simultaneity in the auditory or audiovisual experience (or at least 102 

“The exceptions to copyright infringement, perhaps more properly understood as users’ rights, are set out in ss 29 and 30 of the Act.” 103  WIPO Copyright Treaty (opened for signature 20 December 1996, entered into force 6 March 2002) 36 ILM 65 (1997).

Intellectual Property Law in Canada    279 contemporaneousness) was required for a transmission to be a communication.104 It is unclear how that decision meshes with section 2.4 (added as part of the third phase of reforms in 2012), which reads as follows: [C]‌ommunication of a work or other subject-​matter to the public by telecommunication includes making it available to the public by telecommunication in a way that allows a member of the public to have access to it from a place and at a time individually chosen by that member of the public.105

Second, in Alberta (Education) v Canadian Copyright Licensing, a split (5-​4) court interpreted the Act as basically saying that any copying of a work even by teachers for students in a primary and secondary education (K–​12) setting is a dealing with the work for the purpose of private study or research, and thus non-​infringing of copyright subject only to a fairness requirement. Some saw this as overreach, in part because it does not exclude material specifically published for the educational market (though that may factor in the fairness analysis). Other Supreme Court of Canada cases were less impactful, but clearly the court has increased its level of proactivity in the field of copyright.106

3.  Industrial Property 3.1 Impact of the Paris Convention The role of international rules was initially less noticeable in industrial property. Canada joined the Paris Convention in 1923, years after the adoption of its first trademark and patent statutes. As will be discussed, Canada joined several key international registration systems only very recently. Unlike Berne, which the US did not join until 1989, for Canada to join international conventions to which its southern neighbor was party meant extending protection to US trademark, patent, and other industrial property owners (the US has been party to the Paris Convention since 1887).

3.2 Trademarks Trademark registration in Canada is for the most part a matter of federal jurisdiction.107 104  See D Gervais, “The Internet Taxi: Collective Management of Copyright and the Making Available Right, After the Pentalogy” in M Geist (ed), The Copyright Pentalogy: How The Supreme Court Of Canada Shook The Foundations Of Canadian Copyright Law (University of Ottawa Press 2013) 373. 105  Emphasis added. This was under consideration by the Copyright Board of Canada as of this writing. 106  See also D Gervais, “Trente ans de droit d’auteur à la Cour suprême du Canada” (2009) 21 Cahiers De Propriété Intellectuelle 419. 107  Under the general power to regulate “trade and commerce.” Constitution Act 1867 (UK) (30 and 31 Vict c 3) s 91(2). Provinces retain relevant jurisdiction eg, over tort and delicts that may accompany trademark protection.

280   Daniel Gervais

3.2.1 Early Common Law Protection The protection of trademarks in common law jurisdictions is said to date back to the 1830s, when courts began to issue injunctions to prevent the fraudulent use in commerce of another’s trademark.108 At least until the common law and equity courts were merged by the Judicature Act, the trademark owner’s only recourse was in passing off.109 Plaintiffs had to prove that there was an association in the minds of the public between the trademark and her goods, which was not always easy to do. That difficulty led to the adoption of the UK Merchandise Marks Act in 1862110 and the Trade Marks Act of 1875.111 Major changes were made by the adoption of the Patents, Designs and Trade Marks Act 1883,112 which repealed the Act of 1875 and amendments thereto, and defined trademarks for the first time as “fancy words not in common use.”113 Additional changes were made to British trademark legislation in 1905 and 1938.114

3.2.2 The First Canadian Statutes Canada legislated independently in the area of trademarks even before Confederation. The Province of Canada passed its first trademark legislation in 1860, and quickly replaced it in 1861 with a statute that defined trademarks broadly as including “all marks, names, brands, labels, packages, or other business devices adopted for the purpose of distinguishing any manufacturer, no matter how applied.”115 The province of New Brunswick adopted its own Trade-​Mark Act in 1867,116 quickly replaced by an Act passed in 1868 by the new Parliament of the Dominion, the Trade Mark and Design Act.117 This 1868 Act established a federal trademark register and included provisions concerning cancellation of registration, assignment of registered trademarks, and conflicts between entries on the register. It also protected industrial designs, a matter to which I return in Part III of this chapter. Amendments made in 1879118 introduced a distinction between “general” trademarks (those referring to a business generally) and “specific” trademarks (those used in connection with a particular class of the merchandise). The latter could only be protected for 25 years, with a possible renewal for a similar term.119 In part a result of the introduction of new conflict rules, in 1890 changes were made to the statute to give the Exchequer Court jurisdiction to determine matters concerning applications for trademark registration.120 108

 See Millington v Fox [1838] 3 My and Cr 338.  See Crawshay v Thompson [1842] 4 M and G 357 and Croft v Day [1844] 7 Beav 84. 110   Merchandise Marks Act 1862 (25 and 26 Vict c 38). 111   Trade Marks Act 1875 (38 and 39 Vict c 91). 112   Patents, Designs and Trade Marks Act 1883 (46 and 47 Vict c 57). For a comment see RW Wallace, The Patents, Designs and Trade Marks Act, 1883 (WM Maxwell and Son 1884). 113 114 115  Fox (n 32) 5.   Fox (n 32) 4.   51 and 52 Vict c 50 and 1-​2 Geo VI c 22. 116  An Act relating to Trade Marks 1867 (30 Vict c 31). 117  Trade Mark and Design Act 1868 (31 Vict c 55). 118  42 Vict c 22. Consolidated as An Act Respecting Trade Mark and Industrial Design 1886 (RSC 1886 c 63). 119  Fox (n 32) 6. 120  53 Vict c 14. Additional changes were made in 1891 (54-​55 Vict c 35), 1919 (9 and 10 Geo V c 64), 1923 (13 and 14 Geo V c 28) and 1927 (registration of union labels, 17 Geo V c 71) and 1928 (grounds to refuse registration, 18 and 19 Geo V c 10). 109

Intellectual Property Law in Canada    281 In 1932, the Act was largely repealed by new legislation, the Unfair Competition Act,121 leaving in force the provisions dealing with industrial designs. One of the features of this 1932 statute was a division between word marks and design marks.122 There were constitutional challenges to the broadening of federal powers in the 1932 statute beyond trademarks per se and into the field of unfair competition writ large.123 The 1932 Act essentially remained in force, however, until the adoption of the next major revision, the Trade-​Marks Act of 1953.124

3.2.3 More Recent Trademarks Legislation The origins of the Trade-​Marks Act of 1953 can be found in the work of the committee appointed by the Secretary of State of Canada on 28 October 1947, which tabled its report on 20 January 1953. A draft bill attached to the report became the Trade-​Marks Act of 1953,125 which came into force on 1 July 1954,126 with relatively few changes. Challenges to the constitutional validity of section 7 of the 1953 Act emerged. Section 7(e), which prohibited any act or business practice “contrary to honest industrial or commercial usage in Canada,” was considered ultra vires of Parliament’s jurisdiction after the Supreme Court decision in MacDonald v Vapor Canada Ltd.127 Indeed, it was repealed in 2014.128 Doubt as to the constitutional validity of section 7(b)129 was resolved in 2005 when the Supreme Court found section 7(b) to be within the Federal Government’s legislative competence.130 Though it is obiter in the case, the Court seemed to support the validity of section 7(a) as well. Those provisions read as follows: 7. No person shall (a) make a false or misleading statement tending to discredit the business, goods or

services of a competitor; (b) direct public attention to his goods, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his goods, services or business and the goods, services or business of another.

121   1 and 2 Eliz II c 49. The remaining sections were known as the Industrial Designs and Union Labels Act 1952 (RSC 1952 c 150). 122   1 and 2 Eliz II ss 2(c) and 27. 123   For example, s 11 prohibited “any other business practice contrary to honest industrial and commercial usage.” For an example of an (unsuccessful) challenge, see Good Humor Corporation of America v Good Humor Food Products Ltd et al [1937] Ex CR 61. 124 125  Fox (n 32) 9.   Unfair Competition Act 1932 (1 and 2 Eliz II c 49). 126  Unfair Competition Act 1932 (1 and 2 Eliz II c 49) s 57. 127  MacDonald v Vapor Canada Ltd [1977] 2 SCR 134 (SCC). 128  Combating Counterfeit Products Act 2014 (SC 2014 c 32) s 10. 129 See Marketing International Ltd v SC Johnson & Son, Ltd [1979] 1 FC 65, para 11 (Federal Court of Appeal), affirmed by [1980] 1 SCR 99; and Motel 6, Inc v No 6 Motel Ltd [1982] 1 FC 638 (Federal Court, Trade Division). But see also Asbjorn Horgard A/​S v Gibbs/​Nortac Industries Ltd [1987] 3 FC 544 (Federal Court of Appeal). 130  Kirkbi AG v Ritvik Holdings Inc 2005 SCC 65, para 36.

282   Daniel Gervais Overall, few major changes were made to the Act until recently. When the Act was consolidated in 1985,131 the word “trade-​mark” began being hyphenated in the statute.132 In 1990, additional minor changes were also introduced to avoid conflicts with the names of plant varieties.133 And in 1993–​1994, changes were made to reflect Canada’s participation in NAFTA and membership of the WTO (and specifically the TRIPS Agreement).134 Potential conflicts between trademarks and geographical indications (GIs) led to a number of further legislative amendments, including a list of exceptions for use and registration of what were considered generic names for wines and spirits (such as Champagne, Porto, and Chablis). It was deleted in 2013 by Order in Council.135 A number of spirits remain, though Grappa and Ouzo were similarly removed from the list.136 The deletions followed the conclusion of the Canada–​European Community Wine and Spirits Agreement in April 2003, which came into force on 1 June 2004.137 One may expect additional changes as the Comprehensive Economic and Trade Agreement (CETA) and its long list of protected GIs is implemented.138 In 2014, two groups of significant changes were made to the Act.139 In parallel with changes to the Copyright Act,140 Bill C-​8 (formerly Bill C-​56), known as the Combating Counterfeit Products Act, introduced new terminology into the Act that was more in line with international practice. It created new criminal offences for trademark counterfeiting (possession or export of infringing copies or counterfeit trademarked goods, packaging, or labels) and enacted new border enforcement measures enabling customs officers to detain goods that they suspect infringe trademark rights. The 2014 changes also affected the scope of what may be registered as a trademark, and allowed the Registrar of Trademarks to correct errors that appear on the register. In addition, they modified the trademark application process, most notably by eliminating the notion of “associated marks.” This change was made to remove limitations on the Registrar of Trademarks concerning the registration of changes with respect to ownership or the name or address of the owner of associated trademarks. As a result, the register can better reflect the actual marketplace in indicating when an owner has sold one or more trademarks or assigned their rights. The Bill also allowed the division of applications and streamlined the opposition process. 131 

A prior consolidation occurred in 1970. The Act was then Trade Marks Act 1970 (RSC 1970 c T-​10). Trade-​marks Act 1985 (RSC 1985 c T-​13). By contrast, British statutes do not use the hyphen and US statutes use trademark as a single word. 133  Plant Breeders’ Rights Act 1990 (SC 1990 c 20) ss 79 to 81l, reflected in ss 10.1, 11.1 and 12(1)(f) of the Act. 134  Intellectual Property Improvement Act 1993 (SC 1993 c 15) (see, eg, ss 57 to 69), North American Free Trade Agreement Implementation Act 1993 (SC 1993 c 44) s 234 (seizure at border), and World Trade Organization Agreement Implementation Act 1994 (SC 1994 c 47) ss 190–199. 135  SOR/​2004-​85, s 1(3). The Act (s 11.18(5)) gives the Governor in Council the power to amend the lists of wines and spirits. 136  SOR/​2004-​85, s 1(4). 137 < http://​www.treaty-​accord.gc.ca/​text-​texte.aspx?id=104976&Lang=eng>. 138  5 August 2014. The Agreement contains annexes of European GIs that must be protected in Canada. See (annexes I-​III). 139  Combating Counterfeit Products Act 2014 (SC 2014 c 32) ss 7 to 51. 140  Combating Counterfeit Products Act 2014 (SC 2014 c 32) ss 2 to 6. 132 

Intellectual Property Law in Canada    283 Then, extensive changes were made to bring Canada’s trademark system in line with agreements administered by the World Intellectual Property Organization (WIPO), and discussed by Sam Ricketson earlier in this volume. As of February 2017, Canada was party to none of what one might refer to as the “three 27s” of international trademark law (so named because of the date of the adoption of each one on the 27th of the month), that is, the Madrid Protocol,141 and the two post-​TRIPS WIPO trademarks instruments, namely the Trademark Law Treaty (TLT)142 and the Singapore Treaty on the Law of Trademarks.143 The Singapore Treaty in particular requires changes to: (a) the form and means of transmittal of communications with the Canadian Intellectual Property Office (CIPO); (b) what happens when an applicant misses a time limit; (c) allow the addition of the definition of a sign to include non-​traditional trademarks; (d) include the ability to divide applications; and (e) provide for a 10-​year renewal period. The Singapore Treaty also essentially bans “proof of use” requirements.144 Bill C-​31, once in force (it was tabled on 28  March 2014 and received Royal Assent on 19 June 2014) will lead to major changes to Canada’s participation in the international trademark system. Bill C-​31’s main purpose (in the area of trademarks) is clearly to bring Canadian law in line with the Singapore Treaty and add the authority to make regulations for carrying into effect the Madrid Protocol and the Nice classification.145 Specifically, Bill C-​31:146 • simplifies the requirements for obtaining a filing date in relation to an application for the registration of a trademark; • eliminates the requirement to declare use of a trademark before registration (that is, proof of use is only required if registration is challenged for non-​use147); • reduces the term of registration of a trademark from 15 to ten years; • eliminates the concept of distinguishing guise; • adds a definition of trademark as a “sign or combination of signs that is used or proposed to be used by a person for the purpose of distinguishing or so as to distinguish their goods or services from those of others”; and • defines sign as including “a word, a personal name, a design, a letter, a numeral, a color, a figurative element, a three-​dimensional shape, a hologram, a moving image, a mode 141  Protocol relating to the Madrid Agreement Concerning the International Registration of Marks (adopted 27 June 1989, entered into force 1 December 1995) as amended. 142  Trademark Law Treaty (opened for signature 27 October 1994, entered into force 1 August 1996) 2034 UNTS 298. 143  Singapore Treaty on the Law of Trademarks (opened for signature 27 March 2006, entered into force 16 March 2009) Treaty Doc 110-​2. 144  Singapore Treaty, art 13(2)(iii). 145  Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks (opened for signature 15 June 1957, entered into force 8 April 1961) 550 UNTS 45, as revised and amended. As of October 2015, Canada was not party to this Agreement. 146  Now the Economic Action Plan 2014 Act, No 1 (SC 2014 c 20). 147  Under the current system, a declaration of use is an unsworn, unverified statement made by the applicant or his agent. Under Bill C-​31, as a pre-​condition of filing, an applicant must either propose to use, be using his mark, and be entitled to use his mark in Canada. Logically, the fact that applicant had not used or have intent to use when it filed becomes a ground for opposition.

284   Daniel Gervais of packaging goods, a sound, a scent, a taste, a texture and the positioning of a sign)”148; and, finally, • adapts Canadian law to the classification established by the Nice Agreement by requiring that goods or services be grouped according to the Nice Classification. These may well be the most significant changes to Canadian trademark law since the adoption of the 1953 Act. They had not entered into force as of this writing (February 2018). Once in force, Canada will be in a position to ratify the Madrid Protocol and the Singapore Treaty, and adopt the Nice classification.

3.3 Designs Designs are not specifically mentioned in the Constitution Act but are thought to be a matter of federal jurisdiction as they are often linked to copyright. The Trade Mark and Design Act of 1868, mentioned previously, provided for the registration of industrial designs.149 When the bulk of that statute was repealed in 1932 by the Unfair Competition Act, it essentially became a statute dealing with industrial designs.150 It was consolidated as such in 1952, 1970, and 1985.151 There have been few amendments made to the Act since. In 1992, changes were made to update the description (and terminology) of the registration process,152 and in 1993 changes were made to implement Canada’s obligations under NAFTA and the TRIPS Agreement.153 A set of changes were adopted in 2014, but were not in force as of this writing (February 2018). They are meant to allow Canada to join the Geneva (1999) Act of The Hague Agreement.154 The amendments include provisions relating to the contents of an application for the registration of a design (defining as “novel design”), requests for priority, and the term of an exclusive right for a design (which would end the later of ten years after the date of registration of the design in Canada or 15 years after the filing date of the application), transfers, and electronic applications. Substantively, most of these provisions already existed in some form in the Industrial Design Act but, as with the latest rounds of changes to the

148   Actually, in the French version distinguishing guise was already referred to as “signe” (distinctif). The terminology is thus only “new” in the English version. 149 150 See (n 121).   Trade Mark and Design Act 1868 (31 Vict c 55) ss 22 to 38. 151  Industrial Designs and Union Labels Act, RSC 1952. The union label provisions were removed the following year (1953), the same year that a new trademarks statute was passed. See (n 124). The 1970’s version was simply titled Industrial Designs Act (RSC 1970 c I-​8) and the next consolidation Industrial Design Act (RSC 1985 c I-​9). 152  Miscellaneous Statute Law Amendment Act (SC 1992 c 1) ss 79 to 82 and 143. 153  Intellectual Property Improvement Act 1993 (SC 1993 c 15) ss 12 to 24; NAFTA Implementation Act (SC 1993 c 44) ss 161 to 173; and World Trade Organization Agreement Implementation Act 1994 (SC 1994 c 47) s 118. A minor change to headings was made in 2001 (SC 2001 c 34) s 52. 154  Economic Action Plan 2014 Act, No 2 (SC 2014 c 39) ss 102–112. Geneva Act of The Hague Agreement Concerning the International Registration of Industrial Designs (opened for signature 2 July 1999, entered into force 23 December 2003) 2279 UNTS 156. As of October 2015, Canada was not a party. The United States only recently adhered to the Agreement (with effect from 13 May 2015). See .

Intellectual Property Law in Canada    285 Trade-​Marks Act, the amendments adapt the terminology to international standards and term of protection with international norms. A complete overview of Canadian design law must include sections 64 and 64.1 of the Copyright Act, which restrict copyright (in effect makes it non-​infringing as a matter of copyright law) in cases where a design is applied to a useful article (under certain conditions) and/​or applies to a useful article features solely dictated by the function of the article.155 A provision of this type has been in the statute since 1927.156

3.4 Patents Patents are a matter of federal jurisdiction in Canada.157

3.4.1 Early Patent and Patent-​like Instruments The early history of patents in Canada is really the story of the application of English patents to the Colonies. Patent rights granted by the Crown were typically restricted to England, Wales, and Berwick-​on-​Tweed (the northernmost town in England near the Scottish border). Upon payment of a small additional fee, however, letters patent could be extended to include “all His [after 1837 ‘Her’] Majesty’s Colonies and Plantations abroad.”158 There is evidence that many English patents were so extended to Canada.159 It is also worth mentioning that even before any patent statute was adopted in Canada, the province of Quebec (before it was split into Lower Canada and Upper Canada in 1791) had granted patent-​like protection, including a six-​year monopoly issued by government ordinance160 which provided that a sum of ten shillings per pound of potash would be recoverable against infringers of a (now protected) process for the making of “Pot and Pearl Ashes.”161 This was soon set to change, however. Lower Canada adopted the first general legislation for the grant of local patents in 1824.162 It was followed by similar legislation adopted in Upper Canada,163 Nova Scotia,164 New Brunswick,165 and Prince Edward Island.166 All such statutes provided that patents could only be granted to residents of the colony (province) concerned.167 In the 1850 case of Adams v Peel, it was held that a British patent had no force in Canada after the passing of the provincial Patent Act of 1824.168 As a result, Her Majesty’s subjects in England or other Colonies could not obtain patents in the Colonies unless they 155 

156 RSC 1985 c C-​42, s 64 and 64.1.   RSC 1927 c 32, s 46. Constitution Act 1867 (UK) (30 and 31 Vict c 3) s 91(22). 158  RH Barrigar and C Robinson, “Some Notes on the Historical Development of Patent law in Colonial Canada and Other British Colonies” (1990) 5 Intellectual Property Journal 391, 392. 159  G Asher, “The Development of the Patent System in Canada Since 1767” (1965) 43 Canadian Patent Reporter 60. 160  Ordinance of the Governor in Council of Quebec, ch 7, 31 Geo III. 161  Barrigar and Robinson (n 158) 393. Statute of Monopolies 1623 (21 Jac I c 3). 162  SLC 1824 c 25. 163  SUC 1826 c5. 164  SNS 1833 c 45. 165  SNB 1834 c 27. 166  SPEI 1837 c 21. 167  Barrigar and Robinson (n 158) 393. 168  1850, 1 LCR 130. This seems to have been confirmed by the English Act of 1852. See H Lund, A Treatise on the Substantive Law relating to Letters Patent for Inventions (1851, republished by Gale 2010) xxi. 157 

286   Daniel Gervais proceeded by private bill.169 It seems, however, that “the colonial legislatures could and did make special exceptions to the residency requirement.”170 The 1824 Lower Canada Act, the development of which was used as a model for developments until Confederation,171 was short, although in many ways it was similar to modern patent statutes. Its purpose was stated as being “for the encouragement of Genius and of Arts in this Province by securing an exclusive right to the Inventor of any new and useful Art, Machine, Manufacture or Composition of Matter.”172 The term of the patent was 14 years, as had been the practice under the Statute of Monopolies of 1623.173 Applicants were required to swear or affirm that they were the first inventor. This 1824 Act was amended several times, including in 1829 to allow residents to obtain a patent on an invention imported from abroad but not invented by the applicant.174 A survey of the first 62 patents granted in Lower Canada showed that 20 of those patents were for imported, not locally invented, technology.175 The tumultuous years that followed, during which Lower Canada and Upper Canada were united (1840) and the capital moved from Kingston to Montréal and then Toronto, until Ottawa was finally chosen by Queen Victoria as the permanent capital of Canada in 1857,176 also saw the adoption in 1849 of a single new Patent Act, applicable to the combined Province of Canada.177 It introduced the concepts of reissue and disclaimer for the first time in Canadian law and allowed for an extension of the patent term from 14 to 21 years “if the patentee failed to obtain reasonable remuneration from his invention.”178 This was followed by a number of smaller administrative changes in 1851,179 1852180 (giving the Minister of Agriculture the power to administer the Act), 1857,181 1859,182 and finally 1866,183 that is, one year before Confederation.

3.4.2 The First Federal Statutes The first Canadian (federal) patent statute was adopted in 1869.184 It was quite different from its provincial predecessors. It was also partly aligned with US law and, hence, not entirely based on British law.185 For example, Canada was unique among British colonies in adopting a first-​to-​invent standard.186 The 1869 Act required applicants to have been residents of Canada for at least one year prior to the date of application. The Act187 provided for a patent term of five years, which 169 

Asher (n 159) 57–​58 (reviewing the exchanges of the letters between various officials and the inventors desiring to obtain the colonial patents in the 1850s). 170  Barrigar and Robinson (n 158) 395; Asher (n 159) 64. 171  A list of changes to the statutes adopted by the different Colonies is available in G Asher, “Legislative History of the Canadian Patent Act” (1960) 33 Canadian Patent Reporter 64, 66–​67. 172  Asher (n 159) 60. 173  Statute of Monopolies 1623 (21 Jac I c 3). 174  9 Geo IV c 47. See also Asher (n 159) 61. 175  Barrigar and Robinson (n 158) 396. 176  The location of the patent grant also moved from one city to another. The first Canadian patent awarded in Ottawa was No 1,902 on 25 October, 1865. Asher (n 159) at 63. A new numbering series was started after the adoption of the federal Patent Act in 1869 at number one, a series still in use today. 177  12 Vict c 24.   178  Asher (n 159) 61–​62.    179  14 and 15 Vict c 79.   180  16 Vict c 11. 181  20 Vict c 33. 182  22 Vict c 34. 183  29-​30 Vict c 19. 184  SC 1869 c 11. 185  WL Hayhurst, “Intellectual Property Laws in Canada: The British Tradition, the American Influence and the French Factor” (1996) 10 Intellectual Property Journal 263. 186  Hayhurst (n 185). 187  SC 1869 c 11, 32 and 33 Vict c 11.

Intellectual Property Law in Canada    287 could be renewed for a total of 15 years. It specified that an invention had to be made available at a reasonable price. Patents could be impeached for non-​working.188 It did not apply to every patent, however, because the practice of issuing private bills to protect specific inventions continued even after the adoption of the 1869 Act.189 Yet, as Christopher Wadlow noted, Canada was unique among the Colonies surveyed in also providing for automatic forfeiture of patents 12 months after issue in the event of articles protected by the patent being imported by or for the proprietor. Both the non-​working and the importation provisions in Canadian law were attributed to its propinquity to the United States.190

Three years later, the statute was amended to allow foreign applicants to obtain Canadian patents.191 By comparison, US law restricted US patents to citizens of the US from 1793 until 1836.192 The first publication of records by the Patent Office also began after the adoption of the 1872 Act as part of a (private) publication known as Mechanics Magazine.193 Mostly minor changes were made to the Act almost every year for the 20 years that followed.194 The first important changes were made in 1892, when the patent term was changed to three six-​year periods, for a possible total of 18 years. The 1892 Act also provided that patents could only be granted after an examination by a competent examiner. While examination had been in place before then, this was the first official reference in the statute to examination by professional examiners.195 Finally, the 1892 Act196 eliminated the requirements to provide a model or miniature of the invention (which were often made of brass), in part because the Patent Office was running out of storage space, but also to reduce costs and encourage more people to file for patents.197 The Act was revised seven more times between 1893 and 1921,198 including by a 1913 amendment that gave jurisdiction to the Exchequer Court to hear appeals from refusals by the Commissioner of Patents to grant patents. In 1919, an amendment transferred jurisdiction over patents from the Department of Agriculture to the Department of Trade and Commerce, where it remained until 1927, when it was transferred to the Secretary of State Department.199 A new Act was adopted in 1923.200 It increased the powers of the Commissioner of Patents and modified the novelty requirement by introducing a two-​year window (as prior art for previous patents, description in a printed publication or use prior to application).201 The 188 

Asher (n 159) 65. In his survey of the private bills, Gordon Asher, a former Principal Examiner at the Canadian Patent Office (now the Canadian Intellectual Property Office), found 170 such bills passed between 1867 and 1955. See Asher (n 159) 64. 190  C Wadlow, “The British Empire Patent 1901-​1923: The ‘global’ patent that never was,” [2006] Intellectual Property Quarterly 311, 323. 191  SC 1872 c 26; 35 Vict c 26. 192  Barrigar and Robinson (n 158) 394. 193  Asher (n 159) 67. 194  1873 (36 Vict c 44); 1874 (37 Vict c 44); 1875 (38 Vict c 14); 1882 (45 Vict c 22); 1883 (46 Vict c 19); RSC 1886 c 24; 1887 (5051 Vict c 12); 1888 (51 Vict c 18); 1890 (53 Vict c 13); 1891 (54-​55 Vict c 26 (Exchequer Court) and c 33). 195  Asher (n 159) 69.    196  55-​ 56 Vict c 24.   197  Asher (n 159) 69. 198  1893 (56 Vict c 34); (1897) 60-​61 Vict c 25; 6 Edw VIII c 69; 1913 (3-​4 Geo V c 17); 1919 (9-​10 Geo V c 64); 10 Geo V c 26 (1919, 2nd session); 1921 (11-​12 Geo V c 44). 199  Asher (n 159) 70, 72.    200  13-​14 Geo V c 23. 201  13-​14 Geo V, s 23, ss 2 to 5 and 7. 189 

288   Daniel Gervais 1923 Act also introduced for the first time special provisions relating to naturally occurring substances in patents on food and medicine.202 Those provisions would remain in the statute until 1993.203 The 1923 Act allowed Canada to join the Paris Convention (to which Canada adhered on 21  August 1923, with effect from 1  September 1923).204 Specifically, it modified the provision contained in the Act of 1906 that gave applicants a year’s window. The window was to be calculated from the earliest foreign filing, rather than a foreign grant.205 The 1923 adhesion to Paris understandably led to a significant influx of foreign patent applications. That Act was amended five times between 1924 and 1932,206 including by introducing a conflict procedure in the 1932 revision.207 Importantly, 1923 also saw the examination at London’s Imperial Economic Conference of the possibility of creating a patent for the British Empire. Canada is “credited” with the failure of the conference. Christopher Wadlow explains that the newly elected Prime Minister, William Lyon Mackenzie King, was elected on a “platform of nationalism,” was to remain a force in Canadian politics for another 25 years, and was attempting to chart a new course for Canada, which “of all the Dominions, instinctively took a negative and defensive attitude to patents, reflected in the fact that the main preoccupation of their legislation was less to reward or encourage innovation, than to avoid having their economy dominated by foreigners.”208 A new Patent Act was passed in 1935.209 It introduced, inter alia, public information on pending applications and a requirement to divide applications in the case of multiple inventions.210 It also reduced the term of patents from a possible maximum of 18 to 17 years.211 That Act was further amended after the Second World War to introduce provisions dealing with national defense and atomic energy, but also to make changes to other parts of the statute, including provisions on joint applications.212 During the War, an Order was issued to deal with patents owned by enemy nationals and to expand compulsory licensing options.213 A number of additional changes were made, most of them minor, in the years that followed. In 1949, the Act was amended to reflect Newfoundland’s entry into the Confederation.214 A  1952 Consolidation215 of the Act followed. It came into force on 15 September 1953 and was then amended several times: twice in 1954,216 once in 1959,217 1966,218 and in 1967–​1968,219 three times in 1968–​1969,220 and once again in 1970.221

202   They would then reappear in the 1935 Act (1935 c 32, s 40) and as section 41 of the 1952 revision (RSC 1952 c 203). 203   RSC 1970 c P-​4, s 41; RSC 1985 c P-​4, s 39. Repealed by SC 1993 c 2, s 3. 204   Asher (n 159) 71 and . 205  13-​14 Geo V, s 8. 206  1924 (14-​15 Geo V c 5); RSC 1927 c 150; 1928 (18-​19 Geo V c 4); 1930 (20-​21 Geo V c 34); 1932 (22-​23 Geo V c 21). 207  Asher (n 159) 72. 208  Wadlow (n 190) 335. 209  Patent Act 1935 (25-​26 Geo V c 32). In force 1 August 1935. 210   Patent Act 1935, ss 10 and 37. 211 212   Patent Act 1935, s 48.   1947 (11 Geo VI c 23 ss 4–19. See also Asher (n 159) 73. 213  War Emergency order of 1939, PC 3362. 214  13 Geo VI c 6. See RSC 1952 c 203, s 79(1). 215  RSC 1952 c 203. 216  2-​3 Eliz II c 19 (fees) and 2-​3 Eliz II c 40 (changing regime of public servant inventions in s 47). 217  7-​8 Eliz c 8 (again modifying the regime of public servants’ inventions). 218  SC 1966–67 c 25, s 38.    219  SC 1967–68 c 16, s 10; c 28, s 105 (fees); c 55. 220  SC 1968–69 c 28, s 105.    221  SC 1970–​7 1–​72 c 1, s 64.

Intellectual Property Law in Canada    289 The Act was then consolidated again in 1970.222 This consolidation, which entered into force on 1  August 1972, was amended three times before the entry into force of the 1985 consolidation (on 12  December 1988).223 Significant changes were effected in the 1987 amendments, including to the novelty requirement and the treatment of foreign applications, but perhaps more relevant is the establishment of the Patented Medicines Prices Review Board.224 Under section 41.15(2), the Board may (still today) affect the price of medicines it finds excessive.

3.4.3 Modern Patent Legislation The next Consolidation in 1985225 was amended several times after its entry into force on 12 December 1988.226 A first major round of changes was caused by Canada’s adhesion to the Patent Cooperation Treaty (PCT), with effect from 2 January 1990.227 Those changes came into effect in domestic law on 1 October 1989.228 The Act provided for a transitional regime which remained in effect until 1 October 1996.229 Most of the other changes between 1989 and 2004, though numerous, were fairly minor in scope, except perhaps, as previously noted,230 those seen as either necessary or desirable after the adoption of trade agreements (NAFTA and TRIPS, the texts of which on patents are very similar). This includes renewal fees, re-​examination of patents, a linkage regime, and NOC regulations for pharmaceutical products. Also, the term of patents was changed from 17 years from grant to 20 years from filing. A pioneering change was the addition in 2004 of sections 21.02 to 21.2 (“Use of Patents for International Humanitarian Purposes to Address Public Health Problems”) to give effect to “Canada’s and Jean Chrétien’s pledge to Africa.”231 This part of the statute allows Canada to issue compulsory licenses under the World Trade Organization’s paragraph 6 222 

RSC 1970 c P-​4. RSC 1970 c 10 (2nd Supp) ss 64–65; SC 1984 c 40, s 57; SC 1987 c 41. 224  SC 1987 c 41, s 15, which became s 41.1 to 41.26 when inserted into the consolidated text. 225  Patent Act (RSC 1985 c P-​4). 226  Earlier versions (going back to 2002) can be found online at . Pre-​2002 amendments (to the 1985 Consolidation) are: RSC 1985 (3rd Supp); SC 1992 c 1, s 113; SC 1993 c 15, ss 26–56; North American Free Trade Agreement Implementation Act (SC 1993 c 44 ss 189–199; SC 1994 c 26, ss 52 and 53; World Trade Organization Agreement Implementation Act (SC 1994 c 47) ss 141 and 142; SC 1995 c 1, ss 62(1) and 63(1); SC 1996 c 8, s 32(1)(k); SC 1997 c 9, s 111; SC 1999 c 26, s 50; SC 1999 c 31, s 174; SC 2001 c 10, s 34, s 63; SC 2001 c 41, s 36 (number of changes including repealing s 55.2(2) and (3), found to be in violation of TRIPS by a WTO dispute-​settlement report); SC 2002 c 8, s 182 (powers of Federal Court). Many of these changes were either to allow implementation of trade agreements and/​or making administrative changes. Post-​2002 changes are: SC 2003 c 22, s 225; SC 2004 c 23, s 1; SC 2005 c 18, ss 1 and 2.1; SC 2013 c 33, s 196. 227 . 228  RS 1985 c 33 (3rd Supp). 229  Under Intellectual Property Improvement Act 1993 (SC 1993 c 15) ss 26 to 49 and 52 to 56, which came into effect once Regulations were in place in October 1996. See RS 1985 c P-​4, s 78.1 and 78.2(3), introduced by SC 1993 c 15. Some ameliorations were effected by SC 2001 c 10, s 3. 230 See (n 226). 231  Patent Act (RSC 1985 c P-​4) s 21.01, added by an Act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa) (SC 2004 c 23) s 1. 223 

290   Daniel Gervais system, in place since 2003, to allow the export of patented pharmaceutical products to least-​ developed countries without the necessary manufacturing capabilities, subject to a number of conditions.232 A final but fairly massive round of changes (not in force as of February 2017) to the Act, though mostly of an administrative rather than substantive nature, was effected by the Economic Action Plan 2014 Act, No. 2.233 As with trademarks and designs, where legislation adopted in 2014 discussed in Parts I and II of this chapter paved the way for Canada’s adhesion to various international registration-​related instruments and classifications, the changes made here are intended to allow Canada to join the Patent Law Treaty.234 According to the official summary of the 2014 changes, the “amendments include reducing the requirements for obtaining a filing date in relation to an application for a patent, requiring that an applicant be notified of a missed due date before an application is deemed to be abandoned, and providing that a patent may not be invalidated for non-​compliance with certain requirements relating to the application on the basis of which the patent was granted.”235 Additional changes to implement the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU were presented as well and scheduled for a third reading in the House of Commons in February 2017. It increased the protection of geographical indications and introduced changes to the current regime of pharmaceutical patent protection.236

4.  Concluding Thoughts Canada is indeed a unique IP laboratory. Historically, it had to navigate a course away from colonial waters. Industrially, it has tried to meet competing objectives, namely fostering homegrown innovation and creativity, including protection of its cultural production, and access. Juridically, Canada has integrated civil law notions into an edifice constricted mostly of common law bricks. As in a number of other jurisdictions, discordant notes are sometimes played by various branches of government. In the copyright area, the role of the Supreme Court in making policy in the past two decades cannot be overstated. Canadian IP law and policy has not stopped evolving since its emergence. Indeed, the very latest round of changes, which include joining the latest trademark and design treaties, signaled yet again something relatively new: namely a desire to join several international registration and classification systems (trademarks and designs).

232  See D Gervais, The TRIPS Agreement: Drafting History and Analysis (4th edn, Sweet & Maxwell 2012) 54–​75. 233  Economic Action Plan 2014 Act, No 2 (SC 2014 c 39) ss 114 to 141. 234  Patent Law Treaty (opened for signature 2 June 2000, entered into force 28 August 2005) 39 ILM 1047 (hereafter PLT). The PLT’s aim was to “harmonize and streamline formal procedures in respect of national and regional patent applications and patents.” WIPO, Summary of the Patent Law Treaty, online: . It entered into force in 2005. 235  PLT, “Summary.” 236  Most of Bill C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and The European Union and its Member States and to provide certain other measures, entered into force on Sept. 21, 2017.

Chapter 11

T he Em ergenc e a nd Devel opm e nt of In tellectual Prope rt y L aw in Au stra l ia a nd New Zea l a nd Kimberlee Weatherall †* 1. Introduction 1.1 Siblings, not Twins I imagine Australia and New Zealand can be difficult to distinguish from a distance. Heirs to British legal, political, and cultural traditions; adjacent to each other but geographically remote from their former colonial master; often treated as a single market by the world’s great capitalist forces; inching today towards closer market integration: The distant observer could be forgiven for blurring the two. Australians like to remind New Zealanders (usually right after Australia again loses the rugby) that at Federation, New Zealand’s incorporation as a State of Australia was contemplated.1

† 

Kimberlee Weatherall has asserted her moral right to be identified as the author of this Contribution. All websites were last accessed in February 2018, unless otherwise specified. *  I sincerely thank Isabella Alexander, Catherine Bond, Kathy Bowrey, Susy Frankel, and Justine Pila for their feedback on an earlier draft of this chapter. 1  J La Nauze, The Making of the Australian Constitution (Melbourne UP 1974). The thought may have been one-​sided: a New Zealand Royal Commission in 1901 clearly established New Zealanders’ opposition to federation with Australia: J Farrar, “Harmonisation of Business Law between Australia and New Zealand” (1989) 19 Victoria University of Wellington L Rev 435, 438–​439. As to the close economic ties between the two at an early stage, see CGF Simkin, The Instability of a Dependent Economy (OUP 1951).

292   Kimberlee Weatherall There is no denying that these two countries share a political history and legal tradition, both generally and in intellectual property (IP) law. Both, at their inception, grappled with Great Britain’s strange and evolving patchwork of IP laws, and experienced, at some distance and with less immediate controversy, the convulsions that gave birth to modern IP laws. Both based their legislation on British models for much of the twentieth century, and used British legislative revisions as catalysts for local reform. Both shed direct links to the British legal system only gradually. But Australia and New Zealand are siblings rather than twins, and have been occasionally “unruly” children of the Empire.2 They faced one-​sided British colonial IP rules, and in their earliest stages made independent legislative choices that departed from UK law and each other in interesting ways. After a period of (mostly) following British developments, in the latter part of the twentieth century their laws diverged markedly, as each responded to local circumstances and external demands, and as the UK’s own IP law became more European. Today, the siblings may be growing closer again, as part of a broader program aimed at closer economic integration. Trade negotiations also have a potential impact:  Although the Trans-​Pacific Partnership (TPP) Agreement appears to have failed with the US’ withdrawal, it is possible that some smaller subgrouping might be pursued, and at the time of writing the Regional Comprehensive Economic Partnership (RCEP) negotiations involving both Australia and New Zealand are ongoing.3 Like any mature siblings, however, they retain their differences, including very distinct relationships with their local indigenous knowledge systems and cultures. Most IP histories of Australia and New Zealand emphasize the importance of colonial ties and abiding British influence. Australia is sometimes depicted as transferring a kind of IP policy subservience from one imperial force (Britain) to another (the United States).4 Had the TPP Agreement come into force similar narratives would doubtless have been applied across the Tasman. Although there is a partial truth here—​external forces have been and continue to be extremely important in shaping both countries’ IP policies and laws—​such caricatures do neither country justice. There are many stories, some yet to be told, about the development of IP laws in the Antipodes. The ambitions of this chapter are necessarily modest: To sketch out key moments and debates and some overarching themes, and to point the reader in the direction of the very interesting in-​depth historical work already being done, as well as to identify some unanswered questions and future potential avenues for exploration.

1.2 A Note on Sources and the State of the Scholarship In 2011, Lionel Bently noted that although there had been considerable historical work on the development of British IP laws, there had been less investigation of colonial and 2 

B Kercher, An unruly child: a history of law in Australia (Allen & Unwin 1995). Trans-​Pacific Partnership Agreement between the Government of Australia and the Governments of: Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States of America and Vietnam 2016 [2016] ATNIF 2 (not yet in force). The TPP is “mega-​regional,” that is, a large regional free trade agreement. US President Donald Trump repudiated the agreement immediately following his inauguration in January 2017. The Regional Comprehensive Economic Partnership (RCEP) negotiations are, at the time of writing, ongoing and involve the 10 ASEAN nations, China, India, Japan, the Republic of Korea, Australia and New Zealand. 4  B Atkinson, The True History of Copyright: The Australian Experience 1905–​2005 (Sydney UP 2007). 3 

Intellectual Property Law in Australia and New Zealand    293 post-​colonial history in the former British empire.5 The truth of this statement is rapidly diminishing. We are in the midst of a flowering of such research, especially directed at the nineteenth and early twentieth centuries. It is spurred by the increasing availability of original sources in digital and searchable form, as well as the creation of global networks of scholars interested in questions historical.6 More legislation and law reform and commission reports are available electronically,7 and in Australia, the National Library’s Trove project provides valuable consolidated access to digitized newspapers as well as information about archive collections, searchable from one online location.8 Catherine Bond, Sarah Ailwood, and Maree Sainsbury are among those who have taken advantage of these sources to explore early copyright laws and public discussion.9 Other scholars, including Kathy Bowrey and her collaborators, have ranged outside legislation and court decisions to explore the operation of rights in practice and the market, and interactions with industry structures;10 still others have engaged with the IP stories of particular technologies11 or issues.12 Copyright’s context has never been “a narrowly legal one.”13 5   L Bently, “The ‘Extraordinary Multiplicity’ of Intellectual Property Laws in the British Colonies in the Nineteenth Century” (2011) 12 Theoretical Inquiries in Law 161. 6   Eg, the International Society for the History and Theory of Intellectual Property. See similar comments in C Seville, “British colonial and imperial copyright” in I Alexander and HT Gómez-​ Arostegui (eds), Research Handbook on the History of Copyright Law (Edward Elgar 2016) 268. 7  Eg, Primary Sources on Copyright 1950–​1900 edited by Lionel Bently and Martin Kretschmer. Available at: , accessed 16 April 2017. 8   Trove (available at: ​) pulls together metadata and content from multiple sources into one platform including information on over 300 million books, articles, images, historic newspapers, maps, music, archives, datasets and more, including digitized newspapers published in each state and territory from the 1800s to the mid-1950s (and some for later periods where there is an agreement with the publisher). 9   C Bond, “ ‘Cabined, cribbed, confined, bound in’: Copyright in the Australian colonies” in I Alexander and HT Gómez-​Arostegui (eds), Research Handbook on the History of Copyright Law (Edward Elgar 2016) 372; S Ailwood and M Sainsbury, “The Imperial Effect: Literary Copyright Law in Colonial Australia” (2014) Law Culture and the Humanities 1; C Bond, “ ‘A spectacle cannot be owned’: A history of the uneasy relationship between copyright and sport in Australia” (2013) 8 Australian and New Zealand Sports LJ 1 (revealing there were seven court decisions between 1925–​1947 where a plaintiff claimed copyright in horse racing information!). 10  Eg, K Bowrey, “ ‘The World Daguerreotyped: What a Spectacle!’ Copyright Law, Photography and the Economic Mission of Empire” in B Sherman and L Wiseman (eds), Copyright and the Challenge of the New (Kluwer Law International 2012) 11; the current work of Kathy Bowrey as part of the ARC Discovery Project Australian Made: A History of Australian Copyright Law and Creator Success 1868–​1968 (Chief Investigators Bowrey and Bond), some of which I’ve been fortunate to read in draft; C Bond, “ ‘Curse the Law!’: unravelling the copyright complexities in Marcus Clark’s His Natural Life” (2010) 15 Media and Arts L Rev; C Bond, “ ‘This is not a bill to legalize looting’: wartime regulation of enemy-​owned intellectual property in Australia” [2015] Intellectual Property Quarterly 79; C Seville, The internationalisation of copyright law: books, buccaneers and the black flag in the nineteenth century (CUP 2006); R Atkinson and R Fotheringham, “Dramatic Copyright in Australia to 1912” (1987) 11 Australasian Drama Studies 47. 11  See eg, B Sherman and L Wiseman (eds), Copyright and the Challenge of the New (Kluwer Law International 2012). 12  Eg, moral rights: C Banks, “Lost in Translation: A History of Moral Rights in Australian Law 1928–​2000 (Part One)” (2007) 11 Legal History 197; C Banks, “Lost in Translation: A History of Moral Rights in Australian Law 1928–​2000 (Part Two)” (2008) 12 Legal History 99. 13  Seville (n 10) 16.

294   Kimberlee Weatherall Trademark history has been tackled by Amanda Scardamaglia, author of the first substantial history of pre-​Federation colonial Australian trademark law.14 Historical examination of patents is patchy. Jeremy Finn’s 2000 piece is an important historical work on early Australian patent legislation;15 he and Christopher Wadlow both explore inter-​colonial developments affecting both Australia and New Zealand, including early twentieth century proposals for an Imperial patent.16 Economic and scientific historians have investigated early patenting trends in both Australia17 and New Zealand,18 trends in invention,19 and battles such as the international conflict in the gold mining industry over cyanide processing patents that prefigure the patent troll debates of today and which, like the troll phenomenon, influenced patent law developments in Western Australia around the turn of the twentieth century.20 The years between 1925 and 1975 represent less extensively tilled ground. Benedict Atkinson’s grandly titled True History of Copyright21 describes debates during the development of Australian copyright through the mid-​twentieth century, but has been criticized for mixing history with ideology.22 A  Fitzgerald and Atkinson collection contains interesting personal reflections on the 1968 Australian Copyright Act.23 Patent and trademark developments in this period are under-​explored, and one source yet to be fully tapped by legal researchers is registration data. In Australia, IP Government

14 

A Scardamaglia, Colonial Australian Trade Mark Law: Narratives in Lawmaking, People, Power and Place (Australian Scholarly Publishing 2015); see also A Scardamaglia, “The Colonial Trade Mark Regime: Parallel Rationales, Theories and Frameworks” (2011) 22 Kings LJ 259; A Scardamaglia, “A Legal History of Lithography” (2017) Griffith Law Review 1–​27. Catherine Bond’s 2017 book deals with the history of the potent ANZAC (Australia and New Zealand Army Corps) symbols: C Bond, Anzac: The Landing, The Legend, The Law (Australian Scholarly Publishing 2017), and Fady Aoun has completed a PhD thesis exploring Australia’s historical racist and sexist trademarks. 15  J Finn, “Particularism versus Uniformity: Factors Shaping the Development of Australasian Intellectual Property Law in the Nineteenth Century” (2000) 6 Australian Journal of Legal History 113. 16  Finn (n 15); C Wadlow, “The British Empire patent 1901–​1923: the ‘global’ patent that never was” [2006] Intellectual Property Quarterly 311. 17  G Magee, Knowledge Generation: Technological Change and Economic Growth in Colonial Australia (Australian Scholarly Publishing 2000); G Magee, “Technological Development and Foreign Patenting: Evidence from 19th-​Century Australia” (1999) 36 Explorations in Economic History 344. 18  D Greasley and L Oxley, “Knowledge, natural resource abundance and economic development: Lessons from New Zealand 1861–​1939” (2010) 47 Explorations in Economic History 443. 19  Eg, A Moyal, “Invention and Innovation in Australia: The Historian’s Lens” (1987) 5 Prometheus 92. 20  N Segal, “The Intervention That Wasn’t: A New Look at the McArthur-​Forrest Cyanide Patent Conflict in Western Australia” (2000) 18 Prometheus 175. 21 Atkinson (n 4). 22  See K Bowrey, “Book review: Benedict Atkinson, The True History of Copyright. The Australian Experience 1905-​2005” (2009) 14 Media and Arts L Rev 96. 23  B Fitzgerald and B Atkinson (eds), Copyright Future, Copyright Freedom: Marking the 40th Anniversary of the Commencement of Australia’s Copyright Act 1968 (University of Sydney Press 2011). The collection includes reflections from commentators who worked on the Spicer Copyright Committee (Leslie Zines) and Franki Committee considering photocopying (John Gilchrist).

Intellectual Property Law in Australia and New Zealand    295 Open Data (IPGOD) has over 100 years of IP Rights data including patents, trademarks, designs and plant breeders’ rights, the application and application process, hearings and oppositions, and even identifiers to link information to individual firm-​level business data.24 In more recent periods, history shades into contemporary commentary. In Australia, the cataclysm that was the Australia–​US Free Trade Agreement (AUSFTA)25 prompted work tracing local developments killed off or accelerated,26 as well as societal responses.27 New Zealand’s own recent landmarks—​the decision, for example, to institute a fully-​fledged notice-​and-​fine system for the pursuit of individual downloaders,28 and the Wai 262 claim in the Waitangi Tribunal addressing indigenous culture and knowledge claims, have also received detailed treatment.29 Like the literature that underlies it, this chapter almost entirely neglects that perennial poor cousin, the law of designs, although it would make an interesting study.30 Why did New Zealand have to re-​write parallel importation rules in copyright to allow the import of cars?31 Why, by comparison with Europe or the US, has Australia persisted with so crabbed a form of protection, where registration is indispensable, partial designs cannot be registered, and infringement is confined to certain product categories?32 Most of these stories remain underexplored, and will not be told here. Other areas, such as plant variety rights and geographical indications are also neglected, both because again less historical work has been done—​and for lack of space.

24 

Discussing IPGOD and its use: M Davison, “The innovation patent system: Lessons for Australia in the IP reform process” (2015) 26 Australian Intellectual Property Journal 64, 71–​73. 25  Australia–US Free Trade Agreement 2004 [2005] ATS 1. 26  K Weatherall, “Of copyright bureaucracies and incoherence: stepping back from Australia’s recent copyright reforms” (2007) 31 Melbourne University L Rev 967; M Rimmer, “Robbery under Arms: Copyright Law and the Australia-​United States Free Trade Agreement” (2006) 11 First Monday; C Bond, A Paramaguru, and G Greenleaf, “Advance Australia Fair? The Copyright Reform Process” (2007) 10 Journal of World Intellectual Property 284. 27  R Burrell and K Weatherall, “Exporting Controversy? Reactions to the copyright provisions of the US-​Australia Free Trade Agreement: Lessons for US Trade Policy” (2008) 2 University of Illinois Journal of Law, Technology and Policy 259. 28  Copyright (Infringing File Sharing) Amendment Act 2011 (NZ), discussed in R Giblin, “Evaluating Graduated Response” (2014) 37 Columbia Journal of Law and the Arts 147. 29  J Lai, Indigenous Cultural Heritage and Intellectual Property Rights: Learning from the New Zealand Experience? (Springer 2014); H Geismar, “Resisting settler-​colonial property relations? The Wai 262 claim and report in Aotearoa New Zealand” (2013) 3 Settler Colonial Studies 230. 30  One notable new piece on the antipodean history of designs is forthcoming work of Isabella Alexander on the copyright-​design overlap: The copyright/design interface in “Australia” in E Derclaye (ed), The Copyright/​Design Interface: Past, Present, and Future (CUP forthcoming). 31  L Longdin, “Parallel Importing Post TRIPS: Convergence and Divergence in Australia and New Zealand” (2011) 50 International and Comparative Law Quarterly 54. 32  Advisory Council on Intellectual Property (Australia), Review of the Designs System: Final Report (March 2015).

296   Kimberlee Weatherall

1.3 A Backgrounder on Political and Legal Institutions in the Antipodes The Antipodes33—​New Zealand, and what became Australia—​started as a set of British colonies established in the period from 1788 through the 1850s, although their foundation stories vary. The Australian continent was subject to involuntary colonization through (mostly) penal settlements, and regarded as a “settled” rather than conquered colony, based on the legal fiction that the land was terra nullius (unoccupied), denying any rights to the local indigenous peoples.34 This meant that the Australian colonies inherited the body of British common law at the time of their establishment. Colonists took the laws of England with them as their birth right.35 There were close trans-​Tasman governmental ties: New Zealand was briefly governed via the colony of New South Wales,36 and even after New Zealand acquired its own governing arrangements, it retained strong legal and trade links as well as ongoing connections via political and legal officials who shifted between them.37 But New Zealand does not have the same penal background, and included in its founding documents the Treaty of Waitangi (6 February 1840) with indigenous Māori people, which continues to have constitutional significance, and is an integral part of New Zealand law. It also has particular significance for IP, which is discussed later in this chapter.38 The Antipodean colonies acquired their first semi-​independent political institutions and some control over internal affairs from around the middle of the nineteenth century.39 Even after this, Britain exclusively governed the colonies’ external affairs and retained 33  According to the Oxford English Dictionary, the “Antipodes” is the opposite side of the earth. Here it is used, consistent with British colloquial use, to refer to Australia and New Zealand. 34  Discussed in P Parkinson, Tradition and Change in Australian Law (5th edn, Lawbook Co 2013) 129–​133. This legal fiction was finally excised from Australian law by the High Court in Mabo v Queensland (No 2) (1992) 175 CLR 1. 35  B Kercher, “Homer in the Australian Alps: Attitudes to Law Since 1788” (1995) 1 Australian Journal of Legal History 1, 6; W Blackstone, Commentaries on the Laws of England (15th edn) vol 1, 107, reprinted in W Morrison (ed), Blackstone’s Commentaries on the Laws of England (Cavendish 2001) vol 1, 78. The Australian Courts Act 9 Geo IV, c 83 (1828) (Imp) s 24 made clear that all British laws and statutes in force at that time should be applied so far as possible in New South Wales and Van Diemen’s Land (later Tasmania): Anne Twomey, The Australia Acts 1986 (Federation Press 2010) 7. British laws enacted after the date of reception applied to colonies if expressed to do so, or by necessary intendment: Twomey, Australia Acts. 36  P Spiller, J Finn, and R Boast, A New Zealand Legal History (2nd edn, Brookers 2011) 65. New Zealand was officially proclaimed a separate colony in May 1841: Farrar (n 1) 437. 37  Spiller, Finn, and Boast (n 36) 71–​72. The first ordinance passed by the New Zealand Legislative Council in 1841 adopted all applicable New South Wales law as the law of New Zealand: Spiller, Finn, and Boast 65. 38  M Palmer, The Treaty of Waitangi in New Zealand’s Law and Constitution (Victoria UP 2008); although there is a great deal more to the story of this treaty and New Zealand law than a simple founding document story. See R Boast, “Recognising Multi-​Textualism: Rethinking New Zealand’s Legal History” (2006) 37 Victoria University of Wellington L Rev 547. Note that New Zealand’s constitution, like that of the UK, is an unwritten one. 39  La Nauze (n 1) 1 (Australian colonies); New Zealand Constitution Act 1852 (Imp). The Colonial Laws Validity Act 1865 (Imp) 28 and 29 Vic, c 63 affirmed the operation of colonial legislation provided it was not repugnant to applicable imperial legislation.

Intellectual Property Law in Australia and New Zealand    297 considerable control over their internal affairs:  Local legislation passed by the colonial parliaments was required to receive royal assent, which was occasionally denied,40 although the British attitude appears to have favored allowing local variation.41 Australia as a political entity came into existence with federation effective 1 January 1901 (New Zealand declined to join). Even at this point laws could be invalid if repugnant to imperial legislation, and the Australian Constitution provided for certain federal acts to be reserved for royal assent. The Commonwealth, as a collection of free and equal sovereign entities constituted of Britain and her former colonies, was formally recognized in 1926.42 Shortly after, with the passage of the Statute of Westminster 1931 (Imp), Britain’s Parliament relinquished the power to override dominion legislation in Australia and New Zealand, although legislatures in both countries were remarkably slow to pass the legislation needed to adopt their new freedom:43 Evidence that many local elites, at least, still saw themselves as British. Judicial ties to Britain were also persistent. It was only in 1963 that the Australian High Court declared that it did not have to follow decisions of the House of Lords at the expense of Australian courts’ opinions,44 and only in 1978 did the Court decide it was not bound to follow decisions of the Privy Council.45 In Australia, the last judicial ties were cut with the passage of the Australia Acts 1986 (Cth and UK), which removed the possibility of appeal to the Privy Council; New Zealand shut this door only in 2003.46 British decisions, especially older ones, retain influence by being built into Antipodean precedents and are still extensively cited in court decisions, including in IP. The big picture thus is one of close and long-​standing post-​colonial links that persisted through gradually increasing independence. This picture is mirrored in IP. Legal historians have noted, however, that the picture “on the ground” is a complex one of pluralism, not unity, as law in the colonies oscillated between local variation and strict adherence to English law and practice. Similarly, in-​depth histories have noted the “extraordinary multiplicity” of colonial IP laws, and pointed out that the exercise of influence was not unidirectional: The periphery also influenced legal developments in the center.47 It is to these IP developments that we now turn. 40 

Kercher (n 35) 6; Twomey (n 35). Bently (n 5), citing D Swinfen, Imperial Control of Colonial Legislation, 1813–​1865: A Study of British Policy towards Colonial Legislative Powers (Clarendon Press 1970) 76; Spiller, Finn and Boast (n 36) 64–​65. 42  Wadlow (n 16). 43  The Australian Commonwealth Parliament adopted this statute via the Statute of Westminster Adoption Act 1942 (Cth); see generally Parkinson (n 34). New Zealand adopted the Statute of Westminster in 1947: Statute of Westminster Adoption Act 1947 (NZ). On the position of the Australian States, see Twomey (n 35). 44  Parker v R (1963) 111 CLR 610. The Privy Council acknowledged soon after that un-​enacted law in Australia should be described as the Australian Common Law: Australian Consolidated Press v Uren (1967) 117 CLR 221. 45  Viro v R (1978) 141 CLR 88. 46  Supreme Court Act 2003 (NZ), although transitional arrangements prolonged the link: the last Privy Council appeal from New Zealand was decided in 2015: Pora v The Queen [2015] UKPC 9; [2016] 1 Cr App 3. 47  In copyright, see R Burrell, “Copyright Reform in the Early Twentieth Century: The View from Australia” (2006) 27 The Journal of Legal History 239 (noting the influence of Australia’s Copyright Act 1905 on the development of Britain’s Copyright Act 1911); in trademark see Scardamaglia (n 14) (noting that some Australian colonies created trademark registers in advance of Britain and that their smooth operation may have eased the way for similar developments “at home”). 41 

298   Kimberlee Weatherall

2.  The Nineteenth Century What is striking about the development of intellectual property law in the Australasian colonies is the degree to which it reflected the tension between centripetal and centrifugal forces, between suggestions of a common body of law for the whole empire and the particularist tendencies of the colonies.48

The Antipodean colonies acquired local lawmaking power during a key epoch in the development of what we now call IP law. The 1850s, when the colonies’ proto-​parliaments were forming, fell bang in the middle of the evolution from pre-​modern IP laws to their modern form.49 In Europe, a debate was raging over whether patent systems should be abolished altogether.50 Scholarly work on colonial IP systems suggests that, while some of the drama of the European and British debates over IP may have passed the far-​distant colonies by,51 the developing and unformed state of UK laws empowered new colonial legislators to experiment both with core IP rights and with distinct and sui generis rights related to copyright, like telegraphic copyright52 and tailored rights in photography, including specific rights in photographs of scenery in New Zealand.53 Britain’s pre-​1852 patent laws carried equal force in the colonies: British patent owners could, for a fee, extend their patent protection to all British colonial possessions. Once colonial parliaments acquired the ability to pass local legislation, one way this power was exercised was to issue patents enforceable within the colony by private act of parliament; a power first exercised in 1848 in South Australia for an improved windlass.54 But serious colonial action followed the Patent Law Amendment Act 1852, which explicitly excluded the colonies—​putting the onus on them to consider whether, and how, to protect inventions locally. Their response was rapid: Patent laws were adopted across the colonies,55 including New Zealand,56 and subsequently updated to create local patent offices, mirroring the increasing formalization of patent systems in the UK.57 Despite agreement at inter-​colonial conferences that uniformity and even mutual recognition were desirable,58 these patent laws 48

  Finn (n 15).   B Sherman and L Bently, The Making of Modern Intellectual Property Law: The British Experience 1760–​1911 (CUP 1999). 50   F Machlup and E Penrose, “The Patent Controversy in the Nineteenth Century” (1950) 10 The Journal of Economic History 1. 51   See, eg, Magee (n 17) (asserting that “in the Australian colonies, the debate over the costs and benefits of patents did not manifest itself with the same intensity or bitterness as it did in Europe”). Magee is an economic historian and in the absence of an in-​depth legal history it is possible there was more controversy than Magee acknowledges. 52   L Bently, “Copyright and the Victorian Internet: Telegraphic Property Laws in Colonial Australia” (2004) 38 Loyola of Los Angeles L Rev 71. 53   Photographic Copyright Act 1896 (NZ), cited in G McLay, “New Zealand and the Imperial Copyright Tradition” in U Suthersanen and Y Gendreau (eds), A Shifting Empire: 100 Years of the Copyright Act 1911 (Edward Elgar 2013) 30. 54  Scardamaglia (n 14) 278; see also Finn (n 15) 119. 55  For details see Finn (n 15). 56  Patents Act 1860 (24 Victoriae 1860 No 14) (New Zealand). 57  Magee (n 17) (noting for example that the Victorian patents legislation was amended in 1865, 1872, 1884, 1889, and 1890). 58  Finn (n 15). 49

Intellectual Property Law in Australia and New Zealand    299 also varied from jurisdiction to jurisdiction,59 and separate patent registers in each colony significantly limited the protection available. Nevertheless, the colonial patent laws were used with some enthusiasm.60 As for trademarks, as Bently has noted that at the midpoint of the nineteenth century there was no [coherent] law of trade marks . . . there was no consensus as to what a trade mark was, nor of what a “law of trade marks” would look like. In fact, we can probably say that, as of 1850, it made no sense to talk of “a law of trade marks” in the UK.61

The first British trademark act was the Merchandise Marks Act 1862, but despite the urging of some interests, it did not include a registration system: In the UK, trademark registration was only created in 1875.62 The Imperial government suggested in 1863 that the colonies introduce unified legislation following the UK model. Local interests, however, pushed further: The various colonies drafted their own acts. Some followed the British approach, but others, including New Zealand,63 introduced trademark registration.64 Scardamaglia, in a detailed Australian history, notes the striking variety in these laws, and argues that local pragmatic interests, the rise of consumerism, real concerns about parasitic trading practices, and the emergence of modern marketing techniques in the colonies were all as important to development of local trademark law as any commitments of legal philosophy or imperial pressure.65 Few of the mess of British copyright-​related acts as of the 1850s or shortly thereafter had any direct application in the colonies. The Literary Copyright Act, however, promoted the interests of the British publishing industry at the colonies’ expense, because it extended British copyright to any part of the British Dominions—​copyright in a book or music first printed in Britain could be infringed by the making of reproductions anywhere in the British Empire.66 It may have been underappreciated in the colonies, but became clear with the 1868 House of Lords decision in Routledge v Low, that reciprocal protection was not extended in Britain or the Empire to works first published in the colonies.67 Much scholarly attention has been directed at this peculiar injustice and its impact;68 Burrell, for example, asserts that resulting resentment may have reverberated through a number of inter-​and intra-​ colonial IP debates.69 The lack of reciprocity was not addressed until 18 years later via the International Copyright Act 1886 (UK) (and even then, only for books and music). 59   Bently (n 5); Finn (n 15); Wadlow (n 16) 315. South Australia, for example, had provisions for forfeiture of patents not worked within three years. 60   Bently (n 5); Finn (n 15); see also statistics in Wadlow (n 16) 317 and, regarding New Zealand patenting, Greasley and Oxley (n 18). 61   L Bently, “The Making of Modern Trade Marks Law: The Construction of the Legal Concept of Trade Mark (1860–​80)” in L Bently, J Davis, and J Ginsburg (eds), Trade Marks and Brands: An Interdisciplinary Critique (CUP 2008) 3. Some protection for unregistered marks existed in the common law (Perry v Truefitt (1842) 49 ER 749) and equity (Millington v Fox (1838) 40 ER 956); the law of passing off was inherited by the colonies. 62   Trade Marks Registration Act 1875 (UK). 63  Trade Marks Act 1866 (30 Victoriae 1866 No 9) (New Zealand). 64  Scardamaglia (n 14) 260. 65  Scardamaglia (n 14). 66  Bently (n 5) 172–​173. 67  Routledge v Low (1868) LR 3 HL 100. For evidence of colonial misunderstandings see Bond (n 9). 68  Eg, Bond (n 9); Ailwood and Sainsbury (n 9); Bently (n 5); I Alexander, Copyright and the Public Interest in the Nineteenth Century (Hart Publishing 2010). 69  Burrell (n 47) 244–​245.

300   Kimberlee Weatherall New Zealand provided local copyright protection significantly in advance of any of the Australian colonies: A copyright law was the 18th piece of legislation enacted by New Zealand’s legislative assembly in 1842, apparently motivated by a very local aim: the desire to protect an original and critical grammar of the New Zealand language being prepared by a Reverend Mr Maunsell.70 Following Routledge v Low, (some) Australian colonial parliaments acted. As Bowrey notes: Whilst Victoria, which saw itself as the cultural leader of the Australian colonies, enacted a law very soon after the UK, other Australian colonies were very slow to act. Two colonies, NSW and South Australia, did nothing for over an entire decade, WA and Queensland waited for close to two decades and Tasmania chose not to enact a copyright law at all.71

Notably, the Victorian and New South Wales legislation was accompanied by lively debates, and British law was not simply transplanted;72 in particular, artistic copyright in these colonies, for example, was consciously more restricted.73 The Australian colonies may have had a relatively small number of local creators, but another reason for the laggardly timetable may have been that those creators had other means of protecting their interests. Some relied on “gentleman’s agreements;” others pursued economic and legal interests (and cultural affirmation) through first publication in London.74 And, as noted previously, distinctly local concerns prompted experimentation with sui generis laws aimed at the protection of investment in telegraphic news delivery, and photographs of scenery. It is also worth noting that despite limited legal protection, by the time of federation in Australia, 20 copyright infringement cases had been reported.75 In sum, at the start of the twentieth century, the Antipodean picture is one of pre-​ modern variety, with early colonial legislation modeled on British law but exhibiting an “extraordinary multiplicity.” Finn argues that colonial legislators were aware of the benefits of uniform IP law, but made a deliberate choice to insist on local legislative regimes because they were not prepared to put colonial interests at hazard in a unified imperial system likely to be dominated by British industry.76 Historical work also suggests an active debate about IP laws and experimentation, as well as a degree of selectivity. Colonial legislatures moved quite rapidly to promote local industrial innovation via patents, but approached the ­cultural sphere in a more leisurely manner, which perhaps reflected a belief that, while innovation might be necessarily local, culture came from, or was affirmed by publication in, the center.77

70   Copyright Ordnance 1842 (NZ) (5 Vict c 18); see McLay (n 53). New Zealand law at this point followed the British pattern of separately addressing subject matters; the Ordnance was followed by the Fine Arts Copyright Act 1877 (NZ), the Photographic Copyright Act 1896 (NZ) and later the Dramatic Copyright Act 1903 (NZ). 71   Bowrey (n 10) 32; Merilyn Merril, A Nation’s Imagination. Australia’s Copyright Records 1854–​1968 (Commonwealth of Australia 2003) 25. See Copyright Act 41 and 42 Vic No 95 (1878, SA); 42 Vic No 20 (1879 NSW); 51 Vic No 2 (1887 Qld); 59 Vic No 24 (1895, WA). The Victorian act is discussed in Bond (n 9). 72  See sources cited in ns 9 and 10.    73  Bond (n 9), 389; Bowrey (n 10). 74  See the work of Bond and Bowrey (ns 9 and 10). 75  Bond (n 9) 375. 76  Finn (n 15) 114. 77  Bond (n 9) 385–​386; Bowrey (n 10).

Intellectual Property Law in Australia and New Zealand    301

3.  The Twentieth Century 3.1 The Turn of the Century: Federation for Australia and an Imperial Push for Uniformity The turn of the twentieth century and its first decade represent “arguably the most important period in the development of copyright law throughout the former British empire.”78 For Australia, this period coincided with federation, which saw the power to make IP laws shift to the central government.79 The newly-​formed Australian Parliament exercised its new powers via a series of laws passed in quick succession: the Patents Act 1903, the Trade Marks Act 1905, the Copyright Act 1905, and the Designs Act 1906.80 At an imperial level, there was a decided attitudinal shift in favor of uniformity: Variation in IP laws was increasingly seen as an anomaly.81 This was, no doubt, influenced by the conclusion of the Berne and Paris Conventions,82 which may only have achieved limited harmonization in text, but furthered a discussion that enabled even more ambitious developments among a set of countries with a common legal inheritance. Nevertheless, even in this period, while pressure for uniformity with the UK and the Empire more generally put something of a dampener on the legislative creativity of the Australian and New Zealand dominions, Finn’s centrifugal forces persisted. The push for harmonization was particularly strong in copyright, where it coincided with pressure within the UK to clean up its messy multitude of acts (an issue mirrored in New Zealand83) and respond to the Berne Convention and its 1908 Berlin revision. The imperial government was keen to ensure that the process resulted in copyright legislation acceptable to the self-​governing dominions:84 IP laws were discussed at a number of Colonial Conferences which started in 1887 and continued through the first decade of the twentieth century.85 Moves to adopt uniform copyright legislation throughout the Empire were (at least in the final stages of debate) enthusiastically supported by Australia,86 which saw itself as leading the way with its distinctly modern, “succinct and elegant codification”87 in the form of the Copyright Act 1905. Some commentators have lamented the rapid passing of the 1905 Act, although others also note that it left key issues unresolved, including the treatment of films. Reform was needed, and the Imperial push for harmonization prevailed. A uniform law was passed in the Copyright Act 1911 (UK), which was

78 

Burrell (n 47) 239. Commonwealth of Australia Constitution act 1900 (Imp), s 51(xviii). 80  See Burrell (n 47) 246–​247 (discussing reasons for the rapidity of this burst of legislation). 81  Bently (n 5) 188. 82  Berne Convention for the Protection of Literary and Artistic Works 1886 and Paris Convention for the Protection of Industrial Property 1883, discussed Bently (n 5), 192. 83  See (n 70).    84  Burrell (n 47).   85 Bently (n 5) 188.    86  Burrell (n 47) 248–​249. 87  S Ricketson, “The Future of Australian Intellectual Property Law Reform and Administration” (1992) 3 Australian Intellectual Property Journal 3, 10. Burrell describes it as “progressive”: Burrell (n 47), 250. For Canada on the other hand, harmonization was controversial, because it would limit cheap imports from the US: Seville (n 6, n 10). 79 

302   Kimberlee Weatherall reproduced in both Australia—​literally, as a schedule to the Copyright Act 1912—​and in 1913 by New Zealand.88 In the case of industrial property, Australia’s new legislation was modeled very closely on UK legislation: The federal Patents Act 1903 was based on the Patents Designs and Trade Marks Act 1883 (UK) and amended in 1909 following UK amendments in 1907. The Trade Marks Act 1905 (Cth) was based closely on a bill then before the UK Parliament. But the Australian act added its own distinctive twist in the form of “workers’ marks”—​ marks that could be registered and used to indicate that goods were made by “an individual Australian worker or association of Australian workers.”89 Passed after rancorous parliamentary debate, workers’ marks existed for only two years before being held invalid by the young High Court on the basis that they did not fall within a Commonwealth power relating to trademarks,90 as that term was understood.91 This narrow reading of the Constitutional power was to reverberate through most of the twentieth century, and caused reform committees to hesitate over other innovations like performers’ rights and plant breeders’ rights. Efforts to promote empire-​wide unity in patent and trademark were not successful. Wadlow’s work suggests that, in patent law, the ambition failed in part because it was so much greater: The push in the first two decades of the twentieth century was for a full imperial patent—​one that would be examined and granted once, but would then be enforceable throughout the British empire.92 This proposal foundered amid fears that it would favor strong British industries at the expense of local industry; reluctance on the part of local lawmakers to give up their local patent office and control over an area of economic and industrial policy; and political difficulties (some unrelated to patents) in the UK’s relationship with Canada.93 An interrelated reason is suggested by the work of Naomi Segal and others on the international battle over the cyanide patent, which pitted a British patent owner against powerful Australian mining interests.94 This dispute may have served to emphasize to local lawmakers the close links between patents and local industrial development, and made them less willing to hazard their interests in a single or even harmonized imperial system.95

88   See Bently (n 5) 192–​195 (noting reasons it was possible to harmonize copyright). The 1912 Australian Act is notable for retaining certain distinctive Australian elements: summary offences for copyright infringement beyond the provisions of the British Act, rules regarding parallel importation and optional copyright registration. 89   Trade Marks Act 1905 (Cth) s 74. 90   Attorney-​General for NSW v Brewery Employees’ Union of NSW (1908) 6 CLR 469; discussed in detail in S Ricketson, “The Union Label case: an early Australian IP story” in A Kenyon, M Richardson, and S Ricketson (eds) Landmarks in Australian Intellectual Property Law (CUP 2009) 15. 91  Note also D Plowman and G Smith, “Moulding Federal Arbitration: The Employers and the High Court 1903–​1935” (1986) 11 Australian Journal of Management 203, 211 on the industrial relations context of the decision. 92  Wadlow (n 16). As an aside, it is interesting to note internal disagreements within New Zealand over the plan for an Empire-​wide patent: Wadlow (n 16), 322. 93  Wadlow (n 16), especially 324–​325. 94  Segal (n 20). 95  See also Bently (n 5) 196.

Intellectual Property Law in Australia and New Zealand    303

3.2 Mid-​Century Stability The burst of harmonizing and modernizing activity in the late nineteenth and early twentieth centuries gave way to a long period of relative (legislative) stability in IP in Australia and New Zealand, during which both have been characterized as slavishly following British developments.96 Through much of the twentieth century, a consistent pattern of lawmaking saw Britain review developments, produce a report, and enact reforms, whereupon committees in New Zealand and Australia would be tasked with working out, in essence, whether the UK approach should be followed. In general, the relevant Antipodean committee decided this question (mostly) in the affirmative (even where critical of UK legislation).97 Legislation followed,98 which was modeled on British Acts, with varying degrees of departure.99 This pattern is consistent with Kercher’s thesis regarding the development of Australian law,100 in that it began creatively enough, became an abject copier of the English, and only in the 1980s and 1990s started to become more creative again. Yet while harmonization can risk subsuming distinct local interests, risks also inhere in “intellectual isolation”: Review committees noted the benefit for smaller jurisdictions in being able to use decisions in larger jurisdictions to inform jurisprudential development. And if a much larger jurisdiction with a shared legal history has already expended great effort to reform the law, why reinvent the wheel? Thus, in 1952 Australia acquired a new Patents Act,101 which was modeled on the 1949 UK Act. The new Act was a major revision of patent law that made patents more challengeable by introducing legal requirements for disclosure in the specification (best method; fair basing), as well as a threshold of inventiveness. New Zealand also enacted new law via the Patents Act 1953 (NZ). The Trade Marks Act 1938 (UK) was followed by the Trade Marks Act 1953 (NZ) and the Trade Marks Act 1955 (Cth). In copyright, New Zealand once again acted in advance of Australia with its Copyright Act 1962 (NZ), which was based closely on the UK’s Copyright Act 1956, and distinguished clearly for the first time between copyright and neighboring rights. Australia experienced long-​running battles around the performance right and the apparently monopolistic control of the Australasian Performing Right Association (APRA),102 and over the relationship between copyright and neighboring rights 96 

See eg, Ricketson (n 87) 10; McLay (n 70). For example, New Zealand’s Dalglish Report on copyright in 1959 was highly critical of the long term of copyright: McLay (n 70) 42, 47. Ricketson comments that New Zealand committees considering IP law reform showed greater consciousness of New Zealand’s differential position as a net importer of IP, compared to Australian committees more concerned with “getting the law (ie the technicalities) right”: Ricketson (n 87) 17. 98  Albeit sometimes at “an embarrassing interlude”: G Sawyer, “Australia—​Embarrassing Interlude” (1964) 11 Bulletin of the Copyright Society of the USA 313. 99  There was variation between committees. Ricketson asserts that the Knowles committee report on patent was focused on uniformity with UK law, but the Knowles and Dean Committees that reviewed trademark law had broader horizons, considering Canadian and American developments and making several important departures from UK law: Ricketson (n 87) 13–​14. 100 Kercher (n 2). 101  Patents Act 1952 (Cth), repealing the Patents Act 1903 with effect from 1 May 1954. 102  S Ricketson, “The Imperial Copyright Act 1911 in Australia” in U Suthersanen and Y Gendreau (eds), A Shifting Empire: 100 Years of the Copyright Act 1911 (Edward Elgar 2013) 52, 78–​80; Atkinson (n 4). 97 

304   Kimberlee Weatherall and the broadcasting of sound recordings.103 Australia finally rewrote copyright law via an entirely new 1968 Act, which was also based on the UK’s 1956 Act, with a similar bifurcated approach to subject matter. The intertwining of IP law between Australia, New Zealand, and the UK was also promulgated through the courts. Australian courts throughout this period heavily relied on UK precedent right across IP law, although the influence was not entirely unidirectional. The High Court decision in National Research Development Corporation v Commission of Patents104 (“NRDC”), for example, which loosened restrictions on the subject matter appropriate for patent protection, has been described as a landmark (even a “Copernican-​like moment”105) not only for Australian law, but for New Zealand law also—​and appeared to influence English decisions.106

3.3 Divergence in the Later Twentieth Century If the mid-​twentieth century was marked by close parallels in the development of IP law, from the 1970s New Zealand, Australia, and the UK moved apart with increasing rapidity. The economies of New Zealand and Australia were maturing, and local interests, stakeholders, and issues were increasingly drawing attention and responsive reform. The courts, too, were asserting independence.107 For its part, the UK was being drawn into Europe and the pursuit of a common market and, as part of that project, harmonization of commercial law.108 This left the Antipodes with choices: Whether to follow, look elsewhere for inspiration, or stick to their jurisprudential roots. The first area to feel strongly the effects of this distancing was patent law. The Patents Act 1977 (UK) brought British law into line with the European Patent Convention,109 which led to significant changes to subject matter, innovation thresholds, and specification requirements. In response, in 1980 Australia convened a review committee which was directed to consider

103 

Atkinson (n 4). For a personal perspective see A Sterling, “The Copyright Act 1968: Its Passing and Achievements” in B Fitzgerald and B Atkinson (eds), Copyright Future, Copyright Freedom: Marking the 40th Anniversary of the Commencement of Australia’s Copyright Act 1968 (University of Sydney Press 2011) 51. Australia has distinct interests in broadcast policy owing to its large geographic expanse and remote populations: K Weatherall, “Culture clash: the Australian Law Reform Commission’s discussion of retransmission and the world of broadcast” (2014) 24 Australian Intellectual Property Journal 202. It is not surprising therefore that this is one area where Australia and New Zealand both insisted in Berne Convention revision conferences on the qualification of broadcasting rights: S Ricketson, “Australia and International Copyright Protection” in M P Ellinghaus, A J Bradbrook, and A J Duggan (eds), The Emergence of Australian Law (Butterworths 1989) 161. 104  National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252. 105  S Hubicki and B Sherman, “We have never been modern: the High Court’s decision in National Research Development Corporation v Commissioner of Patents” in A Kenyon, M Richardson, and S Ricketson (eds), Landmarks in Australian Intellectual Property Law (CUP 2009) 73. 106  The case was cited and relied on in Swift & Co v Patents Commissioner [1960] NZLR 775 and The Wellcome Foundation Limited (Hitching’s) Application [1980] RPC 305 (Supreme Court of NZ); it was also cited with approval in Schering AG’s Application [1971] RPC 337 (UK). 107 Section 1.3. 108  L Bently and B Sherman, Intellectual Property Law (4th edn, OUP 2014) 11, 17. 109  Convention on the Grant of European Patents 1973, 13 ILM 276.

Intellectual Property Law in Australia and New Zealand    305 the Australian national interest in patents, and included a professor of economics (Professor Lamberton) to better assess the interaction with Australian economic policy. The Final Report in 1984 contained a thoughtful questioning of the contribution of patents to the national economic interest, but (with Lamberton dissenting) refrained from proposing radical change. This approach was based not so much on the system’s current benefits, but rather on the potential international costs of withdrawal, as well as the future hope of supporting local innovation.110 It led to the Australian Patents Act 1990 (Cth), which notably did not follow the UK’s 1977 act. The 1990 Act retained Australia’s open-​ended approach to patentable subject matter, but made other changes, including allowing the Patent Office to take account, for the first time, of documents published overseas and acts within Australia in assessing inventiveness. The 1990 Act heralded a period of increasing rates of legislative activity. The Patents Act 1990 (Cth) has been amended 25 times since enactment—​including to implement the Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS), but also 20 times since TRIPS came into effect in 1995.111 In New Zealand, the Patents Act 1953 was not finally repealed until the Patents Act 2013 (NZ), which followed an extended reform process that started in 2002.112 The 2013 Act includes a number of distinct New Zealand features which differ from Australian patent law, including an interesting purposes clause (s 3), and provisions excluding patents for computer programs as such (s 11) and methods of medical treatment (s 16). Legislative divergence generated judicial divergence and a distinct “cooling of relations” in patent jurisprudence between Australia and the UK.113 Australian courts spent the 1980s through the first decade of the twenty-​first century rejecting the relevance of English cases decided under the 1977 Act.114 Over this period, too, Australian courts sometimes looked to US courts for guidance, as the older-​style US legislation was seen as closer to the Australian legislation.115 Importantly, too, courts in Australia and New Zealand struck quite different tones. Commentators have noted the different “styles” of the courts, for example, the textualist approach of the Australian High Court116 compared to the New Zealand courts’ openness to a wider range of considerations.117 In patentable subject matter, until the Myriad gene 110 

Professor Lamberton’s dissenting report lamented the missed opportunity seriously to apply economic thinking to the patent system: Industrial Property Advisory Committee (Australia), Patents, Innovation and Competition in Australia (Commonwealth of Australia 1984) 79–​80. 111  Apotex Pty Ltd v Sanofi-​Aventis Australia Pty Ltd (2013) 253 CLR 284 [280] (Crennan and Kiefel JJ) (citing 24 amendments, but predating the 2015 implementation of the TRIPS Protocol: Intellectual Property Laws Amendment Act 2015 (Cth)). 112  S Frankel, Intellectual Property Law in New Zealand (LexisNexis NZ 2nd edn 2011). 113  S Burley, “Is Lockwood v Doric No 1 dead or does it just look that way? A review of the new requirements for textual disclosure under the Australian Patents Act” (2014) 99 Intellectual Property Forum 36, 36, citing a somewhat acerbic exchange between the High Court in Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2004) 217 CLR 274 and Generics (UK) Ltd v H Lundbeck A/​S [2009] RPC 13 [2007] HL 12. 114  The High Court has castigated lower courts for relying on post-​1977 UK cases: see, eg, Aktiebolaget Hassle v Alphapharm Pty Ltd (2002) 212 CLR 411 [42]–​[48]; but note Kirby J’s dissent at [107]–​[109]. 115  Eg, ibid [76]; see also Welcome Real-​Time SA v Catuity Inc [2001] FCA 445; (2001) 113 FCR 110, relying on State Street Bank & Trust Co v Signature Financial Group Inc 149 F 3d 1368 (1998). Aktiebolaget Hassle v Alphapharm Pty Ltd (2002) 212 CLR 411 [76]. 116  Burley (n 113). 117  S Frankel, “Lord Cooke and Patents: The Scope of ‘Invention’ ” (2008) 39 Victoria University of Wellington L Rev 73; Farrar (n 1). But New Zealand courts have also noted the desirability of New

306   Kimberlee Weatherall patent decision in 2015118 and some interesting court decisions rejecting the patentability of certain computer-​implemented business methods in 2014–​2015,119 Australian courts generally eschewed limits on patentable subject matter, and left questions of exclusion to the Legislature.120 On the other hand, New Zealand courts have on occasion taken the opposite approach, and suggested that Parliament, rather than the courts, should be the body to extend patents to newer subject matter (it is striking, then, that the New Zealand legislature has in fact excluded a greater range of subject matter in the 2013 Act).121 This has led to divergent results. For example, methods of medical treatment are readily patentable in Australia, but not New Zealand.122 New Zealand courts have also warned against too great a departure from international jurisprudence—​a statement the likes of which has rarely been seen in Australian judgments.123 In trademark law, too, the very different European system, which significantly redirected UK law from the mid-​90s,124 presented a choice to the former colonies, who took different paths: Trademark legislation today in the Antipodes therefore “differ[s]‌completely in language, structure and style.”125Australia’s Trade Marks Act 1995, like the Patents Act 1990, stuck conservatively to its historical and legal roots and only made incremental changes. Australia widened the range of signs that could be registered as a trademark, but declined to follow Europe (or the US) in recognizing broader rights against dilution. New Zealand’s trademark legislation, on the other hand, is much closer to UK (and European) law,126 including, for example, infringement in cases where use of a sign “takes unfair advantage of, or is detrimental to, the distinctive character or repute of the mark.”127 But New Zealand courts are not bound by the European cases, and they have interpreted the provisions Zealand law and practice being consistent with Australia: eg, Dominion Rent A Car Ltd v Budget Rent-​A-​ Car Systems [1987] 2 NZLR 395 (CA); Douglas Pharmaceuticals Ltd v Ciba-​Geigy AG [1990] 2 NZLR 46 (CA); Wineworths Group Ltd v Comite Interprofessionel Du Vin De Champagne [1992] 2 NZLR 327 (CA). 118 

D’Arcy v Myriad Genetics Inc (2015) 325 ALR 100; [2015] HCA 35. Research Affiliates LLC v Commissioner of Patents (2014) 227 FCR 378; [2014] FCAFC 150; Commissioner of Patents v RPL Central Pty Ltd (2015) 238 FCR 27; [2015] FCAFC 177. 120  National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252. 121  Wellcome Foundation Ltd v Commissioner of Patents [1983] NZLR 385. 122  Apotex Pty Ltd v Sanofi-​Aventis Australia Pty Ltd (2013) 253 CLR 284; cf Pfizer Inc v Commissioner of Patents [2005] 1 NZLR 362. 123  Smith Kline & French Laboratories Ltd v Attorney-​General [1991] NZLR 560, 563; Pharmaceutical Management Agency Ltd v Commissioner of Patents [2000] 2 NZLR 529, 533. But in D’Arcy v Myriad Genetics Inc (2015) 325 ALR 100; [2015] HCA 35 [28] the High Court cited foreign patent laws as relevant (but still not of primary importance) in determining patentability of new subject matter. Note also Patents Act 2013 (NZ) s 3, stating that one purpose of the Act is to “ensure that New Zealand’s patent legislation takes account of developments in the patent systems of other countries.” 124  Trade Marks Act 1994 (UK). 125  N Taefi, “Beyond harmonisation: the case for a trans-​Tasman trade mark regime” (2011) 86 Intellectual Property Forum 11. 126  See generally A Firth, “Reception of EU Trade Mark Law in New Zealand” in A Björkdahl et al (eds), Importing EU Norms: Conceptual Framework and Empirical Findings (Springer International Publishing 2015) 169. 127  Trade Marks Act 2002 (NZ) s 89(1)(d). The concept of “taking unfair advantage” comes from Europe and is the basis for the controversial CJEU decision in Case C-​487/​07 L’Oreal SA v Bellure NV [2009] ECR I-​5185 which prohibits third parties from “free-​riding” on the repute of famous marks. Firth (n 126) notes that following EU legislative models has not led to adoption of European approaches. 119 

Intellectual Property Law in Australia and New Zealand    307 differently. In 2014, for example, New Zealand jurisprudence consciously referred to Australian cases rather than following EU jurisprudence on questions of trademark use and the scope of trademark owners’ exclusive rights.128 One early point of divergence in copyright was moral rights. Moral rights had been seen as foreign to common law systems, and potentially raised constitutional issues for Australia129 when originally proposed for inclusion in the Berne Convention in 1928. Australia’s Sir William Harrison Moore was instrumental in developing the art 6bis compromise text,130 which enabled common law countries to ratify the new Act on the basis that equivalent protection was provided through a range of non-​copyright laws. In 1977, however, the UK’s Whitford Committee concluded that UK law did not sufficiently protect authors’ moral rights,131 which led the UK in 1988 to introduce a limited suite of rights (waivable rights of attribution and integrity, and a right to privacy in certain photographs and films). New Zealand followed this model in 1994.132 But the Australian Copyright Law Review Committee in 1988 recommended by a slim majority against moral rights, asserting that they were foreign to the common law, and could negatively impact established industries.133 This position was strongly criticized,134 and soon the minority view prevailed. Moral rights of integrity, attribution, and against false attribution were introduced in 2000, after a contentious debate over contractual waiver, which was eventually settled by industry compromise. The complex provisions allow specific consent to otherwise-​infringing acts, and broader consents for employees and films.135 From the 1980s, legislative changes to copyright and the assertion of distinct interests increasingly drove UK and Antipodean copyright laws apart.136 The rise of photocopying led Australia to enact elaborate, bureaucratic statutory licenses for educational and government use; New Zealand (like the UK) retained a voluntary system with collective licensing and tribunal oversight.137 In 1998, New Zealand acted boldly to remove parallel importation restrictions in copyright.138 With the mainstreaming of digital technology, 128  See eg, Intercity Group (NZ) Ltd v Nakedbus NZ Ltd [2014] 3 NZLR 177, holding that (invisible) use of trademarks in advertising keywords is not infringing use; mentioned with approval in Tasman Insulation New Zealand Limited v Knauf Insulation Limited [2015] NZCA 602 (2015) 116 IPR 352. 129  As a result of the Union Label case, discussed in Section 3.1.    130  Banks Part 2 (n 12). 131  Copyright and Designs Law, Report to the Secretary of State for Trade, March 1977, Cmnd 6732. 132  The Copyright Act 1994 (NZ) was substantially based on the UK’s Copyright Designs and Patents Act 1988 (UK). 133  Copyright Law Review Committee, Report on Moral Rights (Australian Government Publishing Service 1988). 134  S Ricketson, “Is Australia in breach of its international obligations with respect to the protection of moral rights?” (1989) 17 Melbourne University L Rev 462; David Vaver, “Authors’ Moral Rights and the Report of the Copyright Law Review Committee: W(h)ither Such Rights Now?” (1988) 14 Monash University L Rev 285. 135  Banks Part 2 (n 12). Among other exceptions, the rights of attribution and integrity are qualified by a broad flexible exception to allow “reasonable” actions: Copyright Act 1968 (Cth) ss 195AR, 195AS, 195AXD, 195AXE. 136  The 1968 Australian Act has been amended at least 22 times at the date of writing. 137  Copyright Act 1968 (Cth) Part VA, VB, VC, pt VII Div 2. In New Zealand, educational use is covered by limited free exceptions and voluntary collective licensing with Copyright Tribunal oversight: Copyright Act 1994 (NZ) ss 44–​49; pt 8. 138  Copyright (Removal of Prohibition on Parallel Importing) Amendment Act 1998 (NZ). Australia’s response was much more piecemeal: Longdin (n 31).

308   Kimberlee Weatherall Australia moved early with the Copyright Amendment (Digital Agenda) Act 2000 (Cth), that enacted broad technology-​neutral rights to communicate works to the public in 2001, coupled with anti-​circumvention laws notably narrower than those introduced in the EU or US.139 It is perhaps appropriate that the twentieth century closed with the Digital Agenda Act—​ an assertive, creative piece of legislation that promulgated a model unique in the world and notably narrower (in anti-​circumvention law) than either the US or EU. But it was short-​ lived: From 2004, the impact of trade policy really kicked in. As Antony Taubman and I have each argued, for this small, Anglophone, culture-​importing country, copyright has been a pawn in a bigger trade game, rather than a distinct area of legal and policy development.140 Australian digital copyright and IP enforcement rules were substantially rewritten in the image of US law as a result of AUSFTA.141 Further copyright amendments followed in 2006 that implemented US-​style anti-​circumvention law and created new copyright exceptions, including to allow personal copying, and fair dealing for the purposes of parody or satire.142 The latter rules were designed to mirror certain US fair uses, but enacted in the specific, complex Australian style. The overall effect was to broaden and strengthen copyright protection, but questions of online enforcement continued to dog Australian debates. The government hoped for industry solutions, but rights holder frustration led to unsuccessful litigation in an attempt to force Internet service providers (ISPs) to take action against infringing customers.143 In 2015, the rights holders convinced the government to follow court decisions in the UK by introducing legislation that allowed courts to order ISPs to block access to flagrantly infringing sites.144 New Zealand was not an early signatory to any prescriptive trade agreement, and so remained free to experiment, and struck her own course. Her unique anti-​circumvention laws (introduced with other digital reforms in 2008) lie somewhere between the original 139 

Australia tied the definition of protected technology to devices aimed at preventing or inhibiting infringement, proscribed only the distribution of circumvention devices, not their use, and allowed for the supply of circumvention devices and services to a category of trusted “qualified persons”: Copyright Amendment (Digital Agenda) Act 2000 (Cth). These rules were re-​written in the image of US law as a result of AUSFTA (n 25): Weatherall (n 26). 140  A Taubman, “Australia’s Interests under TRIPS Dispute Settlement: Trade Negotiations by Other Means, Multilateral Defence of Domestic Policy Choice, or Safeguarding Market Access” (2008) 9 Melbourne Journal of International Law 217; K Weatherall, “The Australia–US Free Trade Agreement’s impact on Australia’s copyright trade policy” (2015) 69 Australian Journal of International Affairs 538. Frankel makes a similar point regarding New Zealand: S Frankel, “Digital Copyright and Culture” (2010) 40 Journal of Arts Management, Law, and Society 140, 145. 141  For a history see Weatherall (n 26). The effects of AUSFTA were most dramatic in copyright, because the copyright text is the most detailed, and because Australian patent law already had key features deemed desirable by the US, such as patent term extensions, a grace period, and a broad concept of patentable subject matter: AUSFTA “locked in” laws that otherwise might have been reconsidered, particularly in the area of pharmaceutical patents and term: T Harris, N Gruen, and D Nicol, Pharmaceutical Patents Review Report (Commonwealth of Australia 2013). 142  Copyright Act 1968 (Cth) ss 41A, 103AA (parody/​satire); 43C, 47J, 109A, 110AA (personal copying). 143  Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16; (2012) 248 CLR 42. 144  Copyright Amendment (Online Infringement) Act 2015 (Cth). Inspiration for the legislation came from UK decisions such as Twentieth Century Fox Film Corp v British Telecommunications Plc [2011] EWHC 1981 (Ch), applying s 97A of the Copyright Designs and Patents Act 1988 (UK).

Intellectual Property Law in Australia and New Zealand    309 Australian model, and the broad US approach. In relation to online infringement, New Zealand directly targeted file-​sharers. The amendments passed in 2008 included a controversial provision to require ISPs to terminate accounts of repeat infringers. This was replaced in 2011 with a system to send infringement notices followed by potential fines to be imposed by New Zealand’s Copyright Tribunal or a District Court order for suspension of an Internet account, but the system has not been used by rights holders, who considered it too expensive.145 The EU’s contribution to divergence in copyright came late. The decision of the Court of Justice of the European Union in 2009 in Infopaq, which asserted a Europe-​wide threshold for protection, accelerated the European harmonization of copyright law,146 resulted in UK divergence from its traditional “sweat of the brow” approach to protection.147 In the Antipodes, the picture is evolving. The Australian High Court in IceTV Pty Ltd v Nine Network Australia Pty Ltd shifted the emphasis in Australia to require authorship in the form of some independent intellectual effort,148 which resulted in denial of copyright to automated productions, like the telephone directory.149

4. Re-​C onvergence . . . Maybe And so, a discussion of history shades again into contemporary commentary. In contrast to the rapid and dramatic divergence over the course of the 1990s and early 2000s, today a number of forces could be pushing Australia and New Zealand IP law closer together—​although resistance is strong. The first force for convergence is the single economic market program between Australia and New Zealand, which has evolved out of the relationship forged through the Australia– New Zealand Closer Economic Relations Trade Agreement of 1983 (ANZCERTA, or more commonly, CER). In 2011, the New Zealand and Australian governments announced an ambitious set of goals: • One regulatory framework for patent attorneys;150 • A single application process for patents in both jurisdictions; • A single examination for patents (with separate registration);

145 

Copyright (Infringing File Sharing) Amendment Act 2011 (NZ). For a discussion see Giblin (n 28). Case C–​5/​08 Infopaq International A/​S v Danske Dagblades Forening [2009] ECR. I-​6569; see J Griffiths, “Dematerialization, Pragmatism and the European Copyright Revolution” (2013) Oxford Journal of Legal Studies 767. 147  Newspaper Licensing Agency v Meltwater Holding BV [2010] EWHC 3099 (Ch); [2011] RPC 7; Newspaper Licensing Agency v Meltwater Holding BV [2011] EWCA Civ 890), [2012] RPC 1, discussed Griffiths (n 147). 148  IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239 CLR 458. 149  Telstra Corp Ltd v Phone Directories Co Pty Ltd (2010) 273 ALR 725. On the position in New Zealand see University of Waikato v Benchmarking Services Ltd [2004] NZCA 90; a later case that could have considered the persuasiveness of IceTV in New Zealand settled before judgment. 150  Legislation to give effect to parts of the program was passed in Australia in 2015. 146 

310   Kimberlee Weatherall • A unified trademark regime through alignment of registration practice and a single register; and • A unified plant variety rights regime.151 The proposal was not for a merged IP law, but for examiners on both sides of the Tasman conducting simultaneous examination under both laws. At the time of writing, the future of this program (beyond the single regulatory framework) is not positive. Echoing patent debates from the early twentieth century, there was opposition in New Zealand to the potential loss of sovereignty, and a Parliamentary Committee recommended against both the single patent application and examination on the basis that it would reduce costs only marginally in light of continuing legal differences, and that efforts should be directed to WIPO-​led initiatives.152 Only the single regulatory framework for attorneys has come into effect at the time of writing. On the other hand there has been some convergence in patent legislation, via the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth), and the Patents Act 2013 (NZ). The Raising the Bar reforms were intended to raise Australian standards for patentability: specifically, expanding the prior art taken into account in assessing whether an invention is obvious, and rewriting the requirements for a valid specification in order to ensure a better match between the disclosure made and the monopoly granted. This latter goal was explicitly sought to be achieved by adopting European language into the Act.153 In contrast to earlier periods, there are also halting signs of greater openness on the part of the Australian courts to develop patent law more consistently with overseas decisions. The Myriad case154 regarding the patentability of isolated and artificially constructed gene sequences illustrates a range of approaches. The first instance decision fell squarely within a post-​1977 Australian tradition of stubbornly autochthonous development of patent jurisprudence. The Full Federal Court judgment on the other hand engaged with international jurisprudence, but with a firm “we know best” attitude. The High Court decision on the other hand shows greater a readiness to reconsider longstanding Australian approaches (notably this was met with quite a hostile response within the profession concerned about the potential breadth of new restrictions on patentability).155 The Patents Act 2013 (NZ) also adopts European language relating to the specification, and brings standards of examination and novelty into line with Australian law. If a single application and examination system had come into effect, it might have been expected that

151 

S Frankel and M Richardson, “Trans-​Tasman Intellectual Property Coordination,” in S Frankel (ed), Learning from the Past, Adapting for the Future: Regulatory Reform in New Zealand (LexisNexis 2011) 527. 152  Parliament of New Zealand, Commerce Committee, Patents (Trans-​Tasman Patent Attorneys and Other Matters) Amendment Bill (83-​2) (13 July 2016). See S Frankel and J Yeabsley, “Features of the Uniqueness of New Zealand and their Role in Regulation,” in S Frankel and J Yeabsley (eds), Framing the Commons: Cross-​cutting Issues in Regulation (Wellington: Victoria University Press, 2014). 153  Explanatory Memorandum to the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 (Cth); discussed in Burley (n 113) 36. 154  D’Arcy v Myriad Genetics Inc (2015) 325 ALR 100; [2015] HCA 35. 155  See also Apotex Pty Ltd v Sanofi-​Aventis Australia Pty Ltd (2013) 253 CLR 284 [243] (Crennan and Kiefel JJ), stating that while decisions from overseas are not binding, and legislation differs, “the theory and purpose of patent legislation everywhere have much in common,” referring also to TRIPS and to statements in the Explanatory Memorandum to the 1990 Act emphasizing the desire to “harmonize” law with major trading partners.

Intellectual Property Law in Australia and New Zealand    311 these standards in patent law would have further coalesced.156 The trans-​Tasman harmonization is not complete, however. The New Zealand law Act excludes a range of subject matter, including software “as such,”157 inventions contrary to public order or morality (in considering which the Commissioner may seek advice from a Māori Advisory Committee), and inventions which are surgical, therapeutic, or diagnostic methods practiced on human beings.158 Trademark legislation underwent no major revision in either jurisdiction since 2002, and remains very different as between the two countries. Across IP, and especially in copyright, the other key factor for convergence could be future trade negotiations. As noted earlier, at the time of writing, the TPP Agreement appears to have failed with the withdrawal of the US. It seems at least a strong possibility, however, that, failing a general disintegration in globalization, trade pressures will return in some other form: whether a revised TPP, the RCEP, or a desire to further progress trans-​Tasman integration. Both Australia and New Zealand have long demonstrated a commitment to open trade. But just as AUSFTA did not actually harmonize US and Australian IP law, and left untouched many important underlying principles as well as the interpretation of the scope of key terms and rights,159 even detailed future trade agreements will not necessarily lead to genuine convergence unless that goal is actively promoted by legislatures and courts. As responses to initiatives in the Single Economic Market suggest, it is not clear that there would be support for such a push. New Zealand, at least, seems conscious that neither its policies nor its interests are the same as those of Australia.160 At the time of writing, Australia is mired in a contentious debate around revision of copyright exceptions: in particular, the Australian Law Reform Commission’s 2013 recommendation, supported in 2016 by the Productivity Commission, to introduce an open-​ended fair use exception.161 It may be that New Zealand, with its capacity to pass legislation rapidly through its single house of Parliament, will end up taking the lead on copyright modernization.162

5.  Indigenous Culture and Traditional Knowledge If there are halting signs of convergence or at least dialogue within Australian and New Zealand IP law, the standout exception relates to the treatment of indigenous traditional knowledge and cultural expressions. Justice cannot be done to this wide-​ranging set of issues here.163 Indigenous people in both Australia and New Zealand have long suffered the 156  P Drahos, The Global Governance of Knowledge: Patent Offices and their Clients (CUP 2010) 46–​47 (discussing the many layers of coordination between patent offices and the resulting harmonization of attitudes despite differences in legislation and national interests). 157  Patents Act 2013 (NZ) s 11.    158  See (n 159), ss 15–​16.    159  Burrell and Weatherall (n 27). 160  Frankel and Yeabsley (n 154). 161  Australian Law Reform Commission, Report No 122, Copyright and the Digital Economy (2013); Australian Productivity Commission, Report No 78, Intellectual Property Arrangements (2016). 162  Frankel and Yeabsley (n 154). 163  In New Zealand, a good place to start is the relevant chapter in Frankel’s text (n 112) 115–​152, and Jessica Lai’s monograph (n 29).

312   Kimberlee Weatherall copying and appropriation of traditional knowledge, artefacts, images, and themes without consent or respect for or understanding of their underlying meaning or context, and with little or no benefit flowing back to indigenous people.164 But New Zealand and Australia have approached these issues very differently via a trajectory that can be traced all the way back to the two countries’ foundations: New Zealand through a treaty with Māori peoples; Australia through a legal fiction that imagined away Australian aboriginal laws and sovereignty. The Treaty of Waitangi provided Māori in New Zealand with legal leverage to force a modern reconsideration of the relationship between New Zealand’s British-​heritage IP law and matauranga Māori (loosely translated as Māori traditional knowledge, or rather, the Māori way of seeing the world, including both Māori culture and traditional knowledge165). In 1991, a group of Māori lodged a claim with the Waitangi Tribunal, a permanent commission of inquiry which considers and issues advisory reports relating to Māori claims of alleged treaty breaches by the Crown. The Wai 262 claim raised questions relating to Māori ownership of and guardianship over native or indigenous flora and fauna, and intellectual and cultural property,166 alleging that in relation to matauranga Māori, the Crown had failed to ensure Māori tino rangatiratanga, or the unqualified exercise of chieftainship guaranteed by the Treaty of Waitangi. The claim led to 20 years of hearings, consultations, and deliberations, and, in 2011, a wide-​ranging report with strong recommendations for better interfaces between IP laws and matauranga Māori and specifically kaitiakitanga (guardianship, or stewardship) of culture, flora, and fauna.167 As Jessica Lai notes, the recommendations are process-​oriented, designed to balance recognition of Māori and Western worldviews, and to promote Māori kaitiakitanga through mechanisms for consultation, a voice in decision-​making, and in some cases, requirements of consent at the interface with IP law.168 The Wai 262 claim was a far-​reaching process, and seems likely to influence the interface between Māori culture and IP law for many years to come, but New Zealand took some steps to accommodate Māori concerns in the twenty-​first century. The Māori Trade Mark Advisory Committee was established by the Trade Marks Act 2002 (NZ), and advises the Trade Marks Commissioner on whether proposed use or registration of a trademark derivative of a Māori sign is likely to be offensive to Māori. The Patents Act 2013 (NZ) also established a similar committee to advise the Patents Commissioner whether a claimed invention derives from Māori traditional knowledge or from indigenous plants and animals, and whether commercial exploitation is likely to be contrary to Māori values. In 2014, specific legislation was enacted to ensure proper attribution of the Haka Ka Mate, the famous Haka performed by the New Zealand All Blacks rugby team.169 New Zealand also pushed in the TPP negotiations for provisions relating to traditional knowledge, and an annex to the Agreement’s IP chapter preserves some rights for New Zealand to meet its obligations under the Treaty of Waitangi.170 Australia’s indigenous people constitute a smaller proportion of the population across the Tasman than the Māori in New Zealand. They also have no legal leverage analogous to that 164 

165  Lai (n 29) 227. 166  Discussed Lai (n 29). Lai (n 29) 2. Report of the Waitangi Tribunal on Claims Concerning New Zealand Law and Policy Affecting Māori Culture and Identity (2011) Wai 262. 168  Lai (n 29) 302. 169  Haka Ka Mate Attribution Act 2014 (NZ). 170  TPP Agreement (n 3) Annex 18-​A. 167 

Intellectual Property Law in Australia and New Zealand    313 provided to the Māori by the Treaty of Waitangi. And Australia’s response to the interaction between IP law and indigenous traditional knowledge and cultural expressions has been poor and ad hoc. There have been a number of government reviews and non-​government proposals for adjusting IP law to give better recognition of indigenous peoples’ distinct interests and ways of knowing and being.171 But there has been no adjustment of IP laws to accommodate indigenous interests or values,172 apart, perhaps, from the introduction of droit de suite or resale royalties on the sale of artistic works in 2009, which was motivated in part by the hope that it would ensure better remuneration to indigenous artists who have seen their products rise in value.173 More significant developments have come through the Australian courts, where indigenous artists have successfully asserted claims to copyright in artistic works, and damages for cultural harm.174 The Bulun Bulun case is particularly notable for its extensive discussion of, and attempt to recognize through fiduciary law, a collective, rather than purely individual interest in the exercise of copyright rights.175 There have also been extra-​legal developments in the form of various codes of practice addressing both cultural expressions and traditional knowledge, with mixed success.176 This is an area where, as Susy Frankel and Megan Richardson point out, Australia could learn from New Zealand.177

6.  Concluding Thought A question for legal historians is when, where, and how did Australian and New Zealand legislators and commentators start to articulate their national laws as different from those of other nations:  with different histories, philosophies, functions, concepts, etc?178 This chapter suggests that the answers are complex. There has been no single, smooth trajectory from dependent colony to independent nation with distinct national IP law. Developments in nationally-​oriented IP law have been piecemeal and halting, they have stopped and

171  In particular, Report of the Working Party into the Protection of Aboriginal Folklore (Commonwealth of Australia 1981). On non-​government proposals see the work of Terri Janke, such as her 1999 report, Our Culture, Our Future (Michael Carrier and Company, 1999). 172  Draft legislative amendments providing for communal moral rights were abandoned: see J Anderson, “The Politics of Indigenous Knowledge: Australia’s Proposed Communal Moral Rights Bill” (2004) 27 UNSW LJ 585. 173  Resale Royalty Right for Visual Artists Act 2009 (Cth). 174  Milpurrurru v Indofurn Pty Ltd (1994) 54 FCR 240. 175  Bulun Bulun v R & T Textiles Pty Ltd (1998) 86 FCR 244 (discussed in C Golvan, “The protection of At the Waterhole by John Bulun Bulun: Aboriginal art and the recognition of private and communal rights,” in A Kenyon, M Richardson, and S Ricketson (eds) Landmarks in Australian Intellectual Property Law (CUP 2009) 191; see also K Weatherall, “Culture, Autonomy and Djulibinyamurr: Individual and Community in the Construction of Rights to Traditional Designs” (2001) 64 Mod L R 215. 176  N Stoianoff, “Navigating the Landscape of Indigenous Knowledge: A Legal Perspective” (2012) 90 Intellectual Property Forum 23. 177  Frankel and Richardson (n 152). 178  R Deazley, M Kretschmer, and L Bently, “Introduction: The History of Copyright History” in R Deazley, M Kretschmer, and L Bently (eds) Privilege and Property: Essays on the History of Copyright (OpenBook 2010).

314   Kimberlee Weatherall started, and there was more local identity, perhaps, in the nineteenth century than there was for much of the twentieth century. The period from the 1980s to the early 2000s did see more distinctive and divergent trajectories for these legal siblings. But in the twenty-​first century, especially in Australia, IP policy has been subordinated to broader trade interests, and the trend has been towards more extensive IP rights, which has resulted in laws that may not have redounded to the national interest. For now, too, the future of trans-​Tasman cooperation is uncertain. Despite its rhetorical appeal, making harmonization or regulatory coordination work in practice is hard—​as debates over the proposed imperial patent proved in the early twentieth century, and as we have seen more recently in the attempt to create a Trans-​Tasman Single Economic Market. The picture in trade and the future impact of trade agreements are uncertain. And any impact Brexit could have in reinvigorating convergence in law and principles between former members of the British Empire is yet unknown. For today, Australia and New Zealand retain IP laws far more different than might be apparent from a distance. I am conscious of this chapter’s flaws. For all my enthusiasm in the introduction over new historical research uncovering practice around IP, this chapter has been very focused on developments in law alone: mostly in legislation. With more space, it could be supplemented with more investigation of trans-​Tasman judicial conversations. And if I were writing in a decade’s time, given current trends in scholarship, there would likely have been more creator and inventor stories. For now, I simply look forward to what the current generation of active scholars uncover of the past that will shape the future of Australia and New Zealand.

Chapter 12

T he Em ergenc e a nd Devel opm e nt of In tellectual Prope rt y L aw in Cent ra l a nd Eastern Eu rope Mihály Ficsor* 1. Introduction Although this chapter focuses on Central and Eastern Europe (CEE), its coverage also extends to several countries that—​from a geographical viewpoint—​may not be necessarily regarded as parts of this region. Those countries are dealt with that fell (and some of which may still, at least partly, fall) into the category of “countries in transition.” The term “countries in transition” or “transition countries” was a shortened version of what Article 65.3 of the TRIPS Agreement refers to as any member of the World Trade Organization (WTO) “which is in the process of transformation from a centrally-​planned into a market, free-​enterprise economy and which is undertaking structural reform of its intellectual property system and facing special problems in the preparation and implementation of intellectual property laws and regulations.” This common past of the CEE countries is more decisive than the answer to the question of exactly where they may be found on the map.1 This group of countries includes the former Member States of the ComEcon2 (and the Warsaw *  Mihály Ficsor asserted his moral right to be identified as the author of this Contribution. Member of the Hungarian Copyright Experts Council; former Assistant Director General of the World Intellectual Property Organization (WIPO). The manuscript was finalized on 6 May 2016. All websites were last accessed in February 2018, unless otherwise specified. 1  For example, Austria geographically is a Central European country—​more than Poland, which, along with the Czech Republic, Slovakia, and Hungary, is considered to be part of Central Europe. Politically, Austria is not part of the category of CEE countries covered by this chapter. 2  The ComEcon—​officially known as the Council of Mutual Economic Assistance—​was between 1949 and 1991 the organization of economic co-​operation of the Central and Eastern European “socialist

316   Mihály Ficsor Pact3) or their successor independent states (with the exception of the German Democratic Republic, which became part of Germany and adopted its legal, social, and economic systems) and the countries of the “West Balkans region.” Before the “transition,” they identified themselves as socialist countries, while in the Western industrialized world they were called “communist regimes.”4 They are the following 28 countries in alphabetical order: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Montenegro, Poland, Republic of Moldova, Romania, Russian Federation, Serbia, Slovakia, Slovenia, Tajikistan, the Former Yugoslav Republic of Macedonia (hereafter FYROM), Turkmenistan, Ukraine, and Uzbekistan. To present the specific aspects of the IP systems of these countries, it should be described how they existed at the beginning of the political and economic changes and how they have been—​or have not been—​transformed by more or less completing, or at least making progress in, their “transition” process. Such retrospective analysis is necessary because it is only on this basis that certain features of the present IP systems of these countries may be understood. Vaclav Havel, in his famous 1975 open letter to Gustav Husak, the then head of the Czechoslovak Communist Party, warned about the consequences of the regime’s politics, saying “I fear that the baneful effects on society will outlast by many years the particular political interests that gave rise to them.” The prophesy has turned out to be quite well founded.5 As discussed below, there were significant differences between the various countries of Central and Eastern Europe, but all of them were faced with the unusual task to which, at the time of the political changes around 1990, The Economist referred in this way: “Hundreds of books have been written on the transition from capitalism to communism, but not the other way. There is no known recipe for unmaking an omelette.”6 When reference is made to the “transition” process of these countries usually the ­economic, market, and trade aspects are emphasized—​as in the above-​quoted Article 65.3 of the TRIPS Agreement, but there are others that influenced the IP laws of the CEE countries in quite a significant manner; in particular the political system of “democratic ­centralism.” In this expression, the adjective “democratic” was a typical example of distorting the meaning of words in the form of “newspeak,”7 since only centralism existed without any democracy; it meant determining, regulating, and then strictly controlling countries” under the leadership of the Soviet Union. Mongolia, Cuba, and Vietnam also became members of the organization, while Yugoslavia only had observer status. 3 

The Warsaw Pact—​officially known as the Treaty of Friendship, Co-​operation and Mutual Assistance—​was a collective defense alliance of the CEE countries between 1955 and 1991. 4  In this chapter, when referring to the past of the CEE countries, the adjective “socialist” is used. However, the self-​characterization of these countries as “socialist” does not correspond to the contemporary concept of socialism. In contrast, the ruling parties of the regimes generally referred to themselves as “communist” and to their basic ideology as “communist;” thus, it is in these contexts that these adjectives are used in the chapter. 5  See , accessed 20 April 2016. 6  The Economist (London, 24–​30 March 1990) 22. 7  Of course, by this, reference is made to the way George Orwell had invented and used this word in his novel 1984 (Secker & Warburg 1949) describing totalitarian regimes.

Intellectual Property Law in Central and Eastern Europe    317 everything by the central organs of the party state/​state party. It is equally important to refer to the deeply dogmatic roots of the political and social system of the regime. The “advertised” objective, according to the Utopian recipe of some philosophers, ideologues, and “beloved great leaders,” was to build a much more judicious and advanced society which would replace and triumph over “rotting” capitalism. This chapter outlines both the common and, importantly, different features of the various CEE countries. It then discusses their participation in the international treaty relations, along with a general description of two aspects of their national laws: (i) how much they seem to be in accordance with the treaties; and (ii) what kinds of specific features—​typical for this group of countries—​may be found in those aspects that are not regulated by the treaties. It then analyzes the basic elements of IP legislation and infrastructure with special attention to the said specific features.

2.  Common and Differing Characteristics Under Article 65.3 of TRIPS Agreement, “transition country” members of the WTO, similarly to developing country members, were allowed to benefit from a period of five years to fulfil their obligations under paragraphs 1 and 2 of Article 65.3 of the Agreement. This might suggest that these countries were more or less over the transition within that period; that is, by 2000. However, the transition has not been as quick as the five-​year grace period anticipated, and has not been completed fully everywhere. There are still significant differences among the countries that were referred to together as “transition countries.” For example, there are now 11 countries to which the above-​described concept of “country in transition” was applied in the middle of the 1990s, but which, in the meantime, have become Member States of the EU.8 Due to their accession to the EU, they have had to transpose EU norms on industrial property rights, copyright, related rights, enforcement of rights, electronic commerce, data protection, competition, etc., into their national legislation. These former transition countries also benefited from significant pre-​accession support through a number of programs (eg, PHARE, TAIEX). Now the representatives of these countries are present in the various governing bodies of the Union. There seems to be good reason to consider that, for them, the “transition” is practically over.9 In spite of this, some of these countries are still facing difficulties in fulfilling certain requirements of the international and EU norms in the field of IP. There are also other countries—​those that are members of the WTO or in negotiation to accede to the WTO and/​or to the EU—​that have made significant progress in

8 

The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia joined the EU in 2004; Bulgaria and Romania joined it in 2007; and Croatia joined it in 2013. 9  This does not mean that if an EU Member State in this region and a country that is not a member yet of the EU is compared, it is necessarily the EU Member State that has a more appropriate collective management system. For example, of two neighboring countries in the Balkans—​Bulgaria and Serbia—​ the still non-​EU member Serbia appears to be more advanced in some aspects due to its stronger legacy from the times of the former Yugoslavia.

318   Mihály Ficsor the “transition” process, and several of them may not consider themselves as truly belonging to the category of “countries in transition” anymore. In spite of this, it seems that, in some of those CEE countries, the process of transition, at least in certain aspects of IP, has not been fully completed yet. It is also important to note that in the CEE region there are a number of countries—​in fact the majority of the countries—​that obtained or received back independence at the beginning of the 1990s as a result of the dissolution of the Soviet Union, Yugoslavia, and Czechoslovakia. Czechoslovakia was divided into the Czech Republic and Slovakia in a smooth—​“velvet”—​manner, but the dissolution of the Soviet Union took place with more conflicts and even with armed atrocities, while Yugoslavia’s ex member republics regained their independence through bloody civil war. It was somewhat easier to establish an independent IP infrastructure in those countries where the capital of these federal states used to be found, and where therefore the public and—​to the extent they existed at all—​private or semi-​private organizations necessary for governmental administration and management of rights had been established. In contrast, many newly independent countries in the “periphery” of those former federal states where at maximum some local offices of the central organizations had existed below, had to establish their infrastructure more or less from scratch. In the process of “transition,” much depended on the length of time for which the planned economy and “democratic centralist” regime had existed. For the newly independent countries born from the member republics of the Soviet Union, this was as long as 70 years, although the Baltic States enjoyed a period of independence between the two World Wars, and for the countries of Central Europe and the Balkans, about 40 years. The different legal and social traditions and levels of development of the “transition countries” have also played a significant role (for example, the situation in, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, (the “five ‘stans’”) was more or less the same as in developing countries).

3.  Adherence to International Treaties All the CEE countries are members of the World Intellectual Property Organization (WIPO) and have ratified or acceded to the Convention Establishing the WIPO, the Berne Convention for the Protection of Literary and Artistic Works (hereafter the Berne Convention), and the Paris Convention for the Protection of Industrial Property (hereafter the Paris Convention). With the exception of Turkmenistan and Uzbekistan, all these countries have ratified or acceded to the basic related rights treaty: the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (Rome Convention), and more importantly the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT), otherwise known as the “Internet Treaties.” In the field of industrial property, all the CEE countries are party both to the Patent Cooperation Treaty (PCT) and the Madrid Protocol on the International Registration of Marks, which are the two registration systems of WIPO that are indispensable in order to participate in international economic cooperation and trade relations. The majority of them have also ratified or acceded to the Patent Law Treaty (PLT) which harmonizes formal procedures of patent applications (making them more user-​friendly and determining

Intellectual Property Law in Central and Eastern Europe    319 maximum sets of requirements), to the Trademark Law Treaty (TLT), which standardizes and streamlines national and regional trademark registration procedures; fewer have ratified or acceded to the Singapore Treaty on the Law of Trademark, which further harmonizes trademark registration procedures.10 The great majority of the countries of the CEE region are members of the WTO and, thus, bound by the TRIPS Agreement. However, for the time being, Azerbaijan, Bosnia and Herzegovina, Serbia, and Uzbekistan only have observer status. Turkmenistan does not yet hold observer status.

4.  The Basic Features of National Laws of Central and Eastern European Countries 4.1  Ideological Nature of Intellectual Property Legislation One of the most fundamental characteristics of communist law was that it was influenced to a great extent by Marxist-​Leninist ideology. Quite frequently, legal principles and provisions were deducted from dogma that reflected the objectives of building a “socialist”—​and, as a long-​term objective, later a fully fledged communist—​society. These objectives were outlined in a boasting, slogan-​style manner alleging communism’s superiority to capitalism. However, in certain cases some solutions were declared typical features of socialist law, which then became dogma themselves, to be followed automatically and blindly. Those who did not do so, and who dared to express the view that the same objectives might be obtained more efficiently or simply, were faced not only with a theoretical or practical dispute on which alternative would be more appropriate, but also risked being declared “revisionists,” “capitalist agents,” or even “enemies of socialism,” with all the negative consequences.

4.2 Civil Code Dogma One of the basic principles of “socialist” intellectual property (IP)  law (although as discussed below, other expressions were used for what are regarded now to be covered by this category of rights) was that it must be regarded to be part of civil law. Although it may be said that this qualification basically was right, for complete legal regulation of such rights, other branches of laws also may and do play a role, such as administrative law or—​for the purpose of e­ nforcement of rights—​penal law. However, in the majority of socialist countries in the CEE region, this principle—​having acquired the status of a dogma—​was applied in an exaggerated way, resulting in parallel legislation of the same issues and, due to the 10  The list of those countries that have not ratified or acceded to these procedural treaties are quite “colorful;” countries of various sub-​regions and with different levels of development appear in it. In the case of the PLT: Azerbaijan, Bulgaria, Belarus, Czech Republic, Georgia, and Poland; in the case of the TLT: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Georgia, Poland, Tajikistan, and Turkmenistan; and in the case of the Singapore Treaty: Albania, Azerbaijan, Bosnia and Herzegovina, Czech Republic, Georgia, Hungary, Slovenia, Turkmenistan, Ukraine, and Uzbekistan.

320   Mihály Ficsor differences between the parallel provisions, in unnecessary interpretation problems and legal uncertainty. As in the case of many other features of socialist law, Soviet law was the origin of parallel legislation in civil codes, and separate laws on IP. IP rights—​with differing levels of detail but still in a substantive manner—​were regulated basically in the civil codes but frequently also in separate legal provisions on copyright and industrial property rights. In the Soviet Union, this was further complicated due to the federal structure of the state. “Fundamentals” were adopted on federal level determining basic elements of the laws of the member republics of the Union which, in certain member republics, formed practically all the substantive regulation of IP rights, while in others, they were completed with other norms. In the period of Gorbachev’s “perestroika,” or transformation, and during Yeltsin’s early years in the Russian Federation, there was a break in the civil-​code dominance of IP legislation. In 1992, a Patent Law and a Trademark Law were adopted on the same day, followed in 1993 by the adoption of a Law on Copyright and Related Rights11. These modern laws had been prepared in close cooperation with WIPO,12 experts representing interested rightholders, and other stakeholders at a quite up-​to-​date level of international standards. In the preparation of the separate laws on IP adopted in 1992 and 1993, certain Russian academics participated, but the majority of those who dealt with IP as part of civil law were not academics. Soon after the adoption of the new laws, civil law professors took over control, and—​citing civil-​code regulation of IP rights (now not as a Soviet principle but) as a “Russian tradition” to be preserved—​began preparing (this time not involving the representatives of stakeholders who were considered by them as “lobbyists”) the “missing” Part IV of the Civil Code on IP. Part IV of the Code was finally adopted in 200613. In general—​but not in all aspects—​ it was in accordance with the international treaties and reflected the fact that it had been prepared by civil law academics with great care and professional pride. Some of their provisions had been prepared in the style of university textbooks and contained certain abstractions that were of a theoretical nature rather than of any real practical relevance. Part IV since then has been amended for certain reasons; in particular, in 2010 and 2014, with the objective of bringing it into accordance with the substantive provisions of the TRIPS Agreement. The laws of the—​at least formally—​independent countries of the “Soviet bloc” were supposed to follow the Soviet legal concepts. This did not take place necessarily in an automatic and direct manner and some of the countries of the bloc were able to maintain certain

11 

Law No 5351-​I of 9 July 1993. The author of this chapter—​at that time as Director of Copyright Law Division of WIPO—​was a member of the Working Group of the Duma that was preparing the separate Law on Copyright and Neighboring Rights. When the law was adapted, President Yeltsin first, on the advice of some “old guard” experts, vetoed the Law. Later, however, when it was clarified—​inter alia, as a result of an intervention by WIPO—​that the Law was in due accordance with the international treaties and best practices, the Duma adopted it again without any change, and President Yeltsin signed it into law. 13  By the State Duma on 24 November 2006 and by the Federal Council on 8 December 2006. 12 

Intellectual Property Law in Central and Eastern Europe    321 elements of their legal traditions. Not all of them followed the civil-​code form of IP legislation. For example, the Hungarian Civil Code adopted in 195914 only contained two short articles on the protection of “intellectual creations,”15 which referred to separate laws on the various branches of IP.16 The Hungarian Civil Code adopted in 2012 still includes such references, although not in the same way; this is discussed later. The Baltic States, in the period when they were member republics of the Soviet Union, also had to follow the Soviet model, but when they regained independence, they adopted separate laws on different branches of IP. (Lithuania’s Civil Code still contains a small number of provisions on IP rights, but, similarly to the Hungarian Code—​they mainly consist of references to separate laws.) The 1998 Civil Code of Belarus contains the same kinds of provisions as the Civil Code of the Russian Federation in no fewer than 51 of its articles (Articles 979–1030). However, while the latter has replaced the separate laws on the various branches of IP, in Belarus the two sets of detailed provisions are applicable in parallel, which may create some interpretation problems due to the different languages used in the Code and the separate laws. In contrast, the Civil Code of 2002 of the Republic of Moldova, the other Eastern European independent state born of a former Soviet republic, only includes a short reference (Article 8, point 5) to rights in works, innovations, and “other results of creative activity.” The three former Soviet republics of the Caucasus region—​Armenia, Azerbaijan, and Georgia—​as independent states chose different solutions. The Azeri Civil Code of 1999 only contains short references to IP rights without any substantive norms.17 The 1997 Civil Code of Georgia applies the same kind of model as the Hungarian and Lithuanian 14 

As Law IV of 1959. On the reasons for avoiding use of the term “intellectual property,” see below. 16  Sections 86 and 87 of the Civil Code read as follows: 15 

‘Rights Related to Intellectual Creations Section 86 (1) Intellectual creations are protected by law. (2) In addition to the provisions of this Act, protection is prescribed for certain specified types of creations and certain related activities by copyright law, industrial rights protection (patent, trademark, certification of origin and design protection), innovation law and legal regulations protecting the producers of sound recordings. (3) Intellectual creations that are not regulated by separate legal regulations but which can be used by the general public and have not yet become part of the public domain shall also be protected by law. (4) Persons shall also be entitled to protection with respect to their economic, technical, and organizational knowledge and experience that has pecuniary value. The beginning and duration of the period of protection shall be determined by a legal regulation. Section 87 (1) A person whose rights with regard to intellectual creations have been violated may file charges under the civil law titles governing violations of rights related to (in addition to the protection prescribed by separate legal regulations). (2) Within the sphere of protection provided for intellectual products that do not fall within the scope of separate legal regulations and for economic, technical, and organizational knowledge and ­experience of pecuniary value, obligees may also demand a share of the financial proceeds from persons who have expropriated or used their achievements.’ 17

  See art 14.2.5 on the rights and obligations covered by the Civil Code, art 30.2.2 on the legal capacity of minors, and art 731.1 on franchising.

322   Mihály Ficsor Codes. In the original text of the Code, there were detailed substantive norms on IP in no fewer than 81 detailed articles (Articles 1018–1099) in accordance with the Soviet style, but they were deleted by a 2001 amendment. Currently, there are only references to separate laws on different branches of IP, with one exception: Article 1100 of the Code contains what may be regarded as substantive norms on basic principles of ownership of rights of creators of inventions, utility models, and industrial designs;18 however, this does not create disturbing overlaps with the more detailed provisions of the Patent Law. In contrast, in Armenia, between the fully fledged regulation of IP rights in the Armenian Civil Code of 1998 and the separate laws on the various branches of IP, there is extremely broad overlap, which is not only completely unnecessary but, due to the differing expressions and wordings, could create legal uncertainty. Of the “five stans” of Central Asia, there are two groups of countries: In Article 7, point 5 of the 1994 Kazakh Civil Code and in Article 8, point d of the 1999 Tajik Civil Code, there is just a short reference to rights in works and inventions and in “other intellectual creations,” while the 1998 Civil Codes of Kyrgyzstan (in Articles 137–1117) and of Turkmenistan (in Articles 1052–1069), and of the 1999 Civil Codes of Uzbekistan (Articles 1031–1111), contain detailed substantive provisions; those countries also have separate laws on the various branches of IP.

4.3 Ambivalent Attitude to the Concept of Intellectual Property In regard to the communist attitude to the concept of property, the following statement in the “Communist Manifesto” is quoted frequently: “The theory of Communism may be summed up in the single sentence: Abolition of private property.”19 In the countries of the Soviet bloc, not the original Marxist theory but its “Marxism-​Leninism” version20 was the dominant ideology. It had been developed on the basis of the recognition that the “world revolution” and the creation of a communist society as visualized by Marx could not be an immediate objective; a longer transition was needed from capitalism to communism. The idea was to accept historical reality and begin building “socialism” first in one country—​ Russia—​the step-​by-​step development of which might lead then to a genuine communist society; and, on this basis to promote revolutionary movements in other countries.21 The 18 

Art 1100 reads as follows: ‘1. The protection of rights in inventions, utility models and industrial designs shall be exercised by the issuance of a patent under the Patent Law of Georgia. 2. The right to acquire a patent shall belong to the author of the invention, utility model or industrial design, or to his successor in title. 3. The authorship right in invention, utility model and industrial design is inalienable and unlimited in time. 4. During the effectiveness of the patent, the patentee shall enjoy the exclusive patent right.’

19  K Marx and F Engels, Manifesto of the Communist Party (German Workers’ Educational Society 1848) section 2, para 13. 20  The term “Marxism-​Leninism” was coined in the 1920s in the period when Stalin took over the leadership of the Russian (“Bolshevik”) Communist Party. 21  The initial organizational platform was the “Communist International” (also referred to as “Comintern”), the declared objective of which was to fight “by all available means, including armed

Intellectual Property Law in Central and Eastern Europe    323 elimination of private property also remained a central principle of Marxism-​Leninism, and “private property” meant any kind of ownership of goods and rights that allowed the owners to produce more income than was necessary to fulfil their own needs. Thus, it did not include “personal” rather than “private” property (housing, personal belongings, food, beverages, and the like). The differentiation between private property and personal property—​along with the strong emphasis on the desirable dominance of state (or “community”22) property—​was manifested also in the field of what we call now IP. As discussed later, certain rights of creators (inventors, authors) were granted in recognition of their contributions to the “common good,” but only to the extent that this did not serve as a basis for using those rights in the way “private rights” might be exploited. This was in accordance with a fundamental principle (and catchphrase) of communism: “From each according to his ability, to each according to his needs.” Although known and popularized by Marx,23 this tenet had in fact appeared previously in the work of French utopian socialists.24 As a consequence, moral rights were, in general, generously granted—​in contrast with economic rights, particularly exclusive rights. Furthermore, although inventors and authors also received certain income and other benefits, legal regulation took care of limiting all this to a level in order that it might not serve as a source of private property. The laws of the CEE countries in their socialist period stressed the specific reasons for which inventors and authors enjoyed certain rights, namely, that they contributed to the common good as creators, rather than the property aspects of those rights. For this reason, they avoided identifying those rights as “intellectual property rights.” Either just the specific categories of rights, for example, inventors’ rights or authors’ rights, were mentioned or, more generally, it was “the law of intellectual creations” or some synonym. The reluctance to use the expression “intellectual property rights” did not disappear with the political changes and the transition process from centrally planned economy and “democratic centralism” to market economy and pluralist democracy. This may be regarded also as a result of a linguistic inertia, but it was much more due to the professors and researchers who had specialized in the field of these rights, and who had been accustomed to using it. In their textbooks and other publications, they had explained why “the law of intellectual creations” was more appropriate than “intellectual property rights,” and they did not want to recognize that their arguments had become outdated.

force, for the overthrow of the international bourgeoisie, the creation of an international Soviet republic as a transition stage to the complete abolition of the State.” The “Comintern” regrouping of communist parties and movements around the world took place between 1919 and 1943. The official reason for its dissolution was that the conditions and requirements of the various countries justified more differentiated objectives and activities within the communist movements. However, what really happened was that Stalin wanted to calm the Soviet Union’s allies in the critical period of the Second World War: see R Service, Stalin. A Biography (Macmillan 2004) 444–​445. In reality, the objective of promoting “world revolution” had not changed, as became quite clear after the war. 22 

Such as the property of agricultural or small industrial cooperatives. The slogan appeared in Karl Marx’s study Critique of the Gotha Program published in 1875 (in original German: Jeder nach seinen Fähigkeiten, jedem nach seinen Bedürfnissen). 24  It was used in this form first by Louis Blanc in his writing Plus de Girondins published in 1851 (in original French: De chacun selon ses facultés, à chacun selon ses besoins). 23 

324   Mihály Ficsor With the increasing acceptance of the use of IP rights to cover both copyright (and related rights) and industrial property rights at the international25 and European26 levels, it became more difficult to reject the application of this term. The EEC countries having become Member States of the EU—​and also the countries of West Balkans—​have adopted it, but in the newly independent countries born from the former member republics of the Soviet Union this is not necessarily the case. In Part IV of the Civil Code of the Russian Federation—​prepared mainly by civil law academics—​a kind of compromise solution was adopted. The title of the section on what are recognized under international standards as IP rights does not use this expression. It reads as follows: “Rights in the Results of Intellectual Activity and Means of Individualization.” This term is repeated in the title of the first article—​Article 1225—​of Part IV but, in the text of the article, the expression “intellectual property” appears as a kind of short-​hand reference to these two categories of rights, and is then used in certain provisions of the Code with that meaning.27 Nevertheless, a new terminology of “intellectual rights” emerges immediately in the second article of Part IV: Article 1226. Intellectual Rights Intellectual rights shall be recognized for the results of intellectual activity and means of individualization equated to them (results of intellectual activity and means of individualization), which include an exclusive right that is a proprietary right; and, in cases provided for by the present Code, also personal non-​proprietary rights and other rights (droit de suite, right of access, and others).

Thus, even if the term “intellectual property” has been recognized and used, the underlying basic concept has remained as a category of “intellectual rights” (rather than “intellectual 25  It is sufficient to refer to the way this term is used in the very name and in the various documents of the World Intellectual Property Organization and the Agreement on Trade Related Aspects of Intellectual Property of the WTO. 26  First of all, copyright academics were against the use of the phrase “intellectual property rights” during—​and even after—​the “transition” period. As mentioned below, eg, in Hungary, an influential member of the preparatory committee of the new Civil Code opposed the use of the term (fortunately, in vain). This was in spite of the fact that Directive 2001/​29/​EC of the European Parliament and of the Council of 22 May 2001 on harmonization of certain aspect of copyright and related rights in the information society [2001] OJ L 167/​10 had several years previously unequivocally confirmed that copyright and related rights fell within the category of “intellectual property.” For example, recital (5) of the Directive included this statement: “While no new concepts for the protection of intellectual property are needed, the current law on copy right and related rights should be adapted and supplemented to respond adequately to economic realities such as new forms of exploitation,” and recital (9) also pointed out: “Intellectual property has. . . been recognised as an integral part of property.” 27  Art 1225 has the title “Results of Intellectual Activity and Means of Individualization Subject to Protection,” and reads as follows:

‘1. The results of intellectual activity and means equated to them of individualization of legal entities, goods, work, services, and enterprises that are granted legal protection (intellectual property) shall be as follows: 1) works of science, literature, and art; 2) computer programs; 3) databases; 4) performances; 5) phonograms; 6) broadcasting or diffusion of radio-​or television transmissions via cable; 7) inventions; 8) utility models; 9) industrial designs; 10) selection attainments; 11) topographies of integrated circuits; 12) secrets of production (know-​how); 13) trade names; 14) trademarks and service marks; 15) appellations of origin; 16) commercial names. 2. Intellectual property shall be protected by statute.’

Intellectual Property Law in Central and Eastern Europe    325 property rights”). It is within this category of intellectual rights where the rights recognized for the results of intellectual activity are the core features, and to which the rights of the means of individualization are just “equated.” In the legislation of some of the other independent states created from the former member republics of the Soviet Union, stronger inertia prevails and the term IP is not yet used, even ambiguously, as in the Russian Civil Code. As mentioned previously, the Civil Codes of the Republic of Moldova, Kazakhstan, and Tajikistan refer to rights in works and “other results of creative activity,” and inventions and “other intellectual creations.” Even in Central Europe, there was a certain resistance to giving up the term “rights in intellectual creations” and replacing it with IP rights. As mentioned, the Hungarian Civil Code of 1959 contained short provisions referring to what are recognized internationally as IP rights under the term “rights related to intellectual creations.” In 2013, Hungary adopted a new Civil Code.28 In the Drafting Commission, initially, the idea dominated that the concept imported from the Soviet law—​“rights in ­intellectual creations”—​should be maintained. Then it was proposed that the Civil Code should provide for “rights in intellectual creations and intellectual products.” The strange resistance to adopting the international term may be explained by the composition of the Drafting Commission; it was fully dominated by university professors who before had ­always spoken and written on the “law of intellectual creations.” Furthermore, the member of the Commission responsible for IP rights was a copyright lawyer who strongly held the “monist” theory of copyright, which stresses the inseparable nature of economic and moral rights routed in the authors’ personality expressed in the works created by them.29 The majority of stakeholders in the protection, exercise, and enforcement of rights did not agree with the idea of adapting the legislative concept of IP rights to the monistic copyright theory (and by this, maintaining a concept introduced into Hungarian law not from German monistic theory but from Soviet-​style socialist legal theory). Both practicing lawyers, such as Vilmos Bacher (an attorney at law and also a member of the Hungarian Copyright Experts Council) and the representatives of governmental IP policy, in particular Mihály Zoltán Ficsor30 (the then  Vice President of the Hungarian Patent Office—​in the meantime, renamed as Hungarian Intellectual Property Office) intervened with studies proving that the use of the term “intellectual property rights” would be appropriate in the Civil Code. At the same time, they expressed the view that it would not be 28 

Art V of 2013, which entered into force on 15 March 2015. György Boytha, “The law of intellectual property and the new Civil Code”: G Boytha, “A szellemi alkotások joga és az új Ptk.” (2000) Available at: , accessed 20 April 2016. However, favoring the maintenance of “rights in intellectual creations” did not necessarily mean a preference for Soviet-​style legislation. Although the communist theory about IP rights had common features with the monist theory, it was and still is represented by academics of certain Western European countries too (in particular, Germany with the Max-​Planck Institute as center, and personalized by Adolf Dietz who had widespread—​and well-​deserved—​respect in the CEE region). 30  Due to the similarity of the name, it is to be noted that Mihály Zoltán Ficsor is not the same person as the author of this chapter; at the finalization of this chapter, at the beginning of May 2016, he was the Vice President of the Hungarian Intellectual Property Office (HIPO); however, two months later he left the Hungarian Office; currently he is Deputy Director of the EUIPO in Alicante. 29 

326   Mihály Ficsor appropriate to include substantive provisions in the Code on these rights; a very short reference to the separate laws on the various branches of IP would suffice.31 The kind of legal civil war that evolved from this debate finally ended with a compromise between academic theories and reality.32 In the new Civil Code—​in Article 2:55 of its Second Book—​only one single sentence refers to IP rights, under the title of “Copyright and the Protection of Industrial Rights”:  “This law shall be applied in regard to those questions covered by it which are not regulated by the laws on copyright and the protection of industrial rights.” Although the compromise did not extend so far as in Part IV of the Russian Civil Code (which also includes a bracketed reference to “intellectual property”), the ministerial exposé about the new Code presented in the parliamentary debate did stress that actually what are involved are “intellectual property rights.”

4.4 Special Features Allowed by Gaps and Flexibilities in International Treaties The international treaties on IP contain detailed requirements to be fulfilled by contracting parties. It may be said that the national laws of the CEE countries were, in general, compatible with the provisions of the treaties establishing minimum obligations, and this is even more so in the case of those countries that, in the meantime, have gone through, or have made progress in, the “transition” process. In this chapter, it seems appropriate to concentrate on those aspects of the national laws of the CEE countries that differ from the laws of industrialized countries without a centrally planned economy and “democratic centralist” past. These may be found in connection with those aspects of legislation and infrastructure that are not regulated—​at least not in a detailed manner—​by the international treaties, or where the treaties allow flexibilities to the contracting parties. In the case of CEE countries, due to the freedom of choices allowed by the treaties, certain characteristic features prevailed in their socialist period—​and where, time and again, the impact of that past may still be felt: (i) the organizational structure of the governmental 31  The titles of those studies themselves reflected the essence of their contents: V Bacher, “A szellemi tulajdon védelme és a Ptk.” (“The protection of intellectual property and the Civil Code”) (2000) Available at: , accessed 20 April 2016; and MZ Ficsor, “Szellemi tulajdon és a Ptk” (“Intellectual property and the Civil Code”) (2001). Available at , accessed 20 April 2016. 32  The compromise was promoted, among others, by those who acted both as practicing lawyers and as university lecturers, such as by Gábor Faludi who was (and still is) both an attorney-​at-​law and an associate professor at the Eötvös Lóránd University in Budapest (the de facto academic center of the preparation of the new Civil Code). In his study entitled “Copyright, the protection of industrial rights and the concept of the new Ptk” (G Faludi, “Szerzői jog, iparjogvédelem és az új Ptk. koncepciója” (2003)). Available at: , accessed 20 April 2016. Faludi presents arguments as to why the adoption of neutral language referring to the two basic branches of IP might be an acceptable solution.

Intellectual Property Law in Central and Eastern Europe    327 administration of IP rights; (ii) the provisions governing original ownership and the issues of transferability of rights; (iii) the relationship between IP rights and contract; (iv) the collective management of copyright and related rights; and (v) the enforcement of rights. The following sections discuss these specific features of the IP system of the CEE countries.

5.  The Public Administration of Intellectual Property Rights In respect of the public administration of IP rights, there is an important difference between industrial property rights and copyright because of the differing requirements for acquiring and maintaining each of these rights. For the acquisition of industrial property rights, the fulfilment of formalities—​registration and, in certain cases, also deposit of exemplars—​are needed. The administration of these formalities was and is taken care of by governmental offices (or regional offices operated on behalf of various countries): Patent Offices, where trademark protection was recognized (now, in general, this is the case also in the CEE region), Trademark Offices or, with overall competence for these rights, Intellectual Property Offices. In regard to the fulfilment of governmental tasks concerning copyright (which normally include such tasks as participation of the country in international and regional cooperation and projects; preparation of draft laws and regulations; harmonization of anti-​infringement programs; authorization and supervision of the activities of collective management organizations; and sometimes also the operation of voluntary registration systems), the picture is usually more colorful. Before the political and economic changes ushered in around the dissolution of the Soviet Union, Yugoslavia, and Czechoslovakia, many countries in the socialist bloc faithfully followed the example set by the Soviet Union. For example, in 1938, the VUOAP (Administration for the Protection of Authors’ Rights) was established to administer copyright, and was linked to the Union of Soviet Writers.33 Therefore, in the governmental structure, the Ministry of Culture was responsible for dealing with copyright. When the cooperation between the countries of the socialist bloc began in the field of copyright, this was “mirrored” by including copyright in the portfolio of the Ministry of Culture of each country. This did not change when the VUOAP was replaced in 1973 with the VAAP (All-​ Union Copyright Agency) as an independent agency in the governmental structure and when the cooperation between the socialist copyright organizations became active with annual meetings.34

33 

See S Levitsky, Introduction to Soviet Copyright Law (Sytthoff-​Leyden 1964) 39. The first such meeting (soveshchanie) was organized in Moscow in May 1976, and followed nearly every year by a meeting somewhere else in the bloc. The author of this chapter had the dubious pleasure to participate in all of the meetings until his joining of WIPO in 1985, in the first two meetings as Deputy Director General and then as Director General of the Hungarian Bureau for the Protection Author’s Rights (also fulfilling the function of an authors’ society under the name of “Artisjus”—​see Section 8). 34 

328   Mihály Ficsor During the transition process, the organizational systems became more diversified, although there were also common trends, most typically that the government’s administration of both industrial property and copyright was concentrated in a single IP office. This was particularly the case in several newly independent countries established from the former member republics of the Soviet Union and Yugoslavia where new organizations had to be established. Currently there are IP offices (under various names, such as ROSPATENT in the Russian Federation, patent office, state service, IP center, department of IP rights, etc.) covering both industrial property and copyright in the following former republics of the Soviet Union: Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Republic of Moldova, Russian Federation, Turkmenistan, Ukraine, and Uzbekistan, while in the three Baltic States, the two branches are dealt with separately, industrial property rights by the Patent Offices and copyright in Estonia by the Ministry of Justice and in Latvia and Lithuania by the Ministry of Culture. In Tajikistan, the organizational structure is similar to the latter two Baltic States. In Azerbaijan, there is a separate Copyright Agency but no separate office for industrial property rights; those rights are administered by the competent sector of the State Committee for Standardization, Metrology, and Patents. Of the former republics of Yugoslavia, the portfolio of IP offices covers all IP rights in Bosnia and Herzegovina, Croatia, Montenegro, Serbia, and Slovenia, but in FYROM, governmental administration is performed by the Ministry of Culture. In Albania, which was the only stand-​alone country in the West Balkans also before, there was a separate Copyright Office (beside a Patent Office to administer industrial property rights), but recently it has become a department of the Ministry of Culture. In the Czech Republic and Slovakia, the Intellectual Property Offices do not deal with governmental administration of copyright; rather, in each country it is the task of the Ministry of Culture. In the countries of the CEE region that were separate countries before “transition,” the administration of the two branches of IP rights is divided in a similar manner: Copyright is in the portfolio of the Ministry of Culture in Bulgaria and Poland, and the Copyright Office in Romania. In contrast, the tasks of the Hungarian IP Office extend to all IP rights.35 All the CEE countries that are EU Member States, and the West Balkan countries except for Bosnia and Herzegovina and Montenegro—​but including Albania—​are members of the European Patent Organisation.36 The latter two countries, however, have concluded “extension agreements” and the Republic of Moldova has concluded a “validation agreement” with the Organisation; thus, in those countries, European patents may be valid too. Eight former republics of the Soviet Union—​Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Russian Federation, Tajikistan, and Turkmenistan–​are members of the Eurasian

The meetings did not have too much meaning and relevance; the closing reports had to be finalized more or less before the meetings began. 35 

For the list of governmental organizations to administer IP rights in these and other countries, see Directory of Intellectual Property Offices Available at: , accessed 20 April 2016. 36  The European Patent Organisation is an intergovernmental organization that was set up on the basis of the European Patent Convention (EPC) (opened for signature 5 October 1973, entered into force 7 October 1977) 1065 UNTS 199. It has two bodies, the European Patent Office and the Administrative Council, which supervises the Office’s activities.

Intellectual Property Law in Central and Eastern Europe    329 Patent Organization, with the Eurasian Patent Office acting as its executive body and granting patents valid in the member countries of the Organization. Thus, of the 28 CEE countries, it is Ukraine and Uzbekistan where, for the time being, only national patents exist.

6.  The Nature and Original Ownership of Rights 6.1 Differences between the Branches of Intellectual Property The principle of rejection of private property as much as possible (in contrast with a certain scope of personal property and in favour of state and community property) discussed earlier was not applied in the same way concerning the various branches of IP rights in the socialist period of the CEE countries. The differences in the application of the Marxist-​Leninist dogmas partly followed from the fact that after the first wave of hasty “revolutionary” measures when the regimes had to be faced with reality, adaptations turned out to be necessary. Certain elements of private property had to be accepted as a “temporary” compromise in order to maintain the functioning economy and to achieve some development through forced industrialization in accordance with ambitious five-​year and seven-​year plans. These kinds of “compromises” were mainly necessary regarding industrial rights that had a role to promote innovation. From this viewpoint, trademarks were less relevant. The conditions and requirements of copyright law were significantly different in the socialist society, not only because the above-​mentioned constraints to accept “compromises” in the case of industrial property rights did not exist, but also due to the fact that this branch of law was applicable in the field of creations—​books, poems, dramatic works, films, etc.—​ that were directly relevant for, and were supposed to serve, Marxist-​Leninist ideology. For these reasons, the specific features of the socialist IP system more clearly prevailed regarding copyright than regarding industrial property rights. In view of these differences, the rights to promote innovations and trademarks, and copyright, are discussed separately.

6.2 Rights in Innovations and Trademarks After the October Revolution and the creation in 1917 of the first Soviet government, according to the standards of the given period, Russia’s patent law was considered appropriate.37 However, patents, as typical private-​property elements of the capitalist legal system, contradicted Marxist-​Leninist ideology. The first piece of Soviet legislation on industrial property rights, the “Decree on inventions,” was signed on 30 June 1919 by Lenin as the President of the Council of People’s Commissars, 37  The Law on Privileges for Inventions and Improvements was adopted in 1886 and amended up to 1912.

330   Mihály Ficsor that is, as the head of the Bolshevik government. All existing legislation on industrial property was abolished and existing patents were no longer valid. Instead of patents, the Decree introduced an “inventor’s certificate,”38 which remained the decisive element of the Soviet legal system until the end of the twentieth century.39 The certificates were issued practically under the same conditions as patents, but the inventors receiving such certificates lost ownership of their inventions, which became state property. At the same time, inventors were entitled to receive a modest remuneration in proportion with the economic results achieved. Not long after the hasty adoption of “revolutionary measures,” it became painfully clear to Lenin and other Bolshevik leaders that correction was needed. As a consequence of the First World War, the civil war, the international blockage, and the destruction of the more or less workable pre-​revolutionary economic structures, the Russian economy was in ruins and the population was struck by increasingly grave shortages. It became also clear that the hope for the Bolshevik revolution to grow into a worldwide communist revolution was not well founded, and that Russia had remained surrounded by not quite friendly capitalist countries. In a desperate attempt to survive, Lenin worked out the program of New Economic Policy (NEP), temporarily restoring chances for private initiatives and benefiting therefrom. This had an impact on IP. A new patent law was prepared according to Western standards at that time, and was adopted in 1924,40 which re-​established inventors’ rights to exploit their inventions either directly or through licensing mechanisms. A commentator analyzing the development of that period remarked that: The policy behind the enactment [of the 1924 patent law was] evident. Industrial progress required invention, and invention, in turn, had to be induced by means other than mere “wage claims.” The latter were not effective, not, at any rate, during the early period of “re-​ educating” the masses in terms of “social consciousness,” i.e., in terms of a “duty” to supply the state with useful inventions, as opposed to notions of “personal rights” in the invention supplied. . . Hence, during the middle and late 1920s, Soviet policy reverted to traditional Western notions of promoting scientific technical progress. The “egocentric individual” was supplied with “exclusive rights” which he might exploit in pursuit of his own profit, thereby promoting, in the aggregate, social ends.41

The restoration of certain elements of the capitalist IP regime did not last long. In 1931, a new law42 was adopted that re-​established the pre-​NEP principles.43 Additionally, by that time 38  In fact, its literal translation would be “author’s certificate” (in Russian: “avtorskoye svidelstvo”), and when it was introduced in other countries in the “socialist camp”—​as it had to be due to political pressure—​the same kind of expressions were used (for example, in Hungarian: “szerzői tanúsitvány” meaning literally “author’s certificate”). Nevertheless, in this chapter rather the expression “inventor’s certificate” is used, referring to inventors as inventors rather than as authors. 39  More precisely until 1991, when the new law adopted in the Gorbachev period abolished it; see further below. 40  Law on patents of 12 September 1924. 41  BR Burrus, “The Soviet Law of Inventions and Copyright” (1962) 30 Fordham L Rev 693. 42  Decree on Inventions and Technical Improvements of 9 April 1931. 43  The re-​establishment of the old “socialist” principles was stressed in a typical boasting style—​ advertising the “moral superiority” of the “new Soviet men”—​in the preamble of the 1931 Decree as follows:

“The patent legislation existing until now, serving the interests of the inventors by means of allowing them exclusive rights to their inventions, is not in accordance anymore with the aspirations of our outstanding

Intellectual Property Law in Central and Eastern Europe    331 the Soviet Union had stabilized, and Stalin—​who took over the leadership after Lenin’s death in 1924—​insisted on strict application of Marxist-​Leninist philosophy in all aspects of social life. Although the possibility of patenting inventions was maintained in principle, in practice, inventors’ certificates became the nearly exclusive legal means by which inventors could obtain recognition and a modest share of the results of the exploitation of their inventions. The 1953 riots against the regime in Berlin and the 1956 twin uprisings in October and November in Poznań (and even more dramatically in Budapest and all over Hungary) showed clearly that the “superiority” of socialism over capitalism was untrue. It became obvious that fundamental reforms were needed, but despite this realization, few changes took place in the Soviet Union in general, particularly in the field of intellectual policy. However, it might be regarded as a sign of progress that, in 1965, the Soviet Union acceded to the Paris Convention. While it was possible to obtain a patent instead of an inventor’s certificate, the economic system of the Soviet Union did not allow the patentee to exploit it normally. The inventors were not allowed to license their inventions to private enterprises, particularly not to foreign companies (export–​import was a governmental monopoly). Otherwise, private companies did not truly exist, and the State-​or community-​owned industry—​in accordance with the instructions of central planning authorities—​insisted on the use of “morally superior” inventors’ certificates. While the law permitted patent-​holder inventors to use their patents for their own activities, it was only on a low-​scale artisanal level. The following frequently quoted statistics characterize the real chance of patents in that period. The shadow of the dominant inventor’s certificates is quite telling: Between 1965 and 1968, about 80,000 inventors’ certificates were granted in the Soviet Union; the number of patents was three.44 The objective of this chapter would not justify and its length would not allow going through all the changes in the industrial property legislation of the former Soviet Union. After all, its socialist past is mainly relevant to the extent that its elements might have influenced the current IP law of the Russian Federation and other countries of the CEE regions. Nevertheless, before referring to the 1991 Patent Law of the (then already dying) Soviet Union bringing about fundamental changes, it is worthwhile mentioning the Law on Discoveries, Inventions and Rationalisation Proposals of 21 August 1973, which remained in force until the said 1991 Law adopted as a production of the reform movement of the Gorbachev era. The 1973 Law comprehensively covered not only inventors’ certificates and patents, but also discoveries and rationalization proposals45 that, according to international standards, are not objects of IP rights.

inventors aware of their role as contributors to the building of socialist society. It is necessary to create new forms for relations between inventors and the socialist society and government, which will correspond to the important role of inventors in the building of socialism.” 44 

See SP Ladas, Patents, Trademarks, and Related Rights—​National and International Protection, Vol 1 (Harvard UP 1975) 380 n 226 (indicating that the source was a Brochure of the Soviet Patent Office (GOSPATENT) published in 1969 on inventions and rationalization activities). It is also quoted in WA van Caenegem, “Inventions in Russia: From Public Good to Private Property” (1993) Bond University ePublications@bond 233. 45  The definition of rationalization proposals is “. . . a technical concept that is new and useful for the enterprise, organization, or institution to which it is submitted and that envisions a change in article design, production technology, and machinery or a change in the composition of materials that are used.” AM Prokhorov (ed), The Great Soviet Encyclopedia, 3rd edn, (Macmillan 1974–​1983).

332   Mihály Ficsor Provisions on the official recognition of scientific discoveries of laws of nature sufficiently important to increase the level of human knowledge were first adopted in 1947 in Soviet law; in the 1973 Law they were codified together with the provisions on the rights concerning inventions and rationalization proposals. A discovery was certified but did not trigger any rights or remuneration for its substantive use, development, and possible transformation into technical applications; beyond the certification, it only went along with a one-​time reward and with some advantages46 that were due, even without such achievements, to outstanding scientific activities. Rationalization proposals did not reach the level of the “new technical solution to a problem” required for an inventor’s certificate or patent. They were supposed just to contribute by improvements to the manufacturing activity at the level of state enterprises. A more limited test of novelty was applied and the application for and the decision on the recognition of such improvements normally took place at the level of the enterprises concerned. Monetary reward went along with such recognition in proportion with the economic result of the rationalization, but at a level lower than that of inventors’ certificates. In the 1980s, it was becoming ever more evident that the Soviet Union was losing both the arms race and the economic competition with the so-​called “capitalist world.” This was due to the overly centralized planned economy system, the absence of sufficient incentives to work better and more efficiently, as well as to produce higher-​quality, more inventive products and services. There was hardly any doubt that the out-​of-​date, dogma-​based industrial property system had played a significant role in producing these historical disadvantages. Thus, it did not come as a surprise that, in 1988 the Central Committee of the Soviet Communist Party instructed the Government (the Council of Ministers) to prepare a new law on inventions to conform to international standards of IP. The draft law, the first version of which was submitted to the Supreme Soviet in 1989, led to certain controversies, the more so because there were still some groups trying to protect and maintain certain “socialist values.” After all, the resistance of the “old guard” had manifested in such a serious way as the putsch in August 1991. Finally, on 31 May 1991, the new Patent Law of the Soviet Union was adopted, and entered into force 1 July 1991. It contained precisely those kinds of fundamental changes against which the “old guard” in the putsch was rioting. The inventors’ certificates and the provisions on discoveries and rationalization proposals were abolished; patents remained the only legal means to recognize and protect inventions. Some fading features of the socialist period could be detected in it, but it was an important step towards a real market-​oriented, private property-​based legislative regime based on international standards. It also included provisions on the protection of utility models and industrial designs, but with less stringent requirements than for genuine patents. Thus, to a certain extent, it filled the void left by the abolition of rationalization proposals. The 1991 Law did not last long due to the demise and dissolution of the Soviet Union, although it operated for a short while in the Russian Federation, as successor state, and had an impact also in certain other newly independent states formed from former member republics of the Union. However, on 23 September 1992 the Patent Law of the independent 46  Advantages such as better housing conditions, the chance to get access to certain goods and services that were scarcely available to the general public, the possibility of travelling abroad (with some “guarantees,” such as family members remaining at home), etc.

Intellectual Property Law in Central and Eastern Europe    333 Russian Federation was adopted and signed into law by President Yeltsin, entered into force on 14 October 2016. The Patent Law reflected even more consistently the strong commitment to comprehensive market reforms than the 1991 Law did. The industrial property provisions of Part IV of the Civil Code were already more or less in accordance with international norms and had also taken into account the main features of EU law when they were adopted in 2006. This was due to a great extent to the fact that it had been drafted by a committee composed mainly of civil law professors and researchers who had received quite broad freedom to work out a modern IP law, who had the necessary knowledge and skills for achieving this, and who wished to prove their capacity to produce high quality rules. Part IV has been further improved as a result of certain amendments, several of which were adopted in order to confirm its compliance with the TRIPS Agreement before the Russian Federation’s accession to the WTO on 22  August 2012. Law N 259-​F3 of 4 October 2010 amended paragraph 5 of Article 1229 of the Civil Code, and quoted almost verbatim Articles 13, 17, 26(2), and 30 of the TRIPS Agreement on the three-​step test on exceptions to and limitations of copyright, and exceptions to patent and industrial design rights, and it introduced a test that corresponded to the third condition of the exceptions to trademark rights. The original text was much simpler and applied equally to exceptions and limitations to any IP rights. Specifically, it referred to the overall terms of “exceptions to the exclusive rights in the results of intellectual activity and means of individualization, including those cases where the use of the results of intellectual activity is permitted without the consent of the owner of rights but with the obligation to pay remuneration . . . provided for by the present Code.”  It also read that these “limitations shall be applied under the conditions that they do not cause unjustified conflict with a normal exploitation of the results of intellectual creativity or means of individualization and do not unreasonably prejudice the legitimate interests of the owners of rights.” Although this amendment fulfilled the WTO negotiating parties’ request that Part IV be in accordance with the TRIPS Agreement, its impact on the various branches of IP was mixed. It may be said that the explicit inclusion of the first condition of the test (referring to the limited nature of exceptions to patent and industrial property rights and the confinement of exceptions to copyright to special cases) was a positive element from the viewpoint of owners of rights, and that by transposing the specific text of Article 13, copyright owners got rid of the adjective “unjustified” regarding conflicts with the normal exploitation of works concerning the second condition of the test. In contrast, however, for the owners of patent and industrial design rights it became necessary to take into account that other legitimate interests received greater emphasis in the application of the third condition of the test, not mentioning the provision on exceptions to trademark rights in the case of which the second step was left out and the test was reduced to the third one as provided in Article 17 of the TRIPS Agreement. Finally, in 2014 an overall revision of Part IV took place with three basic objectives: first, to take into account and utilize the practical experience obtained since the entry into force of Part IV; second, to it respond to the challenges of new technological developments; and, third, to adapt the legislation to emerging international standards. On 12 March 2014, President Putin signed Law 35-​FZ amending the Civil Code, including Part IV. It entered into force on 1 October 2014 (and in the case of certain provisions, on 1 January 2015).

334   Mihály Ficsor The new provisions modified the requirements for obtaining patents,47 utility models,48 and industrial designs,49 which partly consisted in the codification of established practice. A further, more substantive amendment was to add to the two existing basic categories of patentable inventions provided in Article 1350 of the Civil Code. Specifically, these were product and process (method) inventions, that is, inventions consisting in a new use of a substance, device, or method (for a new purpose).50 The provisions of Article 1363 on the terms of protection of utility models51 and industrial designs52 were also modified. In the case of patents, the procedure and status of term extensions of pharmaceutical, pesticide, or agrochemical patents53 have also changed. Amendments were also made regarding dependent patents, utility models, and industrial designs, the filing and processing of applications, the invalidation of patents, infringements of patents, and transfer of rights. In this chapter, it is sufficient to offer a more general description about trademarks and the trademark system in the early years of the Soviet Union (if the system existed at all). After the October Revolution, trademark law was neglected, and while both patents and trademarks were closely linked to private property and regarded as relics of bourgeois law, there was a difference between the two branches of industrial property. It was regarded as essential to apply some legal means to fulfil the function that patents served, especially to promote inventions, and this led to the creation of inventors’ certificates. In contrast, in an economy where market competition was not encouraged or allowed and the manufacturing and distribution of goods took place on the basis of central plans, the distinguishing function of trademarks was irrelevant. Nevertheless, when the Soviet politicians recognized that both technologies and goods and services from capitalist countries were vital to economic success, the Soviet Union had to adapt their laws to international standards of IP protection. The Soviet Union’s accession to the Paris Convention in 1965 took place on the basis of these considerations. On 8 January

47  Such as including sufficiency of disclosure—​until the amendment, only a practical but not a statutory requirement—​in addition to the three basic requirements of novelty, inventive step, and industrial applicability (art 1386). 48  Utility model protection was introduced by the 1992 Patent Law of the Russian Federation. However, the requirements of such protection were not regulated adequately, allowing misuse of the absence of examination for novelty and inventiveness against legitimate competitors. Through the 2014 amendments, the concept of prior art has been broadened (art 1351), the provision based on the “doctrine of equivalent” has been deleted (art 1358), and substantive examination has been introduced (art 1390). 49  Concerning the protection of industrial designs (“design patents”), multiple amendments were made, such as the abolition of “artistic design solution” as a requirement for protection, the deletion of certain exclusions from protection (such as those related to agriculture), the increase of the grace period for prior disclosure from six to 12 months, the extension of examination to cover possible prior patent and utility model applications, and the removal of the requirement for written description (arts 1552 and 1377). 50  However, this third category—​using a patent term—​had fallen in the category of “prior art,” because the 1992 Patent Law of the Russian Federation contained a provision on such inventions. Uncertainties have, however, emerged about their status in view of subsequent regulations and practice. 51  Now there is strict ten-​year term of protection without the possibility of extension as before. 52  In fact, 25 years as a maximum term has remained, but now more frequent renewals are needed (every five years). 53  Now it is not the term of the original patent that is extended, but a new supplementary term of protection that is granted for the specific product.

Intellectual Property Law in Central and Eastern Europe    335 1994, a Trademark Law was adapted which fulfilled the minimum international requirements, and it was entered into force on 1 May of the same year. On 3 July 1991, the Supreme Soviet of the moribund Soviet Union adopted a new Law on Trademarks and Service Marks, which was also part of the fulfilment of its obligations under the trade agreement of 1 June 1990 between the US and the Soviet Union to apply measures against widespread counterfeiting. For a while, this Soviet law was applied in the newly independent Russian Federation as successor state (and impacted also on some other independent countries formed from former republics of the Soviet Union). However, on 23 September 1992, a new Trademark Law was adopted in the Russian Federation, which then was further amended up to 2002. The new law included provisions in line with international standards, not only for the protection of trademarks and service marks in general, but also (under the new Articles 19-​1 and 19-​2 inserted through subsequent amendment) for the protection of well known marks specifically. In Part IV of the Civil Code, further clarifications and improvements on the protection of trademarks and other “means of individualization” were introduced, which were later updated by subsequent amendments. As a result, the Code contained provisions which were in accordance with the international standards, including the TRIPS Agreement and, to a great extent also, with EU norms concerning trademarks and service marks (Articles 1477–1515), company names (Articles 1473–1478), appellations of origin (Articles 1516–1537), and trade names (Articles 1538–1542). The other countries of the Soviet bloc were under political pressure to adopt the legal institutions of the Soviet Union, and had to introduce inventors’ certificates and rationalization proposals.54 Some of the (at least formally) independent countries of Central Europe, however, were reluctant to replace their patent systems with inventors’ certificates. For example, Czechoslovakia resisted the pressure, There was an attempt to apply the Soviet model in the 1960s, but the reformist politicians did not support it and it did not go through the parliament. On the contrary, in 1968, the cabinet approved a draft Industrial Property Code that would have confirmed that patents as the legal means for protecting inventions. However, the Prague Spring was crushed by a Soviet-​led invasion and the puppet government and parliament followed Soviet instructions. In 1972, inventors’ (authors’) certificates became the dominant institution for the protection of inventions.55 In Hungary, contrary developments took place. Hungary was an ally of Germany in the Second World War; thus, the Soviet Union, as an occupying power, from the very beginning exercised stronger and more direct pressure on the Hungarian Government. In 1948, after the communist takeover of Hungary, the application of the Soviet model was nearly immediate. In the same year, Government Decree 1948/​11990 practically copied the Soviet legislation; the institution of the inventor’s (author’s) certificate became dominant and patents were only used in connection with export-​import activities. In 1956, an uprising against the 54 

In Hungary, the word “újítás” was used for rationalization proposals, the Hungarian meaning of which is just “innovation.” Thus, at present, in order to avoid reference to that out-​of-​date institution, this Hungarian word is not used anymore to refer to innovation activity in general; instead a derivative form of the foreign expression is used: “innováció.” 55  For a detailed description of these events in the 1960s and 1970s, see M Trimble, “The Patent System in Pre-​1989 Czechoslovakia” (2013). Available at: , accessed 20 April 2016.

336   Mihály Ficsor communist regime and Soviet occupation was crushed and a period of bloody suppression began. Perhaps due to the dominance of other more fundamental political issues and the absence of attention by the Soviets (and their faithful local followers), a draft decree—​the preparation of which still began in the reform wave before the uprising—​was adopted in 1957 as Governmental Decree 38/​1957 (VI. 23) to abolish inventors’ certificates and base the protection of inventions on patents. In the current laws of the CEE countries, these Soviet concepts are not present anymore. Their legislation now corresponds to international standards and to EU law. This applies ever more not only for the EU Members States of the region but also for those which, although not yet EU Member States, are negotiating their accession; one of the conditions of which is to align their laws with the EU directives. This may also be said about the law of the Russian Federation which, in turn, serves as a model for those countries that are members of the above-​mentioned Eurasian Patent Organization.

6.3 Copyright After the Bolshevik Revolution, authors’ rights partly shared the fate of industrial property rights due to a wave of nationalization regarding certain outstanding creations. In parallel with this, the quite surprising “author-​centric” Soviet copyright law also appeared. On the basis of the “revolutionary” ideas, already in 1917, the year of the revolution Lenin signed a decree56 that the working masses should be able to get access to valuable works (published in cheap editions by nationalized publishing houses) of the greatest Russian authors. The decree authorized the Commissariat of Education to nationalize the works of famous deceased authors; which was then extended to certain living authors. The Commissariat had a monopoly to publish these works against a modest pre-​determinate remuneration. Later, however, the fate of authors and works changed. The method of nationalization was abandoned, and on 10 October 1919 a new Decree (under which the term of protection of works was reduced to the life of authors) introduced the doctrine of inalienability of authors’ rights, and this prevailed throughout the years of “socialism.” The assignment of rights became forbidden; authors could only grant licenses to publishers for a given limited period. These licenses were for the reproduction and distribution of a given number of copies, for which they received remuneration according to a pre-​established scale. These characteristics of the Soviet copyright law were maintained in the 1925 Fundamentals on Copyright, on the basis of which the member republics were to adopt their own copyright laws (ie, in the Russian Federal Republic, it was adopted on 11 October 1926). Under the new law, the term of protection was 25 years after publication (later changed to 15 years’ post mortem auctoris), and generous moral rights and basic economic rights were granted, although with broad limitations. However, protection under this law only extended to Soviet citizens and works published in the Soviet Union. In 1961, the Fundamentals of Civil Codes were adopted under which the legislative provisions on IP—​and thus also on copyright—​became parts of the Codes adopted in accordance with the Fundamentals

56 

Decree of the Council of People’s Commissars of 19 December 1917.

Intellectual Property Law in Central and Eastern Europe    337 in the member republics. Certain details were modified but, in comparison with the 1925 Copyright Fundamentals, the nature of copyright legislation remained the same. In 1973, the Soviet Union acceded to the UNESCO Universal Copyright Convention (UCC) as a result of which foreign works became protected in the Soviet Union. The Fundamentals were adapted to the minimum requirement of the UCC and later not only under its original 1952 Geneva version, but also under its somewhat more demanding 1971 Paris Act. The term of protection was extended to 25 years’ post mortem auctoris, and, for example, the exclusive right of translation (not existing before in Soviet law) was recognized. Gorbachev’s perestroika brought about similar changes in the field of copyright to those concerning industrial property rights. In 1991, new Fundamentals were adopted that increased the level of protection nearly to the international standard. In the meantime, however, the Soviet Union ceased to exist. The Fundamentals served as transitional legislation in the former member republics, which later adopted their own separate copyright laws. On 3 August 1993, a modern Copyright Law was adopted in the Russian Federation in accordance with the Berne Convention. It was applicable until the entry into force of Part IV of the Civil Code, which replaced all separate IP laws. The copyright provisions of the Code comply with international treaties and standards. The copyright laws of the (at least formally) independent countries of the CEE region were in accordance with the minimum requirements of the Berne Convention to which they were party even in the socialist period (in contrast, regarding related rights, only Czechoslovakia was then party to the Rome Convention). Currently, practically all CEE countries’ legislation is in accordance with the minimum requirements of international copyright and related rights treaties. There are three aspects of their copyright systems where specific features—​inherited from the socialist past—​may still be found: contractual aspects including the transferability of rights; collective management of copyright; and enforcement of rights. (However, in some of these countries, while the laws are in line with international standards, they are not necessarily duly applied, if they are applied at all.)

7.  The Transferability of Rights and Contractual Systems It was typical in the socialist period of the CEE countries that the various aspects of contracts were regulated in great detail and remuneration for IP licensing was determined within strict limits. Egalitarianism prevailed; where creators received remuneration for their inventions and works, they were not supposed to earn “excessive” amounts. In a centrally planned economy, detailed regulation of copyright fees was also governed by the income policy of the regimes; no significant differences were allowed between personal incomes. Thus, brutally regressive fee charts were provided in decrees and regulations on the various types of uses of inventions and works protected by patents and copyright. There were several thresholds in the fee systems which determined both minimum and maximum remuneration and, beyond a certain number of copies or uses, creators received considerably lower fees.

338   Mihály Ficsor The overregulation of contracts is incompatible with the conditions and requirements of a market economy. Thus, it was clear from the very beginning of the transition to a market economy that the provisions on IP contracts had to be revised. This took place in different ways. In some CEE countries, it occurred step by step; for example, by eliminating the maximum limits but maintaining the minimum fees in order “to protect the interests of creators” (with the obvious danger, however, that the minimum fees were applied also as maximum fees). In other CEE countries, remuneration was introduced based on percentages of the economic results of the use of inventions and works respectively (this was a transitional step in the Gorbachev era). Currently the former style of tariff regulation has generally been eliminated and broad contractual freedom is the norm.57 There is, however, one element of the existing contractual system—​namely, the principle of inalienability (non-​assignability) of copyright (not only moral rights but also economic rights)—​that continues to reflect certain traditions of the socialist period in some CEE countries. As discussed above, while after the October Revolution, the rights in inventions had to be transferred to socialist enterprises, on 10 October 1919, the Soviet copyright decree prohibited the assignment of rights to publishers, and only allowed licenses to be granted for a limited time and for limited copies. As with many other things, this also became a socialist dogma and as such was strictly applied—​not only in the Soviet Union but also in other CEE countries—​until the beginning of the liberalization trends at the start of the 1990s. It may be difficult to understand why socialist copyright laws chose the civil law (or Continental) model in respect of original ownership and transferability of rights, rather than the common law (or Anglo-​American) model. Why was it that employees and individual creators were declared original owners of rights and not state-​owned enterprises? Why was the assignment of copyright, as a rule, not allowed? What was the reason for this apparently unnecessary complication of individualistic exclusive rights, when practically all relevant rights could have been owned by the community through its state-​owned companies? Why did the Soviet Union, without the constraints of international conventions, recognize, with many limitations, exclusive rights for authors? The answers lie in the understanding of how the Soviet-​type socialist copyright system was born, and how it developed and functioned. Before October 1917, publishers were the only important group of users of works. On the basis of the law in force in that time, as a rule, publishers contractually owned the rights of the works they published. As discussed, as part of the state’s anti-​capitalist measures, revolutionary legislation declared that those contracts lost validity, confiscated the rights of publishers, and gave rights back to authors (first reducing the level of protection, but later gradually increasing it). After the Second World War, the so-​called people’s democracies in the bloc faithfully followed these measures. In principle, copyright could have been simply nationalized, as were many industrial property rights. Copyright escaped this fate probably because of the ideological desire to prove that “socialism” was superior to capitalism, and that it better served basic human needs and values. At the time when the principles of the socialist legal system were established, the 57 

This does not mean that creators everywhere are happy with this kind of liberalization. Some of them—​in particular authors—​are of the opinion that legal provisions on tariffs, even if minimum tariffs, offer certain protection in negotiation with users, such as publishers, without which they might receive nothing.

Intellectual Property Law in Central and Eastern Europe    339 romantic concept of the author-genius was accepted in Europe. The communist ideologues wanted to be in a position to boast that the socialist system, in accordance with this concept, fully respected and promoted the creativity of authors. Based on this, there were two specific features of socialist copyright laws that followed. First, since in the recognition of authors’ rights, the romantic notion of the author-​genius played a decisive role, the personality of the author was recognized as the focus of the system. The reason for granting quite “individualistic” exclusive rights to authors was that the need for recognizing such rights followed from the inner relationship of the author to his work. As a result, socialist copyright laws were based, in general, on a fairly strict monistic theory that presented copyright (more precisely “authors’ rights”) as an inseparable unity of moral and economic rights. Within this unity, moral rights were generously regulated, while economic rights, although they were also recognized, were fairly extensively limited to guarantee that they were in harmony with the interests of society. Second, from this approach it also followed that the commodity nature of copyright was emphatically rejected as a typical feature of capitalist copyright laws. The recognition of exclusive economic rights was inseparably linked to what was characterized as the special personal nature of an author’s creativity. Thus, as a rule, authors—​and not employers, producers, or publishers—​had to be recognized as the original owners of copyright; authors’ rights had to be inalienable; and even the validity of licenses granted to users had to be limited in time and in other aspects. All this became part of legal dogma. This specific author-​centric nature of socialist copyright laws had certain advantages under the conditions of a centrally planned economy and “democratic centralism.” Authors’ rights were limited in various respects, and many conditions—​several of an ideological, political nature—​were set for their exercise; however, to a certain and not negligible extent, they still represented an island of privacy, “individualism,” and personal (also to some extent private) property. The alternative—​which might have consisted in granting the original ownership of copyright to the producers, publishers, and employers of the authors of works, and/​or at least allowing the assignment of authors’ rights to them—​would have meant the indirect collectivization of authors’ rights. Therefore, this aspect of socialist copyright laws had certain beneficial effects from the viewpoint of authors as creators. In a market economy, it is essential that employers, producers, and publishers are able to exploit works and objects of related rights, the creation and production of which they have invested in, in a reasonably flexible way and without the need to ask for authorization from the creative contributors repeatedly. Furthermore, there are certain complex works (such as films, computer programs, encyclopedias, databases, etc.) where it would be impossible or highly impracticable to require that economic rights be exercised on an individual basis by the great number of creative contributors. In these cases, decision making, negotiation, licensing, and enforcement of rights for these works should be concentrated. Therefore, it has become necessary for the transition countries to review the rigid dogma of inalienability of authors’ rights, as well as the related question of the original ownership of rights. It is ironic that while in the Russian Federation, the successor state of the Soviet Union as the source of the dogma of inalienability of copyright, complete liberalization has taken place in this respect through, Article 1233(1) of Part IV of the Civil Code which allows the assignment of all kinds of IP rights, in certain CEE countries, this has not been necessarily the case. For example, under Hungarian copyright law before the socialist period, economic rights were assignable. Thus, it would have been natural to revert to that tradition when market

340   Mihály Ficsor economy was re-​established. However, this has not—​or at least only partly—​taken place. The 1999 Copyright Law—​mainly at the influence of certain academics who favored the newer “tradition”—​still includes the principle of inalienability of copyright.58 Only some exceptions are provided to its application, for example, in the case of: (i) works created under employment contract; (ii) contributions to the creation of audiovisual works; (iii) computer programs (software), (iv) databases; and (v) works ordered for the purpose of advertisement.59 These issues, however, have also emerged in traditional market economy countries that follow civil law legal traditions. In these countries, the copyright laws also contain provisions under which, in general, authors are recognized as the original owners of rights, and there are limits to the assignment of economic rights. Such provisions have been adopted, for example, in Germany60 on the basis that they are necessary to strengthen the position of authors—​and, in the field of related rights, performers—​in negotiations with employers, producers, and publishers, who are often regarded as being in a stronger negotiating position. It is thought that, without appropriate provisions on original ownership and transfer of rights, authors and performers might be compelled to give away their rights without the chance of exercising and benefiting from them again.

8.  The Collective Management of Rights 8.1 Governmental, Semi-​governmental, and Private Organizations In the socialist period, in the majority of CEE countries, the functions of state copyright administration and collective management of authors’ rights were combined. There were governmental agencies (eg, the VAAP in the Soviet Union with a Moscow center and units in all member republics), semi-​governmental organizations with more or less autonomy (eg, ARTISJUS in Hungary or JUSAUTOR in Bulgaria) or, in principle, private societies, but with strong governmental influence and control (eg, OSA and DILIA in the Czech, and SOZA and LITA in the Slovak, parts of Czechoslovakia). Only the Polish ZAIKS and the Yugoslav SOKOJ seemed to work as more or less (probably less) independent authors’ societies. The example of UOVAP, predecessor organization to the Soviet VAAP, strongly influenced organizational structure of collective management organizations (CMOs) in the Soviet bloc countries. The UOVAP was closely linked to the publishing administration, and established to deal with authors’ rights in published works. CMOs usually had also to fulfil the functions of literary and theatrical agencies (exercising a state monopoly) in addition to performing the traditional collective management activities. In fact, for VAAP, agency activity seemed to be the dominant task, and it was the key organizer of the Moscow Book Fairs, held from 1975 and regularly after that. In some CEE countries, the agency functions, along with the management of rights in literary and dramatic 58 

See art 9(3) of the Copyright Law. See arts 30, 58(3), 61(2), 63(1) and 66 of the Copyright Law. 60  See art 29(1) of the German Copyright Law. 59 

Intellectual Property Law in Central and Eastern Europe    341 works, were fulfilled by separate organizations. This was the case in Czechoslovakia, where, in the Czech part DILIA and in the Slovak part LITA operated as such agencies, as well as in Romania (Fondul Literal), and in Yugoslavia (Autorska Agencija). In accordance with this strong publishing orientation, where the organizations were not independent state bodies as VAAP in the Soviet Union, they were subject to governmental control by the Ministries of Culture. In general, the Vice Minister in charge of publishing was responsible for the supervision of CMOs.

8.2 Transformation of the Organizational Structure in the Transition Period In September 1990, WIPO published a book on the “collective administration” of copyright and “neighboring rights.”61 It was originally presented in English, French, and Spanish, and then, with the authorization of WIPO, was translated into a number of other languages, including Russian.62 In 2002, WIPO published an updated edition of the book.63 Both editions describe the main areas and typical forms of collective management of copyright and related rights. They also analyze the basic conditions and requirements of the establishment and operation of CMOs, and the final chapter offers conclusions on the most important principles of collective management. In the 2002 edition of WIPO’s book on collective management, principle (12) addresses certain important issues that emerged when the CEE countries were faced with the task of transforming their governmental or semi-​governmental bodies into private organizations. It reads as follows: Whether public or private organizations are more appropriate for joint management of copyright and related rights . . . depends on the political, economic and legal conditions and traditions of the countries concerned. In general, private organizations are preferable. The conditions of certain countries . . . may, however, make the setting up of public organizations desirable in order to safeguard rights owners’ interests. In the case of such public organizations, appropriate organizational forms and guarantees are needed in order that the rights owners concerned may participate in the direction of the management of their rights.64

During the transition period, immediate transformation into private societies did not take place in all CEE countries. In certain countries, transition was slow and convoluted. For example, in the Russian Federation, VAAP was transformed into RAIS, then for a short while into GAASP, which was still of a governmental or semi-​governmental nature. Finally, the RAO—​the Russian Authors’ Society—​was established as a private organization. In other countries, the organizational change was sudden; in some cases, so sudden that it created a transitional vacuum. On the one hand, the governmental or semi-​governmental structure no longer functioned and, on the other, the private organizations were not yet 61 

M Ficsor, Collective Administration of Copyright and Neighboring Rights (WIPO 1990). M Ficsor, Kolektivnoye upravleniye avtorskim pravom i smezhnymi pravami (Russian Authors’ Association 1999) (AV Turkin (tr), VS Dunin (ed)). 63  M Ficsor, Collective Management of Copyright and Related Rights (WIPO 2002). 64  Ficsor (n 61) 161. 62 

342   Mihály Ficsor established. It also happened that private societies were established but, under the slogan of freedom of association, a number of parallel organizations were set up to manage the same category of rights for the same category of rightholders. This side-​by-​side situation led to chaos, and became an obstacle of normal exercise of the rights concerned. At the time of writing this chapter,65 the current situation in Ukraine is particularly frightening: for example, the number of organizations managing musical performing and mechanical rights hovers around 20. The current governmental CMO (Ukrainian Agency of Copyright and Related Rights, or UACRR) still exists, but now has to compete with a number of private, and several “rogue,” CMOs. Still, there are a limited number of countries in the region where the transformation from governmental organizations to private societies has not taken place, and it is still governmental or semi-​governmental organizations that deal with collective management, for example, in Belarus, Kyrgyzstan, and Tajikistan. The operation of governmental or semi-​governmental CMOs, as clarified by the above-​ quoted principle in the WIPO book, in view of the current stage of the social and economic development of certain countries, may be necessary for the operation of the copyright system. Where this is the case, the application of two principles seems desirable. Firstly, in such organizations, the rightholders concerned should have also an appropriate role in the management system.66 Secondly, the organization should function in accordance with international norms and general principles of collective management. With this in mind, there are countries where the transformation of the governmental or semi-​governmental organizations into civil societies took place in a seamless way. For example, in Hungary, although ARTISJUS, the authors’ society, lost its semi-​governmental character, it continued its activity without any transitional problems. This was due to a reasonable grace period to establish all the requirements of becoming a private body and to integrate other helpful aspects of the new legislation. It also prescribed strict conditions for the registration of a private CMO (which generally only the existing CMOs were able to fulfil), and it provided that only one organization may be registered for the collective management of a given category of rights of a given category of rightholders. The political, economic, and social changes in the CEE region were coupled with the division of existing states into separate independent countries. This—​in addition to the transformation of governmental or semi-​government organizations into real private societies—​enabled the “velvet” separation of Czechoslovakia into the Czech Republic and Slovakia, especially as there were separate Czech and Slovak CMOs already during the socialist period. However, the separation of Yugoslavia into several independent states and the subsequent creation of duly functioning CMOs was not a smooth process. In Serbia, where SOKOJ had its center of activities in the Yugoslav period, and in the economically more developed Croatia and Slovenia, the transitional problems were solved quite soon.

65 

20 April 2016. From this viewpoint, it is necessary to also take into account Principle (16) of the WIPO study, which reads as follows: “Decisions about the methods and rules of collection and distribution of remuneration, and about any other important general aspects of joint management, should be taken by the rights owners concerned or by bodies representing them under the statutes of their organization.” See Ficsor (n 61) 162. 66 

Intellectual Property Law in Central and Eastern Europe    343 However, in general, great efforts still need to be made for achieving an adequate, well-​ functioning collective management system in the other newly independent countries.67 Among the newly independent states created from the ex-​republics of the Soviet Union, the differences are even more emphatic. In the Russian Federation, RAO inherited the staff, equipment, machinery, experience, and relations of VAAP, which facilitated a relatively smooth transition and paved the way for further modernization. In Armenia, Georgia, and the Republic of Moldova, private CMOs were created that administered both copyright and related rights, and that integrated the personnel of the small VAAP regional branches; however, all have been facing great problems in the exercise and enforcement of rights entrusted to them. In Kazakhstan, a private CMO, KAZAK, was created in 1997, and seems to be the only private CMO operational in Central Asia. In Azerbaijan and Uzbekistan, small private CMOs are still fighting with a number of problems to establish themselves and to operate appropriately. In the Baltic countries, however, collective management took a different path and ended up with multi-​repertoire CMOs operating successfully within the legal and economic environment of the EU.

8.3 Existing and Missing CMOs: Sleeping and Neglected Rights In the CEE countries, as in other parts of the world, authors’ organizations—​particularly for the management of rights in musical works—​are the best and more generally established CMOs. In different organizational forms, with better or worse operations, there are such organizations in the overwhelming majority of the countries covered in this chapter. Some of them have quite old traditions, are recognized as well-​functioning CMOs, and have played traditionally quite important roles also in the governing bodies of the International Confederation of Authors and Composers Societies (CISAC) and Bureau International des Sociétés Gérant les Droits d'Enregistrement et de Reproduction Mécanique (BIEM); such as ARTISJUS in Hungary, ZAIKS in Poland, RAO in the Russian Federation, and SOKOJ in Serbia. It may be claimed that, in the 11 CEE countries that are EU Member States, the collective management of authors’ rights as a whole, and in particular in the field of music, are functioning properly68. This does not mean that, in the other countries covered in this chapter, there are no CMOs that function in an appropriate way, but in the West Balkans, the Caucasus region, and the “five stans” in Central Asia, the picture is quite mixed. 67  For example, in Bosnia and Herzegovina the organization SQN (Sine Qua None) started exercising collective management as a kind of private agency, but in 2012 the State Intellectual Property Office of Bosnia and Herzegovina withdrew SQN’s license and authorized another CMO—​AMUS (Association of Composers—​Musical Creators)—​to collectively manage the rights in respect of musical works. However, in the meantime SQN appealed the Institute’s decision and, at the time of finalizing this text, the case was still pending before the courts. 68  In 2013 the level of domestic collections (performing rights, per GDP) of some CEE societies, such as ARTISJUS (Hungary), HDS-​ZAMP (Croatia) and SAZAS (Slovenia), was higher than that of most Western European societies: CISAC Statistics. Available at: , accessed 20 April 2016.

344   Mihály Ficsor The situation is different in regards to the management of the rights of performers and producers of phonograms to a “single equitable remuneration” under Article 12 of the Rome Convention and Article 15 of the WPPT, and to reprographic reproduction rights. In the CEE countries that are EU Member States and some other countries with relatively well-​established copyright systems, there are separate organizations to manage these rights. In others, they are either managed by the authors’ societies (as regards related rights, normally only performers’ rights, since the extension of the management activity to the rights of producers might lead to conflicts of interest) or fall in the category of “sleeping” rights. Sleeping rights are those rights that are provided for in national laws, but that are not applied in practice. In several CEE countries, cable retransmission rights, the lending right, the right to remuneration for private copying, and the resale right have more or less the same status. In some CEE countries, there are separate organizations of performers and producers of phonograms (which usually act together in many aspects). Along with producers’ associations, performers’ societies or unions exist in Albania (AKDIE), Croatia (HUZIP), Estonia (EEL), Hungary (EJI), Kazakhstan (AMANAT and KOUPI), Poland (SAWP and STOART), Romania (CREDIDAM), and Serbia (PI). In Azerbaijan (Society for Collective Management of Related Rights), the Czech Republic (INTERGRAM), Latvia (LAIPA), Lithuania (AGATA), the Russian Federation (VOIS), Slovakia (SLOVGRAM), and Slovenia (IPF), performers and producers of phonograms have established joint organizations. In Armenia (ARMAUTHOR), Georgia (GCA), and Uzbekistan (Gai Uz), the authors’ societies also manage performers’ rights. In other CEE countries, these related rights, in general, are still sleeping, and in some of the countries listed in this paragraph, the CMOs that attempt to enforce these rights are far from successful. In regard to reprographic rights, the situation is similar. The CEE countries where separate reprographic rights organizations have been established include Bulgaria (REPRO BG), Croatia (ZANA and DHK), Hungary (HARR), Poland (COPYRIGHT POLSKA and KOPIPOL), Republic of Moldova (REPROMOLD), Romania (COPYRO, OSRO, and VISARTA), the Russian Federation (COPYRUS), and Slovenia (SAZOR GIZ). In the Czech Republic (DILIA), Georgia (GCA), Lithuania (LATGA) and Slovakia (LITA), the authors’ societies also deal with the management of reprographic reproduction rights. However, in many CEE countries reprographic reproduction rights still are not applied in pratice. The right to remuneration for private copying, although formally introduced in most CEE countries, is effectively collected only in the EU Member States, with the exception of Bulgaria, where the Government even tried to abolish the whole scheme in 2010.69 A positive example is Russia where, following the accreditation of the RUR (Russian Union of Rightholders) to represent authors, performers, and producers, and presided over by the famous film director and actor Nikita Mihalkov, private copying remuneration has been effectively collected and distributed since 2011. 69 

In 2010 the Bulgarian Government introduced a bill abolishing private copying remuneration, while paradoxically preserving the possibility for making private copies. It was only following the interventions by BIEM, CISAC, GESAC, IFFRO, IFPI, and their local partners that the remuneration right was formally restored, but at the price of amendments that significantly reduced the scope and level of the remuneration.

Intellectual Property Law in Central and Eastern Europe    345 The resale right (droite de suite) is present in the copyright legislation of almost all CEE countries, but is effectively implemented and collectively administered in only a few EU Member States:  the Czech Republic (by GESTOR), Estonia (by EAU), Hungary (by HUNGART), Latvia (by AKKA/​LAA), Lithuania (by LATGA), and Slovakia (by LITA). The absence of Poland from the list is quite atypical, considering that it has one of the most mature collective management systems in the CEE region, particularly regarding musical and audiovisual works. The Russian system of state-​accredited CMOs introduced in 2008 seems to have not produced results in this field because the authorized CMO (UPRAVIS) has not yet effectively been able to start licensing.

9.  The Enforcement of Rights The annual Special 301 Reports of the US Trade Representative on the IP situation in the various countries may be—​and sometimes are—​challenged in regard to some of their statements, but they still seem to indicate certain trends. In that sense, it may be regarded relevant that since 2000, a number of CEE countries have appeared on the various lists; in the reports, one of the consistently identified problems has been the weak enforcement of IP rights (Table 12.1). Clearly there have been some improvements in IP regulation, for example, Central European countries no longer appear on the Special 301 Reports. It seems that one of the sources of enforcement deficiencies emerged in the CEE countries partly as a specific negative collateral effect of the euphoria of the newly regained public freedoms that resulted from the political changes at the end of the 1980s and the beginning of the 1990s; namely diminishing law-​abiding discipline. In the centrally planned economic period, all aspects of political, economic, and social activities were overregulated and closely controlled; in the new political atmosphere, not only the unnecessary rules but also many necessary and justified legislative provisions lost public respect. This was coupled with the efforts of some people, after the long years of egalitarianism, to become rich as soon as possible and no matter through what means—​legal or illegal. In the laws of socialist countries, there were no truly efficient legal measures available against counterfeiting and piracy; the need for such control was inconceivable. All activities were strictly controlled, and the idea of establishing a private enterprise in such an ideologically important cultural industry was quite unthinkable. Such a tight state control did not allow counterfeiting and piratical activities either (apart from such activities of the socialist States themselves in certain cases). After the dramatic political and economic changes, the absence of appropriate means of enforcement became suddenly obvious. Since then, steps have been taken in most of CEE countries to strengthen the means of enforcement. In general, the necessary enforcement measures are provided for in legislation. Quite frequently, what is missing is sufficient political will and the necessary knowledge and experience of enforcement methods. And, in a way, the overall attitude of the general public also contributes to this, which seems to prove that Vaclav Havel was right in his forecast quoted at the beginning of this chapter: “I am very much afraid that the devastating social consequences will for many years survive the system which—​following its political objectives—​have triggered them.”

346   Mihály Ficsor Table 12.1 Office of the United States Trade Representative (USTR)—​ Special 301 Report Year

Priority Foreign Priority Watch List Country

2000

Watch List

Poland, Russian Federation, Ukraine

Azerbaijan, Belarus, Czech Republic, Hungary, Kazakhstan, Latvia, Lithuania, Republic of Moldova, Romania, Tajikistan, Uzbekistan

2001

Ukraine

Hungary, Russian Federation

Armenia, Azerbaijan, Belarus, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovakia, Tajikistan, Turkmenistan, Uzbekistan

2002

Ukraine

Hungary, Russian Federation

Armenia, Azerbaijan, Belarus, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovakia, Tajikistan, Turkmenistan, Uzbekistan

2003

Ukraine

Poland, Russian Federation

Azerbaijan, Belarus, Croatia, Hungary, Kazakhstan, Latvia, Lithuania, Romania, Slovakia, Tajikistan, Turkmenistan, Uzbekistan

2004

Ukraine

Russian Federation

Azerbaijan, Belarus, Bulgaria, Croatia, Hungary, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovakia, Tajikistan, Turkmenistan, Uzbekistan

2005

Ukraine

Russian Federation

Azerbaijan, Belarus, Bulgaria, Croatia, Hungary, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovakia, Tajikistan, Turkmenistan, Uzbekistan

2006

Russian Federation, Ukraine

Belarus, Bulgaria, Croatia, Hungary, Latvia, Lithuania, Poland, Romania, Tajikistan, Turkmenistan, Uzbekistan

2007

Russian Federation, Ukraine

Belarus, Hungary, Lithuania, Poland, Romania, Tajikistan, Turkmenistan, Uzbekistan

2008

Russian Federation

Belarus, Czech Republic, Hungary, Poland, Romania, Tajikistan, Turkmenistan, Ukraine, Uzbekistan

2009

Russian Federation

Belarus, Czech Republic, Hungary, Poland, Romania, Tajikistan, Turkmenistan, Ukraine, Uzbekistan

2010

Russian Federation

Belarus, Romania, Tajikistan, Turkmenistan, Ukraine, Uzbekistan

2011

Russian Federation

Belarus, Romania, Tajikistan, Turkmenistan, Ukraine, Uzbekistan

2012

Russian Federation, Ukraine

Belarus, Romania, Tajikistan, Turkmenistan, Uzbekistan

Russian Federation

Belarus, Bulgaria, Romania, Tajikistan, Turkmenistan, Uzbekistan

2014*

Russian Federation

Belarus, Bulgaria, Romania, Tajikistan, Turkmenistan, Uzbekistan

2015

Russian Federation, Ukraine

Belarus, Bulgaria, Romania, Tajikistan, Turkmenistan, Uzbekistan

2013

Ukraine

*  In 2014, Ukraine was not present on any list due to the difficult political situation and certain promises made by the Government to improve enforcement.

Intellectual Property Law in Central and Eastern Europe    347

10. Conclusions There have always been differences between the countries covered in this chapter as regards their level of development, as well as their social and legal traditions. What still justifies reviewing and analyzing their IP systems together is their socialist past. Their transition to market economies and pluralist democracies has also taken place in different ways and, in some countries and in certain respects, this transition has not been fully completed. Nevertheless, there are also certain converging trends, which tend generally in positive directions. The basis of such trends is the ever-​broader accession of these countries to the international IP treaties administered by WIPO and WTO and, in the case of those that are EU Member States, or that are in the negotiation process of accession thereto, the harmonization effect of EU law also has had a beneficial effect. The laws of the CEE countries, in general, are in accordance with the obligations under the treaties and, to a great extent, they are also adapted to emerging international standards. The basic deficiencies may be found, in several of them, in the practical application of the laws through inadequate mechanisms for managing and enforcing rights.

Chapter 13

In tellectua l Prope rt y in Asia ASEAN, East Asia, and India Christoph Antons * 1.  Introduction: Discourses about Regionalism and the Framework of this Chapter Asia is the world’s largest continent. Europe and Asia overlap in the vastness of the Eurasian landmass, with some countries being regarded as belonging to both continents. These geographical features, and the enormous varieties of cultures and diversity in social, economic, and political structures and historical experiences means that an academic coverage of a significant section of “Asia” ideally should begin with an explanation of why certain countries are chosen to be included as relevant over others and what analytical insights can be expected from this particular choice. In the case of this chapter, a first and simple answer for its restricted geographical scope is that Michael Birnhack and Amir Khoury cover the countries of the Middle and Near East in a separate chapter. Of the remaining parts of “the East,” independent developments in intellectual property (IP) in the Central Asian republics that were part of the former Soviet Union are of relatively recent origin. Because of their geographical position at the crossroads between Europe, East and South Asia, and the Middle East, Central Asian republics are part of Free Trade Agreements and Framework Agreements that establish links between Central Asia and these neighboring regions, such as the Commonwealth of Independent States FTA, the Common Economic Space (CES), the Eurasian Economic Community Customs Union, and the Georgia, Ukraine, Azerbaijan, Moldova Free Trade Agreement. Some of the largest * 

Christoph Antons has asserted his moral right to be identified as the author of this contribution. The research for this chapter was supported under the Australian Research Council’s Discovery Projects funding scheme (project number 160104402). All websites were last accessed in February 2018, unless otherwise specified.

Intellectual Property in Asia: ASEAN, East Asia, and India    349 regional initiatives include the Shanghai Cooperation Organization that links China, Russia, and Central Asian republics; the Economic Cooperation Organization Trade Agreement (ECOTA) that links countries in Central and South Asia with Turkey and Iran; the 2004 Framework Agreement for the Trade Preferential System of the Organization of the Islamic Conference with as many as 36 countries; and the Preferential Tariff Agreement of the Group of Eight Developing Countries, which links Turkey with developing countries with large Muslim populations in Africa and South and Southeast Asia.1 However, with the exception of a few broad provisions in ECOTA, IP law plays as yet no role in such agreements. Speaking of the IP systems of former Soviet republics and members of the Commonwealth of Independent States, a regional commentator points out that “[m]‌any of the laws of these countries meet international requirements, which cannot be said of the legal practice.”2 In the countries of South Asia, IP developments during the last few decades have been overshadowed by wars and by political and security concerns that have occupied the (often unstable) governments of these countries to a considerable extent. For these reasons, perhaps unfairly and with the exception of India, South Asian countries have in general attracted less attention in IP debates than the countries of East and Southeast Asia. The second reason for the geographical focus of this chapter is that the part of the world it discusses is widely regarded as comprising the most economically dynamic markets, that these markets are predicted to be world economic leaders in the 21st century, and that, historically, they have been a part of the developing world that has made or is about to make, in the words of one of its former leaders, the transition from “third world to first.”3 The question of a particular “Asian development model” has led to considerable debates in several academic disciplines and to influential reports of international institutions. Talk of an “Asian miracle” became particularly frequent after the World Bank’s “East Asian Miracle” research report of 1993.4 Other reports spoke of the “Asian century,”5 while academic analysis began to examine the economic performance of countries dubbed at various times the “little dragons”6 or the “Asian tigers.”7 Because of the strong links between the first generation of “Asian miracle” economies and the United States (US), and because of increasing links to Non-​Asian regional economies like Australia and New Zealand (NZ), soon the new regional construct of the “Asia-​Pacific” was coined. This construct has been used over the years in the academic literature and in international organizations in many different ways and with 1 

C Antons and D Thampapillai, “An Overview of Free Trade Agreements in the Asia-​Pacific Region with a Particular Focus on Intellectual Property” in C Antons and RM Hilty (eds), Intellectual Property and Free Trade Agreements in the Asia-​Pacific Region (Springer 2015) 27, 40–​42. 2  AB Gafurov, “Developing the system of intellectual property protection in CIS countries” in A Gafurov (ed), Intellectual Property Rights: Prospects for Development (Adolat 2012) 43. 3  KY Lee, From Third World to First—​The Singapore Story: 1965–​2000 (HarperCollins Publishers 2000). 4  World Bank, The East Asian Miracle: Economic Growth and Public Policy (OUP 1993). 5  Eg, Australian Government, Australia in the Asian Century, White Paper (Commonwealth of Australia 2012), available at accessed 12 February 2018. 6  EF Vogel, The Four Little Dragons: The Spread of Industrialization in East Asia (Harvard UP 1991). 7  Eg, M Castells, “Four Asian Tigers with a Dragon Head: A Comparative Analysis of the State, Economy, and Society in the Asian Pacific Rim” in RP Appelbaum and J Henderson (eds), States and Development in the Asian Pacific Rim (Sage 1992) 33.

350   Christoph Antons hugely differing membership.8 With the rise of India, regional politicians now occasionally refer to an “Indo-​Pacific region.”9 In view of the shifting terminology, critics soon argued that the “Asia-​Pacific” construct was conceptually hollow,10 and that academics using larger regional constructs for comparative studies were under the influence of orientalism.11 However, political scientists like Björn Hettne have pointed out that there are no “natural” regions, and that definitions tend to vary according to the problem under investigation. Decisive is how political actors perceive and interpret the idea of a region, because “all regions are socially constructed and hence politically contested.”12 The case studies in this chapter are included based on their relevance to current IP debates and diplomatic efforts involving IP for countries in the region. A key role in efforts to achieve regional integration is, in the view of many observers, played by the Association of Southeast Asian Nations (ASEAN). Although originally formed in the 1960s mainly for security purposes, ASEAN has long shifted its attention to the economy and is in the process of creating an ASEAN Economic Community.13 With wider regional integration efforts hampered by the competition between China and Japan in particular, ASEAN has concluded Framework and Partnership Agreements with all the main players in East Asia and with India. ASEAN has also become the building block for various forums based on the principle of open regionalism, such as ASEAN +3 (ASEAN, plus China, Japan, and Korea) and ASEAN +6 (ASEAN, plus China, Japan, Korea, Australia, NZ, and India). The countries discussed in this chapter are included based on these wider regional discussion forums, which are often used to enhance trade relations. These are also the countries involved in the discussion of a Regional Comprehensive Economic Partnership (RCEP) agreement, which stresses the centrality of ASEAN in the emerging regional economic architecture.14 The RCEP has the strong support of China and has often been seen by observers as rivalling the Trans-​Pacific Partnership Agreement (TPP). Following the US withdrawal, the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or TP11 at least for the time being, equally does not include China.15 With the exception of Australia and NZ, which were considered by Kimberlee Weatherall in the previous chapter, this chapter covers all countries involved in the “ASEAN +6” forum and in the negotiation of the RCEP. 8  Antons and Thampapillai (n 1) 30–​31. For the early history of the concept see R Garnaut and P Drysdale, “Asia Pacific regionalism: the issues” in R Garnaut and P Drysdale (eds) Asia Pacific Regionalism: Readings in International Economic Relations (HarperCollins 1994) 1–​7. 9  See, eg, the statement by Australia’s Foreign Minister Julie Bishop: “My goal is to see study in the Indo-​Pacific region benefit us all,” The Australian, 11 December 2013. 10  See the contributions in A Dirlik (ed), What is in a Rim? Critical Perspectives on the Pacific Region Idea (Westview Press 1993). 11  V Taylor, “Beyond Legal Orientalism” in V Taylor (ed), Asian Laws Through Australian Eyes (LBC Information Services 1997) 47. 12  B Hettne, “Beyond the ‘New’ Regionalism” (2005) 10 New Political Economy 544. 13  See the contributions in D Hew (ed), Roadmap to an ASEAN Economic Community (Institute of Southeast Asian Studies 2005). 14  See the “Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership,” (accessed 12 February 2018). 15  C Antons and RM Hilty, “Introduction: IP and the Asia-​Pacific ‘Spaghetti Bowl’ of Free Trade Agreements” in Antons and Hilty (n 1) 6–​7. See also G Wignaraja, “Southeast Asia’s mega trade pact,” Asia Sentinel, 17 May 2013.

Intellectual Property in Asia: ASEAN, East Asia, and India    351 It is not possible to provide details of the development of the IP systems of all 14 countries discussed in this chapter; however, it aims to show trends in the region and identify sticking points and developments that are controversial from the viewpoint of right holders, as well as broader public policy goals informed by considerations of domestic social and economic policy and environmental and human rights concerns. The next section reviews the historical development of IP in the region in the context of a political economy characterized in technological terms by development policies to “catch up with the West.” This includes an examination of the way countries have implemented the WTO Agreement on Trade-​Related Intellectual Property Rights (TRIPS), which is discussed in general terms by Sam Ricketson in ­Chapter 8, as well as attempts to move towards “TRIPS plus” standards in bilateral, multilateral, and plurilateral agreements, as well as the broader discussion about IP harmonization in the region. I also point out how the recent extension of IP protection into fields such as plant variety and geographical indication protection, as well as a discourse on alternative forms of “traditional” knowledge, is beginning to impact on rural areas and the grassroots level of developing country societies.

2.  The Context: Intellectual Property Law Reform and Asian Models of Development Asia’s apparent economic success soon attracted academic interest in the institutional features of what became termed the “Asian developmental state”—​in Meredith Woo-​ Cumings’s words, “the region’s idiosyncratic response to a world dominated by the West.”16 Woo-​Cumings traces developmentalism to the work of early writers on economic development, such as Gunnar Myrdal, Paul Baran, PN Rosenstein-​Rodan, and Simon Kuznets.17 For East Asia, Chalmers Johnson pioneered the analysis of the “developmental state” in his classical work on MITI in Japan.18 His basic concepts were soon picked up in similar writings on Korea,19 Taiwan,20 China,21 Hong Kong, and Singapore.22 Their applicability in a wider “region” and for the original ASEAN countries was more difficult to argue,23 although here, too, heavily centralized development planning accompanied the emergence of a local class

16   M Woo-​Cumings, “Introduction: Chalmers Johnson and the Politics of Nationalism and Development” in M Woo-​Cumings (ed), The Developmental State (Cornell UP 1999) 1. 17 18  C Johnson, MITI and the Japanese Miracle (Stanford UP 1982).   Woo-​Cumings 5. 19  AH Amsden, Asia’s Next Giant: South Korea and Late Industrialization (OUP 1989). 20  R Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton UP 1990). 21  YS Wu, Comparative Economic Transformations: Mainland China, Hungary, the Soviet Union, and Taiwan (Stanford UP 1994). 22 Castells (n 7). 23  C Antons, “Japan as a Model?—​Law and Development in Japan, Singapore and Indonesia” in C Antons (ed), Law and Development in East and Southeast Asia (Routledge Curzon 2003); G Rodan, K Hewison, and R Robison, “Theorising Markets in South-​East Asia: Power and Contestation” in G Rodan, K Hewison, and R Robison (eds), The Political Economy of South-​East Asia: Markets, power and contestation (3rd edn, OUP 2006) 1.

352   Christoph Antons of entrepreneurs.24 In the introduction to her book, Woo-​Cumings summarizes some of the essential features of the developmental state as consisting of political finance; a professional bureaucracy embedded in society; close relations between big business and the state and the “picking of winners” by the state bureaucracy; and authoritarianism.25 It is arguable how far all of these elements were present in East and Southeast Asian countries at the time of the emergence of the “Asian development model,” and it is even more controversial in the diversified landscape of Asia today. More importantly for the analysis of law in general, and IP law in particular, in Asia is, however, what Chalmers Johnson said about the role of law and administrative discretion in decision making in a developmental context. In his discussion of administrative guidance as “the most important market conforming method of intervention,” he explains that: “Highly detailed statutes serve the interests primarily of lawyers, not of development. The Japanese political economy is strikingly free of lawyers; many of the functions performed by lawyers in other societies are performed in Japan by bureaucrats using administrative guidance. The Japanese of course rely on law, but on short and highly generalized laws. They then give concrete meaning to these laws through bureaucratically originated cabinet orders, ordinances, rules, and administrative guidance.”26

When the Asian Crisis struck at the end of the 1990s, many believed that the Asian development model was at its end.27 Woo-​Cumings, however, when discussing Northeast Asia, predicted that the staying power of the institutional features of the Asian developmental state was greater than expected at the time because entrenched interests prevented the easy dismantling of the existing networks of power.28 As far as the legal features of Asian developmentalism are concerned, subsequent work on law reform in Asia indeed shows a continuing struggle between proponents of reform and defenders of the previous success models.29 The combination of short and generalized laws, numerous implementing decrees, and administrative discretion that Chalmers Johnson found so striking in Japan certainly looks familiar to those analyzing law in general, and IP law in particular, elsewhere in Asia. In the mid-​1990s, Vietnam’s Law on Land referred to nearly 600 implementing regulations and Indonesia’s Foreign Investment Law was accompanied by 328 pieces of related legislation.30 24 

For Indonesia, see R Robison, Indonesia: The Rise of Capital (Allen and Unwin 1986). See also KS Jomo, “Introduction: Southeast Asia’s ersatz miracle” in KS Jomo (ed), Southeast Asian Paper Tigers?—​ From miracle to debacle and beyond (Routledge Curzon 2003) 1. 25  See Woo-​Cumings (n 16) 10–​20, especially 20 (stating that “the developmental state grows both out of the barrel of the gun and its ability to convince the population of its political, economic, and moral mandate”). 26  Johnson (n 18) 318–​319. 27  On the reaction at the onset of the crisis see J Stiglitz, Globalization and its Discontents (Penguin Books 2002) 91–​92. 28  Woo-​Cumings (n 16) 31. 29  See the contributions in C Antons and V Gessner (eds), Globalisation and Resistance: Law Reform in Asia since the Crisis (Hart Publishing 2007); T Lindsey (ed), Law Reform in Developing and Transitional States (Routledge 2007); J Gillespie and R Peerenboom (eds), Regulation in Asia; Pushing back on globalization (Routledge 2009); C Antons and R Tomasic (eds), Law and Society in East Asia (Ashgate 2013). 30  DN Pham, Vietnamese Business Law in Transition (The Gioi Publishers 2002) 56; H Hill, The Indonesian Economy Since 1966: Southeast Asia’s Emerging Giant (CUP 1996) 100.

Intellectual Property in Asia: ASEAN, East Asia, and India    353 The combination discussed by Chalmers Johnson is equally apparent in IP law. Indonesia’s current IP laws make reference to 87 implementing decrees in the form of government regulations, presidential decisions, regulations of the Minister of Justice, and decisions of the Director General of the IP Office. Only a few dozens of those have been issued and, after a series of amendments, some of the implementing decrees are now older than the laws they are supposed to implement.31 Writing on Vietnamese IP law, Heath has observed that “legal clarity and certainty is not helped by the confusing multitude of sometimes contradictory codes, decrees and circulars.”32 Also commenting on Vietnamese IP laws prior to 2005, Dang has pointed out that the Civil Code provided only general guidelines on various categories of IP rights, while detailed regulations, guidelines, and circulars were issued by the Government, various Ministries, the Market Management Bureau, Customs Office, and other institutions.33 As for the current legislation, Phan has ranked the sources of IP laws in Vietnam as including laws, ordinances, decrees of the government, circulars of the ministries, decisions of provincial People’s Assemblies or People’s Committees, and decisions and official letters of ministerial and general departments. He has also pointed to the ambiguous nature of this type of law making. On the one hand, laws or ordinances can only be enforced under implementing decrees and circulars, causing delays if these are not immediately available. On the other hand, the promulgation of a decree can be a fast way to fill a gap in areas not yet covered by law. Importantly, however, “[w]‌ithout a Constitutional Court, there is practically no means for right holders to request revision of legislative acts of administrative bodies, which are called ‘implementing documents’, if they contradict the law or even the Constitution.”34 A further example is China. Ganea and Jin have pointed to the country’s long history of administrative guidance as explanation for relatively short IP laws with “rather general and widely interpretable provisions.”35 These interpretations are then provided by the State Council in implementing provisions, by the Supreme Court’s quasi-​legislative legal interpretations, by administrative regulations and guidelines of various ministries and agencies, and even by locally applicable rules of local departments. They conclude that “[i]‌t is self-​evident that this tangled mass of legal rules and administrative provisions on various hierarchical levels causes inconsistencies and confusion.”36 Although this type of discretionary administrative law-making may be more prevalent in civil law than in common law countries, and particularly frequent in countries with so-​called “socialist market economies,”37 it is clear that where IP is part of development 31   C Antons, “The Intellectual Property Jurisdiction of the Indonesian Commercial Court” in C Antons (ed), The Enforcement of Intellectual Property Rights: Comparative Perspectives from the Asia-​ Pacific Region (Kluwer Law International 2011) 365–​366. 32   C Heath, “Vietnam” in C Heath (ed), Intellectual Property Law in Asia (Kluwer Law International 2003) 273. 33   THT Dang, “The Protection of Well-​known Marks in Vietnam” in C Heath and K-​C Liu (eds), The Protection of Well-​known Marks in Asia (Kluwer Law International 2000) 137. 34   VD Phan, “Vietnam” in P Goldstein and J Straus (eds), Intellectual Property in Asia: Laws, Economics, History and Politics (Springer 2009) 338–​339. 35  P Ganea and H Jin, “China” in Goldstein and Straus (n 34) 29. 36 ibid. 37  On the continuation of the practice in China’s latest patent law reform of 2009, see S Luginbuehl and T Pattloch, “The Awakening of the Chinese Patent Dragon—​The Revised Chinese Patent Law 2009” (2011) IIC 131; P Ganea, “China’s amended legal regime on patents for inventions and utility models” (2010) 5 Journal of Intellectual Property Law and Practice 651.

354   Christoph Antons planning processes, it takes on different and more instrumental forms than in advanced industrial economies that want to incentivize contributions to technological progress and cultural life. John Owen Haley has coined the term “selective adaptation” for the process in which Japan, under pressure from the West to open up the country, selected laws from elsewhere and adapted them to the Japanese setting. In IP, a similar selective adaptation process was triggered in other Asian countries by international deadlines and pressure. At first this pressure came when countries were placed on the “priority watch lists” and “watch lists” of the United States Trade Representative under the section 301 process of the US Tariff and Trade Act to provide better protection for the IP rights of US companies.38 After the conclusion of the WTO TRIPS Agreement, they had to observe the TRIPS deadlines for developing and least developed countries. More recently, “TRIPS plus” standards introduced in bilateral and regional FTAs have renewed the pressure on those countries that have agreed to such standards.39 Selective adaptation followed by selective implementation using rather generalized laws and many implementing decrees has several advantages for developing countries experiencing such pressures. First, it allows them to comply with the deadlines of trading partners and international agreements. They can be seen to act swiftly, but leave important details for further study and implementation via subordinate legislation at a later stage. Second, to some extent, particularly sensitive details can be removed from public scrutiny and debate by shifting them from the legislative process in parliament, where they would attract much attention, to the seemingly technocratic level of implementation by various parts of the bureaucracy. Finally, shifting such details to the administrative level also makes it less likely that there will be judicial scrutiny of what are ultimately administrative decisions made with wide discretionary powers.40 A final, and perhaps obvious, point that must be made when discussing the context of IP reform in Asia is that IP laws do not exist in a vacuum. Although IP after the introduction of TRIPS standards in WTO Member States is now one of the fields that is most harmonized with international standards, and although the TRIPS Agreement concerned itself to a considerable degree with the enforcement of these standards, enforcement nevertheless still reaches deep into the general legal system of a country, where it can be confronted with local legal culture, lack of resources, and the politics of law reform. This is a considerable problem, particularly in former colonies that achieved their independence after the Second World War, and have often had to deal with political emergencies, (civil) wars, and economic crises which left little time for systematic law reform or fundamental debate about the future of the legal system. The legal systems of such countries are typically pluralist, with varying degrees of validity of religious and customary laws in addition to national laws. Where a compromise about law reform directions is too difficult to find, the result is often that outdated laws from

38 

C Antons, “Intellectual Property Law in ASEAN Countries: A Survey” (1991) 3 EIPR 78–​84. RM Hilty and T Jaeger, “Legal Effects and Policy Considerations for Free Trade Agreements: What is Wrong with FTAs?” in Antons and Hilty (n 1) 55. 40  C Antons, “Law Reform in the ‘Developmental States’ of East and Southeast Asia: From the Asian Crisis to September 11, 2001 and Beyond” in Antons and Gessner (n 29) 90–​91. On the difficulty of obtaining review of subordinate legislation in Indonesia see S Butt and T Lindsey, “The People’s Prosperity? Indonesian Constitutional Interpretation, Economic Reform, and Globalization” in Gillespie and Peerenboom (n 29) 270. 39 

Intellectual Property in Asia: ASEAN, East Asia, and India    355 the country’s colonial period remain in place as the lowest common denominator. These laws are not well liked, and are often despised because of their colonial origins. This dislike of colonial law is probably a more accurate reason for the frequently quoted dislike of law and litigation in Asian developing countries, rather than cultural impediments. Hence, twenty-​ first-​century IP laws in some countries may have to be applied in the context of twentieth-​or even nineteenth-​century procedural laws that do not provide the remedies that a modern IP system requires.

3.  The History of Intellectual Property in Asia in the Context of Asian Development Policies and Law Reform Debates This section examines the development of IP law in individual Asian countries in the context of the more general observations about development and law reform policies discussed in the preceding section. Earlier forms of grants of exclusive privileges with some similarity to IP notwithstanding,41 modern IP laws originated in Europe. Their emergence in Europe in the nineteenth century—​discussed by Catherine Seville in ­Chapter 7—​coincided with the heyday of European colonial power in Asia, and European laws were applied to colonial dependencies in Asia. The few Asian countries that had managed to remain outside of the European colonial sphere soon had to follow. Japan’s self-​imposed isolation ended with the arrival in 1854 of what is known in Japan as the “black ships,” when Commodore Perry’s fleet forced the country to open its borders for trade with the United States and other countries.42 After the Meiji Restoration, Japan soon emulated the European powers and transferred its laws to its dependencies in Korea and Taiwan. In China, the Xing dynasty made belated attempts at modernization prior to its collapse early in the twentieth century.43 During the reign of King Chulalongkorn, Siam also followed Japan’s example and modernized the Siamese legal system and imported European laws.44 In all of these cases, a major impetus was the desire to reverse unequal treaties with extraterritoriality clauses that had been imposed by the Western powers and that to a considerable extent exempted the foreigners from local laws.45

41  See P Ganea, “Patents, Utility Models and Designs” and “Copyright” in P Ganea, T Pattloch, and C Heath (eds), Intellectual Property Law in China (Kluwer Law International 2005) 1–​2; 205–​206. 42  WG Beasley, The Rise of Modern Japan (Weidenfeld and Nicholson 1990) 28–​29; M Hane, Modern Japan: A Historical Survey (Westview Press 1986) 68. 43  J Chen, Chinese Law: Towards and Understanding of Chinese Law, Its Nature and Development (Kluwer Law International 1999) 21–​22. 44  P Kasemsup, “Reception of Law in Thailand: A Buddhist Society” in M Chiba (ed), Asian Indigenous Law: In Interaction with Received Law (KPI 1986) 292–​293; MB Hooker, A Concise Legal History of South-​East Asia (Clarendon Press 1978) 183–​184. 45  T Loos, Subject Siam: Family, Law, and Colonial Modernity in Thailand (Silkworm Books 2006) 42–​ 43; M Dean, Japanese Legal System: Text and Materials (Cavendish Publishing 1997) 62–​63.

356   Christoph Antons

3.1 The Trailblazer: Japan In the context of wider regional discussions about law reform and “catching up with the West” in industrialization, Japan is often mentioned as the pioneering country and as a trailblazer for distinctive forms of Asian modernity.46 Her selective adaptation to Western laws certainly became the role model for much deliberate (and not so deliberate) law reform in other countries during the twentieth century, including in the field of IP law.47 As with many other traditional societies, pre-​modern Japan knew basic rules for product marks and the protection of designs as part of the guild membership, and (in Edo and Osaka) bookseller guilds obtained protection against unauthorized reprints.48 Nevertheless, the Neo-​Confucianism of the Tokugawa shogunate focused on the subsidiary use of law by a virtuous ruler who could punish those that failed to comply with Confucian standards of self-​restraint.49 In fact, as Yosiyuki Noda points out, law reformers after the end of the shogunate had to find a word for the concept of “right” when they translated the French Civil Code.50 When the 1868 Meiji Restoration reinstated the power of the Emperor, one of the guiding principles in the Charter Oath of Five Articles was that “Knowledge shall be sought throughout the world in order that the welfare of the empire may be promoted.”51 This seeking of knowledge throughout the world became the basis for both the legal modernization necessary to achieve the revision of the unequal treaties, and the technological modernization for which early IP rules aimed to provide incentives.52 The early post-​Meiji period of the introduction of IP rules and the codification of the 1880s established several elements that can be recognized in later IP law reforms in other Asian countries, even as late as during the post-​TRIPS reforms of the 1990s and early 2000s. Firstly, it borrowed from many different sources and was influenced by particularly forward-​thinking individuals and their visions. Summary rules introduced in Japan in 1871, but in practice not applied, for regulating monopolies for inventions were replaced in 1885 by a French influenced Patent Act.53 Only a few years later in 1888, a new Patents Act was implemented which was modeled after the system in the US and introduced, among other features, the first-​to-​invent principle. Heath and Rahn have attributed the law to the influence of Korekiyo Takahashi, the first President of the Japanese Patent Office, who returned

46 

On Japan and Asian modernity see, eg, S Eisenstadt, Japanese Civilization: A Comparative View (University of Chicago Press 1996); Antons (n 23). 47  On selective adaptation see JO Haley, Authority Without Power: Law and the Japanese Paradox (OUP 1991). On selective adaptation in IP law see C Antons, “Harmonisation and Selective Adaptation as Intellectual Property Policies in Asia” in C Antons, M Blakeney, and C Heath (eds), Intellectual Property Harmonisation within ASEAN and APEC (Kluwer Law International 2004) 109. 48  P Ganea and S Nagaoka, “Japan” in Goldstein and Straus (n 34) 129–​131. 49  C Antons, “Legal Culture and History of Law in Asia” in Heath (n 32) 25. 50  Y Noda, Nihon-​jin no sekikaku to sono hō-​kannen (The Character of the Japanese People and their Conception of Law) in H Tanaka and M Smith (eds), The Japanese Legal System: Introductory Cases and Materials (University of Tokyo Press 1976) 305. 51  Quoted in Dean (n 45) 68, fn 34. 52  C Heath, “Inventive Activity, Intellectual Property and Industrial Policy” in W Röhl (ed), History of Law in Japan Since 1868 (Brill 2005) 405. 53  Heath, “Patent Law,” in Röhl (n 52), 423–​425.

Intellectual Property in Asia: ASEAN, East Asia, and India    357 from a visit to the US full of admiration for its technological success.54 Ganea and Nagaoka have found a similar influence of the US copyright registration system on Fukuzawa Yukichi, another modernizer, and on the first Japanese copyright provisions in the Publication Statute of 1869.55 Secondly, the early rules related to copyright were a combination of censorship and protection of authors and publishers.56 Only in the 1880s were provisions on censorship and publication control finally separated from copyright rules.57 Thirdly, and not too dissimilar to the current approach in many developing countries, the main sanctions for infringements were often of a penal nature, such as the use of fines and imprisonment in the Publication Statute of 1869,58 and in the characterization of infringement as a criminal offence in the Design Ordinance of 1888.59 Finally, one can perceive the struggle of the reformers to translate foreign concepts into the Japanese language, for example, when copyright is translated as “printing plate license.”60 However, authors analyzing Japan’s IP history have pointed to a major difference of the Japanese experience in comparison to later IP reforms in Asia. Specifically, these early reforms occurred prior to the conclusion of the major international IP conventions. The early introduction of IP rights was “not tainted by the obligations to protect foreign right owners,” and IP could thus become “an integral part of the modernization policy of the new government.”61 Accordingly, Japan’s early IP laws could discriminate against foreign inventors and copyright holders. Apart from the objective to access knowledge and foreign literature freely, one important reason for this discrimination was that the humiliating unequal treaties imposed on Japan by Western powers were still in force. In a development similar to the current bargaining in bilateral Free Trade and Economic Partnership Agreements, Japan was required to submit to the Paris and Berne Conventions as a pre-​condition for the abolishment of the unequal treaties. Japan joined these conventions in 1899, the unequal treaties were abolished, and foreigners were finally generally permitted to obtain IP rights in Japan.62 Accession to the international conventions ended the initial period of experimentation unrestrained by foreign IP rights. As a consequence, a completely new set of IP laws was enacted at the turn of the century. However, by international standards, the Japanese economy prior to the Second World War remained backward, a fact that would become obvious during the war in competition with US technology.63 Consequently, imitation and the copying of foreign products remained high on the agenda. This is visible from the response

54   Heath, in Röhl (n 52), 425–​426; G Rahn, “The Role of Industrial Property in Economic Development: The Japanese Experience” (1983) IIC 460–​461. 55 56   Ganea and Nagaoka (n 48) 131.   P Ganea, “Copyright Law,” in Röhl (n 52) 500. 57 58  Ganea and Nagaoka, 131.   Ganea and Nagaoka (n 48) 132. 59  P Ganea, “Design Law,” in Röhl (n 52) 454. 60  Ganea and Nagaoka (n 48) 131. Compare the discussion in Indonesia, where the term for copyright was introduced into the national language Bahasa Indonesia at a congress on national culture in Bandung in 1951, but the most appropriate terminology for copyright continued to be debated at law reform conferences as late as 1975: see JCT Simorangkir, Hak Cipta Lanjutan (Penerbit Djambatan 1978) 3–​4; JCT Simorangkir, Undang-​Undang Hak Cipta 1982 (UHC) (Penerbit Djambatan 1982) 30. 61  Ganea and Nagaoka (n 48) 132. 62  Rahn (n 54) 461–​462. Prior to 1899, Japan had concluded a number of bilateral agreements allowing for the filing of patents by foreigners: see Ganea and Nagaoka (n 48) 134. 63  Rahn (n 54) 463–​464.

358   Christoph Antons of the Japanese government to French requests to join the Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods concluded in 1891: “Japanese industry is still at the stage of copying and imitation. The average domestic consumer prefers foreign goods, for which reason a number of domestic producers label their goods misleadingly as foreign. Japanese industry is still in its infancy and has little experience of exporting, so confidence in its products is low and it is very difficult to find markets for goods labelled as ‘Made in Japan’; therefore, misleading indications of origins are not infrequent. For these reasons, to join the Agreement would be of very little practical use for promoting [the] Japanese economy. On the contrary, it would rather be an impediment.”64

Equally, Japan did not adopt an unfair competition law until 1934, and when it finally did, the law’s structure made it largely unworkable.65 In patent law, the Patent Office, rather than the courts, became responsible for infringement cases, and developed its practice of narrow interpretation of patent claims focused on the concrete mode of working an invention as described in the specification.66 For smaller inventions for the domestic market, a Utility Model Law was introduced in 1905, and it followed a similar German law and proved very popular until changes to the law in 1994 reduced its attractiveness.67 Copyright law followed the Continental European author-​focused models after Japan’s accession to the Berne Convention. A  further major round of amendments came in 1921, which, among other things, established rules on employees’ inventions in patent law and shifted to a patent system based on the first-​to-​file principle. After Japan’s defeat in the Second World War, a new Constitution was promulgated during the US occupation. It required that appeals to a court of law were available for all administrative decisions. This in turn meant that further review of internal patent office appeal processes now became available both on grounds of facts and law.68 In the Peace Treaty of San Francisco, Japan also had to agree to accede to the Madrid Agreement, which it had previously avoided.69 In 1959, Japan introduced new patent and trademark laws, which remain in force today, and in 1970 it introduced a new Copyright Act.70 The narrow claim interpretation practiced by the Japanese patent office now shifted to the courts. Ganea and Nagaoka have pointed to a relatively recent change of this practice as a result of Japanese firms losing patent cases in US courts during the 1990s, and a subsequent desire to generate more essential innovation.71 Patentable subject matter has now also expanded to include pharmaceutical substances since 1975, micro-​organisms since 1979, genetically engineered products 64   C Heath, “Industrial Policy and Intellectual Property in Japan and Beyond” in Antons (n 23) 201, quoting from Tokkyo Chô, Tokkyo seido 70 nen shi (70 Year History of the Patent System) (Hatsumei Kyokai Publishing 1955) 103–​104. 65   Heath, in Antons, 202; Rahn (n 54) 464. 66   Ganea and Nagaoka (n 48) 134–​135; T Takenaka, “Extent of Patent Protection in the United States, Germany and Japan: Analysis of Two Types of Equivalents and Their Patent Policy Implications” in A Kur, S Luginbühl, and E Waage (eds), “. . . und sie bewegt sich doch!”—​Patent Law on the Move (Carl Heymanns Verlag 2005) 145–​149. 67  Heath (n 64) 198–​199; M Suzuki and Y Tamura, “Japan” in KC Liu and RM Hilty (eds), The Enforcement of Patents (Kluwer Law International 2012) 120. 68  Heath, “Patent Law” in Röhl (n 52) 433–​434. 69  Rahn (n 54) 464. 70  See the contributions in P Ganea, C Heath, and H Saitô (eds), Japanese Copyright Law: Writings in Honour of Gerhard Schricker (Kluwer Law International 2005). 71  Ganea and Nagaoka (n 48) 140; see also Takenaka (n 66) 147–​149.

Intellectual Property in Asia: ASEAN, East Asia, and India    359 since the 1980s, animals since 1988, and computer software since 2002.72 As Japan changed from an imitating nation to a major exporter, it was now often at the receiving end of product piracy elsewhere in Asia.73 After accession to the Patent Cooperation Treaty (PCT) in 1978, Japan became an international search authority under the PCT and began to actively promote the patent system and IP laws more generally to its Asian neighbors.74 More recent and important developments include the strengthening of employees’ rights to equitable remuneration for inventions devised in the course of employment.75 Following a speech by Prime Minister Koizumi in 2002, Japan enacted the Intellectual Property Basic Act as a guiding policy document. This led to the setting up of IP Strategic Headquarters directly under the Cabinet Office and involving the Prime Minister and all Ministers, and to hundreds of action plans under an IP Strategic Program that is meant to overcome the traditional “sectionalism” of various agencies.76 In 2004, amendments to the civil procedural law gave exclusive jurisdiction over so-​called technological cases (related to patent rights, utility model rights, layout designs of integrated circuit rights, and rights of authors of computer software works), and concurrent jurisdiction over “non-​technological cases” in other fields of IP to the Tokyo and Osaka District Courts. As in other countries in the region,77 the establishment of a specialized IP High Court was controversial in Japan. As a compromise, it was established as a special branch of the Tokyo High Court, which was a mere re-​labelling as this Court already had four specialized IP divisions.78 Nevertheless, Nahoko Ono points to other important changes, such as the introduction of technical advisors operating as amicus curiae, the formation of a grand panel with judges drawn from all four divisions, and a certain streamlining of the existing double track system that results in parallel proceedings for invalidation in the Japanese Patent Office and for infringement in the courts system.79

3.2 Intellectual Property in Asia’s First Generation of Newly Industrialized Economies: South Korea and Singapore The division of the world into developed, developing, and least-​developed countries has always been controversial.80 However, with many economies in the developing world maturing, it is now swiftly becoming an anachronism. Therefore, it is understandable, but nevertheless surprising in view of the legal consequences of developing country status, that the WTO refuses to provide a definition.81 The rapid development in parts of Asia in particular have led to the creation of terms such as “tiger economies,” “newly industrialized 72

73   Heath (n 64) 199–​200; Ganea and Nagaoka (n 48) 141.   Ganea and Nagaoka (n 48) 145.   Rahn (n 54) 467. 75   Ganea and Nagaoka (n 48) 139–​140. For details see M Môri and C Heath, “Employees’ Inventions in Japan” (2005) IIC 663. 76   N Ono, “Legislative Reform Related to IP Enforcement in Japan” in Antons (n 31) 97–​102. 77   See C Antons, “Specialised Intellectual Property Courts in Southeast Asia” in Kur, Luginbühl, and Waage (n 66) 287. 78  Ono (n 76) 104–​105. 79  Ono, 105–​108. 80  D Seers, “The Meaning of Development” in C Cooper and EVK FitzGerald (eds), Development Studies Revisited: Twenty-​Five Years of the Journal of Development Studies (Cass & Co Ltd 1989) 480. 81  WTO, “Development: Definition: who are the developing countries in the WTO?” (accessed 12 February 2018). 74

360   Christoph Antons economies,” “newly industrializing countries,” etc, to refer to economies that are regarded as between “fully developed” and “developing.” Members of such groupings differ, but the terms were originally used for countries that in a popular image of the 1980s and 1990s were the “flying geese” that followed Japan, the leader, most notably South Korea, Taiwan, Singapore, and Hong Kong.82 Of those “flying geese,” South Korea and Singapore are included in the countries involved in the larger regional trade negotiations outlined in the first section. Few would question their status as advanced economies. Korea became a member of the OECD in 1996 and Singapore has one of the highest average per capita incomes in Asia. Although their development in the IP field has gone through similar stages in a similar time frame, and they are now both offering strong IP protection, the motivation of Korea and Singapore to shift towards such strong IP systems was nevertheless quite different. Of the two countries, Korea followed the Japanese blueprint of industrial development rather closely, which has been attributed in part to the institutional legacy of the harsh Japanese colonial regime in the country.83 Singapore, in contrast, achieved developed country status as a city state with an open economy, and as a trading hub for multinational corporations interested in establishing branches in Southeast Asia.84 Quite different from the Confucian model often ascribed to the “Asian tiger economies,” Singapore, as Huff points out, “turned decisively away from its Chinese entrepreneurial class, to achieve export-​oriented growth almost entirely through foreign multinationals,” so that by the mid-​1970s, “foreign firms accounted for over four-​fifths of nationals.”85 Different from South Korea, Singapore did not have to contend with a large agricultural sector, and from the 1970s profited from the international expansion of the services industry, while South Korea was moving from light to heavy industry and towards the development of indigenous technological capacity.86

3.2.1 Singapore Founded by Sir Thomas Stamford Raffles in 1819, Singapore was one of the three British Straits Settlements, which also included Penang and Malacca. Initially ruled from Calcutta, the Straits Settlements became a Crown Colony under the control of the Colonial Office in London in 1867.87 During this period, the British transferred some of their IP laws and principles to the Straits Settlements: the Imperial Copyright Act of 1914; the Trade Marks Act of 1939; passing off for unregistered trademarks; and the action for breach of confidence to protect trade secrets. UK-​registered designs were protected in Singapore under the Registration of the UK Designs Act, while patents had to be locally re-registered to receive protection under the Registration of the UK Patent Act of 1937.88 82  G Rodan, The Political Economy of Singapore’s Industrialization (Macmillan Press 1989) 1; see also Castells (n 7). 83  A Kohli, “Where do High-​Growth Political Economies come from? The Japanese Lineage of Korea’s ‘Developmental State’ ” in Woo-​Cumings (n 16) 93; TJ Pempel, “The Developmental Regime in a Changing World Economy” in Woo-​Cumings (n 16) 137. 84  Rodan (n 82) 20. 85  WG Huff, The Economic Growth of Singapore: Trade and Development in the Twentieth Century (CUP 1994) 35; see also Ng-Loy WL, “Singapore” in Goldstein and Straus (n 34) 234. 86  Huff (n 85) 36–​40. 87  E Lee, Singapore: The Unexpected Nation (Institute of Southeast Asian Studies 2008) 7–​8. 88  Ng-​Loy (n 85) 236.

Intellectual Property in Asia: ASEAN, East Asia, and India    361 After a brief period of independence as part of the Federation of Malaysia, Singapore separated from Malaysia on 9 August 1965.89 During the initial period of independence, which was accompanied by the attraction of low-​technology manufacturing industries, IP—​apart from trademarks—​was hardly on the agenda. Only two pieces of legislation modifying the British derived laws were introduced in the 1960s: a Patent (Compulsory Licensing) Act in 1969 and the Copyright (Gramophone Records and Government Broadcasting) Act in 1968. Commenting on the latter, Ng-​Loy points out that it was not only introduced to stop sound recording piracy after three sound recording companies had established themselves in the Jurong Industrial Park, but also to exempt Government broadcasting from the further payment of royalties to the Performing Rights Society and the International Federation of Phonographic Industry.90 IP arrived in Southeast Asia in a serious manner in the mid-​1980s. The main reason for the change in the IP landscape was that American policy makers in particular began to link the US trade deficit with losses due to the inadequate protection of IP. The US Government began to counteract such inadequate protection at first under the Tariff and Trade Act of 1984, which linked import privileges under the GATT to improved IP standards. Subsequently, section 301 of the US Omnibus Trade and Competitiveness Act of 1988 introduced the process of drawing up lists of countries that have been given deadlines for improving their IP protection or face threats of trade sanctions should such improvement not occur.91 While the section 301 reports have remained important for the relations of the United States with its trading partners in the field of IP,92 Singapore “graduated” from those lists many years ago.93 In Singapore, the American Business Council complained in the mid-​1980s about the difficulties of obtaining royalties under the Patents (Compulsory Licensing) Act,94 but otherwise, US pressure focused on copyright. This was hardly surprising at a time when copyright protection for computer software was an urgent industry concern.95 The US pressure coincided with Singapore’s so-​called “Second Industrial Revolution,” which was a massive effort to lead the country away from labor-​intensive manufacturing towards capital-​ intensive, higher value-​ added production, including in computer software.96 Further pressure came from a court decision in 1985 granting protection to British works and works from “His Majesty’s dominions,” although such former British colonies did not automatically protect Singaporean works.97 Under pressure from the US Generalized System of Preferences Review, Singapore finally enacted a new Copyright Act in 1987 which was modeled on Australian law with British and American influences, and a draft of which had previously been discussed with a US delegation. Parallel imports of books remained allowed.98

89

90 91  Antons (n 38) 78.   Lee (n 87) 260.   Ng-​Loy (n 85) 236–​237. For the 2017 report see (accessed 12 February 2018). 93  It was taken off the Special 301 lists for the first time in 2001: Ng-​Loy (n 85) 249. 94  Antons (n 38) 79.    95  Ng-Loy WL, “Singapore” in Liu and Hilty (n 67) 336. 96  Rodan (n 82) 142; Antons (n 38) 80. 97  See the discussion of Butterworth’s case in CL Choo-​Ludwig, “The Law of Copyright in Singapore” (1988) IIC 747. 98  Ng-​Loy (n 85) 238–​239. 92 

362   Christoph Antons In the 1990s, a period in which the Government emphasized deepening of the technology base and increasing external engagement, the focus shifted to patents.99 A  new Patents Act replaced the re-​registration of UK patents in 1994. Ng-​Loy has pointed to the specific features of this legislation. First, the “self-​examination” system with no substantive examination in Singapore, but reliance on foreign patent offices’ search and examination reports or on the international authorities under the PCT.100 Secondly, the liberal attitude towards the patenting of animal or plant varieties in order to encourage research into horticulture, agriculture, and biotechnology. In Singapore, questions related to the morality of such inventions have to be resolved by relying on a public order provision that prohibits the patenting of inventions that would “generally be expected to encourage offensive, immoral or anti-​social behaviour.”101 After joining the WTO in 1995, Singaporean legislation in the IP field was further completed with the introduction of a new Trade Marks Act and a Geographical Indications Act in 1998, a Layout Designs of Integrated Circuits Act in 1999, a Registered Designs Act in 2000, and a Plant Variety Protection Act in 2004. At the international level, apart from the TRIPS Agreement, the country joined the WIPO Convention in 1990, the Paris Convention, Budapest Treaty, and the PCT in 1995, the Berne Convention in 1998, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks in 2000, and the International Convention for the Protection of New Varieties of Plants (UPOV) in 2004.102 Some of the international accessions and domestic developments went beyond TRIPS requirements and resulted from obligations under bilateral Free Trade Agreements that Singapore had signed, with the most important being the one with the United States, which was signed in 2003 and implemented in 2004. The FTA brought significant changes to the law in Singapore by requiring trademark protection for non-​visually perceptible signs; an anti-​dilution right for well-​known trademarks; an increase in the copyright protection term to life of the author plus 70 years; ratification of the WIPO Internet treaties; stronger protection for rights management information and anti-​circumvention measures in the digital environment; restrictions on compulsory licensing in copyright; prolongation of the patent term because of unreasonable delays and unreasonable curtailment as a result of the marketing approval process in the case of pharmaceuticals; a narrower “Bolar” defence and a narrower scope for parallel importation of patented products and for compulsory licensing; a narrower interpretation of the options on plant variety protection; stricter provisions on undisclosed clinical test data for pharmaceutical products; and stricter enforcement standards, including ex officio border enforcement measures.103 Ng-​Loy has questioned whether the changes brought by the US–Singapore FTA and by another TRIPS plus FTA with the EFTA countries, which also required protection of geographical indications, have translated into growth in relevant IP sectors in Singapore. She has found that in two recently promoted key sectors for Singapore, there has been only marginal change in the copyright-​dependent creative industries and no significant impact of stronger patent protection on biomedical manufacturing.104 With its high protection 99  L Low, The Political Economy of a City-​State: Government-​made Singapore (OUP 1998) 50–​58; Ng-​Loy (n 85) 240; Ng-​Loy (n 95) 337. 100  Ng-​Loy (n 85) 241–​242.    101  Ng-​ Loy (n 85) 241.   102  Ng-​Loy (n 85) 239, 240–​242, 244. 103  Ng- Loy WL, “IP and FTAs of Singapore: Ten Years On” in Antons and Hilty (n 1) 337. 104  Ng-Loy (n 103) 350–​351.

Intellectual Property in Asia: ASEAN, East Asia, and India    363 standards and open economy, Singapore is a showcase for those promoting a link between stronger IP rights and economic development. Analysts of regional development processes, however, point to the specific circumstances of the economic rise of Singapore, and compare it to Hong Kong and other city states in history, but caution about speaking of a “Singapore model” otherwise.105

3.2.2 South Korea In discussions about East Asian development, South Korea is another prime example of the “Asian tigers” that have successfully found “pathways from the periphery.”106 Not surprisingly, this economic success has meanwhile led to recommendations to study the country’s history in areas such as patent law as potential models for other “emerging economies.”107 Historians of the political economy of Northeast Asian countries, however, have pointed to the peculiarities of the Korean development experience with a considerable legacy from the Japanese colonial period in the institutions and strategies chosen, especially during the almost two decades under Park Chung Hee that followed the military coup of 1961.108 As far as the history of IP is concerned, Yi Dynasty Korea had applied a system of privileges for book printers that led to the emergence of a printing right towards the end of the nineteenth century.109 Korea became a Japanese protectorate in 1905 and Japanese IP law was applied in Korea from 1908, first based on a Japan–US treaty and then directly after the annexation of Korea by Japan in 1910.110 Of the Japanese laws, only the copyright law continued to be applied after the end of the Japanese occupation and until the enactment of Korea’s own Copyright Act in 1957, which continues to be modeled after Japanese law.111 It was last revised in 2017. A new Patent Law proclaimed by the US military government in 1946 had little impact on Korea because

105 

Huff (n 85) 40–​41. S Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Cornell UP 1987). On the “Asian tigers” see Castells (n 7). 107  JA Erstling and RE Strom, “Korea’s Patent Policy and Its Impact on Economic Development: A Model for Emerging Countries” (2010) 11 San Diego International LJ 441. 108  B Cumings, “The origins and development of the Northeast Asian political economy: industrial sectors, product cycles, and political consequences” (1984) 38 International Organization 1; A Kohli, “Where Do High-​Growth Political Economies Come From? The Japanese Lineage of Korea’s ‘Developmental State’ ” in Woo-​Cumings (n 16) 93. On the developments after 1945, see also H Koo and Eun Mee Kim, “The Developmental State and Capital Accumulation in South Korea” in Appelbaum and Henderson (n 7) 121. 109  KH Youm, “Copyright Law in the Republic of Korea” (1999) 17 UCLA Pacific Basin LJ 276, 278–​280; H Kim, “Korea’s Experience with Intellectual Property Protection and Membership of the Agreement on Trade-​Related Aspects of Intellectual Property Rights” (2004) 32 Korean Journal of International & Comparative Law 111, 124; Y Choi, “Development of Copyright Protection in Korea: Its History, Inherent Limits, and Suggested Solutions” (2003) 28 Brooklyn Journal of International Law 643, 646–​647. 110  Choi (n 109) 647; E Choi, “With Great Power Comes Great Responsibility: Korea’s Role in the War Against Online Piracy” (2009) 10 San Diego International LJ 555, 562; Ki-su Lee, “General Introduction” in C Heath (ed), Intellectual Property Law in Korea (Kluwer Law International 2003) 1. 111  Ki-su Lee, ‘Copyright’ in C Heath (n 110) 121; Y Choi (n 109) 647–​648; H Kim (n 109) 125–​126. 106 

364   Christoph Antons of the Korean War until its replacement in 1961 by a new Patent Law which was revised in 2016.112 Similarly, a Trade Mark Act drafted during the military administration and enacted in 1949 was replaced with a new Trade Mark Act in 1958 and last revised in 2016.113 Similar to other Asian countries, with the exception of Japan, Korea did not pay much attention to the IP system prior to the 1980s. In the field of patents, Korea followed the Japanese pattern of strong reliance on utility models in the earlier stages of development.114 Statistics show an increasing number of utility model registrations beginning to outpace standard patents from the mid-​1950s onwards. The turning point came in 1989, when standard patents outnumbered utility models for the first time. Standard patent registration then rapidly rose, and by 2005, there were approximately four times more patent registrations than utility model registrations.115 In spite of the strengthening IP landscape, Korea remained a regular on the priority watch lists and watch lists of the USTR until 2008, mostly because of issues related to copyright protection.116 This outside perception of the Korean IP system only changed after the conclusion of the Korea–​United States (KORUS) Free Trade Agreement in 2007, followed in 2009 by the Korea–​EU FTA.117 More recently, Korea has been among the signatories of the Anti-​Counterfeiting Trade Agreement (ACTA), a plurilateral treaty aiming at a considerable raising of IP enforcement standards.118 Korea is also one of the partners in the negotiation of the RCEP. Because the RCEP’s Guiding Principles and Objectives for the negotiations had promised flexibilities taking into consideration the different levels of development in the negotiating group, it had been suspected that only a modest IP content could be negotiated.119 However, detailed and wide-​reaching IP chapters were proposed by both Japan and Korea in October 2014.120 This seems to represent a change in policy from earlier negotiated agreements, in which Korea did not propose higher standards to regional neighbors.121 It confirms the trend of Korea becoming a country offering and promoting high standards of IP protection. According to press reports, Korea was keen to join the TPP, but was asked by the Obama administration, which was anxious not to complicate domestic discussions about its fast track authority, to wait until after the conclusion of the deal.122

112  Keun Lee and YK Kim, “IPR and Technological Catch-​up in Korea” in H Odagiri, A Goto, A Sunami, and RN Nelson (eds), Intellectual Property Rights, Development and Catch-​Up: An International Comparative Study (OUP 2010) 140. 113  S-​K Chang, “Trade Marks and Related Rights” in Heath (n 110) 75–​76. 114  Lee and Kim (n 112) 135. 115  See the statistics in PY Kim, “Patents” in Heath (n 110) 18–​19; Lee and Kim (n 112) 138. 116  See for example the 2006 s 301 report of the USTR at (accessed 21 June 2016). 117  D-​H Lee, “KORUS FTA and Copyright Protection in Korea” in Antons and Hilty (n 1) 355. 118  C Antons and G Garcia, “Initiatives on IP Enforcement beyond TRIPS: The Anti-​Counterfeiting Trade Agreements and the International Medical Products Anti-​Counterfeiting Task Force” in Antons (n 31) 125. 119  Antons and Thampapillai (n 1) 32; see also B Townsend, D Gleeson, and R Lopert, “RCEP: the trade agreement you’ve never heard about but should be concerned about,” The Conversation, 8 June 2015. 120  Townsend et al (n 119).    121 Antons and Hilty (n 1) 4. 122  A Fifield, “South Korea asks to join Pacific trade deal. Washington says not so fast,” Washington Post, 15 April 2015; S Mundy and Song J, “South Korea frets as TPP erodes trade advantage over Japan,” Financial Times, 6 October 2015.

Intellectual Property in Asia: ASEAN, East Asia, and India    365

3.3 Two Developing Country Giants: China and India This section discusses China and India together for several reasons, firstly because of their sheer size. These are the giants of the developing world in Asia, and as such, they exert different bargaining power than most of the other economies. A market of over one billion people is attractive for multinational corporations, independent of IP protection. It is, therefore, not surprising that these two countries have been at the forefront of economic interest in recent years. Secondly, both of them continue to feature prominently on the section 301 lists of the USTR of countries with insufficient IP protection. This can be seen as a result of their attractiveness and bargaining power. Different from some of the smaller economies, China and India are in a better position to ignore demands for improvement of their IP systems. Thirdly, as large developing countries and members of the “BRICS” group of countries (which also includes Brazil, Russia, and South Africa), India and China have influence and can design IP policies that differ from the standard concepts imported from the early industrializers. Fourthly, both of them are relative late-​comers to the group of fast-​ developing Asian economies. Both were not yet mentioned in the 1993 World Bank report on the Asian miracle. The economic liberalization that had been praised as such a prominent feature in other Asian economies arrived in India seriously in the early 1990s, when Dr Manmohan Singh became finance minister in the government of PV Narasimha Rao.123 China gradually began to open up her economy under the leadership of Deng Xiaoping after Mao’s death in 1976.124

3.3.1 China With regards to the history of IP rights in China, William Alford’s book To Steal a Book is an Elegant Offense triggered a strong reaction from Chinese scholars, who have pointed to a long history of copyright in the country.125 Others remain skeptical. Ganea has quoted Chinese sources that argue that “the occasional mention of an exclusive printing right revealed nothing more than the existence of rudimentary privileges granted by local authorities,” and that “[i]‌mperial China lacked the social environment for the development of copyright values.”126 Less historically controversial is that the Chinese Empire embarked on law reform along Western models considerably later than the Japanese towards the end of the Qing dynasty. Chen has mentioned an edict of the Empress Dowager of 1901 appealing to officials in the Imperial Court and provinces for relevant suggestions.127 As in Japan and Thailand, an important trigger was the desire to see the humiliating imposition of extraterritoriality by the Western powers reversed. As in the case of Japan, part of that bargaining

123 

A Panagariya, India: The Emerging Giant (OUP 2008) xviii, 95–​109; R Guha, India After Gandhi: The History of the World’s Largest Democracy (Pan Books 2008) 694–​695. 124  R Peerenboom, China’s Long March toward Rule of Law (CUP 2002) 55. 125  K Shao, “Chinese Culture and Intellectual Property: Let’s Realise we have been Misguided” (2012) 4  The WIPO Journal 103; K Shao, “The Promotion of Learning in Chinese History” (2010) 24 Columbia Journal of Asian Law 63. 126  P Ganea, “Copyright” in Ganea, Pattloch, and Heath (n 40) 205–​206. 127  J Chen, From Administrative Authorisation to Private Law: A Comparative Perspective of the Developing Civil Law in the People’s Republic of China (Martinus Nijhoff Publishers 1995) 10.

366   Christoph Antons process had to do with IP laws, too. Clauses on the protection of IP rights started to appear in bilateral treaties that China was forced to sign towards the end of the nineteenth century. Attempts to establish patent protection were not supported by conservative court officials,128 so that a Copyright Act of 1910 remained the only legacy in this field of the Qing dynasty. This law survived the end of the Imperial order and, reinstated by the Guomindang, became ultimately the first Copyright Act of Taiwan.129 Patent rules enacted during the turbulent first three decades of the twentieth century remained irrelevant in practice and the last Guomindang Patent Act was brought to Taiwan, but never entered into force on the mainland.130 Different from most of the other colonized or partly colonized countries in Asia, Communist China abolished the pre-​existing legal order completely.131 During the years under Mao Zedong’s leadership, rudimentary efforts at developing the legal system of a socialist China were repeatedly interrupted by political campaigns to breathe fresh wind into the revolution, such as the “Anti-​rightist Movement” of 1957, the “Great Leap Forward” of 1958 and, of course, the “Cultural Revolution” of 1966–​1976.132 In the field of IP, the Qing Dynasty derived Copyright Act was abolished together with the Guomindang laws. Basic provisions on authors’ remuneration, trademarks, and inventor certificates established by administrative decrees remained largely meaningless in the radicalized political environment.133 Chinese legal reforms, including in IP, began afresh under the leadership of Deng Xiaoping in 1978.134 As in other developing countries, IP reform began with trademarks, when in 1982 a Trade Marks Act was enacted. This law has since been revised three times, most recently in 2014. As is common in China, the law is accompanied by a large number of judicial interpretations of the Supreme People’s Court, guidelines of the Beijing Municipal Higher People’s Court, and administrative regulations of the State Administration of Industry and Commerce.135 The latest amendments to the Trade Marks Act deleted the requirement of “visual perceptibility.” Zhang et al.136 have concluded from what was discarded in discussions of previous drafts that protection now extends to sound marks, but not to other non-​traditional signs. The new law allows for multi-​class applications and has introduced time limits for examination and review procedures.137 The law has further tackled the problem of bad faith opposition procedures. Now only the holder of prior rights or a party whose interests may be infringed can raise an opposition on “relative grounds” against the registration. Where 128

  P Ganea, “Patents, Utility Models and Designs” in Ganea, Pattloch, and Heath (n 41) 2. 130  Ganea (n 128) 2.   Ganea (n 126) 207. 131  Chen (n 127) 33–​36; Peerenboom (n 124) 44. 132  Chen (n 127) 41–​44; Peerenboom (n 124) 44–​46; J Chen, “Policy as Law and Law as Policy: The Role of Law in China’s Development Strategy” in Antons (n 23) 252–​255. 133  P Ganea and H Jin, “China” in Goldstein and Straus (n 34) 19, 23–​25; Ganea (n 128) 2–​3; Ganea (n 126) 207–​208. 134  Peerenboom (n 124) 55; Chen (n 132) 255–​256. 135  T Pattloch, “Trade Marks and Related Rights” in Ganea, Pattloch, and Heath (n 41) 81–​84. 136  W Zhang, L Wei, and Y Li, “The Third Revision of Chinese Trademark Law—​Analysis and Comment” (2014) IIC 559–​560. 137  Zhang, Wei, and Li 562–​563. See also “Moving fast under China’s new Trademark Law,” Managing Intellectual Property, 11 May 2014. 129

Intellectual Property in Asia: ASEAN, East Asia, and India    367 opposition claims are rejected, there is no further review, but the opposing party has to file for invalidation of the mark.138 The latest amendment also clarifies prohibitions of “bad faith” registrations by parties that know of the existence of the trademark due to “contractual, business or other relationships.”139 Changes to the much-​criticized enforcement environment140 include a raising of statutory damages, punitive damages for wilful trademark infringement, and the opportunity for the court to award damages based on the evidence provided by the plaintiff if the defendant fails to submit documents relevant for their calculation.141 The penalties in China’s “unique” system of administrative enforcement142 have also been raised.143 China’s Patent Act followed in 1984, and was substantially amended in 1992, 2000, and 2008. While the earlier amendments aimed at attracting foreign investment and prepared the ground for China’s accession to the PCT, WTO, and TRIPS Agreement, the latest amendments, in accordance with China’s 2008 National Intellectual Property Strategy, focus on an enhancement of the quality of patents, better accommodation of China’s national interest, and the interests of the public and improvement of enforcement of IP rights.144 The first point relates to the fact that the Chinese law provides protection for inventions, utility models, and designs simultaneously. The cumulative reporting of the data has led to questions about the respective share of the various rights, the quality of the applications, and, more generally in as far as patent filings serve as an important indicator of innovative capacity, the level of innovation in China. Utility model protection was introduced in China in view of the positive experiences that Germany and Japan had had with the system during their respective industrialization processes, and to support the incremental innovation of small-​and medium-​sized enterprises.145 While their contribution is generally seen as positive, many of the rights granted under the 1984 Act have been found to be of dubious quality, a tendency that may have been enhanced by government incentives rewarding patent filings with little regard to quality.146 There are now “utility model thickets” hampering the operations of both foreign investors and Chinese companies, and Luginbuehl has warned of the potential development of “patent trolls.”147 In efforts to counter the trend, a “utility model search report” was introduced in 2000. The 2009 amendment followed by introducing an absolute novelty standard, a prior art defence in court proceedings, and a patent evaluation report issued by the State Intellectual Property 138

  Zhang et al (n 136) 564–​566; “Moving fast under China’s new Trademark Law” (n 137).   Zhang et al (n 136) 571–​572; T Rice and J Simone, “PRC Trade Mark Law revision in force,” Managing Intellectual Property, 2 June 2014. 140   PK Yu, “The US-​China Dispute over TRIPS Enforcement” in Antons (n 31) 239; J Chen, “IP Law Enforcement in China: Think Outside the Box” in Antons (n 31) 291. 141 142  Yu (n 140) 257; Ganea and Jin (n 35) 31.   Zhang et al (n 136) 576–​580. 143  Zhang et al (n 136) 575. 144  Luginbuehl and Pattloch (n 37) 130–​134; Ganea (n 37) 651; S Luginbuehl, “China’s Patent Policy” in S Luginbuehl and P Ganea (eds) Patent Law in Greater China (Edward Elgar 2014) 6–​7. 145  Ganea and Jin (n 35) 20–​21. 146  “China’s utility model growing pains” Managing Intellectual Property, June 2013, Issue 232, 49; P Leung, “Is China’s utility model system getting a bad rap?” Managing Intellectual Property, 28 January 2015. See also D Prud’homme, “China’s indigenous IP policies—​here to stay?” Managing Intellectual Property, October 2013, Issue 235, 11; D Prud’homme, “China’s shifting patent landscape and State-​led patenting strategy” (2015) 10 Journal of Intellectual Property Law & Practice 619. 147  Luginbuehl (n 144) 17–​19. 139

368   Christoph Antons Office (SIPO), which can be requested by any interested person or by the patent holder.148 Further, an amended version of SIPO’s patent examination guidelines allows examiners to conduct a preliminary examination to reject applications that obviously lack novelty.149 The latest proposed amendments released in 2014 also foresee additional grounds that the Patent Re-​examination Board may take into account during re-​examination/​invalidation actions.150 On the second point of enhancing China’s national interest, a confidentiality review of inventions made in China has replaced the previously required first filing in China for inventions that will be filed abroad. This requirement applies to inventions “completed in China,” which, as Ganea has pointed out, may be a difficult requirement in the case of multinational companies.151 Luginbuehl and Pattloch, however, have pointed to various assumptions that are likely to trigger this review.152 The revised patent law makes it mandatory to declare genetic resources on which patent applications have been based, with non-​ compliance leading to rejection of the application or revocation of a granted patent.153 It also introduces the “Bolar exemption” to allow generic producers to test drugs during the term of the patent, and the international exhaustion of patent rights.154 The strong role of administrative enforcement, a particular feature of the Chinese IP system,155 is, according to a recent Five-​Year Plan for Development of National IPR issues, to be enhanced further, although the authorities will no longer be able to determine damages in administrative proceedings.156 Copyright protection was comprehensively covered in a new Copyright Act in 1990. The Act was amended in 2001 to bring it into accordance with the WIPO Internet treaties and the TRIPS Agreement.157 China’s lack of copyright protection for censored works was successfully criticized by the US as violating the Berne Convention and TRIPS Agreement in its complaint filed at the WTO.158 The problematic part in the relevant provision was removed in the 2010 amendment of the Copyright Act, although it was reworded in a manner that remains concerning for advocates of free speech.159 Further revisions proposed in 2014 are likely to bring in statutory and penal damages and authorizations for administrative authorities to seize and destroy equipment used to produce infringing goods as those that have meanwhile been introduced into the Trade Marks Act. Clarifications regarding work for hire and the safe harbor provisions for Internet service providers are also on the agenda.160

148   Ganea (n 37) 651–​652; Luginbuehl and Pattloch (n 37) 137–​138; T Mak, “Utility Models” in Luginbuehl and Ganea (n 144) 371–​372. 149  Luginbuehl (n 144) 18; “Is China’s utility model system getting a bad rap?” (n 146). 150  B Li and K Zhao, “China Patents: SIPO invites comments on patent amendments,” Managing Intellectual Property, 21 April 2015. 151  Ganea (n 37) 652–​654. 152  Luginbuehl and Pattloch (n 37) 138–​141. 153 154   Luginbuehl (n 144) 8; Ganea (n 37) 654.   Luginbuehl and Pattloch (n 37) 149. 155  Yu (n 140) 257–​258; Ganea and Jin (n 35) 31. 156  On the pros and cons of the system, see Cao J, “Dual Enforcement System” in Luginbuehl and Ganea (n 144) 199. 157  Ganea and Jin (n 35) 24–​25. 158  Yu (n 140) 265–​268. 159  Yu  (n 140) 276–​278. 160  P Leung, “China releases new draft revision to Copyright Law,” Managing Intellectual Property, 27 June 2014.

Intellectual Property in Asia: ASEAN, East Asia, and India    369

3.3.2 India India is in many ways different from the other countries discussed here. If much of East and Southeast Asia shows traits of the approaches to development that originated in East Asia, albeit with wide variations in the details and in the success of implementation, India was regarded at the end of the 1990s by economists and political scientists as a “failed developmental state,” at least in comparison with South Korea and other fast-​growing economies in the region. Herring, for example, has explained how the redistributive concerns of the Indian independence leaders Gandhi and Nehru had continued to trump the export-​orientation models recommended elsewhere, with economic liberalization in India ultimately coming “as a softer echo of the restructuring and collapse of the Soviet system.”161 While economic liberalization arrived later in India than in the other countries discussed here, the country has been a frontrunner in political terms. Many of its independence leaders were lawyers,162 “public interest” litigation in front of a strong Supreme Court is well established,163 and the discussion about IP is exceptionally lively, as is visible from such websites as “Spicy IP.”164 British IP law came to India first in the form of copyright with Act XX of 1847.165 Copyright was protected at the time by a combination of the British 1842 Literary Copyright Act, the Indian Act, and the “international copyright” regime under an Act of 1844 recognizing rights to books and works of art published in specified foreign countries.166 This was followed by the Copyright Act of 1914, which addressed the controversial issue of translations and changes necessary due to revisions of the Berne Convention.167 India enacted its own national copyright legislation in 1957. Of the many amendments since then, the important ones were in 1994 and 1999, which were made in order to achieve compliance with TRIPS.168 Further amendments in 2012 introduced digital rights management provisions in line with the WIPO Internet treaties, although India is not a signatory to those treaties.169 Most controversies in India in recent years have been related to patent law. During the colonial period, Act XV of 1859 was the first properly enacted law on patents, with an earlier Act of 1856 remaining ineffective.170 This law was replaced in 1888 and finally by Act II of 1911, which remained in force until the enactment of India’s own national Patents Act of 1970.171 The 1970 Act was preceded by the influential Ayyangar Report published in 1959,172 which warned of the existing and potential dangers for Indian innovation of abuses of the patent system. This led to some of the provisions that, in modified form, have been recently at the 161

  RJ Herring, “Embedded Particularism: India’s Failed Developmental State” in Woo-​Cumings (n 16) 306. 162   R Guha, India After Ghandi: The History of the World’s Largest Democracy (Pan Books 2007) 227. 163   O Mendelsohn, “Law, Terror and the Indian Legal Order” in Antons and Gessner (n 29) 157. 164   (laccessed 13 February 2018). 165   S Ghosh, “A roadmap for TRIPS: copyright and film in Colonial and Independent India” (2011) 1 Queen Mary Journal of Intellectual Property 146; T Garde, “India” in Goldstein and Straus (n 34) 70–​7 1. 166   L Bently, “Copyright, Translations, and Relations Between Britain and India in the Nineteenth and Early Twentieth Centuries” (2007) 82 Chicago-​Kent L Rev 1183–​1186. 167  Ghosh (n 165); Bently “Copyright.” 168  Ghosh (n 165). 169  BV Rajasingh, “India enacts laws to protect copyright over digital content” (2013) 8 Journal of Intellectual Property Law & Practice 265. 170  Garde (n 165) 57–​58. 171  Garde (n 165) 58–​59. 172  Garde (n 165) 59–​60, quoting NR Ayyangar, Report on the Revision of the Indian Patent Law (Delhi: Government of India, 1959).

370   Christoph Antons center of disputes about patents. Only process, but not product patent, protection was made available for inventions relating to food, medicine, drugs, or substances produced by chemical processes. Compulsory licenses were introduced and revocation of the patent if the invention was not used.173 In spite of concerns about the effects on its booming generics industry that resulted from some of these specifics of Indian patent law,174 India joined the WTO. Henceforth, the country was required to provide patents for “any inventions, whether products or processes” (Article 27(1) TRIPS), and to subjugate its compulsory licensing regime to the more restricted conditions under TRIPS. An amendment of the Patents Act became necessary in 1999 after a WTO panel decided that India had to provide for mailbox applications for product patents and introduce exclusive marketing rights for pharmaceutical and agricultural products.175 With the 2005 TRIPS deadline looming for pharmaceutical and agricultural products, further amendments followed in 2002 and 2005 allowing for product patents in these fields.176 So controversial was the 2005 amendment that the government had to introduce it via an ordinance to meet the TRIPS deadline, and the interim measure was only subsequently signed into law.177 However, rather than merely bringing the legislation into conformity with the TRIPS Agreement, the Indian government used the opportunity to bring in new provisions that were meant to put fetters on patent rights and reclaim space for Indians to innovate.178 For example, in addressing controversies about “biopiracy” related to traditional Indian medicines,179 it declared as non-​patentable “an invention which, in effect, is traditional knowledge or which is an aggregate or duplication of known properties of traditionally known component or components.” It also provided for revocation of an invention that is “anticipated having regard to the knowledge, oral or otherwise, available within any local or indigenous community in India or elsewhere,” or whose specification “does not disclose or wrongly mentions the source of geographical origin of biological material used for the invention.”180 Most discussion has been generated, however, by the amended section 3(d) declaring as non-​patentable “[T]‌he mere discovery of a new form of a known substance which does not 173 

Garde (n 165) 61. See P Kamble, S Ghorpade, R Kshirsagar, and B Kuchekar, “Progress of the Indian pharmaceutical industry: a shifting perspective” (2012) 7 Journal of Intellectual Property Law & Practice 48; S Tyagi, V Mahajan, and DK Nauriyal, “Innovations in Indian Drug and Pharmaceutical Industry: Have they Impacted Exports? (2014) 19 Journal of Intellectual Property Rights 243; J Bergström, “The Efficiency of India’s Patent Layering Regime—​Section 3(d) from Scientific Terminology to Patenting Implications” (2015) IIC 667. 175  Garde (n 165) 64–​67. 176  TS Gupta, Intellectual Property Law in India (Kluwer Law International 2011) 46. 177  C Antons, “Sui Generis Protection for Plant Varieties and Traditional Agricultural Knowledge: The Example of India” (2007) EIPR 481. 178  See Garde (n 165) 68–​69 for a survey of these provisions. See also NS Gopalakrishnan and M Anand, “Compulsory Licence under Indian Patent Law” in RM Hilty and K-​C Liu (eds), Compulsory Licensing: Practical Experiences and Ways Forward (Springer 2015) 19–​20. 179  See the examples in SK Verma, “Plant Genetic Resources, Biological Inventions and Intellectual Property Rights: The Case of India” in B Ong (ed) Intellectual Property and Biological Resources (Marshall Cavendish 2004) 129–​130. 180  Antons (n 177) 481. 174 

Intellectual Property in Asia: ASEAN, East Asia, and India    371 result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.” This led to a court challenge regarding the constitutionality and TRIPS compatibility of the Act by Swiss pharmaceutical manufacturer Novartis after its application for the cancer drug Gleevec was rejected. Novartis lost its battle at first in front of the Intellectual Property Appellate Board of the Patent Office, then in the Madras High Court, and finally in the Supreme Court of India.181 India made further headlines with regards to pharmaceuticals in 2012, when the Controller of Patents granted the country’s first compulsory license under section 84(1) of the Indian Patents Act to Indian generic drug manufacturer Natco Pharma Ltd to manufacture and market the drug Nexavar, which was patented by the German pharmaceutical company Bayer.182 In granting the license, the Controller of Patents applied all three alternatives of section 84(1), namely, that the reasonable requirements of the public with respect to the patented invention had not been satisfied (section 84(1)(a)), that the patented invention was not available to the public at a reasonably affordable price (section 84(1)(b)), and that the patented invention was not worked in the territory of India (section 84(1)(c)). On the first ground, the Controller concluded that the number of likely patients in India was significantly higher than stated by Bayer and that even on current figures, Bayer’s imports in the year the application was made only catered for 2 percent of these patients. On the second ground, the Controller dismissed Bayer’s argument that “reasonableness” under the subsection referred not just to the public, but to the patentee as well. On the final ground, the Controller developed a contextual analysis of the term “working” by relying on the Paris Convention and the TRIPS Agreement, and on language discouraging importation in other sections of the Indian Patents Act.183 The decision was upheld by India’s Intellectual Property Appellate Board (IPAB), which slightly raised the royalty rate and used a more cautious language regarding the “working” requirement, which in its view depended on “facts and evidence of each case.”184 A further appeal of Bayer in the Bombay High Court was equally unsuccessful, as was a subsequent special leave petition in the Supreme Court of India.185 181  S Ghoshray, “3(D) View of India’s Patent Law: Social Justice Aspirations Meets Property Rights in Novartis v. Union of India & Others” (2014) 13 Journal of Marshall Review of Intellectual Property Law 719, 724; J Bergström (n 174) 668–​669. 182  “India grants first compulsory license to generic drug producer” (2012) 16 Bridges, (accessed 13 February 2018); M Estavillo, “India grants first compulsory licence, for Bayer cancer drug,” Intellectual Property Watch, 12 March 2012, (accessed 13 February 2018). 183  BB Rajasingh, “India’s first compulsory licence over Bayer’s patent” (2012) 7 Journal of Intellectual Property Law & Practice 482; Gopalakrishnan and Anand (n 178) 21–​26. 184  Gopalakrishnan and Anand (n 178) 26; P Chatterjee, “India’s first compulsory licence upheld, but legal fights likely to continue,” Intellectual Property Watch, 4 March 2013, (accessed 13 February 2018). 185  S Rautray, “Nexavar Licence Case: SC dismisses Bayer’s appeal against HC decision,” The Economic Times, 13 December 2014, (accessed 13 February 2018).

372   Christoph Antons As with many other countries in Asia,186 India has exercised the choice between patents, a sui generis regime, or a combination of the two to protect plant varieties, which is granted in Article 27.3.b. TRIPS, in favor of a sui generis Plant Variety Act. However, rather than simply using the 1991 version of the UPOV Convention as blueprint, India has attempted to introduce a second-​tier protection for “farmers’ varieties” and so-​called “extant varieties” in its Plant Variety Protection and Farmers’ Rights Act of 2001.187 There have been mixed reviews regarding the basic concepts and implementation of these schemes, and it seems that further evidence will need to be collected before a judgment about their success or otherwise can be made.188 Much less controversial were the changes in the field of trademark law. Initially introduced in 1860 and revised in 1940, British-​derived trademark laws were replaced in 1958 with the Trade and Merchandise Marks Act, which in turn was replaced by a new Trade Marks Act in 1999 upon India’s accession to the WTO. Changes to the regime covering well-​known trademarks were the most important aspect of the amendments, as well as an increase in the period of protection and the extension of protection to service marks and design marks.189 An amendment in 2010 brought the legislation into accordance with the Madrid Protocol.

3.4 “Second Tier” Newly Industrialized Economies and Least Developed Countries: Intellectual Property in the ASEAN countries Lack of space precludes a detailed treatment of the IP systems of ASEAN countries, and only a brief sketch will be possible. The ASEAN group is very diverse and includes countries with very high IP standards, such as Singapore, discussed in a previous section; the other early members of ASEAN (Indonesia, Malaysia, Thailand, the Philippines, and Brunei), often referred to as “second tier newly industrialized countries”;190 and the latecomer Vietnam, as well as least-​developed country members Myanmar, Cambodia, and Laos, which all joined ASEAN during the 1990s.191 Recent trade negotiations add further complexities. While all ASEAN members are involved in the RCEP negotiations, only Singapore, Malaysia, Brunei, and Vietnam are founding members of the recently concluded TPP. If the agreement with its much more modest IP chapter is ratified, then TPP member countries will still have to implement higher standards than those that currently apply in the other older and larger ASEAN countries of Indonesia, Thailand, and the 186

  See R Kanniah and C Antons, “Plant variety protection and traditional agricultural knowledge in Southeast Asia” (2012) 13 Australian Journal of Asian Law 1. 187   Antons (n 177) 483. 188   See the early criticism of NS Gopalakrishnan, “Protection of Traditional Knowledge: The Need for a Sui Generis Law in India” (2002) 5 Journal of World Intellectual Property 735; and the more recent reports regarding the implementation in K Peschard “Farmers’ rights and food sovereignty: critical insights from India” (2014) 41 The Journal of Peasant Studies 1085; and in S Kochhar, “How Effective is Sui Generis Plant Variety Protection in India: Some Initial Feedback” (2010) 15 Journal of Intellectual Property Rights 273. 189  Garde (n 165) 74–​76. 190  Jomo (n 24). 191  SSC Tay and JP Estanislao, “The Relevance of ASEAN: Crisis and Change” in SSC Tay, JP Estanislao, and H Soesastro (eds), Reinventing ASEAN (Institute of Southeast Asian Studies 2001) 14–​16.

Intellectual Property in Asia: ASEAN, East Asia, and India    373 Philippines. This may not be a problem for the advanced system of Singapore or the small and oil-​rich Brunei. However, it will require changes in Malaysia,192 and in particular in Vietnam, which has been a regular on the USTR watch lists for many years.193 Historically, while Thailand modernized its legal system under the effect of unequal treaties, all the other countries that today make up ASEAN were former colonies of Britain, the Netherlands, France, Spain, and the US. Therefore, it is not surprising that IP arrived earlier in the countries of Southeast Asia than in East Asia. Royalty privileges for authors and inventors became available in some colonies during the first half of the nineteenth century. The colonial powers transferred most of the IP laws of this period to their colonies and also acceded to international conventions on their behalf.194 Over the same period, Thailand introduced a Copyright Act in 1901 and a Trade Marks Act in 1914, and joined the Berne Convention in 1931.195 In 1898, the US ousted Spain from the Philippines and replaced Spanish-​derived IP laws with American ones.196 Some ASEAN countries gained their independence over several decades after the Second World War, but initially they faced more pressing problems than IP protection. Much of the colonial legislation continued in force with relatively little relevance in practice. At first, national laws were introduced, whereby the focus was on trademarks and copyright. Only the Philippines established a national patent office as early as 1947.197 In other countries, patent protection was not introduced (Thailand), lapsed (Indonesia, North Vietnam, Myanmar, Laos, and Cambodia), or continued initially by recognizing patents registered in the former colonial power (Malaysia and Singapore). Significant change arrived in the 1980s due to a combination of factors: the increasing significance of foreign investment under export-​led development strategies; a decline in the prices of raw materials such as oil and gas; and the US-​led campaign for stronger IP rights, as well as similar European initiatives.198 Countries began to overhaul their IP laws, introduce new ones, and accede to relevant international treaties. This process was greatly accelerated after the conclusion of the TRIPS Agreement. By the late 1990s, the older ASEAN countries mostly had in place national laws covering the classical IP rights of trademarks, copyright, and patents, which were then further amended to make them TRIPS compliant in accordance with the deadline for developing countries in 2000. Areas of IP protection that were new in some countries but required by the TRIPS Agreement, such as plant varieties and trade secrets, were also added during the same period.199 The least-​developed ASEAN countries were not bound by the 2000 TRIPS deadline, and continued to struggle for some time with the implementation of basic legislation. Myanmar, for example, continues to use outdated laws from its colonial period. Trademarks can be 192

  HG Lim, “Free Trade Agreements and the Effects of Existing Agreements on Malaysian Intellectual Property Laws” in Antons and Hilty (n 1) 414. 193   For the 2017 watch list see (accessed 12 February 2018). 194  C Antons, “Intellectual Property: Southeast Asian Law” in SN Katz (ed), The Oxford International Encyclopedia of Legal History (OUP 2009) 261. 195  J Kuanpoth, “Thailand” in Heath (n 32) 340. 196  FM Negre and JQ Perez, “The Philippines” in Goldstein and Straus (n 34) 201. 197  AF Fider, “The Philippines” in Heath (n 32). 198  Antons (n 194) 263. 199  For plant varieties see Kanniah and Antons (n 186).

374   Christoph Antons registered under the Registration Act of 1908 and enforced by relying on a combination of the Criminal Code of 1860, the Special Relief Act of 1877 (as amended in 1954), and the Merchandise Act of 1889. The only IP law currently in force is the Copyright Act of 1914. The government has been working on draft laws for some time and a new trademark law may be the first of those to be enacted.200 Cambodia’s patent law, introduced in 2003, also covers utility models and industrial designs. Laws on trademarks and copyright were introduced in 2002–​2003,201 and although as a least-​developed country it is not required to do so, Cambodia introduced plant variety protection in a combined Law on Seed Management and Breeders’ Rights in 2008.202 The Intellectual Property Law of Laos also covers plant varieties as well as patents, utility models, industrial designs, trademarks, geographical indications, layout designs of integrated circuits, trade secrets, and copyright. Like these least-​developed countries, Vietnam is a more recent member of ASEAN, and like China, it is a latecomer to the WTO. Its Intellectual Property Law of 2005, which offers comprehensive coverage of all IP rights, was probably a model for the similarly structured law of Laos. Although French patent law in colonial Vietnam allowed for patents to be issued in France,203 there was subsequently no IP protection in North Vietnam during the war or in the first few years of post-​War Vietnam. Like China, Vietnam’s attitude towards IP protection changed in particular during the reform years of the 1990s, and IP rights were first protected via the Civil Code and then via the 2005 Intellectual Property Law.204 Nevertheless, Vietnam continues to feature on the USTR’s section 301 watch list, mainly because of complaints about its enforcement system.205 As the country is party to the TP11, it will have to upgrade its system if the agreement is ratified and establishes IP standards that go beyond those required by the TRIPS Agreement. Already in 2008, it had concluded a bilateral agreement with Japan.206 As with some other agreements in ASEAN, the Japan–​Vietnam Economic Partnership Agreement requires that parties “endeavour” to offer a plant variety protection system in accordance with the 1991 version of the UPOV convention, thereby narrowing the range of options to design other sui generis models allowed by the TRIPS Agreement.207 Following conclusion of the negotiations for an FTA with the EU in December 2015,208 the text of the agreement was released in February 2016.209 The released text confirmed earlier

200

  P Leung, “Myanmar’s trade mark law quivers on the horizon,” Managing Intellectual Property, 11 July 2014. 201   P Ganea, “Cambodia” in Goldstein and Straus (n 34) 1–​2. 202 203  Heath (n 32) 270.   Kanniah and Antons (n 186). 204  C Antons, “Intellectual property law in Southeast Asia: recent legislative and institutional developments” (2007) 1 Journal of Information Law and Technology 1; VD Phan, “Intellectual Property Enforcement in Vietnam: Recent Legal Reforms” in Antons (n 31) 317–​318. 205  See the 2016 report of the USTR at (accessed 21 June 2016), 50–​51. 206  N Ono, “Japan’s Approach to FTAs and IP” in Antons and Hilty (n 1) 236. 207  Kanniah and Antons (n 186); C Antons, “Article 27(3)(b) TRIPS and Plant Variety Protection in Developing Countries” in H Ullrich, RM Hilty, M Lamping, and J Drexl (eds), TRIPS plus 20: From Trade Rules to Market Principles (Springer 2016) 389. 208  “The EU and Vietnam finalise landmark trade deal,” European Commission—​Directorate-​ General for Trade, 2 December 2015 (accessed 21 June 2016). 209  (accessed 13 February 2018).

Intellectual Property in Asia: ASEAN, East Asia, and India    375 announcements on EU websites that the agreement will bring “a high level of protection going beyond the standards of WTO TRIPS agreement.”210 For example, the agreement extends to plant varieties, for which it requires protection in accordance with the 1991 revision of the International Convention for the Protection of New Varieties of Plants (UPOV). It requires accession to the WIPO Internet treaties and the WIPO Copyright Treaty, and it refers to treaties in trademark and patent law (the Trademark Law Treaty, the Singapore Treaty on the Law of Trademarks, the Patent Law Treaty), of which Vietnam is not a member, as reference points for registration procedures. The enforcement section brings some of the provisions that were discussed a few years ago in the context of the ACTA negotiations.211 Half of the 40-​page agreement deals with geographical indications (GIs) extending the enhanced TRIPS protection for wines and spirits to agricultural products and foodstuffs, and listing 171 EU and 39 Vietnamese protected GIs. Even the working group overseeing the implementation of the entire IP chapter is called the “Working Group on Intellectual Property Rights, including Geographical Indications.” The two other ASEAN countries that regularly feature on USTR (priority) watch lists are Indonesia and Thailand. Enforcement problems are cited in both cases, but both countries have also issued compulsory licenses for essential drugs in recent years.212 An additional concern with regards to both countries has been the unfair commercial use, as well as unauthorized disclosure, of test or other data generated to obtain market approval for pharmaceutical and agricultural chemical products. The USTR has concerns about Indonesia’s procedures regarding compulsory licenses, and “urge[s]‌Thailand to engage  . . .  with all relevant stakeholders . . . as it considers ways to address Thailand’s public health challenges, while maintaining a patent system that promotes innovation.”213 In view of the approaching ASEAN Economic Community (AEC), attempts at regional integration have been made in the ASEAN Working Group on Intellectual Property Cooperation, and with the conclusion of the ASEAN Framework Agreement on Intellectual Property Cooperation in 1995.214 These efforts have been supported by the ASEAN IP Right Action Plans drafted for the periods 2004–​2010, 2011–​2015, and 2016–2025.215 Given the diversity of the parties involved and their interests, progress has been relatively modest.216 Besides regular meetings and workshops, an ASEAN Patent Examination Collaboration Program has been established that aims at

210  (accessed 13 February

2018). 211  Antons and Garcia (n 118). 212  See J Kuanpoth, “Compulsory Licences: Law and Practice in Thailand” in Hilty and Liu (n 178) 64–​67; (accessed 13 February 2018). 213  See (n 205), 37–​38. 214  W Weeraworawit, “The Harmonisation of Intellectual Property Rights in ASEAN” in C Antons, M Blakeney, and C Heath (eds), Intellectual Property Harmonisation in ASEAN (Kluwer Law International 2004) 205. 215  (accessed 13 February 2018). 216  Potential reasons are discussed in Antons (n 204) 8–​9 and J Kuanpoth, “Patents and the emerging markets of Asia: ASEAN and Thailand” in FM Abbott, C Correa, and P Drahos (eds), Emerging Markets and the World Patent Order (Edward Elgar 2014) 308.

376   Christoph Antons the sharing of information on patent filings and the reuse of search and examination reports by ­patent examiners of other offices.217 An ASEAN IP Portal that came into operation in 2013218 provides information on services, resources, statistics, news, and events.

4. Conclusion In this chapter, the short sketch of IP history in Asia suggests that Asian countries accepted modern IP laws under pressure during the nineteenth and early twentieth centuries. This pressure still exists in the form of USTR watch lists as well as the inclusion of TRIPS standards and “TRIPS plus” standards in bilateral and multilateral agreements. Although eventually independent from European rule, Asian countries that had experienced colonization frequently distrusted IP systems that featured a colonial legacy of requiring registration in European capital cities and favoring the interests of colonial enterprises. In some cases, such as Indonesia, colonial legal pluralism in fact had largely excluded the majority of the local population from Dutch-​derived commercial law altogether.219 In such settings, it is hardly surprising that law was politicized after independence and that IP fell into disuse. In addition, state-​led and “top down” development models diminished the need for IP laws in countries in which state enterprises or politically well-​connected firms were strategically supported, and in which appeals to the discretionary power of bureaucrats had better chances of success than court challenges. In spite of such difficult beginnings, many of the countries, with Japan in a pioneering role, have meanwhile adopted strong IP systems, which they are beginning to promote in other Asian neighboring countries. The reason for this is a combination of factors: first, increasingly mature industries are asking for protection in other countries; and secondly, countries that sign up to high protection trade agreements for strategic reasons become spearheads for further development in their respective regions. Such reasons are dominant in domestic considerations to a varying degree. Although it is tempting to see a common trajectory in such stories of maturing IP systems, the very different historical pathways to development suggest that it is difficult simply to declare certain countries as role models for others when constructing a link ­between IP protection and economic and technological development. Japan had a unique opportunity to experiment with Western technology prior to the first international IP treaties in the late nineteenth century. Korea and Taiwan (which is not discussed in this volume) followed Japanese development policies closely at a much later stage, but became strategically important countries in the attraction of foreign direct investment. Singapore, finally, is a city state with no natural resources and aims to attract high technology by offering a strong legal framework.

217 

218 . Kuanpoth (n 216) 307. DS Lev, “Colonial Law and the Genesis of the Indonesian State” in DS Lev, Legal Evolution and Political Authority in Indonesia: Selected Essays (Kluwer Law International 2000) 13. For details see S Gautama and RN Hornick, An Introduction to Indonesian Law: Unity in Diversity (Penerbit Alumni 1983) 1. 219 

Intellectual Property in Asia: ASEAN, East Asia, and India    377 Outside of this group, there are developing country giants, such as China and India, with difficult regional imbalances in their domestic development. For such countries, which are at many different levels of development at the same time, and have also to satisfy the interests of vastly different stakeholders, it remains difficult to adopt standard IP policies. Instead, there is much experimentation; in India, for example, there are “mixed” plant variety acts that aim to promote commercial agriculture and protect traditional farmers at the same time, and narrow interpretations of the scope of patented inventions. This, as well as the use of compulsory licenses and the recognition of traditional forms of knowledge, are some of the features that are currently being revitalized. Countries with large domestic markets, such as China and India, often are at the forefront of such discussions; because of their size, they hold a stronger position to introduce modifications to standard models and prescriptions. Countries with less strong bargaining positions on average adopt some of these modifications, while also following standard models more closely. Even some of the remaining least-​developed countries in the region are positioning themselves for competition with local neighbors for investment by adopting TRIPS standards of IP protection in various areas, for example, plant varieties, although they are not yet required to comply with the TRIPS Agreement. In conclusion, the IP landscape in Asia is likely to become increasingly diverse over the coming years, with some countries promoting strong IP standards in the region or joining larger multilateral agreements that incorporate TRIPS plus standards, while others continue to develop alternative models of IP protection, and least developed countries struggle to set up their IP systems. Conflicts over the appropriate level of protection will continue, and will no longer be confined to countries defined as “North” and “South,” or as “developed” and “developing” respectively.

Chapter 14

The Em erg e nc e a nd Devel opm e nt of Intellectua l Prope rt y L aw in the M i ddl e  E ast Michael Birnhack AND Amir Khoury * 1. Introduction Ottoman imperialism modeled after French law and influenced by western colonial interests, and then by multiple layers of globalization, has shaped intellectual property (IP) law in the Middle East during the past century, allowing a rather narrow leeway for the expression of local interests. Politics, economics, and culture have, however, invariably affected the practice of the law. Middle Eastern IP law is a case of western legal transplants, which by now have been absorbed within the recipient local legal systems. However, the literature on legal transplants has taught us that the insertion of a law from one jurisdiction into another is a process, rather than a one-​time event, and in the course of its assimilation, the transplanted law itself changes.1 This chapter explores the emergence and development of IP law in the Middle East as a case of a western legal transplant. A central theme of the discussion that follows is the need to evaluate a country’s IP regime against the background of a rich context, instead of by means of a technical comparison of legislation. We focus on several countries, and each illustrates a different mix of legal, economic, political, and cultural factors. We discuss Israel and the Palestinian Authority, as well as several Arab countries: Egypt, Jordan, Saudi Arabia, and the United Arab Emirates (UAE). We focus on the three main branches of IP laws: copyright, patents, and trademarks. * 

The authors thank participants of the Oxford Handbook on IP @ TAU Law Workshop for comments, and Hila Speis for able research assistance. Michael Birnhack and Amir Khoury have asserted their moral right to be identified as the authors of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  See P Legrand, “What ‘Legal Transplant’?” in D Nelken and J Fees (eds), Adapting Legal Cultures (Hart Publishing 2001) 55, 63 (“As it crosses boundaries, the original rule necessarily undergoes a change that affects it qua rule”).

Intellectual Property Law in the Middle East    379 A full analysis of each factor in each country requires detailed empirical research, and exceeds the scope of the current discussion. We do hope, however, to provide a grasp of the overall picture. The choice of the countries discussed is of course geographical, but each case enables us to illustrate one or more of the themes mentioned. We begin by explaining the theoretical framework, which argues for a rich contextual evaluation, proceed with a brief comment on Ottoman law, and then turn to the several countries mentioned.

2.  Law, Political Economy, Politics, and Culture The IP system of a country is too often evaluated solely in legal terms. Such an evaluation asks if the system complies with international standards. A comparison of local copyright, patent, trademark, and other laws to international standards, especially those found in the TRIPs Agreement and the Berne and Paris Conventions, would yield a detailed picture, and ignoring language barriers, be relatively easy to conduct. But, as we argue here, the resulting picture would be insufficient to support an assessment of the IP regimes in question. In order to have a full understanding of the IP system of a particular country, we need to contextualize it by adding more dimensions: The legal system at large, the political economy, local and regional politics, and the local culture.2 As for the legal system, IP laws should be evaluated with reference to the legal field as a whole, and to their operation in practice. Copyright law is not an isolated island, nor is patent law, trademark law, or the laws regulating plant varieties. Contract law interacts with IP, for example, by determining how rights are licensed; property law may also influence the exploitation of jointly held rights; and employment law will shape the competing claims of employers and employees with respect to employee-​devised IP subject matter. Tax law might affect transfers of ownership of IP, and corporate law might affect the liability of company directors. Antitrust law intersects with IP in several ways, for example, in regulating the exploitation of patents in respect of technological standards and the activities of authors’ collecting societies. Criminal law, too, has a say in the enforcement of IP laws,3 and constitutional law offers an increasing array of counter-​considerations to the recognition and protection of IP rights, including in its provision for freedom of expression, which affects the contours of copyright and trademark law, and for human dignity and public health, which affects the contours of patent law.4 This is an incomprehensive list, as many countries have

2 

Elsewhere, one of us has elaborated on this framework. See MD Birnhack, “Trading Copyright: Global Pressure on Local Culture” in NW Netanel (ed), The Development Agenda: Global Intellectual Property and Developing Countries (OUP 2008) 365. 3  See E Haber, “The Criminal Copyright Gap” (2015) Stanford Technology L Rev 247. 4  On the copyright-​speech interaction see, eg, Golan v Holder 132 S Ct 873 (2012). On the trademark-​speech intersection see, eg, KA Pace, “The Washington Redskins Case and the Doctrine of Disparagement: How Politically Correct Must a Trademark Be” (1994) 22 Pepperdine L Rev 7; and more recently Matal v Tam, 582 US ___ (2017) (holding that the disparagement clause in the Trademark Act violates the First Amendment).

380    Michael Birnhack and Amir Khoury unique laws and norms, be it the Unjust Enrichment Act in Israel, or the norms of fairness based on Islamic legal principles in Saudi Arabia.5 Moreover, a legal system with broad judicial discretion differs from a rule-​based system, providing less certainty and democratic oversight while also enabling more flexibility and decision-​making tailored to the facts of individual cases. The practice of law is no less important. A country might have a beautifully tidy and coherent law, but it might not be followed.6 The mechanisms of criminal and civil enforcement, and the working of patent and trademark offices7 and of the judicial system itself, are essential to the application of IP laws in practice. But there are additional, less visible, players and sites that affect the working of IP laws. A librarian who makes a decision as to whether to enable access to certain licensed databases to walk-​in patrons,8 the technology startup that considers applying for a patent,9 or the software developer who adorns her app with familiar symbols and images10—​are all examples of everyday behavior that can influence understandings of and attitudes to IP law in ways that can shape their development. The way that IP subject matter and systems are used in practice is more difficult to measure than the plain legal language, but no less important.11 The political economy plays an important role in the overall state of IP systems. The products and services that a country imports versus those that it exports, and the composition of its local industries and workforce, all affect its political interests. For example, a country will generally be more concerned to protect the goods and services that it exports, including, for example, entertainment or information-​based services12 which are infused with IP, than those it imports. Or, to take another example, a country that wishes to develop a generic pharmaceutical industry is likely to favor less-​stringent patent laws and data exclusivity regulations. Where there are insufficient medical facilities to meet the needs of the 5  See AH Khoury, “Ancient and Islamic Sources of Intellectual Property Protection in the Middle East: A Focus on Trademarks” (2003) 43(2) IDEA 151. According to Islamic law, the obligation to pay or the right to receive interest is unenforceable. Furthermore, contracting parties must maintain principles of fairness and equity in their dealings. As such, contracts where one party gains unjustly at the expense of another are voidable, especially if the party gaining unjustly has a monopoly or market dominance in the relevant field. Consequently, in each contract the commercial substance of the transaction is evaluated and scrutinized lest it be contrary to the principles of unjust enrichment under Islamic law. 6  See J Carroll, “Intellectual Property Rights in the Middle East: A Cultural Perspective” (2001) 11 Fordham Intellectual Property Media & Entertainment LJ 555, 557–​563 (pointing to the gap between the many IP laws in the Middle East and high levels of piracy in the late 1990s). 7  There are too few studies on these aspects. For a notable exception see D Harhoff and S Wagner, “The Duration of Patent Examination at the European Patent Office” (2009) 55 Management Science 1969. 8  See, eg, in the American context, P Aufderheide and P Jaszi, Reclaiming Fair Use: How to Put Balance Back in Copyright (University of Chicago Press 2011). 9  SJH Graham, RP Merges, P Samuelson, and T Sichelman, “High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey” (2009) 24 Berkeley Technology LJ 255 (describing the importance of patent system to startup companies). 10  SO Goldsmith, IG DiBernardo, FL Bernstein, S Smedresman, M Gulliford, and RPW Stobbe, “Trends and Observations in Software” (2013) 48 Les Nouvelles 229. 11  As one author aptly commented, in the context of Lebanese IP law, while IP laws “are largely based on European precedents and international developments, legal practice has a distinct local flavour”: M El Said, Intellectual Property in Lebanon (Wolters Kluwer 2012) 13. 12  On the globalization of information services, see A Chander, The Electronic Silk Road: How the Web Binds the World in Commerce (Yale UP 2013).

Intellectual Property Law in the Middle East    381 local community, IP laws may be used to incentivize their creation, and to support investment in medical research and development more generally.13 In the globalization context, it was this way of thinking that led many countries to join the TRIPs Agreement, despite seeming at first sight to be against their economic interests. Peter Yu pointed to four explanatory narratives for this puzzle: bargain, coercion, ignorance, or self-​interest.14 Whichever the appropriate narrative, it is clear that a country’s IP law should be read vis-​à-​vis its economy and economic interests. Politics, in the narrow sense, also play an important role. Under Imperial and Colonial regimes, local politics mattered less, and the empires’ primary motivation in enacting (or demanding) local IP laws was not necessarily to advance the local population and its creative and innovative sectors, but rather to assure protection of their own imperial interests. In a post-​colonial world, the increasing American involvement in Middle East politics over the past few decades has left clear marks on local IP laws. In its annual reports, known as “special 301 reports,”15 the United States Trade Representatives (USTR) has closely examined IP laws in Egypt, Israel, Kuwait, Lebanon, and occasionally other countries in the region.16 The reports review in great detail IP laws and their enforcement in these countries, and make unequivocal if occasionally implicit demands, as by stating that one obstacle for Egypt to achieve an effective IP protection is “a failure to provide additional training for judges,”17 or urging Saudi Arabia to impose “deterrent sentences on IPR infringes,”18 or noting that “the United States remains seriously concerned  . . .  with Israel’s inadequate level of protection against unfair commercial use of undisclosed test and other data generated to obtain marketing approval for pharmaceutical product.”19 Globalization has its demands, too. A country that is interested in participating in an international forum to promote its interests such as the World Trade Organization (WTO) or the Organization for Economic Cooperation and Development (OECD) might find itself bound to adapt its IP laws to meet the standards required by those organizations. This would be a case of bargain, in Yu’s terms. In other words, politics may explain some otherwise mysterious legal situations. Finally, culture, which is probably the most elusive of the factors identified, is crucial to understand the IP laws in a given country. Different cultures might hold different views as to the creative process,20 as to research and development (R&D), or as to consumerism, and other related issues.21 Promoting local education, enabling sufficient breathing space for identity politics,22 protecting local languages and traditional knowledge, and much more,

13   See, eg, AH Khoury, “The ‘Public Health’ of the Conventional International Patent Regime & the Ethics of ‘Ethicals:’ Access to Patented Medicines” (2008) 26 Cardozo Arts & Entertainment LJ 25. 14   See PK Yu, “The First Ten Years of the TRIPs Agreement: TRIPs and Its Discontents” (2006) 10 Marquette Intellectual Property L Rev 369. 15   The authority for issuing the reports lies in Trade Act 1974 (codified as amended at 19 USC §§2411–​ 2420, 2242) s 301. For the annual reports, see . 16   For example, the United Arab Emirates was reviewed in 2001 and Qatar was reviewed in 2002. 17  See USTR Special 301 Report (2011) 34–​35. 18  See USTR Special 301 Report (2004) 32. 19  See USTR Special 301 Report (2008) 36. 20  See, eg, M Sunder, “Bollywood/​Hollywood” (2011) 12 Theoretical Inquiries in Law 275. 21  Carroll (n 6) provides a somewhat orientalist view of Middle Eastern culture, as an explanation for the then under-​enforcement of IP, to which we do not subscribe. 22  See M Sunder, “IP3” (2006) 59 Stanford L Rev 257.

382    Michael Birnhack and Amir Khoury are all issues that countries struggle with, especially those which are net-​importers of cultural production. The particular cultural import/​export balance is the result of numerous factors, such as language, cultural or religious differences, and economics of scale, and it matters. A musical hit among Lebanese Druze, for example, might not have a large enough market to be exportable, and will also have to compete at home with imported western music. Access to knowledge plays an important role in the field of education: Copyright law directly affects the availability of foreign informational resources. Moreover, a state’s cultural policy is intertwined with issues of nationality, contingent on its history and ideologies, including free market and other economic ideologies.23 The mix of factors that shape a country’s IP regime is reflected in opposite narratives of development: as modernization or as dependency.24 For the proponents of globalized IP laws, the sufficiency of installing modern IP laws is based on a modernization and development theory, according to which non-​industrialized countries can only develop through the adoption of norms that have been created by developed countries.25 It follows, according to this logic, that developing countries should adopt the legal norms and standards of IP protection that have ultimately helped in advancing developed countries to where they are today. Under this view, development is portrayed as a linear, progressive process, with a single possible trajectory. The opposite, skeptical view, is that strong IP laws merely benefit nations that are themselves producing the inventions, works, and brands which those laws protect. Keith Maskus argues that “[e]‌mpirical claims that IPRs [intellectual property rights] can generate more international economic activity and greater indigenous innovation are conditional. Other things being equal, such claims may be valid—​but other things are not equal. Rather, the positive impacts of IPRs seem stronger in countries with complementary endowments and polices.”26 For example, in the trademark field, dependency theorists contend that applying modern standards of trademark protection to developing countries will render those countries evermore dependent on foreign brands and will therefore not help generate new

23 

For a fascinating account of the role of the state, cultural policy, and copyright, see D Halbert, The State of Copyright: The Complex Relationships of Cultural Creation in a Globalized World (Routledge 2014). 24  LG Branstetter, “Do Stronger Patents Induce More Local Innovation?” in KE Maskus and JH Reichman (eds), International Public Goods and Transfer of Technology Under a Globalized Intellectual Property Regime (CUP 2005) 309; T Swanson and T Goeschl, “Diffusion and Distribution: The Impacts on Poor Countries of Technological Enforcement within the Biotechnology Sector” in Maskus and Reichman, supra, 669–​670; H Klug, “Access to Essential Medicines—​Promoting Human Rights Over Free Trade and Intellectual Property Claims” in Maskus and Reichman, supra, 481. 25  A Endeshaw, Intellectual Property Policy for Non-​Industrial Countries (Dartmouth 1996) 6 (commenting that supporters of the modernization approach consider it to be the only viable choice for nations aspiring for industrialization and technological transformation). 26  KE Maskus, Intellectual Property Rights in the Global Economy (Institute for International Economics 2000) 199. Also see PK Yu, “The Trust and Distrust of Intellectual Property Rights” (2005) 18 Revue québécoise de droit international 107, 114 (“While developed countries might have resources and regulatory mechanisms to reduce the impact of an unbalanced intellectual property system, such a system would substantially hurt less developed countries. Many of these countries do not have the wealth, infrastructure, and technological base to take advantage of the opportunities created by the system. Many of these countries also lack the national economic strengths and established legal mechanisms to overcome problems created by an unbalanced system”).

Intellectual Property Law in the Middle East    383 local brands.27 In other words, the application of a similar legal system does not necessarily entail similar outcomes on the ground.28 One of us (Birnhack) has called this phenomenon the “Glocal IP gap,”29 and the other (Khoury) has offered a comprehensive analytical framework to assess it in the context of trademark law.30 In his analysis of this phenomenon, Khoury points to the advantages of developed countries over developing countries:  in absolute numbers, as measured by trademark registrations; in relative numbers, namely the share of non-​resident owned marks that are registered in developing countries which is higher than the share of non-​resident registrations in developed countries; and in a particular level, where brands originating in developing countries dominate foreign registrations in developing countries. Khoury suggests the notion of each country having a “trademark potential” that is contingent on the type of industries therein and not on the level of compliance of its trademark law with global norms. Accordingly, this framework examines a country’s trademark balance. Where a country has an inherent trademark deficit because of the structure of its industry, no trademark law, no matter how compliant it is with global law, can effectively boost its trademark potential and ultimately improve its national industry’s ability to enter the market under its own brands. Developing economies are extractive economies with exports dominated by raw materials such as oil.31 Their trademark potential is thus low. The adoption and application of global IP standards in developing countries with a low trademark potential does not necessarily reflect a willful sovereign action but may rather be motivated by indirect benefits and constitute no more than a dictated trade-​off. Trademark policy in developing countries appears to be driven by two primary concerns, namely, loss of foreign investments, and economic sanctions imposed (within the WTO framework) as a result of insufficient protection for IPRs.32 Below, we look at the interesting case of two Arab countries that are classified as developing countries (Saudi Arabia and the UAE) but nevertheless have a low trademark potential. In summary, we argue that a country’s IP regime should be assessed against the background of a rich context that takes a broad view of the IP legal field, and that is acutely aware of the political, economic, and cultural powers and needs informing that field. We now turn to consider the development of IP law in the Middle East along these lines.

27 

D Chudnovsky, “Foreign Trademarks in Developing Countries” (1979) 7 World Development 663. See, eg, RL Ostergard, “Economic Growth and Intellectual Property Rights Protection: A Reassessment of the Conventional Wisdom” in DJ Gervais (ed), Intellectual Property Trade and Development: Strategies to Optimize Economic Development in a TRIPs-​Plus Era (OUP 2014) 3; M Chon, “Intellectual Property and Theories of Developmental Justice” in Ostergard, supra, 256. 29 Birnhack (n 2). 30  AH Khoury, “A NeoConventional Trademark Regime for ‘Newcomer’ States” (2010) 12 University of Pennsylvania Journal of Business Law 351. 31  In complete contrast to the situation in developing countries, the US economy has a mighty trademark balance, and a very high trademark potential. American corporations own millions of marks. James Gerber (in J Gerber, International Economics (6th edn, Prentice Hall 2013) 301–​302) contends that “[g]‌iven its large economy and population, U.S. trade with the rest of the world has been a smaller share of its GDP than in most other developed economies.” The trade-​to-​GDP ratio was approximately 30 percent in 2010. 32  AH Khoury, “Trademark Policy: The Case of Arab Countries” in Gervais (n 28) 299. 28 

384    Michael Birnhack and Amir Khoury

3. Ottoman Times The first to introduce modern IP laws in the Middle East were the Ottomans. The Ottoman Empire ruled large parts of the region for four centuries.33 The early twentieth century saw the Empire’s gradual fall, notably with Egypt becoming a British protectorate in 1914, and then, at the end of the First World War, with the British conquest of most of the region, other than today’s Turkey.34 Ottoman law was composed of Islamic law (Sharia), Sultanic law (Kanun), and customary law (Örf). The nineteenth century was one of reform, which brought about a general cultural liberalization that turned increasingly westwards.35 Legal reforms, known as Tanzimat, were part of this shift away from religious to secular, Western and European forms of law, with the new winds integrated into the Ottoman system producing a unique hybrid.36 The crown jewel was the Mejelle, an extensive codification of civil law matters (1868–​1876). IP, although not part of the Mejelle, perfectly fit the general trend westward. Trademark law was first introduced in 1871,37 copyright law in 1872, and patent law in 1879. These laws were closely based on French law.38 Shortly after the 1908 Young Turks Revolution, which restored the Constitution and parliamentary government, the Ottomans enacted the 1910 Authors Rights Act.39 The Act reflected most of the features of European copyright law at the time, with the exception that it required formalities as a prerequisite for protection, by then prohibited by the 1908 Berlin revision of the Berne Convention. The Ottoman IP scheme applied throughout the Empire, but there is little documentation as to its effect in practice. At least in some fields, there are indications that it was hardly applied, especially in copyright law, given the relatively short period of the Act and the outbreak of the First World War.40 Another exception is Jordan, which held onto the Ottoman Authors Rights Act until 1992.41 In Turkey itself, the law was replaced with a newer law in

33  At its height, the Ottoman Empire controlled the areas which are today Egypt, Israel, Palestine, Syria, Lebanon, most of Jordan, Iraq, Kuwait, Qatar, the western coast of Saudi Arabia, and Yemen. 34  On the fall of the Ottoman Empire, see C Finkel, Osman’s Dream: The Story of the Ottoman Empire (John Murray 2007) 526–​554. 35  See M Şükrü Hanioğlu, A Brief History of the Late Ottoman Empire (Princeton University Press 2008); BC Fortna, Learning to Read in the Late Ottoman Empire and the Early Turkish Republic (Palgrave Macmillan 2011) (concerning the rise in literacy rates). 36  See, eg, A Rubin, “Legal Borrowing and its Impact on Ottoman Legal Culture in the Late Nineteenth Century” (2007) 22(2) Continuity and Change 279 (discussing non-​western modernity). On the Tanzimat, see RH Davison, Reforms in the Ottoman Empire 1856-​1876 (Gordian Press 1973). 37  The Ottoman trademark law was in force in Turkey until 1965. See E Ozsunay, “The New Turkish Trademark Law” (1996) 19 Fordham International LJ 1542, 1544. 38  See Gür Law Firm at . 39  Hakk-​ı Telif Kanunu, 2 Düstur 273 (1910), 12 Jamad ul Awal 1328 (Muslim calendar), 22 May 1910 (Gregorian calendar). For a brief description see D Çakmak, “Concerning the Ottoman Copyright Legislation” (2007) 21 Selçuk Üniversitesi Turcology Study Journal 191 (Turkish). 40  MD Birnhack, Colonial Copyright: Intellectual Property in Mandate Palestine (OUP 2012) 86–​90. 41  M El Said, The Development of Intellectual Property Protection in the Arab World (Edwin Mellen Press 2008) 225.

Intellectual Property Law in the Middle East    385 1951.42 Indeed, the British, in the parts they controlled (Palestine, Transjordan) were quick to get rid of the Ottoman laws; as did the French in the areas they controlled (Syria, Lebanon).43

4.  Israel, the West Bank, and Gaza Israeli IP law is a multilayered structure, composed of British foundations (that replaced a thin Ottoman layer), original Israeli amendments, and numerous marks of international, European, Australian, and increasingly American footprints.44 Jewish law has not played a role in the construction of modern Israeli IP laws, although some courts occasionally cite Jewish law sources as obiter dicta.45 Legally, current Israeli IP law is by and large compliant with most IP international treaties, with the exception of the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms treaty (WPPT). Politically, Israel has been under continuous pressure to ensure that its IP laws meet American demands. Israel is ranked “free” by Freedom House, referring to the State of Israel, rather than to the occupied territories. Practically, the law is routinely applied and adjudicated in courts. There is an ongoing discussion about many issues similar to those found in other developed countries. These include whether methods of doing business are patentable, whether Internet service providers should be liable for allegedly infringing user-​generated content, and what the scope should be of protection afforded to well-​ known marks. Theoretically, the courts and the legislature opted for a mostly incentive-​based, instrumental justification of IP laws, although there are some proprietary undertones, which were enhanced by the 1992 constitutionalization of private property.

4.1 Politics, Economy, and Culture IP law, as we argued in this chapter’s introduction, should not be assessed solely against the international standards. Applied to the Israeli context, in a nutshell, we could note the following. From a political perspective, Israeli IP laws were gradually adapted to satisfy foreign demands, with some attempts to preserve advantages for the generic pharmaceutical industry. On the multilateral side, being a WTO member and bound by the TRIPs Agreement, Israel amended its IP laws in late 1999 to comply with that Agreement, although these were mostly technical amendments.46 On the bilateral side, Israel is bound by a Free Trade 42 

E Özsunay, “Turkey” (2001) 7 International Encyclopaedia of Laws: Intellectual Property 32, 48. See the French Mandate for Syria and Lebanon, art 12, which required the French administration to adhere, on behalf of these countries to international agreements, including in the area of the “protection of literature, art or industries.” For example, in 1924 the French enacted a new copyright law in Lebanon, replacing the Ottoman law, and introduced also a patent law, trademark law, and laws in other IP fields. See El Said (n 11) 35 (Lebanon), 91 (copyright), 144 (trademark). 44  For a contemporary overview of Israeli IP law, see O Fishman Afori, D Gilat, E Bareket, and T Afori, Intellectual Property Law in Israel (Kluwer Law International 2013). 45  On Jewish copyright law, see NW Netanel, From Maimonides to Microsoft: The Jewish Law of Copyright since the Birth of Print (OUP 2016). 46  The main amendments included: in copyright law—​clarifying that software is protected whether it is object code or source code, adding rental rights for software, stating explicitly that ideas are not 43 

386    Michael Birnhack and Amir Khoury Agreement (FTA) with the United States, dating back to 1985, but this FTA says little about IP.47 Similarly, a 2000 Association Agreement with the EU requires in a general manner that IP is protected in accordance “with the highest international standards.”48 The most influential political lever are the unilateral American reviews referred to above, conducted annually by the USTR. The process, captured as it is by American industries,49 has been a powerful political mechanism. Israel has moved up and down the USTR’s black lists, from the Priority Watch List (in 2001–​2002, 2005–​2009, 2011–​2012), to the Watch List (2003– 20​04, 2013), until it was finally removed from all lists in 2014.50 In the early 2000s the central complaint was about piracy, with explicit demands to boost enforcement, but the more persistent issue has been data exclusivity, accompanied in some years by patent term extensions.51 The political pressure over these issues led to a US–Israeli Memorandum of Understanding in 2010, and subsequently, to amendments to Israel’s patent laws in particular, until the USTR was satisfied that “Israel has taken legal and regulatory measures to make its patent system more transparent, efficient, and effective.”52 The USTR has repeatedly urged Israel to join the WCT (which it has not, to this day), and has not shied away from hinting that meeting the American IP demands is important for Israel’s application to join the OECD (which it did, in 2010).53 From an economic perspective, Israel is now classified as a developed country. The laws seem to achieve their goal of promoting local creativity, innovation, and fair competition. The local investment in R&D is one of the highest in the world, and the image of Israel as a “start-​up nation,” popularized by a book under this title,54 nicely fits this narrative, and has been enthusiastically adopted by local officials. However, adhering to the global IP regime comes at some cost, especially given Israel’s large generic pharmaceutical industry, led by Teva, which is currently the largest global generic firm, and which is headquartered in Israel.55 Data exclusivity rules limit the generic industry to some extent, although Teva has also substantial innovative activity. In the copyright and trademark fields, there is a need for empirical studies to evaluate the workings of the law in practice.

protected by copyright (which was an undisputed bedrock principle before the amendment), adding the remedy of destroying infringing copies, and inserting new customs procedures; in design law—​clarifying the status of foreign priority applications; in patent law—​clarifying the protection of foreign patents, clarifying the burden of proof for establishing infringement of a method patent by production of its product; in trademark law—​adding protection for well-​known marks. See An Act to Amend Intellectual Property Law (Adaptation to the TRIPs Agreement) 1999. 47  A one-​paragraph statement reaffirmed the two countries’ obligations under bilateral and multilateral agreements. See US–Israel Free Trade Agreement 1985, 25 ILM 653, art 14. 48  See Euro–Mediterranean Agreement [2000] OJ L147/​3, art 39. 49  See Birnhack (n 2) 392–​396 (comparing industry reports submitted to the USTR with the latter’s reports and concluding that the USTR often closely echoes the industries’ complaints). 50  In 2010 the status was pending due to an “out of cycle review.” 51  See, eg, USTR Special 301 Report (2012) 37. 52  USTR Special 301 Report (2014) 11. 53  See, eg, USTR Special 301 Report (2009) 20. 54  D Senor and S Singer, Start-​up Nation: The Story of Israel’s Economic Miracle (Twelve 2011). 55  According to Teva, it is “among the 10 top pharmaceutical companies in the world,” and it has “The most extensive product portfolio in the industry”: .

Intellectual Property Law in the Middle East    387 The cultural impact of Israel IP laws is probably the most difficult to assess. The Berne Convention and TRIPs Agreement prohibit favoring local authors and their works.56 In this sense, the seemingly neutral character of global copyright streamlines the import of foreign culture into Israel, but does not equip local culture with sufficient tools in its uphill struggle to survive. Being a relatively small country,57 with about 49 percent of the population speaking Hebrew as a first language, often alongside a second or third language (eg, English or Russian), and the remainder speaking Arabic as a first language,58 means that Hebrew-​based creative works at least meet high entry barriers to foreign markets. While Israelis are proud of their few local authors, film directors, and musicians whose works have been successfully translated, and of the several Israeli television formats which have been transposed to other countries, these are the exceptions to the rule. The result is that many local cultural works compete with each other and with the foreign works that are widely available in Israel, but have limited export options. Foreign culture does indeed penetrate the local scene, especially American culture:  Hollywood movies, American television, music, designs, and much more. Multichannel television, and of course the Internet, enable access to other cultural sources. A broad pluralistic variety is a blessing, but it means that local cultural production struggles. Thus, there is a constant search by the Government for protective or supportive measures, outside IP law. These include, for example, an indirect public funding scheme to support local filmmaking,59 regulatory obligations imposed on television channels to meet certain quotas of local production,60 and a non-​copyright based royalty scheme for Israeli authors whose Hebrew and Arabic works are available in public libraries.61 Another cultural impact of global copyright standards concerns education. Access to knowledge and information has become increasingly expensive, with rising costs of licenses to databases and academic books. Given the high centralization of the global academic publishing industry, and the Israeli market being relatively small, academic institutions have little to no bargaining power.62 Moreover, to make their voice heard on a global scale, Israeli scholars are often required to publish in foreign academic journals, assigning their copyright, only to require their employer institutions to buy back access to their works for the benefit of their staff and students. This is not necessarily a unique Israeli problem, but sheds further light on the cultural costs of copyright. It might be a worthy price, but it should at least be acknowledged.

56

  See TRIPs, art 4.   In December 2016 Israel (covering East Jerusalem and the Golan Heights, and excluding the West Bank and Gaza) had 8.63 million citizens. 58   T Gelz, “Israeli Cent Bureau of Statistics” (2013) The Social Survey 2011 33 (Hebrew). 59 60  Second Channel Authority Act 1990, s 59.   Cinema Act 1999. 61  This scheme is based on a 1987 Government decision, and is managed by the Ministry of Culture. 62  The special needs of academic institutions were not addressed in the 2007 Act itself, other than by means of the broad fair use defense discussed below. A self-​regulation project attempts to fill this gap by adopting a Code of Fair Use Best Practices for the use of copyright materials in academic institutions. See the discussion by those who led the project: N Elkin-​Koren, O Fishman Afori, R Haramati-​Alpern, and A Dotan, “Fair Use Best Practices for Higher Education Institutions: The Israeli Experience” (2010) 57 Journal of the Copyright Society of the USA 447. 57

388    Michael Birnhack and Amir Khoury

4.2 A Multi-​Layered Law 4.2.1 Foundations Looking behind the global façade of Israeli IP law, one can find several legal layers, and many unsettled struggles. The Ottoman layer, a thin one to begin with, is unnoticeable. The British were quick to apply their own law. First, there was a short-​lived and little-​known Copyright Ordinance in 1920, which brought the Ottoman Act a bit closer to the British–Berne Convention model, by repealing all formalities.63 In 1924, the British extended the Imperial Copyright Act of 1911 to Palestine, alongside a local Ordinance issued by the High Commissioner, which regulated the customs and criminal aspects of copyright.64 Thus, Palestine (including today’s West Bank and Gaza, but excluding Transjordan, which was administratively separated from Palestine in 1923) was part of the Imperial copyright system. Copyright legislation for the Mandate fit the British copyright agenda, which was to extend copyright law to all parts of the Empire, Mandates included. The purpose was first and foremost to serve British interests, namely, to protect the copyright of British authors and publishers. Copyright was also part of Britain’s copyright internationalization agenda, which was to secure minimum standards of copyright protection throughout the world, in line with the Berne Convention.65 Finally, it fit Britain’s Palestine agenda of advancing the country, complying with the Mandate which required it to enact IP laws,66 and Britain’s more specific dislike of French-​inspired Ottoman laws.67 Copyright in Palestine was set in motion by foreign players, especially European collecting rights societies, as well as a local collecting society, which familiarized the locals with the idea of authors’ rights.68 A small field emerged which was assisted by a few lawyers who specialized in the area, the collecting societies, and the business methods and practices of publishers and new movie and radio producers. Trademark was next in line, with a comprehensive statute in 1921 that was closely modeled after the English Trademarks Act of 1905, although with some changes.69 The Act was later replaced in 1938.70 The British also established a Trademark Office in the Mandate, which was quite active over the years and supported more than 7,000 trademark registrations from 1917 to 1948,71 dozens of legal cases, and a growing field of local experts. Patent and designs were initially registered under transitional orders, with the first Mandate-​time patent applications submitted to the local Patent Office in 1920. The field received full attention in 1924, with the enactment of the Patent and Designs Ordinance.72 However, during Mandate times there were fewer than 30 patents registered, most of which

63

  See Copyright Ordinance 1920, 172 OG 3, and the discussion in Birnhack (n 40) 96.   See Copyright Act 1911 (Extension to Palestine) Order 1924, 114 OG 643; Copyright Ordinance 1924, 117 OG 711. 65   L Bently, “The ‘Extraordinary Multiplicity’ of Intellectual Property Laws in the British Colonies in the Nineteenth Century” (2001) 12 Theoretical Inquiries in Law 161. 66   Mandate for Palestine and Transjordan (1922) art 19. 67  See Birnhack (n 40) 100. On the British dislike of French laws, see A Likhovski, Law and Identity in Mandate Palestine (University of North Carolina Press 2006) 58. 68  Birnhack (n 40) 163. 69  Trade Marks Ordinance 1921, 57 OG 1. 70  Trade Marks Ordinance 1938, 742 OG 1173. 71  Data compiled by Birnhack and on file with the authors. 72  Patents and Designs Ordinance 1924, 114 OG 625. 64

Intellectual Property Law in the Middle East    389 were processed during the 1940s.73 The patent part of the Ordinance was replaced in 1967 with an Israeli Act, and the design-​related part was in force in Israel until 2017.74 From 1948 to 2014, over 110,000 patents were granted, gradually increasing over time, with an average of 2,600 patents having been granted each year since the 2000s.75

4.2.2 Israeli Construction Upon the establishment of the State of Israel in 1948, the entire Mandate’s legal system was absorbed by the new state, with some constitutional modifications. IP law was not at the top of the legislative to-​do list of the new state. British laws still apply to this day in some IP branches, such as Trademark and Designs, subject to Israeli amendments. However, while the letter of the law remained in place, its theoretical underpinnings shifted away from its British origins to reflect a more utilitarian and trade-​related understanding of IP. The utilitarian shift is especially evident in copyright law,76 and the trade-​related shift is especially evident in trademark law. Copyright law was amended several times over the years, first in 1953, when the Act’s title was changed from “Copyright” to “Authors Rights” to reflect a concern to anchor Hebrew as the legal language rather than any substantial, theoretical change. More amendments followed that took account of newer technologies (such as the protection of software in 1988) and global standards (such as the Article 6bis Berne Convention requirement to protect authors’ moral rights in 1981), or to answer American demands to fight piracy (such as by increasing criminal sanctions in 2003). Since the legislative amendments were, for the most part, made in response to external factors, they should not be read as signifying a theoretical choice of a natural-​rights conception of copyright.77 In fact, Israeli courts have explicitly supported an instrumentalist conception of copyright. Since the 1980s, there has been an increase in American influence in the field of copyright, both in the Legislature and in the courts. In 1981 the Israeli Parliament, the Knesset, added a statutory damages provision, copied from the American Copyright Act.78 Courts joined this trend in the 1990s by abandoning their prior reliance on British case law to focus instead on American precedents: Feist’s standard of originality was embraced by the Israeli Supreme Court;79 the standards for protecting software were borrowed from American cases;80 and

73 

Data provided by the Israeli PTO on 5 August 2015 and on file with the authors. In 2017, the Israeli Parliament, the Knesset, approved a new Designs Law. 75  See (n 73). 76  See also L Zemer, “Copyright Departures: The Fall of the Last Imperial Copyright Dominion and the Case of Fair Use” (2011) 60 DePaul L Rev 1051, 1062–​1067. 77  For a similar argument see MF Makeen and G Oron, “The Right of Paternity under the Copyright Laws of Egypt and Israel” [2011] 33 EIPR 26, 28. 78  See Copyright Ordinance 1924, s 3A (added in 1981) and 17 USC §504. 79  See CA 513/​89 Interlego A/​S v Exin-​Lines Bros SA 48(4) PD 133 (1994), adopting Feist Publications, Inc v Rural Telephone Service Company, Inc 499 US 340, 345 (1991), and the analysis in G Pessach, “Israeli Copyright Law: A Positive Economic Perspective” (2006) 29 Israel L Rev 123, 131. 80  See CA 139/​89 Harpaz v Ahituv 44(4) PD 16 (1990), following Whelan Associated v Jaslow Dental Laboratory 797 F 2d 1222 (1986), and CA 2392/​99 Ashraz Ibud Netunim Ltd v TransBeton Ltd 57(5) PD 255 (2003), following Computer Associates International Inv v Altai, 982 F 2d 693 (1992). 74 

390    Michael Birnhack and Amir Khoury the American fair use analysis was inserted into the narrower British fair dealing, resulting in a somewhat incoherent mixture.81 In 2007, after a long parliamentary process, the British law was replaced with an Israeli law.82 However, the original contribution of the Israeli Legislature is found mostly in the selection and arrangement of various legal standards from around the world. Built on the British foundation and Israeli amendments, one can find: the right of making a work available to the public (taken from the WCT); the exception for temporary acts of reproduction (taken from the EU’s Information Society Directive); a reasonableness limitation to the moral right of integrity (taken from Australian copyright law); and above all, adoption of the American fair use defense to copyright infringement.83 The shift away from a narrow fair dealing to a broader fair use defense is probably the single most important change in the 2007 Act.84 In line with the American spirit, Israeli courts have in recent years increasingly accepted the incentive theory as the main theoretical basis for Israeli copyright law, with minor deviations.85 However, they have also been influenced by labor-​based theories, as evident in the construction of the originality requirement,86 and by personality-​based theories, as evident in the interpretation of moral rights.87 The constitutionalization of private property in 1992 is an important element in this picture. For example, the courts have pointed to section 3 of the Basic Law: Human Dignity and Liberty, which states that “[t]‌here shall be no violation of the property of a person,” and commented that copyright is a form of property under the Basic Law. This conclusion has had the effect of tilting the scales in favor of injunctions in cases of copyright infringement,88 and of treating commercial use as less likely to be “fair” in the course of fair use analyses.89 It is yet to be seen whether the 2007 Act will restore the prior balance in these aspects.

81  See CA 2687/​92 Geva v Walt Disney Co 48(1) PD 251 (1993) (hereafter Geva), applying the four fair use factors from 17 USC §107 in interpreting “fairness” within the British formulation of the fair dealing defense. For discussion see M Birnhack “Judicial Snapshots and Fair Use Theory” (2015) 5 Queen Mary Journal of Intellectual Property 264. 82  Copyright Act 2007, LSI 34. For current Israeli copyright law in detail, see MD Birnhack, “Israel” in PE Geller and L Bently (eds), International Copyright Law and Practice (Matthew Bender /​ LexisNexis 2017). 83  See A Khoury, “An International Reading: The Act and Foreign Sources” in MD Birnhack and G Pessach (eds), Authoring Rights: Readings in Copyright Law (Nevo Publishers 2009) 237 (Hebrew); T Afori, Copyright Act (Nevo Publishers 2012) 27–​28 (Hebrew). 84  For discussion see N Netanel, “Israeli Fair Use from an American Perspective” in Birnhack and Pessach (ibid) 377 (Hebrew); Zemer (n 76) 1077–​1089; Birnhack (n 81). 85  One such deviation can be found in the Dead Sea Scrolls case, where the Supreme Court found that a scholar who had deciphered an ancient scroll owned the copyright in the resulting text. See CA 2790/​93 Eisenman v Qimron, 54(3) PD 817 (2000), [2001] ECDR 73 (English translation). 86  See CA 7996/​11 Safecom Ltd v Raviv (2013) (articulating a three-​prong test for originality, composed of origin with the author, minimal creativity, and minimal labor). 87  See Copyright Act 2007, s 46 (moral rights). 88  PLA 6141/​02 ACUM (Society of Composers, Authors and Musical Publishers) v Israeli Defense Forces Radio Station, 57(2) PD 625, 627 (2003). 89 See Geva 263 and later, CA 5977/​09 Schocken Publishing House Ltd v Hebrew University of Jerusalem (2010) para 13.

Intellectual Property Law in the Middle East    391 Israeli trademark law is, however, still based on its British foundations. In 1972 the British Ordinance was rewritten, but only in letter, rather than in spirit. It has since been amended over the years, most notably in 1999, with the introduction of protection for well-​known marks90 as required by the TRIPs Agreement, and the protection of geographical indications.91 Thus, trademark law was adjusted to the global trade environment, where foreign marks may be awarded legal protection even though they are not registered in Israel. These are well-​known marks and recognized by the Israel Trademark Ordinance.92 Israeli patent law also originated with the British Mandate, and has been amended over the years until it was replaced in 1967. From 1920 to July 2015, over 240,000 Israeli patent applications were submitted. The system is based on a first-​to-​file priority; the PTO reviews patent applications based on familiar concepts of novelty and non-​obviousness, and is also supposed to review them for utility, but rarely does so. Patents last for 20 years. One unique feature of Israeli patent law is the option it affords to oppose a patent before it is granted, namely pre-​grant opposition;93 another is the freedom it allows third parties to use a protected invention without the patent owner’s consent for the purpose of conducting experiments towards obtaining marketing approval for a product after the patent’s expiration.94 On the patent owner’s side, Israeli patent law also grants the option to extend patent protection by up to five years for the active ingredients of pharmaceutical products.95 A notable point of contention pertains to data exclusivity. Israeli law now provides a six-​year (and in some cases, 6.5 year) term of market exclusivity for new chemical drugs, subject to some conditions.96 Finally, designs are now regulated under the Israeli Designs Act of 2017.97 Special legislation governs performers and broadcasters’ rights; the Commercial Torts Act of 1999 protects trade secrets; a sui generis law protects plant breeders’ rights; and another law protects topographic circuits. These IP laws are accompanied by the Unjust Enrichment Act 1979, which, as the Supreme Court has said, may supplement IP laws. For example, if a designer fails to register a design, he might nevertheless have an action against an unauthorized user of the design in unjust enrichment.98 To conclude, current Israeli IP law is a complex patchwork reflecting its history, contemporary global politics, and an on-​going shift away from British sources towards American jurisprudence. These trends come, on occasion, at the expense of local cultural needs, with some gaps between the law as stated and practiced.

90   The Supreme Court has de facto recognized the stronger protection of well-​known marks prior to the formal enactment: see, eg, CA 6181/​96 Kardi v Bacardi & Co Ltd, 52(3) PD 276 (1998). 91   Israel joined the Lisbon Treaty for the Protection of Appellations of Origin in 1966 following the Protection of Appellations of Origins and Geographical Indications Act 1965. 92 93   See Trademark Ordinance, ss 1, 11 (13), 11(14), 46, 46A and 59.   Patent Act 1967, ss 30–​34. 94  Patent Act 1967, s 54A. 95  Patent Act 1967, ss 64A et seq. 96  Pharmacists Ordinance (New Version) 1981, s 47D. 97  The Designs Act 2017 replaces the British Patents and Designs Ordinance of 1924. 98  See PLA 5768/​94 AShYR v Forum Avizarim u’Mutzarey Tzericha Ltd, 52(4) PD 289 (1998); O Grosskopf, “The Eagle and the Kingdom: On the Relationship between the Copyright Act, 2007 and the Law of Unjust Enrichment” in Birnhack and Pessach (n 83) 201 (Hebrew).

392    Michael Birnhack and Amir Khoury

4.3 The Palestinian Authority The West Bank and Gaza IP laws require a careful genealogical tracing, due to the frequent geo-​political changes affecting both regions.99 The fate of IP in each region has split. To begin with, both the West Bank and Gaza were part of the British Mandate Palestine, and thus had the British set of IP laws; thereafter, their laws departed. In 1948, the West Bank was under Jordanian rule (officially annexed in 1950), which left its IP laws intact, even though the East Bank had different IP laws.100 Thus, the Copyright Act 1911 remained in force in the West Bank, whereas in Jordan, it was the Ottoman law that was in force. The Jordanians enacted their own trademark (1952) and patent (1952) laws, which applied to the entire Kingdom, including the West Bank but not Gaza, which was under Egyptian rule. However, as Ihab Samaan has commented, these were almost exact copies of the British laws.101 In 1967, when Israel occupied the West Bank, it left the existing law in place, but for establishing its own Patent and Trademarks Office. Since the establishment of the Palestinian Authority (PA) in 1994, it has assumed legislative power in some parts of the territory, but at the time of writing, it has not yet legislated in the field of IP.102 The result is that in the West Bank, the Jordanian 1952 Patent and Trademark Acts are still in force, as well as the British 1911 Copyright Act, which has survived the British-​Jordanian-​Israeli-​Palestinian rule and is probably the last stronghold of the Imperial Act. Gaza was under the British Mandate, but then occupied by Egypt (which left the British law in place) and later by Israel, which also did not tamper with local IP laws. The result is a split: Whereas in the West Bank, Jordanian law applies (though British in its roots and nature), in Gaza the original British IP laws are still in force, including the 1939 Patent Act and the 1938 Trademark Ordinance.103 Accordingly, there are two Patent and Trademark Offices: One operates at the Ministry of National Economy in the West Bank, and the other operates in Gaza at the Ministry of Justice. On the global side, the Palestinian Authority is not a member of the WTO and is not bound by IP international treaties. On the bilateral side, it has entered an Association Agreement with the EU which requires the parties to “grant and ensure adequate and effective protection of intellectual, industrial and commercial property rights in accordance with the highest international standards.”104 The United States extended its FTA with Israel to the Palestinian Authority in 1996,105 but thus far the Palestinian 99  On the complexities of the legal system in the West Bank, see A Rubinstein, “The Changing Status of the Territories: From a Deposit to a Legal Hybrid” (1986) 11 Tel Aviv University L Rev 439 (Hebrew). 100  IG Samaan, A Historical View of Intellectual Property Rights in the Palestinian Territories (LLM Thesis, University of Georgia 2003) 11–​12. 101  Samaan (n 100) 35–​37. 102  IP was on the PA’s legislative agenda. See HI Husseini, “Challenges and Reforms in the Palestinian Authority” (2003) 26 Fordham International LJ 500, 516. See also the Palestinian Investment Promotion Agency (PIPA) on IP (undated) at . 103  See PIPA (n 102). 104  Euro–Mediterranean Interim Association Agreement on Trade and Cooperation Between the European Community, and the Palestine Liberation Organization (PLO) for the Benefit of the Palestinian Authority of the West Bank and the Gaza Strip, of the Other Part [1997] OJ L187/​3, art 33. 105  See United States–Israel Free Trade Area Implementation Act of 1985, §9 (Pub L 99–​47; 99 Stat 85), amended by 110 Stat 3058 (1996).

Intellectual Property Law in the Middle East    393 Authority has gone under the USTR’s radar, at least as far as its official reports indicate.106

5.  Intellectual Property in Arab Countries The development of IP law in Arab countries illustrates the various aspects of the complex context of an IP regime. The discussion that follows in this section focuses on four Arab countries: Egypt, Jordan, Saudi Arabia, and the United Arab Emirates (UAE). Each of these exemplifies a unique characteristic of the matrix comprising the legal scene at large, political economy, politics, and cultural characteristics. On the legal side, these countries have different legal traditions and compositions, comprising an Ottoman layer, Shari’ah law, French civil law influences, and increasingly, obligations under international law.107 All four are members of the WTO and are bound by the TRIPs Agreement. Furthermore, Islamic tradition and teachings and Arab culture do not condone the theft of another’s property, including another’s literary work. In this regard, these values are held in the highest degree, especially with respect to copyright.108 Arab and Islamic culture recognizes and respects private property and intellectual creations, and accepts also the accumulation of private wealth.109 On the economic side, of these four countries, Saudi Arabia and the UAE are classified by the Word Bank as high-​income economies, hence they are considered developed countries, whereas Jordan and Egypt are classified as developing countries, with Jordan classified as an upper-​middle income economy, and Egypt as a lower-​middle income economy.110 None are members of the OECD. On the cultural side, the four countries are part of the Arab world, meaning there are no language barriers among them and other Arabic speakers around the world, estimated by the UNHCR to be 280 million people globally.111 The shared language does not mean a unified culture, however: There are many differences in religion, society, politics, etc., that affect cultural exchanges among Arab countries, but the shared language facilitates such exchanges. But even with this vast market, the level of consumption of literary content remains very low, despite the rather impressive number of literary works published in Arabic. According to 106

  In 2001 the IIPA recommended to the USTR that the PA be left out of the 301 process due to the outbreak of violence: see . The main complaints in the industry’s report were about piracy and inadequate legislation. 107   For an overview of the legal systems, see AF Ansary, “A Brief Overview of the Saudi Arabian Legal System” GlobaLex (Hauser Global Law School Program at NYU 2008) ; BC Isaias and F Jennings, “Overview of the Hashemite Kingdom of Jordan Legal System and Research” GlobaLex ; MS Abdel-​Wahab, “An Overview of the Egyptian Legal System and Legal Research” GlobaLex ; A Aly Khedr and B Alnuaimi, “A Guide to United Arab Emirates Legal System” GlobaLex . 108  See Khoury (n 5). 109  See Khoury (n 5). 110  The World Bank’s World Development Indicators for these countries are available at . 111  See Nations Online, .

394    Michael Birnhack and Amir Khoury Jes Gearing’s sources, “Lebanon and Egypt were the two leaders, with Lebanon producing 3,121, 4,165, and 3,330 books over the years of 2006, 2007, and 2008, and Egyptian publishers bringing out 3,016, 2,960, and 2,310 titles over that same period. (In contrast, Syria brought out 889, 886, and 1,170 books during that same three-​year time period.)”112 Gearing points out that the number of books written originally in Arabic constitutes about 72 percent of the books published in the Arab world. However, in terms of absolute numbers, compared to the 172,000 books published in the United States in 2005, the 8,710 published in the Arab world in 2006 is disheartening.113 This picture has not changed over the past decade. Worse still, the level of illiteracy in Arab countries remains exceedingly high.114 With that said, and as further proof of the state of extremes that exist in Arab culture (and within Arab countries themselves), Arab book exhibitions and fairs have been expanding115 and the use of e-​book formats in the Arab world has been growing.116 The film and music industries in the Arab world are vibrant.117 On the political side, all four countries have a relatively close relationship with the United States. However, none of these countries is a democracy in the Western sense, although in some of them periodical elections are held and political parties exercise freedoms of association and expression. The measure of freedom in Arab countries is held in contention. Freedom House classifies Jordan as “partially free”, and the other three countries as “not free.”118 But one of us (Khoury) believes this to be an overgeneralization of the picture and that it does not impact directly on IP creation and ownership. As discussed later, in the context of IP and especially that of branding and innovation, the rights of individuals to create

112 

J Gearing, “A Note on Arabic Literacy and Translation” (2009) . Gearing refers to the UN Development Program Report of Arab Countries for various years. For more on Arab metrics of culture and progress, see UN Development Program Report of Arab Countries for the year 2003, . 113  See Gearing, ibid. 114  R Faek and S Lynch, “Illiteracy: A Stubborn Problem in Many Arab Countries” Al Fanar Media (London, 27 October 2014) . 115  Consider the Adu Dhabi book fair, which hosts 1,025 exhibitors from 50 countries and which has more than 500,000 titles on display each year: see . Books fairs are held annually in many Arab cities, including Sharjah, Beirut, Casablanca, Abu Dhabi, Dubai, Muscat, and others. 116  See, eg, e-​Ktab, ; Kotob Arabia, ; Kotobi, ; Al-​Manhal, . There are also many blogs that host literary discussions including: for a partial list see Al-​ Bab, . 117  On the music and film industry in the Arab world, see M Frishkopf (ed), Music and Media in the Arab World (American University in Cairo Press 2010). For a historical account of the development of music in the Arab world, see AJ Racy, Making Music in the Arab World: The Culture and Artistry of Tarab (CUP 2003). 118  On a 0 to 100 scale, where 100 is the most free, Jordan scored 37 for 2018, Egypt 26, UAE 17, and Saudi Arabia only 7: see .

Intellectual Property Law in the Middle East    395 and own property is secured. This is also true of literary and artistic works, wherein the right to own such creations and seek protection exists through national law. Another relevant factor is the impact of the Arab countries’ political systems and attitudes to property and ownership in their IP laws. IP laws in Arab countries paint a positive picture. Specifically, they provide protection for all forms of IP that are to a large extent compliant with the TRIPs Agreement, and these rights are granted to all: Women are not excluded.119 National courts provide legal recourse when rights are infringed. In this regard, there is no conflict between cultural and regional norms and IP rationales of protecting creativity and innovation. In fact, Arab ancient culture held a very strong position on—​even attaching social stigma to—​those who engaged in theft, and especially literary plagiarism.120 While censorship does exist in Arab countries and societies, it exists also in other countries and societies, and is thus not exclusively an Arab problem.121 Indeed, in every culture and country there are issues that are considered taboo. With that said, additional freedoms to self-​expression would help to bolster expression even more. In the context of IP, the USTR has consistently reviewed Egypt for IP compliance since 2001; Saudi Arabia was reviewed between 2001–​2009, and the UAE was reviewed once, in 2001. The US has concluded an FTA with only one of these countries—​Jordan—​in 2001.122 But with that said, freedom to engage in IP ownership does widely exist. Arab singers, poets, and writers are prevalent.123 Ian Williams, in referring to a 1994 photo exhibition in the US (by Iranian and Arab women), noted that “this exhibition will help counteract the generally negative images many Americans have about the role of Arab women in their societies by demonstrating that Arab women are indeed afforded the right of self-​expression.”124 In 119  Search WIPO LEX () for a selection of IP laws in Arab (and other) countries. 120 Khoury (n 5). 121  DE Bambauer, “Filtering in Oz: Australia’s Foray into Internet Censorship” (2009) 31 University of Pennsylvania Journal of International Law 493; S Deva, “Corporate Complicity in Internet Censorship in China: Who Cares for the Global Compact or the Global Online Freedom Act?” (2007) 39 George Washington International L Rev 255; R Subramanian, “The Growth of Global Internet Censorship and Circumvention: A Survey” (2011) Quinnipiac University; Yale University—​Information Society Project; H Travis, “YouTube from Afghanistan to Zimbabwe: Tyrannize Locally, Censor Globally” in SA Pager and A Candeub (eds), Transnational Culture in the Internet Age (Edward Elgar Publishers 2012). 122  See the US–Jordan Free Trade Agreement 2000, . This agreement was concluded and signed on 24 October 2000, and ratified by the United States in 2001. 123  Among the hundreds of such names are Fairouz, Oum Kolthoum, Haifa Wahbi, Asmahan, and Ahlam Msotaghnmi. What is more, the role of women in business, education, and the news media is well seen. In fact, most TV news anchors and presenters in the Arab world are women. For a link to the faces of Arab women artists, some of whom boast platinum-sized sales of their music, see S Saeed, “Music of the Arab World: The History and Development of Khaleeji Music” TheNational (Abu Dhabi, 24 July 2012) . On the rich history of Arab music, see further Arab Music Overview, . For an in-​depth look at the rising role of women in the Arab world, see UN, “UN Human Development Report 2005: Towards the Rise of Women in the Arab World,” . 124  I Williams, “Forces of Change: Women Artists of the Arab World” (1994) 12(6) Washington Report on Middle Eastern Affairs . On a related note, in this article Williams quotes the exhibition’s curator: “In

396    Michael Birnhack and Amir Khoury this regard, one of us (Khoury) is rather optimistic that in normative Arab civil society the appreciation for innovation and creativity is growing. Dubai, for example, provides an example of openness to building a friendlier ecosystem for IP development, ownership, and sustainability.125 The discussion that follows cannot do justice to all of the contextual factors affecting the IP regimes in all countries. Instead, we provide a brief and necessarily general overview of the development of IP law in each, while emphasizing at least one of the contextual features identified.126

5.1 The Arab Republic of Egypt Egypt, the most populous Arab country of the region, and with its rich ancient past, is deemed to be the leader of the Arab world. It was the cradle of Arab Nationalism and it remains a central player in the Arab world as well as the Middle East region at large.127 The economy, classified as lower-​middle income economy, heavily depends on basic production and agriculture. Tourism and cash remittances from Egyptians working abroad (mainly in Gulf countries) are also crucial to the country’s economy.128 Egypt has undergone great political changes since 2011.129 As The Economist observes, now, following the rise of the new regime, the country is largely divided into two camps: A non-​religious camp which favors more contact with the West, and a religious camp of the Islamic Brotherhood that opposes this approach. Specifically, the two camps’ flatly opposite views on American policy in Egypt reflect the zero-​sum view of politics in a country deeply divided.130 That makes a smooth and inclusive transition to democracy especially difficult. This political position obviously affects the economy,131 which is beset by high unemployment rates and low wages, and exasperates the political situation.132 But still, Egypt is making some headway on the commercial level. addition to educating people about Arab women, the exhibition is intended to counter the impression that ‘modern, contemporary art is an exclusively Western idea,’ Nashashibi explains. ‘People look on what Arabs do as really improved traditional art.’ ” 125  AH Khoury, “Dubai’s New Intellectual Property-​Based Economy: Prospects for Development without Dependency” (2009) 9 John Marshall Review of Intellectual Property Law 84. 126  For a broader discussion on the development of IP laws in Arab countries, see D Price, The Development of Intellectual Property Regimes in the Arabian Gulf States: Infidels at the Gates (Routledge Research in Intellectual Property 2009). 127  See BBC, “Egypt Country Profile—​Overview” BBC News (London, 30 June 2015) . 128  For an overview of Egypt’s Politics and Economy, see Bertelsmann Stiftung’s Transformation Index (BTI) 2016 Egypt Country Report, . 129  See World Bank, “Egypt Overview,” (updated 1 April 2016). 130  BS “America and Egypt Winning Few Friends and Little Influence” The Economist (London, 17 July 2013) . 131  E Chalamish, “Egypt’s Economic Future and the Need for Outward Strategy” The World Post (13 August 2013) . 132  See Chalamish (n 131).

Intellectual Property Law in the Middle East    397 IP, including patents, copyright, and local brands, are not central to the economy. But Egypt is changing on this front, namely through its massive Arab-​speaking film and music industry, and through growing research companies that are slowly producing home-​grown technology. This is especially evident in the Information and Communication Technology sector.133 Egypt’s new role as a PCT International Search and Examination Authority is indicative of this slow change. Over the past four decades, Egypt has taken substantial steps in its participation in international conventions relating to IP. Egypt became a member of the WIPO in 1975, and joined the WTO in 1995. In May 2002, Egypt enacted a new IP law (Law No. 82 on the Protection of IP Rights), covering all areas of IP, including patents, copyright, trademarks, plant varieties, industrial designs, and semiconductor chip layout designs.134 The law was enacted in order to comply with the TRIPs Agreement, and boosted enforcement of IPRs by increasing efficiency and raising fines. It is worth noting that Egypt’s 2014 Constitution has a specific clause referring to the protection of IPRs wherein the constitution prescribes that Egypt “shall establish a competent body to uphold these rights and provide for their legal protection as regulated by law.”135 As for trademark law, Egypt is a party to a number of international agreements, including The Nice Agreement (2005); The Paris Convention (1951); the Trademark Law Treaty (TLT) (1999); the Nairobi Treaty (1982); and the Madrid Agreement (1952). Egypt is also a party to the Madrid System and a signatory to the Madrid Protocol. With respect to copyright, Egypt joined the Berne Convention in 1977 and the Geneva Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of their Phonograms in 1978. The 2002 Act confers copyright protection on all original works, including computer programs.136 The copyright term is the author’s life plus 50 years thereafter.137 The law also allows for the confiscation and destruction of pirated works.138 In the context of patents, the 2002 IP law grants inventors 20 years of patent protection from the filing date of the application.139 The patent holder has exclusive rights to the invention, and may license or assign the patent, subject to registration with the Egyptian Patent Office.140 The 2002 Act provides that in addition to the inventor, any other party who 133

  WIPO, “The Egyptian Information Technology Sector and the Role of Intellectual Property: Economic Assessment and Recommendations” (Economic Research Working Paper No. 18 2014), (“[The Egyptian Government’s] strategic support to the ICT sector has born fruits. The Egyptian ICT sector is an important contributor to economic growth and employment, with about 283,000 workers directly employed in the ICT sector, yearly revenues of about EGP 70 Billion every year, and adding more than 3 percentage points to GDP in 2012.”). 134   See Law on the Protection of Intellectual Property Rights (Law 82 of 2002), . 135   Egypt Constitution, , art 69. See further A Abdel-​Latif, “Egypt and Tunisia Underscore the Importance of IP” (2014) WIPO Magazine, . 136 Art 140. 137 Art 160. 138  Art 181. The 2002 Act imposes severe penalties against offenders including fines and/​or imprisonment. Repeat infringements incur harsher penalties. 139  Art 9. For the text of the Egyptian Patent Law see . 140  Arts 10 and 21.

398    Michael Birnhack and Amir Khoury introduces adjustments, improvements, or additions to a patented invention shall have the right to apply and obtain an independent patent.141 The Act expands the definition of an invention that is protected by law to cover pharmaceutical products.142 Patents in Egypt are classified according to the Strasburg Agreement Concerning the International Patent Classification, which Egypt joined in 1975. According to Egyptian law, a patent may be granted only after conducting a substantive examination of the application and ensuring worldwide novelty of the invention.143 The examination process might extend for a period of three years. There is a patent use requirement in Egypt. However, it can be satisfied by import of the product into Egypt and minimal use therein. A compulsory license might be granted if the patent is not used in accordance with the law, for example, for a consecutive period of at least three years,144 or if the local needs are not met.145 Egypt joined the Paris Convention in 1951. Consequently, a patent application filed in another Paris Union country entitles the applicant to apply for a patent in Egypt within one year and to claim the filing (priority) date of the earlier invention. Egypt has also been a party to the Patent Cooperation Treaty since 2003. With respect to the international registration of industrial designs, Egypt joined The Hague Agreement Concerning the International Registration of Industrial Designs in 1952, and the Geneva Act of The Hague Agreement in 2004. In 2013, the Egyptian Patent Office was designated by WIPO as a PCT Search and Examining Office. This is notable given that Egypt is the only Arab country, and one of a small number of countries, that holds such a designation.146 However, despite the comprehensive legal IP web, Egypt has remained on the USTR Watch List since 2001, with unpleasant appearances on the Priority Watch List from 2001–​ 2002 and 2004–​2007. In its reports, the USTR has referred to various issues, including lagging enforcement and a lack of deterrence in IP criminal sanctions, and required the implementation of harsher sentences for IPR infringement. For example, according to the 2014 report, Egypt has failed to issue regulations governing “the destruction of counterfeit and pirated products and to provide customs officials with the authority to take ex officio action.”147 The USTR has also alluded to the need to clarify what amounts to unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products (ie, the data exclusivity issue). Another challenge facing Egypt, according to the USTR reports, relates to trademark registrations, especially those filed in bad faith. In addition, the USTR has raised some concerns about the ability of film producers to access the Egyptian market due to obstructive fees and taxes.148

141 Art 1.

142

  Subject to some conditions, it is also possible to patent computer software. 144  Art 16.  Art 23(4). 145   Shortly after Pfizer was permitted to market Viagra in Egypt, the Ministry of Health authorized Egyptian companies to produce the block-​buster pill: RA Castellano, “Patent Law for New Medical Uses of Known Compounds and Pfizer’s Viagra Patent” (2006) 64 IDEA 283, 289. 146  As of 1 April 2013, the Egyptian Patent Office started operating as an International Search Authority (ISA) and as an International Preliminary Examining Authority (IPEA) in accordance with the WIPO-​administered PCT Agreement. Thus far, 17 national Patent Offices and two regional Patent offices have been designated as ISAs: see . 147  See USTR, Special 301 Report 52 (2014). 148  See USTR (n 147). 143

Intellectual Property Law in the Middle East    399 Thus, Egypt has subscribed to international IP standards, but at least in the view of the USTR, there is a substantial gap between its legal commitments and practice. The USTR reports also indicate the kind of global pressure that Egypt is subject to in this regard. Egypt’s struggle in the context of IP enforcement is rather typical of Arab countries. On the one hand, IP enforcement in Arab countries has been gaining momentum and IP piracy is seen as a strategic threat to national development and dealt with accordingly. This is reflected in the conduct of authorities in Arab countries that are nowadays more proactive when it comes to combating IP infringement. For example, according to the US–Egypt Business Council: Since passing its revised intellectual property rights law in 2002, Egypt has made important strides in improving its legal framework for intellectual property rights (IPR) protection as well as its enforcement capacity. Law 82/​2002 reflects the major provisions of the Trade Related Aspects of Intellectual Property Rights (TRIPs) Agreement and was supported by the U.S. government and the US private sector.149

However, the Council went on to state that Egypt lags behind many countries in the region.150

5.2 The Hashemite Kingdom of Jordan Unlike other Arab countries, especially those of the Arab Gulf and North Africa, Jordan has no oil of its own. Its economy, classified as an upper-​middle income economy, is based on the export of minerals (phosphates) and agricultural products, as well as on services, tourism, and American foreign aid.151 Jordan is a close ally of the US and one of two Arab nations to have reached a peace treaty with Israel.152 Jordan is a monarchy, and its foreign policy is directed by its King. Since its independence in 1946, Jordan has maintained close ties with the West and primarily the US. This is reflected in its politics and in its trade, including its approach to IP issues. The most substantial boost to IP protection in Jordan followed the US–Jordan FTA, concluded in 2002.153 The FTA was the first such Agreement which the United States had signed with an Arab country and its fourth FTA overall. While the participant governments naturally praised the FTA as a facilitator of trade between Jordan and the US as well as Jordan’s neighbors, namely the Palestinian Authority, Israel, and Egypt,154 others have been 149   US–Egypt Business Council, “Intellectual Property Rights in Egypt” (USEBC White Paper, October 2011) . 150   US–Egypt Business Council (n 149). 151   JM Sharp, Jordan: Background and U.S. Relations (Congressional Research Service, 2015) . On the political economy of Jordan, see further BBC, “Jordan country profile” BBC (September 2017) . For an in-​depth look at the challenges facing progress in Jordan, see UN Report, “Country Assessment Jordan” (2011), . 152  Sharp (n 151). 153 See (n 122). 154  See, eg, AG Wells [American Ambassador to the Hashemite Kingdom of Jordan], “The U.S.-​ Jordan Partnership: Realizing Jordan’s Economic Potential” (speech delivered at the Talal Abu-​Ghazaleh Knowledge Forum, 9 June 2015).

400    Michael Birnhack and Amir Khoury more apprehensive about its benefits.155 This is most visible in two contexts, namely the issue of access to medicines, and the abuse of employees’ rights and labor conditions. Eight years after the FTA came into force, Al Nasa’a et al. contended that “[t]‌he intellectual property rights provisions in the JUSFTA are unlikely to help Jordan become a regional information technology/​communications hub.”156 Thirteen years after the entry of the FTA, Al-​Shanayleh pointed out that “a closer look at the numbers over the last decade shows that Jordan’s gains from this FTA have, so far, been limited.”157 In the IP context, the main complaint has been about the American Food and Drug Administration’s approval process for drugs. Trademark protection in Jordan is governed by the Trademark Act (Law No 34, 1999, which substituted the Trademark Act No 33, 1952), as amended. Jordanian law follows the Nice classification system. An applicant may claim a priority date in which case the applicant needs to attach a certified copy of the priority document. Once the application is accepted by the trademark office, it is published in the Gazette.158 A registration is valid for ten years, and is renewable for consecutive periods of ten years each, but may be subject to cancellation due to non-​use in the country.159 Nevertheless, despite the law being compliant with global standards, those who benefit are mostly foreigners. The total number of marks registered in Jordan in 2013 was only 4,777, of which 1,293 registrations belonged to Jordanian residents (27 percent), while the remaining 3,484 (73 percent) registrations were by non-​residents. According to WIPO statistics, this pattern has somewhat improved but still is leaning to incoming marks. Specifically, in 2015 trademark registrations by residents rose to 2,725. However, that same year registrations by non-​residents rose to 4,760.160 With respect to copyright, Jordan was the last stronghold of the Ottoman Copyright Act 1910, and in the 1990s shifted within a few years to a full-​scale global framework. The Copyright Act of 1992 replaced the Ottoman Act, and was amended several times. Jordan joined the Berne Convention in 1999. Boosted by the US–Jordan FTA signed in 2001, Jordan ratified the WIPO Internet Treaties of 1996, namely the WCT and the WPPT, in 2004. All original works are protected by copyright, including literary and artistic works, as well as computer programs.161 The copyright term lasts from creation until 50 years after 155 

See Oxfam International, “All Costs, No Benefits: How TRIPs-​Plus Intellectual Property Rules in the US-​Jordan FTA Affect Access to Medicines” (2007); H El-​Said and M El-​Said, “TRIPS-​Plus Implications for Access to Medicines in Developing Countries: Lessons from Jordan-​US FTA” (2007) 10 Journal of World Intellectual Property 438; S Greenhouse and M Barbaro, “An Ugly Side of Free Trade: Sweatshops in Jordan” New York Times (New York, 3 May 2006) . 156  See M Al Nasa’a, J Chin, S Leonard, C Munoz, and B Reilly, “The Jordan-​U.S. Free Trade Agreement: Eight Years Later” (University of Michigan 2008), ; see also M Palmedo, “The Economic Effect of the Intellectual Property Obligations in Free Trade Agreements” (May 2012), . 157  For a critical review of the US–Jordan FTA, see A Al-​Shanayleh, “Unfair Trade: Jordan’s FTA with America” Venture Magazine (April 2013) . 158  Oppositions may be filed within three months. Oppositions are adjudicated by the trademark registrar with a possibility of appeal to the High Court of Justice. If no oppositions are filed, or if oppositions are unsuccessful, the trademark will be registered (art 14). 159  See arts 20 (duration and renewal) and 22 (cancelation). 160  Search WIPO IP Statistics Data Center, . 161  Jordanian Copyright Act, art 3.

Intellectual Property Law in the Middle East    401 the author’s death. Broadcasting programs are protected for a 20-year term.162 The Act cancelled mandatory registration requirements. Enforcement remains a controversial issue. The law authorizes civil courts to impose penalties, including imprisonment and fines. Repeat offenders are faced with the possibility of the closure of their business establishments, as well as the imposition of the maximum fines and imprisonment terms punishable by Jordanian copyright law. While there have been some police raids and other enforcement efforts,163 American content industries have remained concerned with insufficient enforcement of piracy of CD and DVD media, pointing inter alia to the courts as the weak link.164 The copyright industry in Jordan does contribute to the country’s economy.165 As for patents, in 2007 a new Patent Act (No 28) came into effect.166 The Act protects various types of patents, including pharmaceutical products and chemical compositions. Due to Jordan’s membership of the Paris Convention, it is possible to claim priority. Applications for the grant of a patent are filed with the Patent and Trademark Office, which examines them for compliance with patentability standards.167 An aggrieved applicant may appeal the PTO’s refusal or the conditions for acceptance prescribed by it.168 Once a patent application has been accepted, it is published in the Official Gazette.169 An interested party may file an opposition within three months of publication.170 Patents are valid for a period of 20 years from the date of filing of the application.171 Patent rights are transferable through licensing or assignment.172 Thus, on a technical legal level, the law implements TRIPs Agreement standards. Jordanian law requires that the owner of a patent use the patented product or process in Jordan within three years of the date of the patent grant. If this requirement is not satisfied, the law allows the compulsory licensing of the patent to another interested party.173 It is also worth noting that new plant varieties can be protected in Jordan, in accordance with the Protecting New Varieties of Plants Act (2000). 162 Art 30. 163 

Art 46. IP enforcement including raids are reportedly prevalent in Jordan. Counterfeit items and products have been seized and individuals have been brought before the courts in such cases. See, eg, M Ghazal, “Anti-​piracy raids to be stepped up during Ramadan” Jordan Times (Jordan, 23 July 2012) . For a more recent report on IP enforcement in Jordan, see Albawaba Business, “No fun: Jordan raids facility producing 40% of Kingdom’s pirated CDs, DVDs” (12 September 2014) . 164   See, eg, the International Intellectual Property Alliance (IIPA), 2009 Special 301 Report on Copyright Protection and Enforcement, . 165   See WIPO, “The Economic Contribution of Copyright-​Based Industries in the Hashemite Kingdom of Jordan” (2013), . 166   Law No 28 of 2007 Amending the Patents Law. 167   In this regard, the Patent Office will examine the application for worldwide novelty. The PTO has the authority to refuse an application or to condition its acceptance on specific changes or amendments to the patent application (arts 18–​20). 168  Appeals are brought before the High Court of Justice (art 8). 169 Art 13. 170  Art 14. If no oppositions have been filed or if the Registrar or court rejects the opposition, then the patent is issued. 171 Art 17. 172  Transfers need to be registered with the PTO to bind third parties (art 7). 173  Patent Act, art 22.

402    Michael Birnhack and Amir Khoury

5.3 The Kingdom of Saudi Arabia The Kingdom of Saudi Arabia, founded in 1932, is deemed to be one of the main players in the Arab world. It is the largest trading partner of the United States in the Middle East. Saudi Arabia has been stable over the years. It has largely maintained close political and security ties with the United States since the 1940s. Notwithstanding this, a 2015 Congressional Report observed that despite these close security ties, “official U.S. concerns about human rights and religious freedom in the kingdom persist.”174 Economically, the Kingdom has some contradictions. While its annual GDP (for the year 2012) was a staggering $921.7 billion, and its GDP growth rates were also an impressive 6.8 percent, illiteracy in the Kingdom was over 12 percent.175 According to Mundi, in 2015 the illiteracy in the Kingdom has declined dramatically to (only) 5.3 percent. But the country’s GDP growth rate has also sharply fallen to 3.4 percent.176 Saudi Arabia joined WIPO in 1982 and the Paris and Berne Conventions in 2004. In 2005 it attained membership in the WTO. These have both affected the development and shape of IP law in the Kingdom, which now seems to be compliant with global IP standards. Trademark protection in Saudi Arabia is governed by the Trademarks Regulations (law) of 2002 that substituted the 1984 trademark regulations.177 An application to register a mark in Saudi Arabia is not contingent upon prior use of the mark. The law grants protection to well-​known marks even if they are not registered in the Kingdom. Saudi law applies the Nice classification system. The law allows an applicant to claim a priority date of an earlier foreign application filed six months before. Upon receiving the application, the PTO examines the trademark. An applicant is granted three months to respond to any office actions.178 Once the application is accepted, it is published in the Official Gazette for oppositions by interested parties.179 Once registered, the validity of a registration is not automatically undermined by non-​use. However, an interested party can request the cancellation of a mark that has not been used for a consecutive period of five years. Furthermore, any mark that is registered may be disputed during the first five years after its registration. And without derogating from the above, it is worth noting that local culture and politics, especially Islamic law and strict censorship of content, still impact the law and its application. Examples may be offered from the field of trademark law. One is the prohibition under the current Trademarks Act of 2002 against the registration of trademarks covering alcoholic beverages or services related to the sale thereof.180 Another is the use of the Islamic 174 

CM Blanchard, Saudi Arabia: Background and U.S. Relations, Congressional Research Service (2015). 175 ibid 2. 176  See Index Mundi, ‘Saudi Arabia’ available at http://​www.indexmundi.com/​saudi_​arabia/​. 177  Trademarks Act 2002. In 2012 the Saudi Ministry of Commerce and Industry issued a new Ministerial Decision No 1147, amending the Implementing Regulations to the Saudi Trademark Act: see I Awadat, “Saudi Arabia: Amendments to Trademark Law Announced,” INTA Bulletin . 178  The Registrar’s decision to refuse an application may be appealed to the Saudi Minister of Commerce within 60 days, and from there to the court of first instance, namely the Board of Grievances. 179  Such oppositions should be brought before the court within 90 days from the date of publication in the Official Gazette. 180  Trademarks Act (promulgated by Royal Decree No M/​21 of 28 Jumada I 1423, 7 August 2002) art 2c, available at (Arabic and English) (referring to trademarks that are counter to morality and public policy).

Intellectual Property Law in the Middle East    403 calendar to determine the validity of a trademark registration: a trademark is valid for a period of ten years according to the Higri calendar (about nine years and eight months), and is renewable for successive periods of equal length. Copyright protection in Saudi Arabia is regulated by Royal Decree No 41/​M of 2003, which replaced the Copyright Act of 1990.181 The term of copyright lasts from the time a work is created until 50 years after the author’s death.182 However, once again the law should be read in conjunction with the broader legal system, which reflects the political situation of the country. There is notable censorship, wherein Article 39 of the Basic Law of Governance of 1992 states that: Mass media and all other vehicles of expression shall employ civil and polite language, contribute towards the education of the nation and strengthen unity. It is prohibited to commit acts leading to disorder and division, affecting the security of the state and its public relations, or undermining human dignity and rights. Details shall be specified in the Law.183

Accordingly, the distribution of copyrighted materials necessitates receiving the prior approval of the Ministry of Interior, which is authorized to verify that the content does not cause sectarian tension among citizens, or insult the royal family or Islamic values.184 In terms of the enforcement of copyright, the Decree authorizes the courts to impose fines and prison terms, and to confiscate and destroy infringing copies and equipment, as well as closing the offender’s business establishment.185 In 2005 the Saudi government issued a ministerial resolution implementing border measures for the protection of copyright and trademarks. The resolution authorized the Customs Service to withhold goods that are suspected of infringing trademarks or copyrights.186 A foreign law firm operating in Saudi 181 

For a survey of the development of IP laws in Saudi Arabia (as well as other Gulf states), see D Price, The Development of Intellectual Property Regimes in the Arabian Gulf States (Routledge 2009). 182  Royal Decree No 41/​M, art 19. 183  For a survey of the status of freedom of expression in Arab Countries, see Reporters without Boarders, “World Press Freedom Index 2014: Middle East and North Africa” . 184  Royal Decree No 41/​M of 2003, art 7. 185  Art 22. According to an official report: “While the system for collection, maintenance, retrieval and appropriate dissemination of relevant statistical information is being developed, the Kingdom of Saudi Arabia would like to assure the Members that its enforcement agencies are very busy on a daily basis implementing its IP laws and regulations, which were revised to be in full compliance with the TRIPS Agreement. All necessary enforcement offices and judicial authorities have been established to serve the right holders concerns. Further the Kingdom of Saudi Arabia is taking every opportunity to train its enforcement officers and judicial authorities to better fulfil the Kingdom’s obligations in these matters.” Responses from Saudi Arabia to questions posed by Switzerland and the United States, IP/​C/​W/​489 (12 February 2007). 186  See M Jomoa, “Border Measures: A Solution in Saudi Arabia” (2012) World Intellectual Property Review 212: “Under these measures, Saudi Customs Authorities are authorized to act ex officio and, provided there is prima facie evidence, have the power to suspend clearing of goods suspected of bearing imitated trademarks or works suspected of pirating copyrighted work. Customs will then, in compliance with arts 51 and 52 of the TRIPs Agreement, notify the importer and rights holder of any suspension.” See Ministerial Decision No 1277, concerning Regulations of Border Procedures for Protection of Intellectual Property Rights of Trademarks and Copyrights, of 3 July 2004 (15 Jumada I 1425H), as amended by Ministerial decision No 1640, of 22 June 2005. For an expansive overview of the scope of efforts in combating trademark and copyright counterfeiting in the Kingdom, see UNESCO,

404    Michael Birnhack and Amir Khoury Arabia reports several enforcement avenues for trademark and copyright infringements, including an administrative complaint to the Ministry of Commerce and Industry (MOCI), a criminal complaint filed with the police, the bringing of legal proceedings to a court, and a customs complaint.187 As for patents, in Saudi Arabia, and as with other countries that are members of the Gulf Cooperation Council (GCC), there are two available systems and options for filing patent applications.188 The first is to file the patent application with the local Saudi PTO, in which case the patent, once granted, will be valid in the Kingdom. The second option is to file the patent application with the GCC. Any person or corporation (even if not a Saudi national) may file a patent application in Saudi Arabia. Due to Saudi Arabia’s membership of the Paris Convention, it is possible to claim convention priority of 12 months.189 The Saudi Law of Patents, Layout Designs of Integrated Circuits, Plant Varieties, and Industrial Designs of 2004 covers any new article or method of manufacture (including improvements to either of these) in a wide array of fields, including pharmaceutical products. A computer program can be protected by a patent only if it is coupled with hardware.190 Saudi law does not grant patent protection to discoveries, scientific theories, or mathematical methods.191 The rights to a patent belong solely to the inventor, who may transfer or assign these rights to others. The validity of such transactions is contingent upon their registration with the Saudi Patent Office.192 Specifically, a patent is filed with and granted by the Patent Office that is also referred to as the Patent Directorate.193 A patent is granted on a first-​to-​file “World Anti Piracy Observatory: Saudi Arabia” (2009), . 187 

See “Saudi Arabia Enforcing Intellectual Property Law” Mondaq, Clyde & Co Newsletter (March 2015) . The June 2015 issue of the same newsletter further reported that the Kingdom had carried out raids in which “27,000 fraudulent goods seized in Saudi Arabia for health and safety reasons”: see  2. 188  The Gulf Cooperation Council (GCC) is a regional organization comprised of six Arab Countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. (See .) It aims to preserve the economic and political interests of that region, and attain harmony among its Member States in various fields, including economic and financial affairs, commerce, customs and communication, education, and culture. Since 1998 the GCC has operated a regional patent office. Patent applications should be in Arabic. Certificates of Patents granted by the GCC PO secure legal protection of the inventor’s rights in all GCC Member States (subject to validation by the Member States). An applicant cannot simultaneously enjoy patent protection according to both local law and the GCC patent systems; they are mutually exclusive. A GCC patent application can be filed and accepted subject to abandoning a preexisting patent registration in any of the six GCC Member States. The GCC patent system covers a broad spectrum of inventions and processes but excludes others such as computer programs and methods for doing business. A patent that is registered with the GCC is valid for 20 years. 189  Art 10. 190   See R Deans, “Saudi Arabia: Protecting Patentable Technology” Mondaq, Clyde & Co Newsletter (March 2015) . 191  Saudi Patent Ordinance (2004) art 45. 192  Arts 22–​23. 193  The Directorate of Patents at King Abdul-​Aziz City of Science and Technology (KACST) is known as the Patent Office. The Saudi PTO is entrusted with various tasks including receiving and examining patent applications, and granting these patents where applicable; recording patent assignments; and maintaining searchable databases of Saudi and foreign patent documents. Decisions concerning patents

Intellectual Property Law in the Middle East    405 basis.194 The substantive requirements for registration are novelty, non-​obviousness, and industrial application.195 A patent, once granted, is valid for 20 years from the date of the filing of the patent application with the Saudi Patent Office.196 If the patent is registered with the GCC, the registration is valid for 20 years from the date of filing the patent application there. Failure to exploit the patent within three years of its grant may entitle the PTO to grant a compulsory license enabling exploitation of the patent to any person capable of fully exploiting it.197 In addition to patents, the Act also covers and regulates industrial designs (with a ten-​year term of protection), plant varieties, and layout designs of integrated circuits.198

5.4 The United Arab Emirates The United Arab Emirates (UAE) is a federation of seven states: Abu Dhabi, Dubai, Ajman, Fujairah, Ras al Khaimah, Sharjah, and Umm al Qaiwain. The UAE was formed in 1971, after its states became free from British rule. Originally, the UAE economy was dependent on fishing and a pearl industry, but since the discovery of oil in the 1960s, the country’s economy has transformed dramatically. Today, the UAE is a wealthy oil exporter, and also a hub for shipping, tourism, and business. Its culture is Arab-​Islamic, but relatively open to the West.199 According to a Congressional Research Report, the UAE is the largest market for US exports to the Middle East, with US$24.6 billion worth of goods (for 2013). Notably, over 1,000 US companies have offices there and 60,000 Americans work in the UAE.200 The UAE has received no US aid since 2011. In terms of freedom of speech, the UAE is said to walk a fine-​line in a delicate time for the region. In this regard, the International Service for Human Rights has noted the prevalence of cyber-​crime laws in the UAE, and expressed concern about their “unacceptable infringement on freedom of expression” despite their purported concern with tackling “organised crime, terrorism, and trafficking.”201 The United Arab Emirates is a party to both WIPO (as of 1974) and the Paris Convention (as of 1996). The UAE joined the WTO in 1996.202

may be contested by third parties before an administrative commission, within 90 days of the announcement that a patent has been granted. 194

  Saudi Patent Ordinance (2004) art 5.   Art 44. If the invention which is the subject matter of the application has been published or disclosed in any other country, then the applicant is required to provide full details of that application or registration to the PTO. 196 197 198  Saudi Patent Ordinance (2004) art 1.  Art 19.  Art 24. 199  See K Katzman, “The United Arab Emirates (UAE): Issues for U.S. Policy,” Congressional Research Service (2015), ; K Krane, City of Gold: Dubai and the Dream of Capitalism (St Martin’s Press 2009); KS Almezaini, The UAE and Foreign Policy: Foreign Aid, Identities and Interests (Routledge 2012). 200  Katzman (ibid). 201  International Service for Human Rights (ISHR), “Worrying restrictions on freedom of expression in UAE” (2013) . 202  See WTO, “Member Information: United Arab Emirates,” . 195

406    Michael Birnhack and Amir Khoury Trademark protection in the UAE is regulated by Federal Law No 8 of 2002.203 An application to register a trademark needs to be submitted (in Arabic) to the UAE Trademark Office.204 The Office then initiates an examination of the application. If accepted, the Office will issue a Notice of Acceptance, and the mark will be published.205 An interested party may oppose the mark within 30 days.206 If no oppositions are filed, or if oppositions are unsuccessful, the mark will be registered.207 The trademark registration is valid for a period of ten years, and may be renewable for consecutive periods of ten years each. If a trademark registration is not renewed on time, the owner of the mark can still request renewal of the registration (subject to a fine) within three months of its expiry.208 The registered mark can be cancelled if it is not used by its owner in the UAE for a consecutive period of five years.209 In relation to copyright, the UAE joined the Berne Convention in 2004, and became party to the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (1961) in 2005. The UAE also joined the WIPO Internet Treaties, namely, the WCT and the WPPT, in 2004 and 2005, respectively. The UAE Copyright and Authorship Protection Act (No 7, 2002) protects all type of original creations.210 The Act grants copyright protection from the time of creation of the work until 50 years after the author’s death.211 As for enforcement, the UAE Copyright Act provides for the imposition of penalties, including fines and imprisonment. It also allows for the destruction of infringing copies and equipment that is used to create them.212 Patents are presently protected in accordance with the Patent and Industrial Design Act (No 17, 2002), as amended in 2006. As in the case of Saudi Arabia, there are two ways to register a patent in a Gulf Cooperation Council member. A patent can be attained either by registering the patent with the UAE PTO or by filing a patent application with the patent office of the GCC. In addition, the UAE has been a party to the PCT since 1997. As such, the UAE can be designated in a PCT application. According to UAE law, patents may be granted for machines, methods of production, as well as chemical compounds and pharmaceutical products.213 A patent application is examined as to both formalities and substance, including to establish the invention’s novelty, inventiveness, and industrial applicability.214 The UAE has been a party to the Paris convention since 1996. Consequently, an applicant filing a patent application in the UAE can claim convention priority.215 Once an application is accepted, it is published in the Official Gazette.216 Any interested party has the right to

203

  This substituted Law No 37 of 1992.   According to art 16 of the Trademark Act (Federal Law No 8, 2002), a mark need not be in use in the UAE in order to qualify for registration. The application should reveal the name, address, and nationality of the applicant, as well as the goods or services that are to be covered by the mark. 205  UAE Trademark Act, art 14. Publication is done in the Official Trademarks Gazette and in two local newspapers. 206  The trademark registrar rules on the application, and his decision may be appealed to the trademark committee and from there to the courts. 207  UAE Trademark Act, art 15. 208 Art 19. 209 Art 22. 210  UAE Copyright Act (No 7 of 2002) art 2. 211 Art 20. 212  Arts 37–​39. 213  UAE Patent and Industrial Design Law (No 17 of 2002) arts 1 and 70.    214  Arts 5 and 12. 215 Art 11. 216  Art 12. If the application is refused the applicant has the right to appeal to a specialized committee in the PTO. 204

Intellectual Property Law in the Middle East    407 oppose the acceptance of the patent.217 In the absence of opposition, the registration certificate is issued. A patent is valid for 20 years, subject to annual maintenance fees.218 The patent may be assigned or licensed, and to be valid vis-​à-​vis third parties, must be recorded at the PTO and published in the Official Gazette.219 Use of the invention in the UAE constitutes a crucial requirement for the validity of a registered patent. Thus, if the owner of a patent does not work (use) the patented invention, then the patent may be subject to compulsory licensing under the provisions of the law.220 The case of IP law in the UAE enables us to highlight the economic aspects of IP law. While the law itself seems to comply with global standards, the practice reveals that foreigners benefit from the law much more than locals benefit from it. The UAE has been making great strides in capitalizing on the market of IP-​related subject matter. Suffice it to mention the DUBAI brand, as well as the shift to developing the Internet and scientific infrastructure therein.221 But, the volume of mark registrations in the UAE by non-​residents far exceeds the number of marks registered by UAE residents in their country. For example, according to WIPO, in 2013 18,747 marks have been registered. Of these only 5,293 are owned by UAE residents (28.2 percent), while the majority of these marks (13,454 marks, which are 71.7 percent) are owned by non-​residents.222 Interestingly, there is much less available data in the context of patents: In that field, the only publicly accessible data source is the PCT lists of applications and registrations.

6. Conclusion The Eurocentric term “Middle East” captures the historical sources and the emergence of modern IP law in the region. The initial European influence had a long-​lasting effect, and its laws, sometimes reformulated into local laws, are still in force in large parts of the region. In the mid-​1990s the European dominance was taken over by newer winds of globalization. The global replaced the colonial, with new demands. The globalized IP legal framework is mostly indifferent to local needs, and imposes a “one size fits all” approach. Instead of a rather technocratic doctrinal approach that compares the law in a given country to the international standards and asks about “compliance,” we advocate a richer evaluation of a country’s IP regime. In assessing copyright, patent, trademark, and other IP laws against global standards, it is important to inquire whether the law emerged from within this 217   Art 13. The appeals need to be filed with a designated committee within 60 days as of the date of publication in the Official Gazette. 218 219 Art 18.  Art 14. 220  Art 24. The “working” requirement is deemed not to have been satisfied if: 1. The patent has not been worked within four years from the filing date or three years from the grant date of the patent, or if the working of it has ceased for two consecutive years; 2. Use of the patent does not cover the demands of the UAE; or 3. The owner has refused to license his patent under a fair contract. 221  On the knowledge-​based economy in Arab countries and how it can impact the patent system and IP at large, see further Khoury (n 125); N Harabi, “Knowledge Intensive Industries: Four Case Studies of Creative Industries in Arab Countries” (World Bank Project 2009), . 222  Search the WIPO IP Statistics Data Center, at .

408    Michael Birnhack and Amir Khoury country, or was imposed upon it. In the latter case, the assessment should contextualize IP within the larger legal framework, along with constitutional law (especially freedom of expression), contract and property law, antitrust, tax, and corporate law, as well as principles of unjust enrichment, good faith, and the like. The assessment should take into consideration the political economy, local and global politics, and the country’s unique cultural needs. Applying this framework to several Middle Eastern countries helps bring into relief the patchwork of Israeli IP law, with a clear shift from its British origins to a global, American regime, and the external pressures on Egypt to narrow the gap between the law in the books and its practice in the protection of foreign interests. Local cultural interests occasionally arise, but overall, are subordinated to foreign demands. Each country deserves a detailed empirical study, deploying the multi-​factor template we have suggested here.

Chapter 15

Three Centuri e s a nd C ount i ng The Emergence and Development of Intellectual Property Law in Africa Caroline B. Ncube * 1. Introduction The African continent is vast and diverse as it consists of 55 recognized and two disputed states.1 This chapter cannot offer a comprehensive overview of IP governance across the continent, so its scope is sparingly delineated. Many accounts have been given of the introduction of intellectual property (IP) law to individual African states2 and of their current status.3 Therefore, the chapter does not focus on this primary stratum; instead it focuses on the secondary and tertiary strata of regional continental arrangements respectively. The secondary stratum of IP governance is populated by regional IP organizations and regional economic communities (RECs). Much has been written about the regional IP organizations, the African IP Organization (ARIPO) and the African IP Organization/​ Organisation Africaine de la Propriété Intellectuelle (OAPI), particularly from a global *  This chapter discusses law and policy as at 1 May 2017. This work is based on the research supported in part by the National Research Foundation (NRF) of South Africa. Any opinion, finding, and conclusion or recommendation expressed in this material is that of the author and the NRF does not accept any liability in this regard. Caroline B Ncube has asserted her moral right to be identified as the author of the contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  The two disputed states are the Sahrawi Arab Democratic Republic and Somaliland. For a history of the Sahrawi Arab Democratic Republic see E Jensen, Western Sahara: Anatomy of a Stalemate (Lynne Rienner Publishers 2005) and T Shelley, Endgame in the Western Sahara: What Future for Africa’s Last Colony? (Zed Books 2004). 2  RL Okediji, “The international relations of intellectual property: narratives of developing country participation in the global intellectual property system” (2003) 7 Singapore Journal of International & Comparative Law 315, 323; T Kongolo, “Historical evolution of copyright legislation in Africa” (2014) 5(2) The WIPO Journal 163, 168–​170; T Kongolo, ‘Historical developments of industrial property laws in Africa (2013) 5(1) The WIPO Journal 105, 115–​116. 3  E du Plessiss, S Brown, and DF Tanziani Adams, Practical Guide to Intellectual Property in Africa (Pretoria University Press 2012).

410   Caroline B. Ncube milestone tracking perspective.4 In contrast, relatively little has been written about the RECs’ IP initiatives, and this chapter accordingly seeks to provide an account of IP developments in this sector. Finally, the African Union (AU) intends to implement its proposal for a Pan-​African IP Organization (PAIPO) and thus introduce a tertiary stratum of IP governance. This proposal and its merits or otherwise have also been discussed widely, hence this chapter will only seek to provide an update on the most recent developments pertaining to PAIPO. It concludes by referencing how Africa has contended with the big questions of IP, such as the protection of plant varieties and traditional knowledge (TK). It also makes some remarks about lessons that can be drawn from the historical development of IP on the continent. The chapter considers IP developments in Africa from an historical perspective. The emergence and development of IP in Africa progressed through the following periods: precolonial; colonial (fifteenth century onwards); post-​colonial (twentieth century) onwards; and post-​TRIPS (1995 onwards). These phases are loosely delineated5 and a few milestones are recounted here to contextualize the chapter. Colonization was pioneered by the arrival of the Portuguese in the early 1400s.6 Other early explorers were the Dutch who docked at the Cape of Good Hope in 16527 to establish what Young has called “the Dutch maritime mercantile empire.”8 The height of colonialism in Africa was the nineteenth century, during which many European countries annexed territories in Africa.9 Even the American Colonization Society, a non-​state actor, placed Liberia under its tutelage from 1820 to 1847. South Africa is recorded as the first African country to have obtained its independence in 1910 when the Union was formed. However, from 1948 to 1990 it languished under the racially discriminative policy of Apartheid and only achieved a constitutional democracy in 1997 with the certification of its Constitution.10 Other African countries attained their independence throughout the twentieth century, with the last colony, Zimbabwe, attaining her independence in April 1980. The discussion of the post-​colonial11 IP developments in section 4 covers developments with regard to each relevant state’s date of independence. 4 

A Adewopo, “The Global Intellectual Property System and Sub-​Saharan Africa. A Prognostic Reflection” (2001–​2002) 33 University of Toledo L Rev 749; A Adewopo, “Developments in Intellectual Property in Africa” . 5  They roughly coincide with the multilateralisms—​1500 to 1945, 1945 to 1999, and 1994 to the present—​as set out in Okediji (n 2). 6  For an account see J Duffy, Portugal in Africa (Harvard University Press 1962); RO Collins and JM Burns, A History of Sub-​Saharan Africa (2nd edn, CUP 2014) 175–​189; C Young, The African Colonial State in Comparative Perspective (Yale UP 1994) 49–​52. 7  For an overview see R Elphick and H Giliomee, The Shaping of South African Society, 1652–​1840 (Wesleyan UP 1979). 8  Young (n 6) 61. 9  AA Boahen (ed), Africa Under Colonial Domination, 1880-​1935 (University of California Press 1990). 10  The years 1990 to 1996 are generally considered to be a transition period with democratic elections being held in 1994. 11  Some authors contest the use of this phrase but it is used due to its widespread currency. For such critiques see, eg, C Young, “The End of the Post-​Colonial State in Africa? Reflections on Changing African Political Dynamics” (2004) 103(410) African Affairs 23. Young himself continues to use the term: see, eg, C Young, The Postcolonial State in Africa: Fifty Years of Independence, 1960–​2010 (University of Wisconsin Press 2012).

Three Centuries and Counting    411 As Carolyn Deere Birkbeck’s chapter in this volume underlines, the adoption and coming into force of the TRIPS Agreement in 1994 and 1995 respectively constituted a seismic shift in global IP governance, with particular importance for least-​developed countries (LDCs). Accordingly, section 5 outlines IP developments since 1995. It shows that a TRIPS-​induced compliance confidence crisis has resulted in the early adoption of IP protection standards that are not necessarily appropriate for African states at particular levels of development. Section 6 discusses the dynamics between IP and development in Africa, and also notes the localization of access debates and the protection of plant varieties and TK. Finally, the conclusion in section 6 asks whether IP has truly served Africa and questions the lessons that have/​should have been learned from past entanglement with IP that may be useful in the future.

2.  The Precolonial Period IP rights as conceived of in the current IP framework did not exist in precolonial Africa. However, customary law provided, and continues to provide, knowledge governance systems, which are briefly outlined below. Such systems are relevant and required because there are records of African creativity and innovation on both a small and grand scale ranging from the production of agricultural implements to architectural marvels such as the Great Zimbabwe monument that dates back to the fifteenth century.12 Similarly, extensive knowledge was held about the therapeutic or medicinal value of plant and biological materials, which is referred to today as traditional medicinal knowledge (TMK). Further, the continent’s rich cultural life manifested in a variety of art, artefacts, song, and dance, which are now commonly categorized as traditional cultural expressions (TCE) or folklore. The then-​prevailing governing system of customary law would have regulated such expressions, knowledge, skill, and its products. Customary law or “indigenous people’s legal regimes”13 are “established system[s]‌of immemorial rules which had evolved from the way of life and natural wants of the people.”14 Customary law is living in the sense that communities adapt the rules to their changing circumstances and needs.15 This organic nature is distinct from ossified customary law, which first emerged in the colonial era, when some of these living laws were recorded by the state in codes, and gave birth to an official or codified version.16 Other sources of official customary law include case law and accounts or records of customary law by scholars and commentators.17

12 

W Rodney, How Europe Underdeveloped Africa (Zimbabwe Publishing House 1972) 65. B Tobin, Indigenous Peoples, Customary Law and Human Rights—​Why Living Law Matters (Routledge 2014) 1. 14  JC Bekker, Seymour’s Customary Law in Southern Africa (5th edn, Juta 1959) 11. 15  C Himonga and T Nhlapho (eds) African Customary Law in South Africa: Post-​Apartheid and Living Law Perspectives (OUP South Africa 2014) 27. 16  F du Bois (with C Himonga), “Sources of Law: Customary and other sources” in F du Bois (ed), Willies’s Principles of South African Law (9th edn, Juta 2007) 100, 103. 17  Himonga and Nhlapho (n 15) 33. 13 

412   Caroline B. Ncube Each indigenous community has its customary law and while there are many commonalities between the regimes of each community they are all unique.18 Each community also had its own rules that pertained to knowledge governance, the bulk of which are not reduced to writing or even disclosed orally beyond that community. It is thus not possible to provide a comprehensive or detailed overview of what these norms were; a few examples are given. Ouma notes that, in East Africa, TMK is held and practiced exclusively by the Olaibo, a sub-​group of the Maasai, that specific composers are regarded to be the custodians of their music compositions, and that some types of artwork and designs are owned by specific community members.19 These examples show aspects of exclusivity and internal appropriation of TK. It is for this reason that many scholars have suggested that customary law continues to have an important role in the regulation of TK, and should be considered in crafting appropriate protection regimes.20 In particular, it is suggested that customary law should form the root of sui generis means of protecting TK.21 Such proposals have been made not only in relation to African TK, but also in relation to indigenous communities’ TK regardless of the community’s location.22

3.  The Colonial Period During the colonial era, customary law’s coverage shrunk to “family matters and associated property and inheritance issues”23 and was soon overtaken by imperial laws in the domain of knowledge governance as new forms of rights were created by “extractive” IP laws. Drahos explains this characteristic as follows: “[T]‌he concept of an extractive property order refers to property systems in which the systems allow one group (the extractor group) to obtain control of assets belonging to the second group without the extractor group obtaining consent and offering proper compensation for the asset transfer.”24 The extractor group is the outsider or outsiders who colonized African states and then introduced a new system of 18 

Tobin (n 13) 2. M Ouma, “The Policy Context for a Commons-​Based Approach to Traditional Knowledge in Kenya” in J de Beer, C Armstrong, C Oguamanam, and T Schonwetter (eds), Innovation & Intellectual Property Collaborative Dynamics in Africa (University of Cape Town Press 2014) 132. 20 WIPO, Customary Law, Traditional Knowledge and Intellectual Property: An Outline of the Issues (WIPO 2013) ; WIPO Report on Fact-​finding Missions on Intellectual Property and Traditional Knowledge (WIPO 1998–​1999) ; P Kuruk, “The Role of Customary Law under Sui Generis Frameworks of Intellectual Property Rights in Traditional and Indigenous Knowledge” (2007) 17 Indiana International & Comparative L Rev 67, 81–​83. 21  G Dutfield, “Traditional Knowledge, Intellectual Property and Pharmaceutical Innovation: What’s left to discuss?” in M David and D Halbert (eds), The Sage Handbook on Intellectual Property (Sage 2014); DM Conway, “Indigenizing Intellectual Property Law: Customary Law, Legal Pluralism, and the Protection of Indigenous Peoples’ Rights, Identity, and Resources” (2009) 15 Texas Wesleyan L Rev 207. 22  See, eg, T Janke and R Quiggin, “Indigenous cultural and intellectual property and customary law” Aboriginal Customary Laws–​Background Paper 12 ; Tobin (n 13); P Drahos, Intellectual Property, Indigenous People and their Knowledge (CUP 2014); M Rimmer (ed), Indigenous Intellectual Property. A Handbook of Contemporary Research (Edward Elgar 2016). 23  F du Bois (with C Himonga), “Sources of Law: Customary and other sources” in F du Bois (ed), Willies’s Principles of South African Law (9th edn, Juta 2007) 100, 101. 24  Drahos (n 22). 19 

Three Centuries and Counting    413 law that enabled them to extract knowledge and ideas from the colonized territory without asking consent or providing compensation. Various methods of introducing colonial IP laws were utilized, such as simply extending the colonizing state’s laws and the applicability of international agreements to which they were party to the colony, as well as the enactment of colony-​specific laws.25 The main critique of such an approach is that it inevitably resulted in IP regimes which were ill-​suited to the colonies. This is because they were not crafted with due regard for the colonies’ conditions and needs. Administration of IP rights was provided by the colonizing state, often from its home territory. For instance, the French National Patent Rights Institute (INPI) administered patents on behalf of French colonies and the Administrator General of the Ministry of Foreign Affairs of Belgium granted patents for Belgian colonies.26 During this era, African states began to co-​operate with the aim of strengthening their fight against colonization. Where possible, they provided safe houses for exiles and military training facilities for those actively involved in armed struggle.27 In some instances, such support was provided by individual states and in others, such support was given as a collective, such as the Frontline States,28 which supported South Africa in its fight against Apartheid.29 As will be shown, this mutual support has not ended with the demise of colonization and Apartheid, but has continued to inform African states’ continental initiatives30 and their foreign policy positions on a variety of matters, including IP.31 Informed by equity and public interest prerogatives which find expression in the metanorm of Ubuntu (discussed in section 6), African states have coalesced into an influential group (the Africa Group) which advances its members’ interests. For instance, the group is active at the World Health Assembly (WHA),32 the World Trade Organization (WTO),33 and the World Intellectual Property Organization (WIPO).34 The Africa Group’s efforts to bring global attention to the plight of the continent in the face of inaccessibility of essential medicines and other key knowledge assets has resulted in a “global counter-​discourse on the appropriate regulation of intellectual property.”35 25

  Okediji (n 2) 323; Kongolo 2013 (n 2) 106–​108; T Kongolo, “Historical evolution of copyright legislation in Africa” (2015) 5(2) The WIPO Journal 163, 163–​165. 26  A Adewopo, “Developments in Intellectual Property in Africa” 7; Kongolo 2013 (n 2) 107–​108. 27  G Bauer and SD Taylor, Politics in Southern Africa: State and Society in Transition (Lynne Rienner Publishers 2005) 5. 28  Angola, Botswana, Mozambique, Tanzania, Zambia, and Zimbabwe. 29  R Loewenson, M Modisenyane, and M Pearcey, “African perspectives in global health diplomacy” (2014) 1(2) Journal of Health Diplomacy 1, 8; Bauer and Taylor (n 27) 5. 30  LJ Farmer, “Sovereignty and the African Union” (2012) 4(10) Journal of Pan-​African Studies 93, 97. 31  Loewenson, Modisenyane, and Pearcey (n 29). 32  Loewenson, Modisenyane, and Pearcey (n 29) 7. 33  For a discussion see RE Mshomba, African Yearbook of International Law (Martinus Nijhoff Publishers 2009); E Kessie and Y Apea, “The participation of African Countries in the Multilateral Trading System” in AA Yusuf (ed), African Yearbook of International Law: Africa and the International Trading System (Martinus Nijhoff Publishers 2004) 9. 34  T Kongolo, African Contributions in Shaping the Worldwide Intellectual Property System (Routledge 2013); D Shabalala, A Citizen’s Guide to WIPO (Center for International Environmental Law 2007) 32; SF Musungu, “International Intellectual Property Standard-​Setting: A review of the Role of Africa in Shaping the Rules for the Regulation of the Knowledge Economy” in Yusuf (n 33) 169, 181. 35  RL Okediji, “Africa and the Global Intellectual Property System: Beyond the Agency Model” in Yusuf (n 33) 207, 215.

414   Caroline B. Ncube

4.  The Postcolonial Period After a critical mass of African states had attained their independence, they consolidated their regional cooperation by forming in 1963 a continental organization, the Organisation of African Unity (OAU), which later in 2001 became the African Union (AU).36 At about the same time, many states were grappling with how to set up their own IP administrative structures. In view of their limited resources and expertise, it was prudent to leverage economies of scale by setting up regional IP organizations. Legislative reform was a long time coming and many states continue to implement colonial-​era IP laws today. However, OAPI Member States all subscribe to uniform IP laws contained in the Bangui Protocol and its Annexes,37 and ARIPO’s Protocols have played a significant role in the rejuvenation of IP legislation through their harmonizing function. Similarly, some of the RECs have provided leadership, particularly in relation to patent-​related TRIPS flexibilities. The sections that follow outline OAPI, ARIPO, and REC developments, bearing in mind that they occurred within the context of Pan-​Africanism as expressed through formation of the OAU, now the AU. Consequently, it is important to view membership of the regional organizations against the backdrop of the AU and the countries’ colonial past. Fifty-​four of the recognized African states are AU Member States. The 55th state, Morocco, is not an AU Member State. It formally withdrew its membership of the AU’s predecessor, the OAU, in 1985 because of a dispute relating to the recognition of the Sahrawi Arab Democratic Republic (SADR).38 The AU has divided the continent into five regions. These regions are depicted in Table 15.1, together with the regional IP organization membership of its members. The official languages of the AU Member States are also shown as a proxy for colonial heritage. Several countries have multiple official languages, but for present purposes it is only necessary to indicate languages that were introduced to a country by colonization. Regional economic community membership is not indicated in the table because of their multiplicity and the overlapping memberships held by many AU Member States. Instead, it is outlined further below in section 4.1.3, which is dedicated to discussing RECs. As per Table 15.1, membership of OAPI is formed by Francophone states and one Lusophone state, Guinea Bissau, from the central, eastern, northern, and western AU regions, the majority of its membership from the central and western regions. The African IP Organization draws its membership from Anglophone, Francophone, Lusophone, and Arabic states from the eastern, southern, and western regions of the AU, although most of its membership is drawn from the eastern and southern regions. With the exclusion of Mauritania, states in the northern region do not belong to either ARIPO or OAPI. However, four of these states have ARIPO observer status. In the southern and western regions, only South Africa and Nigeria are not members of a regional IP organization, although both 36  For a historical account of this development see K Gottschalk, “The African Union and its sub-​ regional Structures” 2012 1(1) Journal of African Union Studies 9–​39; R.N Kouassi “The itinerary of the African integration process: an overview of the historical landmarks” 2007 1(2) African Integration Review 1–​23. 37  Kongolo (n 34) 83. 38  Shelley (n 1); T McNamee, G Mills, and JP Pham, “Morocco and the African Union: Prospects for ­Re-​engagement and Progress on the Western Sahara,” Brenthurst Foundation Discussion Paper 1/​2013.

Three Centuries and Counting    415 Table 15.1  IP Regional Organization by AU Region Central

Burundi Fr ARIPO Obs Cameroon Fr En OAPI Central African Republic Fr OAPI

Chad Fr Ar OAPI Congo Fr OAPI DR Congo Fr

Equatorial Guinea Sp OAPI Gabon Fr OAPI São Tomé and Príncipe Po ARIPO

Eastern

Comoros Fr Ar OAPI Djibouti Fr Ethiopia ARIPO Obs Eritrea Ar ARIPO Obs Kenya En ARIPO

Madagascar Fr Mauritius Fr ARIPO Obs Rwanda Fr ARIPO Seychelles Fr En ARIPO Obs Somalia Ar ARIPO

South Sudan En Ar Sudan Ar ARIPO Uganda En ARIPO Tanzania En ARIPO

North

Algeria Ar, Fr ARIPO Obs Egypt Ar, ARIPO Obs

Libya Ar ARIPO Obs Mauritania OAPI

Sahrawi Republic Tunisia Ar ARIPO Obs

South

Angola Po ARIPO Obs Botswana En ARIPO Lesotho En ARIPO Malawi En ARIPO

Mozambique Po ARIPO Swaziland En ARIPO Namibia En ARIPO Zambia En ARIPO South Africa En ARIPO Obs Zimbabwe En ARIPO

West

Benin Fr OAPI Burkina Faso Fr OAPI Cape Verde Fr OAPI Côte d’Ivoire Fr OAPI The Gambia En ARIPO

Ghana En ARIPO Guinea Bissau Po OAPI Guinea Fr OAPI Liberia En ARIPO Mali Fr OAPI

Niger Fr OAPI Nigeria En ARIPO Obs Senegal Fr OAPI Sierra Leone En ARIPO Togo Fr OAPI

Languages: Am: Amharic, Ar: Arabic, En: English, Fr: French, Po: Portuguese, Sp: Spanish IP regional organization membership: ARIPO, ARIPO observer (ARIPO Obs), OAPI

have observer status at ARIPO. In total, ARIPO has 12 observer states. The incomplete coverage of the continent by the two regional IP organizations has fueled calls for a continental IP organization, as discussed in section 5.

4.1 The Formation of the Regional Intellectual Property Organizations and their Mandates 4.1.1 The African and Malagasy Office of Industrial Property (OAPI) In 1962 newly independent Francophone states39 adopted a constitutive agreement40 at Libreville, Gabon that created the African and Malagasy Office of Industrial Property/​Office Africaine et Malgache de la Propriété Industrielle (OAPI).41 The OAPI focused only on industrial property. It was replaced in 1977 upon the adoption at Bangui, Central African Republic

39  Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Republic of Congo, Cote d’Ivoire, Gabon, Malagasy, Mauritania, Niger, and Senegal. 40  The Agreement relating to the creation of an African and Malagasy Office of Industrial Property. 41  Kongolo (n 34) 82; ES Nwauche, “An evaluation of the African Regional Intellectual Property Rights Systems” (2003) 6(1) The Journal of World Intellectual Property 101, 105; Adewopo (n 26) 7.

416   Caroline B. Ncube of the Agreement relating to the creation of OAPI, known as the Bangui Agreement.42 The Bangui Agreement came into force on 8 February 1982. As noted, the Bangui Agreement serves a uniform code of laws for OAPI Member States. It currently has ten annexes: Annex I: Patents; Annex II: Utility Models; Annex III: Trademarks and Service Marks; Annex IV:  Industrial Designs; Annex V:  Trade Names; Annex VI:  Geographical Indications; Annex VII:  Literary and Artistic Property; Annex VIII: Unfair Competition; Annex IX: Layout Designs of Integrated Circuits; and Annex X: New Varieties of Plant. Notably, the Annexes do not cater for the protection of TK. The Agreement was updated in 1999 and the revisions and Annexes I to IX became effective on 28 February 2002. Annex X, which adopted the 1991 International Union for the Protection of New Varieties of Plants (UPOV) Convention’s approach to protecting plant varieties, came into force on 1 January 2006, and OAPI became a member of the UPOV Convention in 2014.43 The OAPI Secretariat administers IP rights on behalf of its Member States and undertakes both formal and substantive examinations for the registration of rights.

4.1.2 The African Industrial Property Organization (ARIPO) Fourteen years after the formation of OAPI, newly independent Anglophone states established the Industrial Property Organization for English-​speaking Africa (ESARIPO),44 with technical and administrative assistance from UNECA and WIPO.45 Its constitutive agreement, the Agreement on the Creation of ESAPIRO Africa, was adopted at a Diplomatic Conference held in Lusaka, Zambia on 9 December 1976. The Agreement, which is commonly known as the Lusaka Agreement, came into force on 15 February 1978. Seven years later, Article 4 of the Lusaka Agreement was amended in order to expand the pool of states eligible for membership beyond Anglophone states to all members of UNECA or the OAU (now the AU).46 This necessitated a name change to the African Industrial Property Organization (ARIPO) to remove its reference to the English language.47 Another name change was occasioned by the Organization’s broadening of its mandate from industrial property to other forms of IP and although its acronym remained constant, its full name changed to the African Regional IP Organization in 2004.48 In addition to its constitutive act, the Lusaka Agreement, ARIPO has the following protocols: the Harare Protocol on Patents and Industrial Designs of 1982; the Banjul Protocol on Marks of 1993;49 the Swakopmund Protocol on the Protection of Traditional Knowledge 42

  Kongolo (n 34) 82; Nwauche (n 41) 105; Adewopo (n 26) 7.   C Oguamanam, “Breeding Apples for Oranges: Africa’s Misplaced Priority Over Plant Breeders Rights” (2015) 18(5) The Journal of World Intellectual Property 165. 44   Kongolo (n 34) 75; Adewopo (n 26); Nwauche (n 41) 123. 45   MH Chirambo, The African Regional Industrial Property Organization (ARIPO) as an Example of Regional Cooperation in the Field of Patents (WIPO 2002) para 6. This legacy is honoured by art 5 of the Lusaka Agreement which mandates that ARIPO “shall establish and maintain close and continuous working relationships” with these two organizations and the African Union. 46  Chirambo (n 45) para 7; Adewopo (n 26) 2. 47  See (n 45); Nwauche (n 41) 128. 48  Kongolo (n 34) 75; Amendment to the Lusaka Agreement adopted by the Council of Ministers on 13 August 2004. 49  Banjul Protocol on Marks within the Framework of the ARIPO (opened for signature 19 November 1993, entered into force 6 March 1997) as amended. 43

Three Centuries and Counting    417 and Expressions of Folklore of 2010;50 and the Arusha Protocol for the Protection of New Varieties of Plants.51 Of these Protocols, the latter two have borne the brunt of some criticism, which is summarized in  section 5 as part of the discussion of post-​TRIPS developments. ARIPO’s protocols serve a harmonizing function and are not binding in its Member States unless they are domesticated. Its membership therefore has a patch-​work IP framework as compared to OAPI’s unified one. Member States are at liberty to choose which Protocols to accede to or ratify, and thereafter domesticate. The ARIPO secretariat administers patents, utility models, and industrial design applications on behalf of states party to the Harare Protocol. Substantive examination of patent applications52 and utility models53 is undertaken by ARIPO, but it is only a formality examination of designs.54 However, in each instance, the national office is afforded an opportunity to consider the application and to indicate to ARIPO whether it will grant national protection for it.55 In addition, ARIPO also receives and processes trademark applications on behalf of states party to the Banjul Protocol.56 However, it only conducts a formal examination57 and then forwards the application to national offices for substantive examination.58 It has a Board of Appeal that hears appeals against decisions made by its office.59 The ARIPO Office does not perform any registration function under the Swakopmund Protocol as there are no formalities for obtaining protection. However, the Protocol provides that the Office may maintain a database or registry of protected works “in the interests of transparency, evidence and  . . .  preservation.”60 In addition, the Office is tasked with “awareness-​raising, education, guidance, monitoring, registration, dispute resolution, enforcement” and related activities.61 When the Arusha Protocol comes into force, ARIPO will serve as registry for plant breeders’ rights.62 It will undertake both formal and substantive examinations of applications63 or outsource them.64

4.1.3 Regional Economic Communities One of the AU’s objectives is the creation of the African Economic Community (AEC),65 a major step of which will be the creation of a Continental Free Trade Area (CFTA) which

50 

Swakopmund Protocol on the Protection of Traditional Knowledge and Expressions of Folklore within the Framework of the ARIPO (opened for signature 9 August 2010, entered into force 11 May 2015). 51  The Arusha Protocol for the Protection of New Varieties of Plants (opened for signature 6 July 2015). 52  Harare Protocol (hereafter Harare), s 3(3).    53  Harare s 3ter (4)–​(5) and (7)–​(8). 54  Harare s 4(2)(a).    55  Harare ss 3(6) and 4(2)(c).    56  Banjul Protocol s 1.1. 57  Banjul Protocol s 5.1.   58  Banjul Protocol ss 5.3 and 6.2.    59  Harare s 4bis (1) and (5)(a). 60 Harare s 5.2. 61  Harare s 14.1.   62  Arusha PVP Protocol art 4(1)–​(2).    63  Draft PVP Protocol art 17. 64  Draft PVP Protocol art 18(1). 65  Abuja Treaty Establishing the AEC (opened for signature 3 June 1991, entered into force 12 May 1994) art 6. See also the Kinshasa Declaration, 1976; the Monrovia Declaration of Commitment of the Heads of State and Government, of the OAU on Guidelines and Measures for National and Collective Self-​ Reliance in Social and Economic Development for the Establishment of a New International Economic Order, 1979; the Lagos Plan of Action and the Final Act of Lagos 1980; and the Sirte Declaration, 1999. For discussion see HK Mutai, Compliance with International Trade Obligations: The Common Market

418   Caroline B. Ncube will be constituted by the amalgamation of RECs.66 There are currently 14 RECs,67 although only eight of these will constitute the AEC.68 Listed chronologically according to their dates of formation, the relevant eight RECs are: the Economic Community of West African States (ECOWAS), formed in 1975;69 the Economic Community of Central African States (ECCAS/​CEEAC), formed in 1983;70 the Arab Maghreb Union (AMU/​UMA), formed in 1989;71 the Southern African Development Community (SADC),72 formed in 1992 (which replaced the Southern African Development Coordination Conference SADCC formed in 1980); the Common Market for Eastern and Southern Africa (COMESA),73 formed in 1994 (which replaced the Preferential Trade Area (PTA) formed in 1981); the Inter-​Governmental Authority of Development (IGAD),74 formed in 1996 (which replaced the Intergovernmental Authority on Drought and Development (IGADD) formed in 1986); the Community of Sahel-​Saharan States (CEN-​SAD) formed in 1998;75 and the East African Community (EAC) formed in 1999.76 The RECs derive their IP mandate from their constitutive agreements,77 or trade-​related protocols.78 However, for the most part, they have not adopted any IP-​specific regulatory instruments. As is evident from the list, five of the eight RECs shortlisted to constitute the AEC predate the TRIPS Agreement. Since the coming into force of TRIPS, some of the RECs for Eastern and Southern Africa (Kluwer Law International 2007); B Thompson, “Economic integration efforts in Africa: A milestone—​The Abuja Treaty” (1993) 5 African Journal of International and Comparative Law 743; R Mukisa and B Thompson, “Prerequisites for economic integration in Africa: an analysis of the Abuja Treaty” (1995) 42(4) Africa Today 56. 66

  Protocol on Relations between the AU and the RECs (2007).  AU, Study for the Quantification of RECs: Rationalization Scenarios (AU 2009) 34. 68   B Kolbeck, “Legal Analysis on the Relationship between the AU/​AEC and RECs: Africa Lost in a ‘Spaghetti Bowl’ of Legal Relations?” (LLM Thesis, University of Cape Town 2014) 3; JT Ghathii, African Regional Trade Agreements as Legal Regimes (CUP 2011) 362; AU Decision on the Moratorium on the Recognition of RECs DOC.EX.CL/​278 (IX), AU Doc Assembly/​AU/​Dec 111–​132 (VII). 69   Its members are Benin, Burkina Faso, Cape Verde, Cote d’Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo. 70   Its members are Angola, Burundi, Cameroon, Central Afrian Republic, Chad, Democratic Republic of the Congo, Equatorial Guinea, Gabon, Rwanda, and Sao Tome & Principe. 71  Its members are Algeria, Libya, Mauritania, Morocco, and Tunisia. 72  Its members are Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe. 73  Its members are Burundi, Comoros, DR Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Seychelles, Swaziland, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Uganda, Zambia, and Zimbabwe. 74  Its members are Somalia, Djibouti, Eritrea, Sudan, Ethiopia, Kenya, and Uganda. 75  Benin, Burkina Faso, Central African Republic, Chad, Côte d’Ivoire, Djibouti, Egypt, Eritrea, The Gambia, Ghana, Guinea Bissau, Liberia, Libya, Mali, Morocco, Niger, Nigeria, Senegal, Sierra Leone, Somalia, Sudan, Togo, and Tunisia. 76  Its members are Burundi, Kenya, Tanzania, Rwanda, and Uganda. 77  See, eg, Treaty Establishing COMESA (opened for signature 5 November 1993, entered into force 8 December 1994) arts 104(1)(d) and 128(e); Treaty for Establishment of the EAC (opened for signature 30 November 1999, entered into force 7 July 2000) arts 5(3)(k) and 43; Economic Community of West African States, Revised Treaty (1993) art 27(10) (c). 78  See, eg, Protocol on Trade of 1996, art 24; SADC Protocol on Science, Technology and Innovation (STI) 2008, art 2(m). 67

Three Centuries and Counting    419 have been actively assisting their members to be TRIPS-​compliant. These initiatives are outlined in Section 5. Some scholars find the RECs’ approach to IP to be more robust than that of ARIPO or OAPI because the former is within a regional trade context which takes cognizance of a “broad policy framework on research, technology development and innovation” that the latter often overlooks.79

5.  Since the TRIPS Agreement The TRIPS Agreement, discussed by Sam Ricketson in his chapter in this volume, has been criticized for being neo-​colonial and for failing to adequately cater for the unique position of developing countries.80 Perhaps motivated by Pan-​Africanism and strong bonds of mutual support, African states have rallied together at the WTO, WIPO, and WHO to contribute to important initiatives that have sought to ameliorate the harsh effects of the TRIPS Agreement. Examples of this include African leadership in the crafting of the Doha Declaration and the WIPO Development agenda. In a sense, the TRIPS Agreement created a crisis of confidence among many African states as they set about achieving compliance with its provisions. Many African states had transposed IP laws that were merely extended from the colonizing state and their local IP expertise and administrative capacity was minimal.81 The primary reason for this was that colonial administrators were simply parachuted in to administer IP, or the local IP offices simply served as a “clerical outpost”82 for the colonial IP office and merely rubber-​stamped or extended IP rights granted in the colonizing state to the colonized state. Following TRIPs, African states’ “political dynamics” of IP decision making,83 pressure from former colonizers, global north-​based donors, and the global IP infrastructure (such as WIPO, WTO, and UPOV) coupled African states’ limited technical expertise and national capacity led to a compliance overdrive.84 These compliance efforts appear to have been overdone because many LDCs have gone above and beyond what is required of them. The most glaring example of this is OAPI’s extensive revision of the Bangui Agreement in 199985 to incorporate TRIPS standards during the currency of 79  SF Musungu, S Villanueva, and R Blasetti, Utilizing Trips Flexibilities for Public Health Protection Through South-​South Regional Frameworks (South Centre 2004) 55–​56. 80  K Aoki, “Neocolonialism, Anticommons Property, and Biopiracy in the (Not-​So-​Brave) New World Order of International Intellectual Property Protection” (1998–​1999) 6 Indiana Journal of Global Legal Studies 11; A Rahmatian, “Neo-​Colonial Aspects of Global Intellectual Property Protection” (2009) 12(1) The Journal of World Intellectual Property 40. 81  CB Ncube, Intellectual Property Policy, Law and Administration in Africa: Exploring Continental and Sub-​regional Co-​operation (Routledge 2016) 14. 82  I Mgbeoji, “African patent offices not fit for purpose” in J de Beer, C Armstrong, C Oguamanam, and T Schonwetter (eds), Innovation  & Intellectual Property Collaborative Dynamics in Africa (University of Cape Town 2014) 234, 236. 83  C Deere, “The Politics of Intellectual Property Reform in Developing Countries: The Relevance of the World Intellectual Property Organization” in N Weinstock Netanel (ed), The Development Agenda: Global Intellectual Property and Developing Countries (OUP 2008) 111. 84  C Deere, The TRIPS Agreement and the Global Politics of Intellectual Property Reform in Developing Countries (OUP 2008) 241–​242. 85  Nwauche (n 41) 110.

420   Caroline B. Ncube an LDC transition period. This period was initially set to expire in 2005 and has been extended twice with a current expiry date of 1 July 2021, or sooner if a country ceases to become an LDC before that date.86 The OAPI’s early adoption of TRIPS standards has been attributed to various factors, including inappropriate advice and persuasion/​pressure to adopt the standards, coupled with resource and expertise constraints which led to a less-​than-​full appreciation of what was at stake.87 Section 5.1 presents the provisions concerning the protection of plant varieties provided for by ARIPO, OAPI, and SADC as an example of the early adoption of TRIPS standards by African states.

5.1 Plant Variety Protection Annex X of the Bangui Protocol, the Arusha Protocol, and the SADC’s Draft Plant Variety Protection (PVP) Protocol88 are based primarily on the 1991 Act of the UPOV Convention (UPOV 1991).89 They afford plant breeders’ rights (PBRs) to plant varieties that are new, distinct, uniform, and stable.90 This adoption of a UPOV 1991 approach, which Africa eschewed in 2000,91 is inappropriate because it may facilitate bio-​piracy, does not protect farmers’ rights, and includes PBR eligibility criteria that are ill-​suited to the region,92 as further elaborated later in this chapter. In addition, the majority of all three organizations’ Member States are LDCs and are accordingly not yet required to protect plant varieties. It has also been pointed out that there are better alternatives for protection, such as the hybrid approach employed in Malaysia, the Philippines, and Zambia,93 or the sui generis approach presented by the AU Model Law.94 86  WTO Decision of the Council for Trade-​Related Aspects of Intellectual Property Rights Extension of the Transition Period under art 66.1 for Least Developed Country Members (11 June 2013) IP/​C/​ 64. For an overview of the genesis and extent of the original extension period as well as the latest extension request made in 2012, see FM Abbott Technical Note: The LDC TRIPS Transition Extension and the Question of Rollback, Policy Brief No 15 (Geneva: International Centre for Trade and Sustainable Development 2013). 87  C Deere, The Implementation Game: The TRIPS Agreement and the Global Politics of Intellectual Property Reform in Developing Countries (OUP 2008). 88  Draft Protocol for the Protection of New Varieties of Plants (Plant Breeders’ Rights) in the Southern African Development Community Region (2012) . 89  International Convention for the Protection of New Varieties of Plants (UPOV) (opened for signature 2 December 1961, entered into force 10 August 1968). 90  Draft SADC PVP Protocol, art 6; Arusha Protocol, art 6; Bangui Agreement, Annex X, art 4. The Bangui Agreement adds a fifth requirement, namely that the variety must be “given a denomination devised in accordance with the provisions of Article 23.” Art 23 provides that these denominations are generic designations. 91  Oguamanam (n 43). 92  HM Haugen, “Inappropriate Processes and Unbalanced Outcomes: Plant Variety Protection in Africa Goes Beyond UPOV 1991 Requirements” (2015) 18(5) The Journal of World Intellectual Property 196; B de Jonge, “Plant variety protection in Sub-​Saharan Africa: balancing commercial and smallholder farmers’ interests” (2014) 7(3) Journal of Politics and Law 100, 101. 93  De Jonge (n 92) 106–​107. 94  African Model Law for the Protection of the Rights of Local Communities, Farmers, Breeders and Regulation of Access to Biological Resources (African Model Law) adopted by Council of Ministers of the Organization of African Unity (OAU) in June 1998. For commentary, see L Feris, “Protecting traditional knowledge in Africa: considering African approaches” (2004) 4(2) African Human Rights LJ 242.

Three Centuries and Counting    421 A major criticism of the UPOV approach (as found in both its 1978 and 1991 version) is its disjoinder of plant breeding from its farming context, which is critically important and is infused with TK in Africa.95 Other frameworks provide the requisite comprehensive framework which contextualizes plant breeding within farming, biological conservation, and the protection of TK.96 These frameworks include the Convention on Biological Diversity (CBD),97 its guidelines98 and its Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization (Nagoya ABS Protocol),99 and the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRA).100 Many African countries are party to these agreements and protocols,101 which thereby signals their support for their holistic approach. By overlooking the contextual elements of plant breeding encapsulated in these other frameworks, the UPOV approach fails “to adequately account for smallholder [indigenous and local community] ILC farmers.”102 Among other shortcomings, UPOV’s technical eligibility criteria for protection “exclude the pattern of agricultural production and innovation in Africa’s ILCs.”103 These factors result in the vulnerability of farmers’ varieties, which are then left unprotected under the UPOV scheme.104 Another contested aspect of the UPOV approach is its provision for so-​called farmers’ privilege, which is “the agricultural tradition of farmers saving part of their harvest for the seeding or propagation of the next crop.”105 UPOV 78 provides for an exemption for “private and non-​commercial use” which does not provide for the farmers’ right to re-​sow seed harvested from protected varieties and leaves it to Member States to include or exclude it from domestic legislation.106 However, all Member States opted to include the re-​sowing right.107 Article 15(2) of UPOV 91 provides for farmers’ privilege as an optional exception “to 95 

96  Oguamanam (n 43) 14. Oguamanam (n 43) 14. Convention on Biological Diversity (opened for signature 5 June 1992, entered into force 29 December 1993) 1760 UNTS 79. 98  Bonn Guideline on Access and Benefit-​sharing of the Benefits Arising out of their Utilization (2002). 99  Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from Their Utilization (opened for signature 2 February 2011, entered into force 12 October 2014) XXVII8.b UNTS. 100  International Treaty on Plant Genetic Resources for Food and Agriculture (opened for signature 3 November 2001, entered into force 29 June 2004) 2400 UNTS 303. 101  As of 10 June 2016 the following countries are party to the CBD: Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cape Verde, Cameroon, Central African Republic, Chad, Comoros, Congo, Cote d’Ivoire, Democratic Republic of Congo, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinea-​Bissau, Kenya, Lesotho, Liberia, Libya, Malawi, Mali, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome & Principe, Senegal, Sierra Leone, Somalia, South Africa, South Sudan, Sri Lanka, Sudan, Swaziland, Togo, Uganda, Tanzania, Zambia, and Zimbabwe. See . As of 10 June 2016, the following countries are party to the Nagoya Protocol: Benin, Botswana, Burkina Faso, Burundi, Comoros, Congo, Cote d’Ivoire, Democratic Republic of the Congo, Djibouti, Egypt, Ethiopia, Gabon, The Gambia, Guinea, Guinea-​Bissau, Kenya, Lesotho, Liberia, Malawi, Mauritius, Mozambique, Namibia, Niger, Rwanda, Senegal, Seychelles, South Africa, Sudan, Togo, and Uganda. See . 102  Oguamanam (n 43) 15. 103  Oguamanam (n 43) 15. 104  Oguamanam (n 43) 15. 105  NC Netnou-​Nkoana, JB Jaftha, MA Dibiloane, and J Eloff, “Understanding of the farmers’ privilege concept by smallholder farmers in South Africa” (2015) 111(1/​2) South African Journal of Science 47, 47. 106  Netnou-​Nkoana et al. (n 105). 107  See (n 105). 97 

422   Caroline B. Ncube permit farmers to use for propagating purposes, on their own holdings, the product of the harvest which they have obtained by planting, on their own holdings, the protected variety.” In addition, this optional mechanism is subject to some limitations and is considered to be very narrow because farmers’ use of the varieties is constrained by breeders’ terms.108 It has thus proven difficult to justify or support the adoption by ARIPO, OAPI, and SADC of the UPOV 1991 approach. Such adoption has been partially explained by scholars such as Oguamanam as due to pressure from the United States.109 OAPI Member States are already bound by the UPOV 1991 approach. ARIPO’s Arusha Protocol has not yet entered into force. It will do so once four States have ratified or acceded to it. However, since the ARIPO’s IP framework serves a harmonizing function, its protocols have a potentially less-​devastating effect as they may not be domesticated by Member States. It is hoped that LDC Member States will carefully consider their position prior to ratifying and domesticating the Arusha Protocol. The SADC’s Draft PVP Protocol has not yet been adopted, but once it is, it will also need to be taken up by Member States, and hopefully only after much reflection.

5.2 The Protection of Traditional Knowledge The protection of TK is contested and there is the constant tension between what rightfully belongs to indigenous communities and what ought to form part of the public domain.110 The protection of TK has vexed IP organizations and scholars for a long time, as evidenced by the slow progress of the WIPO Inter-​Governmental Committee (IGC), which has been grappling with the issue for almost 15 years. As outlined previously, some African organizations have crafted their own legal instruments to provide for such protection. In view of the international inertia, one would expect the regional IP organizations to step up and find solutions for their constituents. The OAPI IP framework does not extend to the protection of TK. In contrast, ARIPO’s Swakopmund Protocol provides for sui generis protection of TK111 and folklore.112 It draws 108 

See (n 105); Oguamanam (n 43) 15–​16.    109 Oguamanam (n 43).   110  Aoki (n 80) 46. Defined as “any knowledge originating from a local or traditional community that is the result of intellectual activity and insight in a traditional context, including know-​how, skills, innovations, practices and learning, where the knowledge is embodied in the traditional lifestyle of a community, or contained in the codified knowledge systems passed on from one generation to another. The term shall not be limited to a specific technical field, and may include agricultural, environmental or medical knowledge, and knowledge associated with genetic resources.” 112  Defined as “are any forms, whether tangible or intangible, in which traditional culture and knowledge are expressed, appear or are manifested, and comprise the following forms of expressions or combinations thereof: 111 

i. verbal expressions, such as but not limited to stories, epics, legends, poetry, riddles and other narratives; words, signs, names, and symbols; ii. musical expressions, such as but not limited to songs and instrumental music; iii. expressions by movement, such as but not limited to dances, plays, rituals and other performances; whether or not reduced to a material form; and iv.  tangible expressions, such as productions of art, in particular, drawings, designs, paintings (including body-​ painting), carvings, sculptures, pottery, terracotta, mosaic, woodwork, metal ware, jewelry, basketry, needlework, textiles, glassware, carpets, costumes; handicrafts; musical instruments; and architectural forms.”

Three Centuries and Counting    423 on customary law for the purposes of defining protectable works, determining their ownership, and settling disputes.113 There are no formalities attendant upon the acquisition of ­protection,114 which lasts for as long as the relevant work meets the eligibility criteria when it is owned by a community, and for “25 years following the exploitation of knowledge beyond its traditional context” when it is owned by an individual.115 For TK, these criteria are that the TK must be: (i) generated, preserved, and transmitted in a traditional and intergenerational context; (ii) distinctively associated with a local or traditional community; and (iii) integral to the cultural identity of a local or traditional community that is recognized as holding the knowledge through a form of custodianship, guardianship, or collective and cultural ownership or responsibility. Such a relationship may be established formally or informally by customary practices, laws or protocols.116 For expressions of folklore the eligibility criteria are that they must be: (i) the products of creative and cumulative intellectual activity, such as collective creativity or individual creativity where the identity of the individual is unknown; and (ii) characteristic of a community’s cultural identity and traditional heritage and maintained used or developed by such community in accordance with the customary laws and practices of that community.117 The Swakopmund Protocol has been lauded as being clear and an excellent sui generis model.118 However, it has been criticized for vesting “control of third-​party use of expressions of folklore” in Member States and their national competent authorities, rather than in their originating indigenous communities.119 It has also been criticized for granting ownership rights in respect of TK and folklore to individuals, as this is considered to be contrary to the practices of indigenous communities.120 However, as noted in Section 2, Ouma states that some communities in East Africa grant custodianship and ownership of TK to some community members. It is not clear whether this means an individual can hold such rights, or whether this is a reference to a sub-​group of the community.

5.3 RECs and the Implementation of TRIPS Flexibilities Several RECs have been providing leadership to their Member States with regard to their implementation of TRIPS flexibilities.121 They have probably been spurred on by the 2012 AU Pharmaceutical Manufacturing Plan for Africa (PMPA) Business Plan’s stark call “to fully

113 

Ss 4, 6, 18, 20, and 21. For commentary see LY Ngombe, “The Protection of Folklore in the Swakopmund Protocol Adopted by the ARIPO (African Regional Intellectual Property Organization)” (2011) 14(5) The Journal of World Intellectual Property 403, 404. 114  Ss 5 and 16 relating to TK and folklore respectively. 115  Ss 13 and 21 relating to TK and folklore respectively.    116  S 4.   117 S 16. 118  A van der Merwe, “South and Southern Africa—​recent developments in the legal protection of TK/​ TCEs” (2014) Journal of Intellectual Property Law & Practice 7. 119  ES Nwauche, “The Swakopmund Protocol and the Communal Ownership and Control of Expressions of Folklore in Africa” (2014) 17(5–​6) The Journal of World Intellectual Property 191, 191. 120  E Laltaika, “Western Intellectual Property Rights Regimes and Traditional Knowledge Protection Systems in Africa” in OC Ruppel and K Ruppel-​Schlichting (eds), Environmental Law and Policy in Namibia (Namibia Institute for Democracy 2011) 201, 215. 121  For an overview of flexibilities see CM Correa, “Multilateral agreements and policy opportunities” in M Cimoli, G Dosi, KE Maskus, RL Okediji, and JH Reichman (eds), Intellectual Property Rights: Legal and Economic Challenges for Development (OUP 2013) 417.

424   Caroline B. Ncube exploit the TRIPS flexibilities and accelerate the ongoing negotiations for an extension to the 2016 transition period or face the prospect of paying more for drugs in the future.”122 This Business Plan was prepared and adopted by the AU pursuant to its PMPA which was endorsed by the 2007 AU Heads of State and Government Summit. It is accordingly a government document, rather than a pharma document. Its purpose is to “advance the local pharmaceutical sector as a key contribution towards sustaining the supply of quality, safe and efficacious medical products across all essential medicines.”123 Its primary focus therefore is on developing state-​owned domestic manufacturing capacity. Due to capacity and resource constraints, such efforts would usually require some kind of collaboration with private entities and donor support. The Business Plan constitutes a process by which to enhance domestic pharmaceutical manufacturing capacity. The following paragraph briefly sets out its genesis. Following the adoption of the PMPA in 2007, the 4th session of the AU Conference of Ministers of Health held in 2009 instructed the AU Commission to prepare the Business Plan.124 This directive was confirmed in 2011 at the 5th session of the AU Conference of Ministers of Health.125 Thereafter, the AU Commission in collaboration with the United Nations Industrial Development Organization (UNIDO) proceeded to prepare the Business Plan.126 The Business Plan is currently under implementation and specifically tasks ARIPO and RECs to spearhead efforts to maximize TRIPS flexibilities.127 The EAC has taken up this challenge by adopting a Regional IP Policy on Public Health-​ Related WTO-​TRIPS Flexibilities in 2013.128 In addition, it has adopted the Regional Protocol on Health-​Related WTO-​TRIPS Flexibilities that gives the policy force of law.129 However, the Protocol needs to go through a signature and ratification process before it will become effective. The EAC has also adopted a Regional Pharmaceutical Manufacturing Plan of Action (RPMPoA) and the Federation of East African Pharmaceutical Manufacturers (FEAPM) is actively pursuing its goals.130 Similarly, ECOWAS adopted a TRIPS Policy131 and Guidelines132 in October 2012. It adopted the ECOWAS Pharmaceutical Manufacturing Plan in April 2014.133 The EAC and ECOWAS policies and regulatory instruments were based on reviews of their Member States’ then-​current IP law provisions that found that states were making sub-​optimal use of the flexibilities.134 Concrete recommendations were made for improving 122

 AU, PMPA Business Plan (AU 2012) 50.  AU, Update on Implementation of the Pharmaceutical Manufacturing Plan for Africa (PMPA) 2. First meeting of the Specialised Technical Committee on health, Population and Drug Control (STC-​ HPDC-​1) Addis Ababa, Ethiopia 13–​17 APRIL 2015 STC/​EXP/​HP/​XI(I). 124  AU, Update on Implementation of the Pharmaceutical Manufacturing Plan for Africa (PMPA) 7. 125   See (n 124). 126  AU, Update on Implementation of the Pharmaceutical Manufacturing Plan for Africa (PMPA) 7–​8. 127  AU, PMPA Business Plan (2012) 77, 79–​80. 128   EAC, Regional Intellectual Property Policy on the Utilization of Public Health-​Related WTO-​ TRIPS Flexibilities and the Approximation of National Intellectual Property Legislation (2013). 129   EAC, Health Protocol on Public Health Related WTO-​TRIPS Flexibilities (2013). 130  AU, Update on Implementation of the Pharmaceutical Manufacturing Plan for Africa (PMPA) 14 (AU 2015). 131  Development of a Harmonized TRIPS Policy for Adoption by ECOWAS Member States that Employ TRIPS Flexibilities to Improve Access to Medicines in the Region (2012). 132  ECOWAS, Guidelines for Implementation of TRIPS Flexibilities in National Legislation to Improve Access to Medicines in the West African Region (2012). 133  WAHO/​Technical Document/​ 04.14. 134  Ncube (n 81) 29. 123

Three Centuries and Counting    425 this situation. Examples of these include enacting provisions for Bolar and research exceptions;135 international exhaustion;136 and the requirement of the disclosure of the best mode of implementing an invention in patent applications.137 Further, both the EAC and ECOWAS have provided detailed legislative drafting input in their Protocol and Guidelines respectively. Therefore, their Member States have templates upon which to base their legislative provisions. Other RECs, such as COMESA and SADC, have not yet followed suit but all appearances are that they intend to do so. SADC’s Pharmaceutical Business Plan (2007–​2013) prioritizes the use of the TRIPS flexibilities as a strategy to make quality medicines more affordable to citizens in Member States.138 COMESA has adopted a general regional IP policy139 which expressly states that one of its objectives is to fully exploit available flexibilities “to facilitate access to medicines for all people particularly the marginalised of society.”140 Moreover, both COMESA and EAC have recently launched a tripartite Free Trade Area (T-​FTA)141 and the T-​FTA Agreement commits them to concluding negotiations relating to their IP Agenda within a period of two years.142 Article 27(3) of the 2010 draft of the Agreement provided that “tripartite Member States shall co-​operate and develop capacity to implement and utilise the flexibilities in all relevant international agreements on intellectual property rights.”143 It also included Annex 9, which provided further detail on how this objective was to be met.144 It is likely that this approach will be carried through in the current negotiations. This view is buttressed by the fact that the EAC has already gone ahead and provided for this in its Policy and Protocol. Therefore, it is not improbable that the T-​FTA will simply adopt the EAC’s instruments.

5.4 The Proposal of the Formation of a Continental Intellectual Property Organization Scholars have mooted the creation of a continental IP organization since the mid-​1990s.145 While early proposals contemplated that this organization would have competence in all areas of IP, more recent proposals have isolated competence in trademark law as more 135 

EAC TRIPS Policy 15–​16; ECOWAS TRIPS Policy 28. EAC TRIPS Policy 18; ECOWAS TRIPS Policy 32. 137  EAC TRIPS Policy 17; ECOWAS TRIPS Policy 28. 138  Ncube (n 81) 30. 139  COMESA Regional Policy on IP Rights and Cultural Industries (2012). 140  Para 39(d) Part A. 141  The Sharm El Sheikh Declaration Launching the COMESA-​EAC-​SADC T-​FTA (2015). 142  Agreement Establishing a Tripartite Free Trade Area Among the Common Market for Eastern and Southern Africa, the East African Community and the Southern African Development Community (2015) art 45. 143  Draft Agreement Establishing the COMESA, EAC and SADC T-​FTA, Revised December (2010). 144  Annex 9: Annex on Intellectual Property Rights under Article 27(1) of the Agreement Establishing the Tripartite Free Trade Area (2009). 145  See, eg, OH Dean, “A unified intellectual property law system for southern Africa. Part 1: International arrangements and European conventions” (1994) 2(3) Juta’s Business Law 111; OH Dean, “A unified intellectual property law system for southern Africa. Part 2: Multinational registrations in Africa” (1994) 2(4) Juta’s Business Law 165; T Kongolo, “The African IP Organizations—​the necessity of adopting one uniform system for all Africa” (2000) 3(2) The Journal of World Intellectual Property 265. 136 

426   Caroline B. Ncube appropriate.146 In view of the continent’s very strong Pan-​African agenda, it is perhaps unsurprising that the AU has now turned substantial attention to implementing its proposal for PAIPO. This proposal was first mooted in the early 2000s147 and much of the leg-​work was done in that period.148 This entailed consultative workshops in each AU,149 undertaking studies150 and incorporating the proposal in the AU’s Science and Technology Consolidated Plan of Action of 2006. In that year, a formal recommendation was made for the establishment of PAIPO at a meeting of the African Group.151 Thereafter a concept paper was tabled at the extra-​ordinary African Ministerial Conference on Science and Technology (AMCOST),152 which argued that PAIPO would ensure “continental inclusiveness,”153 leverage economies of scale and better link IP to economic development, thereby encouraging political will and action on this front.154 In January 2007, the AU Assembly adopted a decision which mandated the creation of PAIPO.155 Thereafter, the AU’s Scientific, Technical and Research Commission (AU-​ STRC) was charged with primary responsibility for implementing this decision.156 It then commissioned an expert to draft a situation analysis157 and to draft Constitutive Articles. These were discussed at several workshops158 and at AMCOST IV in 2010.159 AMCOST IV 146  A Adewopo, “Trademark systems in Africa: A proposal for the harmonization of the ARIPO and the OAPI Agreements on Marks” (2003) 6 The Journal of World Intellectual Property 473; Y Mupangavanhu, “The integration of trade mark laws in the European Union: lessons for Africa?” (2014) 2 South African IP LJ 109; Y Mupangavanhu, “African Union Rising to the Need for Continental IP Protection? The Establishment of the Pan-​African Intellectual Property Organization” (2015) 59 Journal of African Law 1. 147  National Advisory Council on Innovation (NACI), Corporate Business Plan 2007/​8 (2007) 20; NEPAD, Africa’s Science & Technology Consolidated Plan of Action (2006) , 6; J Dountino, “Some key events in the early development of the proposal for a PAIPO” (2013) . 148  NACI (n 147); NEPAD (n 147) 6; Dountino (n 147). 149  NEPAD (n 147) 6. 150  PR van Gardingen and A Karp, International Experience on Regional Programmes for Science and Technology: Lessons For Africa’s Science and Technology Consolidated Plan of Action (University of Edinburgh 2006); PR van Gardingen and A Karp, International Overview of Arrangements For National Support Of R&D. Options for African Nations (University of Edinburgh 2006); PR van Gardingen and A Karp, International Survey of Options to Fund Regional Science and Technology in Africa (University of Edinburgh 2006); G Oldham, J Adeoti, and SM Thomas, Designing a Model for the African Science and Innovation Facility to Implement the Science and Technology Consolidated Plan of Action (University of Edinburgh 2006). 151   AU HRS&T, Establishing A Pan-​African Intellectual Property Organization (PAIPO): A Concept Paper. Extraordinary Conference of the AMCOST. 20–​24 November 2006 Cairo, Egypt. EXT/​AU/​EXP/​ ST/​8(II) (hereafter AU HRS&T) 1; Kongolo (n 34) 125. 152 153  AU HRS&T (n 151) 2.   AU HRS&T (n 151) 1. 154  AU HRS&T (n 151) 2; Kongolo (n 34) 125–​126. 155  AU Assembly Decision on the Establishment of PAIPO, Assembly of the African Union Eighth Ordinary Session 29–​30 January 2007 Addis Ababa, Ethiopia, Assembly/​AU/​Dec138 (VIII) para 2. 156  AU Progress Report on Research Policy Framework, Capacity Building for the African Policymakers and the Formation of the PAIPO, AMCOST III Third Ordinary Session 12–16 November 2007 Mombasa, Republic of Kenya, AU/​EXP/​ST/​11(III) 1. 157  M Sibanda, “IP Situation in Africa—​A profile” (2009) 4 Techno Africa Policy Monitor (African Union Scientific Technical Research Commission). 158  WIPO Technical Assistance Database: Experts Group Meeting on PAIPO, Addis Ababa, Ethiopia, 18 May 2009; WIPO Support to NEPAD Period of Report: July 2008–June 2009. 159  AU Ministerial Decisions. AU/​MIN/​ST/​Dec(IV). Fourth Ordinary Session of the AMCOST (AMCOST IV), 10 March 2010, Cairo, Egypt.

Three Centuries and Counting    427 directed that the draft should be revised and further consultations undertaken, which are reported to have been undertaken in 2011.160 In 2012 a draft PAIPO statute was published in anticipation of its consideration by AMCOST V in November of that year. The draft statute was heavily criticized161 and a petition was mobilized against it.162 In view of this response, AMCOST V referred the draft back to the AU-​HRST for further consultation, including a stakeholders’ meeting.163 This direction was confirmed by the 20th Ordinary Session of the AU Summit held in January 2013, which also called for the stakeholders’ meeting to be convened in May 2013.164 However, this meeting was not held at that time and in April 2014, the ARIPO and OAPI Secretariats publicly called for this meeting to be convened, with their participation.165 When AMCOST met at Brazzaville a few days after this public call, it approved a revised Draft of the PAIPO Statute166 and the Science, Technology and Innovation Strategy for Africa 2024 (STISA-​2024), a component of the AU’s Agenda 2063. The STISA-​2024 identified PAIPO as a constituent of the AU Commission.167 Since then, the AU Assembly’s 23rd Ordinary Session held in 2014 has adopted STISA-​2024 and directed that the revised draft PAIPO statute be referred to the Specialized Technical Committee (STC) on Justice and Legal Affairs.168 The Assembly also endorsed Tunisia as the host of the headquarters and secretariat of PAIPO and called for the AU-​HRST and Tunisia to prepare a “road map for [the] implementation of PAIPO.” A progress report on the preparation of the road map was not tabled at the AU’s 2015 Summit and it is not clear when such a report will be forthcoming. However, it is clear that much headway has been made towards operationalizing PAIPO and it is likely to become a reality soon.

160  African Union Scientific Technical Research Commission, Progress report to AMCOST V; Fifth Ordinary Session of the AMCOST (AMCOST V) Dec, 12–​15 December 2012, Brazzaville, Congo, 2; Kongolo (n 34) 127; ARIPO, Recent IP Developments in the Africa Region and Proposal for the Harmonization of ARIPO and OAPI, Council of Ministers 13th, Session, Accra, Ghana, 1-​2 December 2011, ARIPO Doc No ARIPO/​AC/​XIII/​13, 2–​3. 161  See, eg, B Baker, “Proposed Pan-​African IP Organization a Terrible Idea” (28 September 2012) ; K Egbuonu, “Pan-​African Intellectual Property Organization (PAIPO)” (8 October 2012) . 162  D Kawooya and AA Latif, “A new course for The Pan African Intellectual Property Organization is urgently needed” (18 October 2012) . 163  AU Ministerial Decisions, AU/​MIN/​ST/​Dec(V), Fifth Ordinary Session of the AMCOST (AMCOST V), Dec, 12–​15 December 2012, Brazzaville, Congo. 164  AU Assembly Decision on the Creation of PAIPO, DOC EXCL/​766(XXII). Assembly/​AU/​Dec453(XX), Twentieth Ordinary Session, 27–​28 January 2013, Addis Ababa, Ethiopia. 165  ARIPO and OAPI, Communiqué Adopted by the Joint Meeting of the Chairmen of ARIPO AND OAPI, held at the Headquarters of ARIPO on 10 and 11 April 2014, Harare, Republic of Zimbabwe. 166  IST Africa, “Science, Technology & Innovation Strategy for Africa (STISA-​ 2014) (2014) approved by African Heads of State.” . 167  AU Science, Technology and Innovation Strategy for Africa (STISA:2014–2024) (2014). 168  Assembly Decision on PAIPO, Doc EXCL/​839(XXV). Assembly/​AU/​Dec522(XXIII), Assembly of the Union Twenty-​Third Ordinary Session 26–​27 June 2014. Malabo, Equatorial Guinea (2014).

428   Caroline B. Ncube The approved revised Draft Statute was not detailed as it is a constitutive document and further detail will be provided for in secondary instruments.169 However, it depicts the AU’s vision, and envisages that PAIPO will not register IP rights as that will continue to be done by ARIPO and OAPI. Instead, it will serve as a high-​level continental policy formulation platform. Therefore, lack of reference to public interest imperatives and the WIPO Development Agenda in the first draft of the statute was cause for concern because it appeared that the AU had not taken on board significant perspectives and developments.170 If this proved to be true, then the gains that the African Group at international fora, such as the Doha Declaration,171 would be lost. Fortunately, the revised draft makes reference to the WIPO DA, “international human rights law and international agreements on sustainable development and the protection of indigenous knowledge.”172 However, it still does not refer to TRIPS flexibilities or the Doha Declaration. This omission will hopefully be rectified by PAIPO’s integration of the extensive work that has been done by RECs in relation to fully leveraging the flexibilities. This draft of the statute has been criticized for practical shortcomings, such as its failure to not make provision for membership of PAIPO.173 The 2013 draft has been superseded by the final PAIPO Statute that was adopted by the AU on 31 January 2016 at its 26th Summit. The final statute carries forward the tenor of the modified preamble from the 2013 draft. It refers to “the cultural and socio-​economic development of Africa”; recognizes “international human rights laws and international agreements on sustainable development and the protection of indigenous knowledge,” and refers to the WIPO Development Agenda, Sustainable Development Goals, and the AU’s Agenda 2063. In other ways, it is markedly different from the 2013 revised draft. For instance, its art 2 characterizes PAIPO as a specialized AU agency, and art 25 makes provision for the filing of reservations by party states, which was prohibited by earlier drafts. In addition, its art 9 changes the organs of the institution by replacing the Experts Committee with the Conference of State Parties and re-​introduces the Board of Appeal. The Board of Appeal had been omitted from the 2013 revised draft statute because PAIPO’s registration function was removed. Its re-​introduction to the final statute in the continued absence of a registration function is puzzling. The final statute expressly provides for Tunisia as the organization’s headquarters. It also includes new provisions pertaining to the official language of the organization (art 26), popularization of the statute (art 18), a safeguard clause (art 22), signature, ratification, and accession (art 23), registration of the statute (art 27), and the authentic texts of the statute (art 30). Some of these provisions overcome some shortcomings such the failure to provide for a mechanism for the acquisition of PAIPO membership through accession, signature, and ratification. 169  J de Beer, “Applying best practice principles to international intellectual property lawmaking” (2013) 44 IIC 884. 170  CB Ncube and E Laltaika, “A new intellectual property organization for Africa?” (2013) 8(2) Journal of Intellectual Property Law and Practice 114, 117; Kongolo (n 34) 130; B Baker, “Proposed Pan-​African IP Organization a Terrible Idea” (28 September 2012) . 171  Doha Ministerial Declaration on the TRIPS Agreement and Public Health, WT/​MIN(01)/​DEC/​2 (20 November 2001). 172 Preamble. 173  Ncube (n 81) 133, C Moyo “Furthering debate on PAIPO.” (31 October 2012) , accessed 6 February 2015.

Three Centuries and Counting    429

6.  Conclusion: Intellectual Property, Development, and Lessons from History The historical account of the development of IP on the African continent has shown that there are a number of themes at play. First, the external to internal flow of IP law from outside the continent into it, which displaced exiting knowledge governance systems as it entrenched the primarily extractor-​biased IP system, is very apparent. Secondly, this introduction of IP law and its entrenchment particularly in the post-​TRIPs era led to compliance confidence crisis which was observed as ill-​equipped African states grappled with updating transposed IP systems to comply with TRIPs. The political dynamics of IP decision-making overwhelmed many states and led to compliance overdrive, which manifested in developing countries and LDCs to enact provisions they were not required to under prevailing transitional periods. Thirdly, another aspect of this compliance-​focused trajectory is multiplicity and fragmentation. Africa has two IP organizations, numerous RECs, and a proposed continental IP organization, which all jostle to regulate IP and often move in different directions at different speeds. While there is a growing body of literature on IP with an African focus, there is still much to learn about the synergies between innovation, creativity, IP, and development in the region.174 Recent studies have highlighted how IP systems may be both undervaluing and undermining African innovation, firstly because innovation is not easily measured by prevailing metrics, and secondly, because IP laws are not sufficiently calibrated to motivate or support it.175 The elusiveness of some African innovation is due to it being primarily “pragmatic” in nature—​that is, it being needs-​driven and incremental and mostly located in the so-​called “informal” (unregulated) economy.176 This is not to say that formal sector innovation does not occur; far from it. As shown by conventional indices that typically undervalue African innovation, such as WIPO’s Innovation Indices, for example, countries such as Kenya and Uganda show significant levels of innovation.177 It has also been shown that focusing on “dominant preconceptions of IP as involving mainly patent, copyright and trademark protections” is misplaced and cognizance needs to be taken of trade secrets and other flexible legal mechanisms which are better suited to African informal-​sector innovation.178 174 

J de Beer, C Oguamanam, and T Schonwetter, “Innovation, Intellectual Property and Development Narratives in Africa” in J de Beer, C Armstrong, C Oguamanam, and T Schonwetter, (eds), Innovation & Intellectual Property Collaborative Dynamics in Africa (University of Cape Town Press 2014) 1, 4. 175  See (n 174), 5–​8. 176  J de Beer, C Armstrong, C Oguamanam, and T Schonwetter, “Current Realities of Collaborative Intellectual Property in Africa” in J de Beer, C Armstrong, C Oguamanam, and T Schonwetter (eds), Innovation & Intellectual Property Collaborative Dynamics in Africa (University of Cape Town Press 2014) 373, 375. 177  Cornell University, INSEAD & WIPO, The Global Innovation Index 2015: Effective Innovation Policies for Development (2015) xix, categorized Kenya as an “innovation achiever,” Uganda as an “innovation outperformer.” For a full discussion see B Ndemo, “Effective Innovation Policies for Development: The Case of Kenya” The Global Innovation Index 2015: Effective Innovation Policies for Development 131; J Ecuru and D Kawooya, “Effective Innovation Policies for Development: Uganda” The Global Innovation Index 2015: Effective Innovation Policies for Development 147. 178  De Beer et al (n 176) 389.

430   Caroline B. Ncube As several of the other chapters in this volume suggest, including those focused on IP and development specifically, the analysis of the relationship between the robustness of a national IP framework and economic development is one fraught with controversy. Different views have emerged that reflect at least three distinct approaches.179 First, some scholars contend that a strong IP system leads to inflows of foreign direct investment and consequent economic development. Secondly, others argue that such links are tenuous at best, and that the historical evidence suggests that robust IP systems only become relevant as a country becomes more developed, such that developing countries and LDCs are better off with less robust systems. Thirdly, a mid-​point argument is that the relationship between IP and economic development flows both ways or is much more nuanced than being one directional. In addition, Africa has had to contend with the other big questions or issues of IP such as access debates in the context of both patent180 and copyright law,181 cultural appropriation, and protection of TK. The AU’s African Model Law of 1998 and ARIPO’s Swakopmund Protocol of 2000 are instances of such independent solutions. As noted in Section 2, there are growing calls for a reversion to customary law principles in search of sui generis TK protection models, and the world will continue to look to developing states to provide leadership on this front. It appears that in the short to medium term, the African continent will continue to consolidate its efforts to integrate its IP framework in an effort to craft an appropriately nuanced system to meet its unique circumstances.

179  CB Ncube, “Harnessing Intellectual Property for Development: Some Thoughts on an Appropriate Theoretical Framework” (2013) 16(4) Potchefstroom Electronic LJ 369, 371–​372. 180  T Avafia, J Berger, and T Hartzenberg, The ability of select sub-​Saharan African countries to utilise TRIPs Flexibilities and Competition Law to ensure a sustainable supply of essential medicines: A study of producing and importing countries (2006); RL Okediji, “The Role of WIPO in Access to Medicines” (2013) Minnesota Legal Studies Research Paper Series Research Paper No. 13–​55 . 181  JJ Baloyi, “Demystifying the Role of Copyright as a Tool for Economic Development in Africa: Tackling the Harsh Effects of the Transferability Principle in Copyright Law” (2014) 17(1) Potchefstroom Electronic LJ 87; S Isiko Strba, International Copyright Law and Access to Education in Developing Countries: Exploring Multilateral Legal and Quasi-​Legal Solutions (Martinus Nijhoff Publishers 2012); C Armstrong, J De Beer, D Kawooya, A Prabhala, and T Schonwetter (eds), Access to knowledge in Africa: The role of copyright (University of Cape Town Press 2010); ES Nwauche, “Open access and the public interest in copyright” (Conférence sur la publication et la diffusion électronique, Dakar, 6–​7 October 2008), , 8; R Gana Okediji, “Copyright and Public Welfare in Global Perspective” (1999) 7(1) Indiana Journal of Global Legal Studies , art 6; RL Gana “Prospects For Developing Countries Under the TRIPs Agreement” (1996) 29 Vanderbilt Journal of Transnational Law 735.

Chapter 16

T he Em ergenc e a nd Devel opm e nt of In tellectual Prope rt y L aw in Sou th A me ri c a Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina * 1. Introduction The emergence and development of intellectual property (IP) regimes in South America have been associated with the development of Pan-​American institutions and IP treaties that date back to 1889 and the first Pan-​American Diplomatic Conference on Industrial Property. In spite of their failure to lead to any sound regional IP regime, the old Pan-​American Conventions fostered a common legal culture for the future development of national IP codes and statutes in the continent. The majority of South American countries took a long time to join the multilateral IP system based on the Paris and Berne Conventions. A more steady and gradual shift towards joining international treaties followed the establishment of the World Intellectual Property Organization (WIPO) and, at a later stage, with the adoption of the Agreement on Trade-​ Related Aspects of Intellectual Property Rights (TRIPS Agreement) under the framework of the 1994 World Trade Organization (WTO) treaties. In view of this scenario, between the end of the nineteenth century and early twentieth century, most South American countries enacted their own national IP laws without regard to existing international obligations or the minimum rights established by the classic multilateral IP treaties, such as the Paris and Berne Conventions. This paved the way to two distinct landscapes for South American IP regimes, which coexisted for several decades until the TRIPS Agreement entered into force and its transition periods for developing countries

*  Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina have asserted their moral rights to be identified as the authors of this contribution. All websites were last accessed in February 2018, unless otherwise specified.

432    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina elapsed. In this period, IP regimes in South America developed according to each country’s own conception of IP, which resulted in different national IP statutes and constitutional provisions dealing with the protection of inventive and creative activity. From a regional perspective, South America has strived in its efforts towards creating local regimes of IP protection. Two contrasting initiatives stand out in this regard: The successful norm-​setting and dispute-​resolution system created by the Andean Community of Nations; and the failed Mercado Comum do Sul, or South Common Market (MERCOSUL). More recently, bilateralism has started to gain traction, with a number of South American countries engaging in strong IP obligations through investment and/​or free trade treaties, mostly with the United States (US) and the European Union (EU). The final picture is a fragmented South America: highly aspirational but with little success in the creation of strong and far-​reaching regional IP systems. It is mostly bound to the WTO’s minimum standards of IP protection and enforcement, but with varying ceilings of protection as bilateralism has set in and expanded IP rights globally.

2.  Historical Foundations of the Intellectual Property System in South America Until the effective establishment of WIPO in 1967, the multilateral IP system built upon the classic Conventions—​the 1883 Paris Convention for the Protection of Industrial Property (Paris Convention)1 and the 1886 Berne Convention for the Protection of Literary and Artistic Property (Berne Convention)2 (and their respective Unions)—​coexisted with watertight initiatives of regionalism. Such initiatives were based on the aspiration of the American continent to shape a Pan-​American IP regime, a potential outcome of the movement towards a Pan-​American Organization.3 The history of the negotiations—​launched in 1889 1  Paris Convention for the Protection of Industrial Property (open for signature 20 March 1883, entered into force 7 July, 1884, last amended 28 September 1979) 828 UNTS 305 (hereafter Paris Convention). 2  Berne Convention for the Protection of Literary and Artistic Property (open for signature 9 September 1886, entered into force 5 December 1887, revised 27 July 1971) 828 UNTS 221 (hereafter Berne Convention). 3  The Pan-​American Union evolved to the contemporary form of the Organization of American States (OAS), established by the Bogota Charter of the Organization of American States (opened for signature 30 April 1948, entered into force 13 December 1951 and subsequently amended) 119 UNTS 3. It originally comprised the secretariat of the Union of American Republics from 1910 to 1948, succeeding the International Union of American States (1890 to 1910). The International Union of American States was established by the first International Conference of American States in Washington, DC (2 October 1889 to 19 April 1890). Delegates from Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Paraguay, Peru, United States, Uruguay, and Venezuela attended that conference. From 1890 to 1910 the International Union of American States essentially operated as a branch of the US Department of State. In 1910, after the Buenos Aires Conference, the International Union became the Pan-​American Union and its Members organized inter-​ American conferences in Santiago, Chile, in 1923; Havana, Cuba, in 1928; Montevideo, Uruguay, in 1933; and Lima, Peru, in 1938. The Diplomatic Conference in Bogota, Colombia, in 1948, led to the founding

Intellectual Property Law in South America    433 with the first Pan-​American Diplomatic Conference on Industrial Property—​suggests that most of the instruments adopted at that time were associated with a certain competitive strategy among countries in the continent vis-​a-​vis Europe.4 In particular, the US was focusing on a platform for IP negotiations in the Pan-​American Union so as to foster a regional system for the recognition of US-​owned IP rights and thereby strengthen an emerging copyright-​and patent-​based industry. Europe and the Americas simultaneously engaged in law-​making activities in the field of IP both at national and international levels. The fragmentary approach followed by the Pan-​American states, however, conflicted with the harmonized system of IP forged in Europe by the incipient Paris and Berne Conventions.5 The expansion of national IP systems, as well as the adoption of national statutes and codes in South America, due to the influence of the Pan-​American movement in the continent, occurred in several Latin American and Caribbean countries. It was also substantially influenced by the emerging independence movement in the old colonies, mostly in relation to the Spanish and Portuguese empires. While the historical ties involving South American countries and the Iberian Domination are decisive to explain the formation of national legal systems as a whole, the development of local IP systems was guided by both legal transplants of continental European IP laws to the region and the gradual pressure for internationalization of IP protection.6 As pointed out later in this chapter, national, regional, and international phases in IP norm-​setting coexisted until South American countries started to join WIPO in the late 1960s (thus, adhering to the Paris and Berne Conventions) and the WTO in 1994.7 This is why South American countries remained committed to national IP laws and the establishment of a regional IP system based on the Pan-​American conventions.8 A regional movement driven by the desire to create a Pan-​American IP regime led to the adoption of important instruments dealing with the protection of industrial property and copyright. In the field of industrial property (patents, trademarks, and industrial designs) these included: the Montevideo Patent and Trademark Treaties of 1889; the Pan-​American Convention of 1902 (Mexico City); the Pan-​American Convention of 1906 (Rio de Janeiro); the Pan-​American Conventions of 1910 (Patents and Designs, Buenos Aires); the Caracas of the Organization of American States (OAS). Finally, with the Protocol of Amendment to the Charter of the Organization of American States (opened for signature 27 February 1967 at the 3rd Special Inter-​ American Conference, entered into force February 1970) 721 UNTS 324 (hereafter Protocol of Buenos Aires), the Pan American Union became the General Secretariat of the Organization of American States. See further . 4 

M Basso, Direito Internacional da Propriedade Intelectual (Livraria do Advogado 2000); B Atkinson and B Fitzgerald, A Short History of Copyright (Springer International 2014). 5  FBP Polido, Direito Internacional da Propriedade Intelectual: fundamentos, princípios e desafios (Renovar 2013) 27. 6  N Fernandez-​de-​Pinedo, D Pretel, and P Saiz “Patents, Sugar Machinery and Technology Transfer to Spain” in I Inkster and A Calvo (eds), History of Technology (Continuum Press 2010) 48; P Roffe, América Latina y la Nueva Arquitectura Internacional de la Propiedad Intelectual (La Ley/​Facultad de Derecho Universidad de Buenos Aires 2007) 45. 7  See Table 16.1 in Section 2. 8  SP Ladas, The International Protection of Industrial Property (Oxford University Press 1930); SP Ladas, History of Inter-​American Conventions in The International Protection of Literary and Artistic Property (The MacMillan Company 1938); Basso (n 4).

434    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina Agreement on Patents and Inventions of 1911; the Pan-​American Convention on Trade Mark and Trade of 1923 (Santiago de Chile); and the Pan-​American Trademark Conference of 1929 (Washington). In the field of copyright, they included: the Montevideo Treaty on Literary and Artistic Property of 1889; the Pan-​American Convention of 1902 (Mexico City); the Rio de Janeiro Pan-​American Convention of 1906; the Buenos Aires Pan-​American Convention of 1910; the Caracas Agreement of 1911 (Bolivarian Congress); the La Habana Pan-​American Convention of 1928; the Second Treaty of Montevideo on Intellectual Property of 1939; and the Inter-​American Convention of 1946 (Washington). Most of these conventions never entered into force, however, due to an insufficient number of ratifications. In addition, there were substantial costs for South American countries—​and even a lack of qualified diplomatic and human resources—​to maintain national delegates in different diplomatic conferences. For some countries, there was no reason to establish a regional IP system within a Pan-​American Union. Other countries, such as Brazil, also contended that a better multilateral forum for IP norm-​setting was provided by the Paris and Berne Unions and that a duplication of efforts was undesirable for that purpose. Despite the criticism concerning the effectiveness of the Pan-​American conventions, the diplomatic conferences—​held in different places across the American continent—​were effective in gradually shaping regional IP environments. An authentic international phase in IP norm-​setting in South America, however, was completed only after the majority of countries adhered to the Paris and Berne Conventions and other WIPO and WTO IP treaties (see Table 16.1). In addition, adhering to the TRIPS Agreement required a considerable increase of substantive and procedural standards of IP protection in developing countries in

Table 16.1 Adherence of South American Countries to Paris, Berne, WIPO Conventions, and TRIPS Country

Paris 1883

Berne 1886

WIPO 1967

WTO/​TRIPS

Argentina

1967

1967

1980

1995

Bolivia

1993

1993

1993

1995

Brazil

1884

1922

1975

1995

Chile

1991

1970

1975

1995

Colombia

1996

1988

1980

1995

Ecuador

1999

1991

1988

1996

Guyana

1994

1994

1994

1995

Paraguay

1994

1992

1987

1995

Peru

1995

1988

1980

1995

Suriname

1975

1977

1975

1995

Uruguay

1967

1967

1979

1995

Venezuela

1995

1982

1984

1995

Sources: WIPO, Publication 423: Contracting Parties or Signatories to Treaties Administered. Geneva: World Intellectual Property Organization (status on 30 September 2016). See .

Intellectual Property Law in South America    435 South America. These events may also explain the drastic shift that occurred in most national IP systems in the region.9

2.1 Main Features of the Old Pan-​American IP Conventions Current IP scholarship pays little attention to the old Pan-​American conventions. As mentioned, regionalism trends underlying the creation of the Pan-​American Union paved the way for member countries to start negotiating IP treaties at regional level. These treaties followed the old dichotomy between industrial property (patents, trademarks, and industrial designs) and literary and artistic property (authors’ rights). They were designed to ensure a first degree of harmonization of IP rights and protection of substantive rights of IP holders. The normative focus on the rights holder (and, consequently, IP taken as individual rights) is very clear in the first instruments, such as the Montevideo Patent and Trademark Treaties of 1889, the Pan-​American Convention of 1902 (Mexico City), the Pan-​American Convention of 1906 (Rio de Janeiro), and the Pan-​American Conventions for Protection of Patents and Designs Rights of 1910 (Buenos Aires). One could contend that the Pan-​American IP conventions are no more than a bundle of treaties that failed to establish a regional IP system in the American continent.10 On closer inspection, however, their existence points to the efforts made by the region to engage in an actual competitive strategy in multilateral norm-​setting in relation to Europe, although in a fragmentary fashion and paradoxically borrowing largely from the models offered by the Paris and Berne Unions. In addition, these instruments were influenced by the private law and private international law harmonization techniques emerging in the end of the nineteenth century both in Europe and in the Americas. A first hint of this competitive strategy concerns the goal of harmonization and uniformization of IP laws through the creation of a Pan-​American IP system. For instance, Valladão remarks that the main goal of the Pan-​American conventions was to achieve a minimum degree of harmonization in industrial property and copyright laws. According to the author, the international character of IP rights vested in rights holders pursuant to those Conventions suggested an “idealistic” and “transcendental” view of authors’ rights. These rights would be characterized by a universal and cosmopolitan nature, and susceptible for mutual recognition amongst contracting states.11 These conventions—​in addition to the Paris and Berne Conventions—​were designed to promote IP protection and achieve a modest harmonization of IP laws at regional level. A more detailed survey of the Pan-​American treaties and conventions in the field of IP law reveals the diversity of instruments that are perceived, even today, as relevant international legal sources within the framework of Inter-​American law.12 The development of the Pan-​American Union, a wished-​for but never realized customs union between the three Americas, had shown that most countries in the region kept making efforts to establish a rudimentary substantive uniform IP law system. As mentioned, the 9 

10  Basso (n 4) 38. Basso (n 4) 38; Polido (n 5) 27. H Valladão, Direito Internacional Privado (2nd edn, Freitas Bastos 1977) vol 2, 173. 12  H Rangel-​Ortiz, “Regional Trade Agreements in Latin America and Intellectual Property” in Y Gendreau (ed), Intellectual Property: bridging aesthetics and economics (Thémis 2006), 279–​304. 11 

436    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina Pan-​American conventions were inspired by the traditional industrial property/​literary and artistic property dichotomy drawn by the Paris and Berne Conventions, and by the common goal of economic integration, which was entirely frustrated.13 Nevertheless, although the Pan-​American Union never became a customs union, a drift of regionalism was sufficient to ensure a number of regional instruments not only in the field of industrial property law and copyright law, but also in the areas of private international law, civil and commercial law, criminal law, and procedural law.14 The first effort of integration was made at the Congress of International Law at Montevideo in 1889.15 The old-​ fashioned norm-​ setting design fractured IP norms in three main domains: literary and artistic property, patents, and trademarks. The Patent and Trademark Treaties of 1889, concluded in Montevideo, comprised a series of complex provisions, such as reciprocity requirements for protection of patent and trademark owners’ rights and priority rights for patent filings in contracting countries exclusively.16 Notwithstanding the valuable contribution to the scientific field at stake, these instruments failed to achieve a minimum degree of harmonization and unification of IP law, particularly because of the insufficient number of ratifications and the method of ratification provided for in the treaties.17 In general, Pan-​ American Conventions are more restrictive in terms of access requirements for IP protection than their European equivalents. They subject rights holders to certain formalities that the Berne and Paris Conventions do not require.18 The Buenos

13  DR Medina, Tratado de Derecho Marcario (El Autor 1960); SP Ladas, “Integración económica de América Latina y propiedad industrial” (1971) 18 Revista Mexicana de la Propiedad Industrial y Artística 191. 14  D Lipszyc, “Esquema de protección internacional del derecho de autor por las convenciones del sistema interamericano” in D Lipszyc, CA Villalba, and U Uchtenhagen (eds), La Protección del Derecho de Autor en el Sistema Interamericano (Dirección Nacional de Derecho de Autor 1998), 17. 15  For a comprehensive analysis of the historic background on the first Pan-​American Conventions, see SP Ladas, “Pan American Conventions on Industrial Property” (1928) 22(4) American Journal of International Law 803 et seq; Ladas (n 8) 15 et seq. 16  See Ladas (ibid) 806 (“As early as 1889 at the International Congress of South American States at Montevideo, in connection with the other efforts at achieving uniformity in the law governing the international relations of these states, two conventions were signed on 16 January, concerning patents and trade marks. The contracting countries in these conventions are Argentina, Bolivia, Chile, Paraguay, Peru, and Uruguay. All ratified them with the exception of Bolivia and Chile. These conventions secured reciprocal national treatment to the patentees and trade mark owners of the contracting countries and a right of priority of one year for patents only. In all other respects they referred to the municipal law of each country. The outstanding feature of these conventions is that they contained a definition of patentable inventions and trademark.”). 17 Basso (n 4). 18  Art 5(2) of the Berne Convention of 1886 clearly provides for the prohibition of compliance with registration formalities in the case of copyright protection (principle of automatic protection). In addition, art 5(1) of the Berne Convention and art 2(1) of the Paris Convention of 1886 establish that foreign IP holders will be subject to national treatment, with a clear rule on non-​discrimination or reciprocity of protection. Another distinctive feature of the Paris and Berne Conventions is that these instruments are inspired by the principle of independence of protection, ie, the protection of IP is independent of the existence of protection in the country of the Union where another patent, trademark, or industrial design is registered, and independent of the existence of protection in the country of origin of the work of authorship in case of copyright. For a detailed discussion of both Conventions, see the chapter by Sam Ricketson earlier in this volume.

Intellectual Property Law in South America    437 Aires Convention of 1910, for instance, establishes the obligation for copyright holders to link their works to a statement of “reserved rights under the Buenos Aires Convention.” Protection can be recognized and the author’s rights enforced against third parties only in the presence of such a statement. This is contrary to the Berne Convention, which does not permit formalities for copyright protection. This inconsistency alone would be a sufficient reason for countries to step away from the Buenos Aires Convention.19 The Havana Treaty on Private International Law of 1928 (the “Bustamante Code”),20 in turn, has only two provisions—​Articles 108 and 115—​on “industrial and intellectual property rights,” leaving contracting parties free to define the criteria of characterization and situation of immaterial goods.21 The main provisions of the Bustamante Code are to be construed in light of the treaty’s special status as an instrument of private international law. In this sense, the treaty refers to two conflict rules dealing with applicable law, without electing an objective connecting factor: The law of the place where protection is claimed or the law of the place of registration (eg, for IP rights depending on registration).22 The main foundations of the Pan-​American IP system were originally based on the Mexico City Convention of 1902, which comprises 19 provisions dealing with three main IP categories: patents, trademarks, and industrial designs. Influenced by the unionist model and mirroring the Paris Convention of 1883, the Mexico City Convention adopted two important international principles: automatic protection and national treatment.23 These would later become principles in the norm-​setting of national IP laws in South American IP systems (as well as in Latin American legal systems in general), particularly because a vast number of countries in the region were not countries of the Paris and Berne Unions.24 Argentina, Bolivia, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela joined the sister conventions only with the establishment of WIPO in 1967 or after the TRIPS Agreement entered into force (see Table 16.1). After the adoption of the Mexico Convention of 1902, the Pan-​American diplomatic conferences moved further to establish regional IP offices, which were expected to operate in Havana and Rio de Janeiro. However, due to the insufficient number of ratifications, these regional offices were never implemented.25 19 

Valladão (n 11) 38. Havana Treaty on Private International Law (open for signature 20 February 1928) 86 UNTS 246 (hereafter Bustamante Code). For the full text (in Spanish only) see . 21  Essentially, art 108 deals with a rudimentary characterization rule related to intangible goods (in the Treaty’s section concerning “property”). It provides: “The industrial and intellectual property and other analogous rights, of economic nature, which authorize the exercise of certain activities granted by law, are deemed to be situated where they are officially registered.” Art 115 reads as follow: “The industrial and intellectual property shall be governed by the provisions of international agreements, now existing, or those to be adopted in the future. In the absence of these agreements, the enjoyment and the registration of intellectual and industrial property will be subject to the law of the state which grants them.” 22  Valladão (n 11) 174. 23  U Anderfelt, International patent legislation and developing countries (M Nijhoff 1971); Basso (n 4) 101–​102. 24  Basso (n 4) 101. 25  The Rio de Janeiro Convention of 1906 represented a true expansion of the Mexico City Convention of 1902, precisely because the subsequent instrument incorporated the pre-​existing principles (national treatment, assimilation of rights between foreign and national IP holders and automatic protection) 20 

438    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina The Pan-​American states moved subsequently towards implementing a regional system of IP, but had to face clear setbacks. The Buenos Aires Conventions of 191026 reunited a bulk of conventions in the field of IP: the Convention IV on Literary and Artistic Property, as of 11 August 1910; the Convention IX on Patents, Utility Models and Industrial Designs, as of 20 August 1910; and the Convention XV on Trademarks of Industry and Commerce, as of 20 August 1910. Compared with the previous Pan-​American treaties, the Buenos Aires Conventions deviated from the main goal of a regional registration system and the unified approach to a comprehensive Pan-​American IP regime.27 Later, the General Inter-​ American Convention for Trademark and Commercial Protection, concluded on 20 February 192928 in Washington, followed the main normative structure of the Paris Convention of 1886. The treaty adopted a separate regulation for trademark registration and established a set of substantive rights for trademark owners based on national treatment provisions. Contracting parties were requested to grant “the same rights and remedies which their laws extend to their own nationals or domiciled persons with respect to trademarks, trade names, and the repression of unfair competition and false indications of geographical origin or source.”29 The delegates recognized the need for harmonizing the IP legislations in the region, as reflected in the “desire to reconcile the different juridical systems which prevail in the several American Republics.”30 The Washington Convention of 1929, much like the treaties that preceded it, failed to enlarge the number of parties. Initially ratified and attempted to create a unified regional Pan-​American registration office. However, only Brazil, the United States, and Panama adhered to the 1906 Convention, which did not come into force because of an insufficient number of ratifications. See Basso (n 4) 101. 26 

In Brazil see Decree No 2881, as of 9 November 1914 (approving the resolutions and conventions signed by Delegates of the 4th International Conference of American States, held in July and August 1910, in Buenos Aires). For the full text of the Convention see . 27  Another treaty, the Convention for Protection of Trademarks, Trade, Agriculture and Trade Names, concluded in Santiago de Chile, on 28 April 1923 (the Santiago Convention of 1923) was aimed at removing the obstacles to the creation and functioning of the Havana and Rio de Janeiro offices and encouraging the Pan-​American states to resume the project of a regional registration system. However, due to an insufficient number of ratifications, the Convention failed to put that system into operation. Technically, the Rio de Janeiro Office has been established in Brazil by Executive Decree No 16 685, of 26 November 1924 and jointly operates with the Inter-​American Secretariat in that city. From the standpoint of Brazilian administrative law, the Inter-​American IP Office was linked to the General Directory of Industrial Property (today the Brazilian National Institute of Industrial Property—​INPI) and existed as such until the early 1990s, when it was extinguished by Decree 11 of January 1991. The full text is available at . 28 

The full text in the authentic version in English is available at . 29  Art 1 of the 1929 General Inter-​American Convention (“The Contracting States bind themselves to grant to the nationals of the other Contracting States and to domiciled foreigners who own a manufacturing or commercial establishment or an agricultural development in any of the States which have ratified or adhered to the present Convention the same rights and remedies which their laws extend to their own nationals or domiciled persons with respect to trade marks, trade names, and the repression of unfair competition and false indications of geographical origin or source”). 30  Preamble of Inter-​American Convention for Trade Mark and Commercial Protection of 1929.

Intellectual Property Law in South America    439 by Colombia, Cuba, the US, Guatemala, Haiti, Honduras, Nicaragua, Panama, Paraguay, and Peru, the treaty was strongly opposed by the national parliaments of the signatory countries. Motivated by the domestic resistance against the future enforcement of the instrument, the US, Haiti, Honduras, Panama, and Peru withdrew from the Washington Convention.31 In spite of its substantial failure in building a sound regional IP regime, the Pan-​ American Conventions fostered a common legal culture for the future development of national IP codes and statutes in the continent. Starting from the examples given by the 1902 Mexico City Convention, these instruments allowed for the consolidation of basic principles that were simultaneously or subsequently incorporated by domestic legal systems, such as automatic protection, national treatment, and independence of filings and registrations32. Importantly, there is a distinctive feature:  Most South American countries were not countries of the Berne and Paris Unions until the establishment of WIPO in 1967 or even until the adoption of the TRIPS Agreement in 1994 (see Table 16.1). A first principle enshrined by the Pan-​American conventions (after the 1902 Mexico Convention) was that of national treatment, based on the non-​discrimination between national and foreign IP owners.33 Also, the treaties contemplated the principle of independence of filings and registrations34 and established grounds for the refusal or cancellation of registration (eg, in trademarks).35

2.2 Inconsistencies Within the Old Pan-​American Conventions The main reasons why the Pan-​American conventions did not succeed in establishing a unified regional IP system are threefold. First, there were substantial costs involved in 31 

Basso (n 4) 102. According to this principle, essentially derived from art 4bis of Paris Convention, patent registrations granted in a certain country of the Union to nationals or residents of other countries of Union shall be treated as independent of further patents granted for the same invention in other countries, including non-​Union countries. In other words, the existence of a patent registration in one country for a given invention does not require any other country of the Union to grant a patent for the same invention. The principle also suggests that a patent cannot be refused, invalidated, or otherwise revoked in any country of Paris Union because of the fact that a patent for the same invention has been refused, invalidated, or revoked, in another country of the Union or third countries. 33  See, eg, Mexico Convention 1902, arts 1 and 2; General Inter-​American Convention for Trade Mark and Commercial Protection 1929, art 1. 34  General Inter-​American Convention for Trade Mark and Commercial Protection 1929, arts 3 and 12. 35  See General Inter-​American Convention for Trade Mark and Commercial Protection 1929, art 3 (second part): (1) when distinguishing elements of marks infringe rights already acquired by another person in the country where the registration or deposit is claimed; (2) when marks lack any distinctive character or consist exclusively of words, symbols or signs; or become generic or vague terms in the current language or in the commercial uses of the country where the registration or deposit is sought; (3) when marks offend public morals or may be contrary to public order; (4) marks which tend to expose persons, institutions, beliefs, national symbols of public interests, to ridicule or contempt; (4) marks which refer to representations of racial types or scenes typical or characteristic of any of the Contracting States other than of the origin of the mark. 32 

440    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina implementing and operating centralized IP offices in in Havana and Rio de Janeiro, such as those resulting from the mandates foreseen by the Rio de Janeiro Convention of 1906. Second, there was no room for an authentic Pan-​American IP regime fitting the incipient domestic systems, as the first conventions envisaged.36 Finally, the gradual movement of IP harmonization did not suffice to create a common domain based on a unionist legal order (such as that created by the Paris and Berne Conventions at the end of the nineteenth century). The shift was stalled by a nationalist bias, which prevented the incipient Pan-​American union from achieving even a minimum degree of harmonization.37 Also, some countries decided to move further to concurrent multilateral initiatives in Europe, as seen by the development of the Paris and Berne Unions and the consolidation of the administrative framework of their international bureaus. Bodenhausen has strongly criticized the legal technique adopted by the Pan-​American Conventions, contending that the treaties represented a “collection of little convincing texts and provisions,” while also recognizing that they paved the way to a certain degree of “unity” and “amplitude of general international intellectual property law.”38 Indeed, the Pan-​American Conventions did not offer a rule-​oriented consistency in terms of minimum rights accorded to authors and inventors or general international IP principles. This is true especially when they are compared with the avant-​garde approach taken by the founders of the Paris and Berne Conventions. Yet, at times when diplomatic efforts and national expertise in the field of IP were scarce, Pan-​American countries engaged in discussing potential alternatives for harmonizing private law, which included IP law. Under a more formalistic approach, the result was the adoption of specific multilateral treaties having a main aspiration linked to the goal of strengthening the regional integrationist movement. Ladas, one of the first scholars devoted to the study of the foundations of international IP law in the Americas, was even more skeptical regarding the success of those treaties. He argued that the “efforts of a Pan-​American industrial property regime had been sterile,” and questioned whether the causes included the fact that the US was a developing industrial country while most Hispanic-​American nations had evolved as raw-​material producers.39 That alleged deficit could also be explained by the lack of knowledge and skills in the field of IP within the majority of South American countries, or even by their failure to have been convinced of the interest and importance of “a common law on those subjects [industrial property].”40 As a result, most South American countries designed their own national IP laws independent of formal international obligations or a set of minimum rights deriving from multilateral IP treaties, such as the Paris and Berne Conventions. This paved the way to two distinct landscapes for South American IP regimes, which coexisted for several decades until the TRIPS Agreement entered into force and transition periods for developing countries’ compliance with that Agreement elapsed.41 From the late 1960s, some South American countries started adhering to the Paris and Berne Conventions, as well as their amending Acts and 36 

Basso (n 4) 102. A Fernandez, La Propiedad Industrial en el Derecho Internacional (Nauta 1965) 237–​38. 38  GHC Bodenhausen, “Problèmes actuels du droit international de la propriété industrielle, littéraire et artistique” (1941) 74 Recueil des Cours 422. 39  Ladas (n 8) 80. 40 ibid. 41  See TRIPS, art 65.2. 37 

Intellectual Property Law in South America    441 revisions, which eventually led to them becoming original Member States of WIPO. They subsequently joined the WTO in 1994. Few countries in the region, in contrast, were parties to the classic IP conventions and the existing WIPO treaties from their inception. This is the case for Brazil.42 As discussed in Section 3, the IP landscape in South America evolved from a situation of formal coexistence and rudimentary convergence between Pan-​American conventions and national laws, statutes, and codes to a late adoption of the classic multilateral instruments, such as the Paris and Berne Conventions, and the TRIPS Agreement. There is solid evidence that regimes for IP protection in South America were indeed strongly shaped by national IP statutes and constitutional provisions dealing with the protection of inventive and creative activity and the recognition of IP rights vesting in authors and inventors. A national phase in IP norm-​setting was equally indispensable for South American countries to better experience the internationalization initiatives represented by the TRIPS Agreement and other bilateral and regional instruments.

3.  The Evolving Landscape for National IP Regimes in South America 3.1 The Emergence of National Intellectual Property Systems The development of national IP systems in South America has been based on common historical roots and a sequence of historical events in the continent. These are as varied as colonization; isolated wars; violent movements for independence; the emergence of modern republican constitutions based on Rule of Law and democratic principles; technological dependence on industrialized countries; the incorporation of the region into global markets; and the asymmetrical position of the region in terms of technological transfer and innovation regimes.43 Domestic IP systems evolved with similar legislative patterns in South America, mainly influenced by national codes and statutes dealing with the protection of industrial property, copyright, and related rights. They were also influenced by constitutional patterns imported from the US, such as the inclusion of a constitutional copyright clause.44 In the absence of a deep integration of or participation by the countries of the region in the multilateral IP system, the consolidation of IP systems in South America was because: i)  D  uring colonial times, there was a refusal by municipal authorities to recognize or admit any kind of inventors’ or creators’ privileges; this movement was seen as resistance against the enforcement of the Royal Ordinances of Spain and Portugal in the region.

42 

This issue is discussed further in Section 2.2. Fernandez-​Pinedo (n 6); Roffe (n 6). 44  GE Vidaurreta, Historia del Sistema Argentino de Patentes de Invención (1580-​1863) (La Ley 2007) 106. 43 

442    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina ii)  In the first decades of independence (the second half of the nineteenth century), South American governments mistrusted or were reluctant to accept the grant of privileges for authors and inventors, in particular for foreign IP rights holders, but this was followed by a gradual acceptance of exclusive rights where they had been granted by local governmental bodies.45 iii)  The granting of privileges and registrations gradually became a prerogative of the executive branch, subject to specific legislation enacted by the National Congress or to a double scrutiny process (a blend of executive and legislative procedures for granting privileges to authors and inventors). iv)  In some periods, authoritarian governments conferred exclusive powers on the executive branch to grant privileges for inventors. v)  In a later stage, South American countries enacted laws, codes, regulations and even constitutional provisions governing national IP protection, without abandoning a rationale based on privileges.46 Since the end of the nineteenth century, national IP regimes in South America have also kept a strong resemblance to European or US IP national systems. They were focused on legislative statutes granting privileges and royal monopolies to authors, inventors, and publishers (“privileges of inventions,” “privileges of press,” and “privileges of industry”).47 Given the distinctiveness of each particular jurisdiction, such regimes were clearly designed to ensure to inventors and publishers property rights over their inventions and works. Yet, this trend was implemented without any growing creative or manufacturing industries in the region, such as those that emerged in Europe after the Industrial Revolution.48 A multilayered normative approach shaped modern South American IP laws, especially after the enactment of the republican Constitutions and statutory laws in the first half of the nineteenth century. They basically recognized the individual rights of inventors and authors to claim protection for their inventions and creations. The level of protection was based on exclusive rights granted by the state serving a particular purpose.49 Also, and as discussed in Section 2, IP statutes in the region reflected the old-​fashioned industrial property/​copyright dichotomy that existed at regional and multilateral levels until the adoption of the Stockholm Convention establishing the WIPO in 1967. The first IP statutes in the region were adopted by Brazil (in 1809 and 1830), Chile (in 1840), Venezuela (in 1842), Paraguay (in 1845), Argentina (in 1846), Colombia (in 1848), and Bolivia (in 1916). As a common trend in that period, South American countries conceived privileges of invention as “one of the most exclusive privileges granted in general to encourage progress.” 45

46 ibid.  ibid. One could associate the emergence of a national IP legislative phase in South America with the correspondent national phase in Europe, triggered by the French Revolution, and based on the adoption of IP national statutes in such countries as France (in 1791 and 1793), the Helvetic Republic (in 1801), and the Netherlands (in 1806), most of them preceding the adoption of the first bilateral treaties in the field. See Polido (n 5) 20. 48  This rationale appears to be true for some South American Constitutions read in conjunction with national IP codes. See, eg, National Constitution of the Argentinian Republic 1994, art 17; Chilean Constitution 1984 (amended in 2011) art 19. 49  Vidaurreta (n 44) 106–​107. 47 

Intellectual Property Law in South America    443 This is explained not by a conceptual misunderstanding of IP, nor even by a late development of South American patent law,50 but rather as the result of political decisions related to the region’s industrial and technological aspirations. The selective market for IP grants was also linked to the initiatives of South American governments to attract foreign investment, and not specifically to the protection of inventors’ rights. This may be explained by the fact that the inception of national IP systems in South America derived from fragile economic tools primarily based on the goal of catalyzing foreign investment, and not directly from any concern to promote innovative activity and developmental goals.51 In the early 1970s, Latin America as a whole witnessed a critical movement in relation to the existing international IP system built under the Paris and Berne Conventions and the growing pressure of transnational industries to increase IP protection standards at a global level. The region contested the orthodox role of WIPO in pursuing the harmonization and protection of IP rights.52 One of the main relevant outcomes of this movement was a public debate on the costs and benefits of patent and copyright laws that also influenced domestic IP legislation. Some countries in the region started opposing the expansionist approaches adopted in industrialized countries to substantive standards of IP protection, which were reflected in laws governing subject matter, exclusive rights, terms of protection, and exceptions and limitations.53 The main resistance to international IP norm-​setting was evidenced by the developing countries’ pressure (particularly from Latin America) for a comprehensive revision of the WIPO-​administered Conventions, such as the Paris and Berne Conventions, to incorporate greater flexibilities and limitations, and accommodate their socio-​economic developmental demands. These efforts were not successful and are seen as one of the reasons that industrialized countries also pushed for a forum shifting movement to include IP negotiations within the comprehensive normative agenda of the Uruguay Round of GATT. Following that critical movement, new statutes replaced the old legislation adopted in the first half of the nineteenth century and reinforced the main concerns and criticisms of Latin American scholars and public policy makers. There was a sequence of legislative events leading to the enactment of national IP statutes, including in Brazil (in 1971), Mexico (in 1976), Ecuador (in 1977), Colombia (in 1978), Peru (in 1979), Paraguay (in 1979), and Argentina (in 1980).54 Much of the discussion in the region was influenced by the doctrine of Fritz Machlup and Edith Penrose, and by studies carried out by the UN Economic Commission for Latin America and the Caribbean (CEPAL). As a result, new national statutes shared some common features, such as provisions dealing with the exclusion of certain subject matter from patent protection (pharmaceutical-​and chemical-​ related inventions), distinct terms of IP protection, and a rudimentary set of exceptions and limitations to IP rights. 50 ibid 107.

51  The first statute related to industrial property in South America was enacted on 28 April 1809 in Brazil (Decree granting privileges to the manufacturers of the Empire and national vessel industry). See (1809) 45 Coleção de Leis do Império do Brasil, vol 1. For a Portuguese version of the Decree see . 52 Roffe (n 6). 53  Roffe (n 6); Polido (n 5). 54  Roffe (n 6); Vidaurreta (n 44).

444    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina In 1972, under the auspices of the Organization of American States, some countries convened the Latin American Conference on Science, Technology and Development (CACTAL)55 and challenged the functioning of the international patent system.56 The main participants supported the view that IP protection not only impeded the developmental goals of the region, but also created incentives for technology-​exporting companies to dictate consumer trends and opportunities in production, distribution, and foreign trade. The Latin American consensus urged a revisionist approach to national IP regimes and existing treaties in order to adjust them to the social and economic development goals of the region. One of the main demands was that IP regimes should focus not only on the protection of rights, but also on the expansion of exceptions and limitations and the protection of industrial and competition policies. Although the WIPO conventions began to attract more signatories in the subsequent years, until the adoption of the TRIPS Agreement, few countries in Latin America remained committed to multilateralism in IP. In the 1960s, only five Latin American countries were members of the Paris Union (Brazil, Cuba, Mexico, the Dominican Republic, and Trinidad and Tobago). Brazil was the single state in the region to keep its status as an original signatory party of the Paris Convention of 1883. Ecuador, El Salvador, and Guatemala were also originally parties to the Convention, but withdraw from the Paris Union a few years after signing it, re-​adhering respectively in 1999, 1994, and 1998. Argentina, Uruguay, and Paraguay became members in 1967, 1967, and 1994 respectively.57 The status of Latin American countries within the Berne Union was very similar, in part because of their resistance to rules that they believed would grant excessive protection for foreign copyright holders. In the second half of the 1960s, when WIPO was established, no Latin American country, with the exception of Brazil, was part of the Berne Union. The vast majority began adhering to the Convention in the early 1990s. In turn, most countries were members of the Universal Copyright Convention of 1952, which was administered by UNESCO. Table 16.1 summarizes the adherence of South American countries to the Paris and Berne Conventions, the WIPO Convention of 1967, and the TRIPS Agreement, following the overall trend in Latin America.

3.2 South American Constitutions and Intellectual Property Rights National constitutions enacted in the nineteenth century in South America gave room to new or revised ones. IP was expressly included in these texts, and either recognized as an expression of the fundamental rights of creators and inventors or subject to mandatory State protection. From a comparative constitutional law viewpoint, a variety of legal patterns can be identified across South American constitutions, essentially inspired by basic rules anchored in the Rule of Law, democratic principles, and social justice and welfare goals and values.58 Most of these patterns, explained further on, helped to define the region’s 55

 . 57 ibid.  Roffe (n 6). 58  R Gargarella, “El Nuevo Constitucionalismo Latinoamericano: Algunas Reflexiones Preliminares” (2010) 3 Crítica y Emancipación 11. 56

Intellectual Property Law in South America    445 conception of the political, economic, and social impacts of IP policies on domestic innovation, industrial, and technological regimes. In some South American countries, national constitutions, read in conjunction with national IP codes, provide inventors and authors with legal mechanisms for the acquisition and maintenance of property rights over their inventions and works of authorship. Other constitutions directly refer to the exclusive character and temporary duration of IP rights, and to their being subject to social interests and developmental goals. This appears to be the case with Article 17 of the National Constitution of the Argentinian Republic of 199459, Articles 100 and 102 of the Bolivian Constitution,60 and Article 5, XXIX, of the Brazilian Constitution of 1988.61 Article 19 of the Chilean Constitution of 1984, amended in 2011, refers to a proprietary character of the exclusive right of authors and inventors over their creations or inventions, in accordance with the law.62 In some constitutions, IP rights are taken as fundamental rights associated with the freedom of intellectual, artistic, and scientific creation. Article 2(8) of the 1993 Peruvian Constitution recognizes the right over intellectual creations and their outcomes as fundamental rights of the person associated with “freedom of intellectual, artistic, technical, and scientific creation.”63 The Chilean Constitution of 1984 contains a similar provision, assuring “the freedom to create and disseminate the arts, as well as the right of the author[s]‌over their intellectual and artistic creations of any type, for the period that the law specifies and which will not be inferior to that of the life of the entitled [person].” The 1988 Brazilian Constitution recognizes a bundle of authors’ rights as fundamental rights: The authors “exclusive rights to use, publish or reproduce their own works,” and the succession of such rights to the authors’ heirs for a “period fixed by law.”64 In this sense, the Brazilian Constitution ensures the “protection of individual participation in collective works and reproduction of human voices and images, including in sports activities,” and the right of creators, performers, and their respective unions and associations to monitor the economic use of works that they create or in which they participate.65 In other cases, IP rights are subject to State protection by virtue of constitutional provisions, but are not seen as individual rights per se. Some constitutions appear to resort

59

  “Every author or inventor is the exclusive owner of his work, invention or discovery for the term granted him by law.” 60   Art 101: “The State shall register and protect individual and collective intellectual property in the works and discoveries of authors, artists, composers, inventors and scientists, under the conditions determined by law.” 61   Art 5, XXIX: “[T]‌he law shall assure inventors of industrial inventions a temporary privilege for their use, as well as the protection of industrial creations, the ownership of trademarks, company names and other distinctive signs, taking into account social interests and the technological and economic development of the Country.” 62   Art 19.25: “The right of the author comprises the ownership of the works and other rights, such as authorship, the edition and the integrity of the work, all this in conformity with the law. The industrial ownership over the patents of invention, trademarks, models, technological processes or other analogous creations, for the period that the law establishes, is also guaranteed.” 63  Constitution of Peru, art 2(8): “Every person has the right . . . to freedom of intellectual, artistic, technical, and scientific creation, as well as to ownership of such creations and to any benefits derived from them. The State promotes access to culture and encourages its development and dissemination.” 64  Brazilian Constitution 1988, art 5, XVII. 65  ibid art 5, XXVIII.

446    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina to a communitarian or common goods approach when prescribing the recognition of IP and prohibiting the “appropriation of collective knowledge in the fields of science, technology and ancestral wisdom.”66 The communitarian approach applies also to the rights of indigenous people, whose collective property is subject to protection. The clearest examples are Articles 98 and 124 of the Venezuelan Constitution of 1999 and Articles 30.11 and 100 of the Bolivian Constitution. Those countries amended their constitutions in order to clarify the scope of provisions regarding the legal protection of cultural goods, biodiversity, genetic resources, and traditional knowledge, and the limitations and exceptions to IP rights. Bolivia is perhaps the best example of that trend. Nationals, rural native indigenous people, and local communities are directly addressed by the 2009 constitutional provisions,67 which confers on them the right to “collective ownership of the intellectual property in their knowledge, sciences and learning, as well as to its evaluation, use, promotion and development.”68 According to the Bolivian Constitution, the State additionally has the duty to protect traditional knowledge through the “registration of intellectual property rights,” with the goal to safeguard “the intangible rights of the nations and rural native indigenous peoples and of the intercultural and Afro-​Bolivian communities.”69 The existing constitutions in the South American region also empower local governments to adopt laws and regulations dealing with educational and cultural goods, scientific and technological developments, and innovation, paving the way to the design of public policies consistent with these powers and of intersections with IP rights. A comparative analysis of the constitutional texts may better illustrate the IP linkages with culture and science and technology. There are distinct roles and duties of states in promoting access to culture and fostering its development and dissemination also in connection with freedom of intellectual, artistic, technical, and scientific creation. Pursuant to Article 2(8) of the Peruvian Constitution, the State shall “promote access to culture and encourage its development and dissemination.” With regard to cultural heritage and cultural goods, Article 216, I and III, of the Brazilian Constitution directly refers to “forms of expression” and “scientific, artistic and technological creations” as susceptible of legal protection. The Brazilian Constitution defines cultural heritage as including “material and immaterial goods, taken either individually or as a whole, that refer to the identity, action and memory of the various groups that form Brazilian society.” In addition, governmental agencies and IP offices have discretionary power to grant registered rights (such as patents, trademarks, designs, and rights in computer programs) and to enforce constitutional provisions related to IP rights both at regulatory and administrative levels. One of the major constraints on the granting of registered IP rights is the 66  See, eg, Politic Constitution of Ecuador 2008, art 323; also art 321: “The State recognizes and guarantees the right to property in all of its forms, whether public, private, community, State, associative, cooperative or mixed-​economy, and that it must fulfill its social and environmental role.” 67  For the full text of the Bolivian Constitution in English see . 68  Bolivian Constitution 2009, art 30 II. According to art 30.I, “a nation and rural native indigenous people consists of every human collective that shares a cultural identity, language, historic tradition, institutions, territory and world view, whose existence predates the Spanish colonial invasion.” 69  Art 100, II. The nations and native indigenous communities’ knowledge and wisdom comprise “views, myths, oral history, dances, cultural practices, knowledge and traditional technologies,” all of them considered by the 2009 Bolivian Constitution as “patrimony of the nations and rural native indigenous peoples,” and “part of the expression and identity of the State.”

Intellectual Property Law in South America    447 public interest (including the interest in protecting public health and safety) and technological and economic development goals. Article 5, XXIX, of the Brazilian Constitution, for instance, refers to public interest concerns related to technological and economic development in order to justify the legal protection granted to inventors and creators, apart from the temporary duration of the protection.70

4.  Regional Systems of Intellectual Property in South America From the early 1990s South America witnessed a dramatic shift from an import substitution industrialization model of development71 to a more liberal set of economic policies, market-​oriented and focused on foreign investment. “Washington Consensus” policies and the ­emergence of an international trade system—​embodied in the WTO—​meant that most South American countries would no longer be able to rely on domestic laws and governments to protect their national industries. Taking part in the fast-​growing international market was no longer a choice, but a necessity, and international rules were part of the deal. This shift from protectionism to economic neoliberalism had a profound impact on IP laws across the region, as countries were gradually forced to adapt their domestic laws to international standards of IP protection determined largely by highly developed nations with a trade and economic profile very different from that of the still developing South America.72 70 

Art 5: “Everyone is equal before the law, with no distinction whatsoever, guaranteeing to Brazilians and foreigners residing in the Country the inviolability of the rights to life, liberty, equality, security and property, on the following terms . . . XXIX. The law shall assure inventors of industrial inventions a temporary privilege for their use, as well as the protection of industrial creations, the ownership of trademarks, company names and other distinctive signs, taking into account social interests and the technological and economic development of the Country.” 71  The import substitution industrialization model of development was quite popular throughout the fifties and sixties in Latin American countries, and was based on the idea that countries should be free from foreign dependency by increasing their self-​sufficiency. This was believed to lead to economic growth and socio-​economic modernization. See W. Baer, “Werner Baer Import Substitution and Industrialization in Latin America: Experiences and Interpretations” (1972) 7(1) Latin American Research Review 95. 72  There is a general theory of IP rights suggesting that countries at different levels of economic development have different best interests in the strength of IP protection, and that these best interests change over time: see FM Abbott, “Trade Costs and Shadow Benefits: EU economic partnership agreements as models for progressive development of international IP law” in H Drexl, RK Grosse, and S Nadde-​Phlix (eds), EU Bilateral Trade Agreements & Intellectual Property for Better or Worse? (Springer 2014); J Boyle, “A Manifesto on WIPO and the Future of Intellectual Property” (2015) 9 Technology Review (“The history of development in intellectual property is one of change. The countries that now preach the virtues of expansive minimum levels of intellectual property protection, did not themselves follow that path to industrial development. Intellectual property protections changed over time, responding to the internal and external economic and technological context. Even within industries in particular developed countries, patterns of use of intellectual property typically vary as the industry matures and develops. Compare the freewheeling beginnings of Silicon Valley to its current well-​stocked legal departments, for example. Given this history, one would expect that international intellectual property agreements, whether made through trade treaties or in the context of WIPO, would be highly sensitive to the idea that ‘one size does not fit all’ when it comes to intellectual property policy and developing countries”).

448    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina Dreyfuss and Rodrígues-​Garavito have highlighted the influence of northern countries in “shaping spaces for contention in Latin America” regarding IP laws and policies. Their Balancing Wealth and Health provides rich and detailed documentation of how the US and the EU have used trade pressure to force Latin American countries to accept levels of IP protection that satisfy northern interests regardless of their impact on local interests.73 Pharmaceutical patents are a practical result of this movement. Aimed at fostering the local manufacture of generic drugs, IP laws in Brazil,74 Argentina,75 and Chile76 had prohibited the patenting of drugs, in line with those countries’ import substitution model of development and local public health policies. The 1990s saw a shift in this position, however, as these countries were forced to comply with Article 27(1) of the TRIPS Agreement, which requires the protection of product and process inventions “in all fields of technology,” thus adding pharmaceuticals to the range of patentable subject matter under domestic patent regulations. The implications of such an expansive patent agenda for South American countries have been extensively considered in the existing literature,77 but one cannot stress enough the difficulties experienced by governments in equalizing higher drug prices with public health policies. As Kapczynski declares, “patents tend to raise the price of medicines, often substantially. Even small increases in medicine prices can put them out of reach of many people in developing countries, where public health systems are often underfunded, average incomes are low, and individuals frequently must pay for their own drug costs out of pocket.”78 The implementation of compulsory licenses by Brazil back in 2007 and, more recently, by Colombia has faced strong opposition from the developed world, in spite of important existing documents such as the Doha Declaration on TRIPS and Public Health.79 The WTO’s TRIPS Agreement80 is the ruling tool in terms of harmonizing international standards of IP protection, as the vast majority of countries in the world are WTO members.81 In South America, the TRIPS Agreement has been the main driver of change in local IP laws in setting the minimum standards for protection. 73  RC Dreyfuss and C Rodriguez-​Garavito, “The Battle over Intellectual Property Laws and Access to Medicines in Latin America” in RC Dreyfuss and C Rodríguez-​Garavito (eds), Balancing Wealth and Health: The Battle Over Intellectual Property and Access to Medicines in Latin America (Oxford University Press 2014) 1. 74  M Guise, DWL Wang, and TC Campos, “Access to Medicines: Pharmaceutical Patents and the Right to Health” in L Shaver (ed), Access to Knowledge in Brazil: New Research on Intellectual Property, Innovation and Development (Bloomsbury 2010) 165. 75  P Bergallo and A Ramón-​Michel, “The Recursivity of Global Lawmaking in the Struggle for an Argentine Policy on Pharmaceutical Patents” in Dreyfuss and Rodríguez-​Garavito (n 73), 37. 76  SH Millaleo, “Chile: the Case of IP Opposition from Predominantly Private Interests” in Dreyfuss and Rodríguez-​Garavito (n 73), 129. 77  Guise et al (n 74); CM Correa, “Public health and patent legislation in developing countries” (2001) 3 Tulane Journal of Technology and Intellectual Property 1. 78  A Kapczynsky, “Going Local in the Era of TRIPS Implementation” in Dreyfuss and Rodríguez-​ Garavito (n 73), 263. 79  WTO, Declaration on the TRIPs Agreement and Public Health, WT/​MIN(01)/​W/​2, 14 November 2001 . 80  The TRIPS Agreement is one of the three regulatory pillars of the WTO. 81  See T O’Keefe, Latin America and Caribbean Trade Agreements: Keys to a Prosperous Community of the Americas. (Martinus Nijhoff 2009) 13 (“Any discussion of regional economic integration, whether in Latin America or the Caribbean, or anywhere else in the world, cannot ignore the connection with the WTO. This is particularly true when discussing Latin America and the Caribbean, given that all the countries in the region (but for the Bahamas) are now WTO members. This means the Latin America

Intellectual Property Law in South America    449 However, South America has also created its own regional sets of IP regulations by means of Regional Trade Agreements. Regional Trade Agreements have existed since the early 1950s,82 and interact in various ways with existing international regulatory structures.83 In South America, the two most noteworthy initiatives towards integrating countries under specific sets of (mostly trade) norms are The Andean Community and MERCOSUL (see Figure 16.1). Both blocs have

Venezuela Colombia Ecuador Brazil Peru Bolivia Paraguay

Uruguay Argentina

Mercosul Andean Community

Figure 16.1   The Andean Community and MERCOSUL: current composition and Caribbean countries must endure that the rules for their effective economic integration projects conform to their obligations at the multilateral level. For the most part, WTO rules serve as the base upon which the regional integration programs are built”). 82 

A Estevadeordal, K Suominen, and C Volpe, Regional Trade Agreements, Development Challenges and Policy Options. E15 Initiative (International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum 2013) . 83  On the dynamics of bilateral, regional, and multilateral free trade agreements, see further K Suominen, “Resuming WTO’s Leadership in a World of RTAs” in Regional Trade Agreements Group: Proposals and Analysis (ICTSD 2013) 28; O’Keefe (n 81). Estevadeordal et al (n 82) discuss whether there is a “false choice” between regionalism and multilateralism and whether Regional Trade Agreements comply with multilateral trade rules.

450    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina attempted to regulate IP protection under their norm-​setting umbrellas. However, while the Andean Community has been very pro-​active and relatively ambitious in its IP regulation, MERCOSUL’s endeavors have turned out to be quite timid and ineffective.

4.1 The Andean Community The Andean Community (formerly Andean Pact) is a regional integration union originally established as a pact between Bolivia, Chile, Colombia, Ecuador, and Peru through the signing of the Cartagena Agreement in 1969. Its composition has changed over time: Venezuela joined the Pact in 1973 and Chile pulled out in 1976. In 2006, it was Venezuela’s turn to withdraw, claiming too much influence from the US.84 Chile has rejoined, but as an associate member.85 The main objective of the Andean Community is the improvement of the position of its members in the international economic context through strategies for economic growth, harmonization of domestic laws, and foreign investment regulation. On its official website, it claims to be a “community of countries who has voluntarily come together to reach full development, more balanced and autonomous, through Andean, South and Latin American integration.”86 The Andean Community was largely inspired by the (then) European Community:  A supranational governance structure that encompassed legislative, executive, and judicial bodies. The latter created a Court for dispute resolution and national compliance with its supranational decisions, and became The Andean Tribunal of Justice. IP has always been an important feature of the Andean Community’s regulatory efforts, even though, for the first two decades of its existence, the Community practiced the import substitution model of development and, thus, suspiciously viewed IP as an “instrument of foreign imperialism.”87 Nevertheless, when the economic liberalization wave of the 1990s reached South America, the Community was ready and fast to adapt its norms to the higher levels of protection demanded by the WTO. As Helfer88 points out, this “reflected the member states’ awareness that augmented protection for IP would be the price of admission to the new global trading system.” Perhaps the most comprehensive analysis of the IP dynamics within the Andean Community is that of Helfer, Alter, and Guerzovich.89 In their Islands of Effective International Adjudication, the authors argue that the Community has failed to live up to its full economic and development potential as a trading bloc. The Andean Tribunal of 84  “Venezuela quits Andean trade bloc,” BBC News, 20 April 2006 (London) . 85  The other associate Members are Argentina, Brazil, Paraguay, and Uruguay. These countries are able to join certain free trade agreements with the Community, but do not enjoy full membership. 86 . 87  AR Bonilla, The State of Intellectual Property in Latin America: legal trends, economic development and trade (B&R Latin America 2012) 7. 88  LR Helfer, KJ Alter, and F Guerzovich, “Islands of Effective International Adjudication: Constructing an Intellectual Property Rule of Law in the Andean Community” (2009) 103 American Journal of International Law 1, 10. 89 ibid.

Intellectual Property Law in South America    451 Justice, however, is one of the world’s most active international courts, effectively providing a space for the protection of rights in the region. One of the Tribunal’s most interesting characteristics is that it mainly deals with IP disputes.90 One of Helfer et  al.’s91 main arguments is that the rulings of the Andean Tribunal of Justice have “helped to establish intellectual property as a rule-​of-​law island in the Andean Community and to ensure that legal rules—​rather than power, political influence, or bribery—​shape decision making by state actors.” In terms of application, it is interesting to note that the national IP legislation of Bolivia, Colombia, Ecuador, and Peru is Andean law, having direct domestic effect. Furthermore: Domestic IP administrative agencies across the region apply these supranational rules to determine whether to register patents and trademarks, the agencies exchange best practices when they confront unclear aspects of the law, and governments ask for the agencies’ views when revising supranational IP rules. These features give agency officials a stake in ensuring that Andean IP Decisions are respected.92

The case of Venezuela illustrates an interesting issue regarding the direct applicability of the Andean supranational regulation. The country’s withdrawal from the Community in 2006 resulted in the revocation of Andean IP code (official in 2008). Hence, industrial property regulation in Venezuela went back by about 52 years. Nowadays, the law in force in the country is that of 1956, which is non-​compliant with TRIPS. For example, it includes patent terms of ten years (as opposed to the minimum 20 years required by the WTO) and excludes pharmaceuticals, foods, and beverages from protection. Finally, when it comes to scope, the Andean IP regulation (and its interpretation by the Andean Tribunal of Justice) is not always expansionist, meaning it does not necessarily lead to TRIPS-​plus or TRIPS-​extra standards. In sensitive areas, such as those related to patents and medicines, Helfer et al.93 have been able to identify that the system has actually helped the region fight pressure from the US to, for instance, broaden the scope of patent protection, and thereby balance property rights against the public interest.94 Also corroborating this “non-​expansionist” feature of the Andean IP regulation is Decision 39195 (of 1996)  on Access to Genetic Resources, which acknowledges the value of biological resources and related traditional knowledge (TK). Additionally, it sets a legal framework for bio-​prospecting in the area, and anticipates a benefit-​sharing mechanism among the Member States of the Community. Likewise, Decision 46896 (of 2000) limits the granting of patents that are related to TK, and establishes the need for prior consultation with TK holders. Again, this shows the strength of

90 

As of 2009, up to 90 percent of cases in the Tribunal’s dockets concerned IP disputes: ibid.

91 ibid. 92 

LR Helfer and KJ Alter “The Influence of the Andean Intellectual Property Regime on Access to Medicines in Latin America” in Dreyfuss and Rodríguez-​Garavito (n 73), 247. 93  Helfer, Alter, and Guerzovich (n 88) 10. 94  See, eg, the ban on pipeline and second-​use patents described by Helfer, Alter, and Guerzovich (n 88) 25. 95  Available in English at . 96  Available in English at .

452    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina the region, as a bloc, to fight international movements that aim at broadening the scope and duration of IP rights for the benefit of highly industrialized and developed countries.

4.2 MERCOSUL The leading trading bloc in South America, MERCOSUL97 (the Mercado Comum do Sul or South Common Market) was created in 1991 (by the Treaty of Assunción98) by four South American countries: Argentina, Brazil, Paraguay, and Uruguay. The bloc aims at developing an integrated common market among its members based on the free movement of goods, services, and means of production. In order to achieve such goals, the main guidelines for MERCOSUL countries are the standardization of trade and tariff policies between its members, and the harmonization of domestic laws that can impact trade. The bloc’s structure is quite simple, and basically consists of decision-​making bodies responsible for the political conduct of the integration process, the internal organization and decision-​making processes in general, and associated advisory bodies.99 Venezuela joined MERCOSUL in 2012, but as of 5 August 2017, is suspended of all its rights and obligations as a Member, due to the “democractic disruption” the country currently faces.100 Bolivia has been in the process of becoming a member since 2012. The bloc has also six associated country members: Chile, Peru, Colombia, Equador, Guyana, and Suriname, meaning they are able to benefit from some free trade agreements in the bloc and take part in MERCOSUL meetings as listeners. In terms of advancing a regional set of IP regulations, however, MERCOSUL has been quite timid, especially when compared to the vigorous Andean Community. The most significant step towards IP regulation ever taken by the bloc is the 1995 Protocol101 on the Harmonization of Intellectual Property Norms in the Field of Trademarks, Indications of Source & Appellations of Origin (Protocolo de Harmonização de Normas sobre Propriedade Intelectual do Mercosul em Matéria de Marcas, Indicações de Procedência e Denominações de Origem). The 1995 Protocol established minimum rules of protection while also indicating that signatory states can have more restrictive domestic legislation in these areas. Topics such as ten-​year renovation cycles and a six-​month grace period beyond the expiration date also fall under the scope of its regulation. Both Paraguay and Uruguay ratified the Protocol in 1995 and 1998, respectively. However, neither Brazil nor Argentina has signed it. In fact, in 2000 the Brazilian House of Representatives rejected the Protocol altogether. Unlike the Andean Community Directives, which have direct application, MERCOSUL regulations need to go through a ratification process before they can have legal effect at the domestic level.

97 

See at . Amended and updated by the Treaty of Ouro Preto in 1994. 99  For an in-​depth analysis of the institutional framework of MERCOSUL, as well as its economic integration process, see O’Keefe (n 81). 100 . 101  Available in English at . 98 

Intellectual Property Law in South America    453 The next attempt to harmonize IP within MERCOSUL came in 1998, with the Protocol102 on the Harmonization of Standards in the Field of Industrial Designs (Protocolo de Harmonização de Normas em Matéria de Desenhos Industriais). Aimed at “promoting effective and adequate protection of IP rights in respect of industrial designs and ensure that the exercise of such rights does not represent in itself a barrier to legitimate trade,” the 1998 Protocol has not yet—​17 years later—​been ratified by any of the MERCOSUL’s Member States;103 a clear example of sterile norm-​making efforts within the bloc. As Vacas-​Fernández has pointed out,104 the vast majority of fields relevant to the ­harmonization of IP rights have not yet been subject to regulatory treatment within MERCOSUL. The few topics that have made it to the negotiating table have never been ratified by Member States, meaning the regulations have no practical effect for nationals. All MERCOSUL members are also WTO members and, thus, compliant with minimum international standards of IP protection (with the exception of Venezuela, as mentioned earlier). Regionally, however, MERCOSUL misses out on the opportunity to clarify and/​or solve issues that are left open and have significant impact on local trade, such as the exhaustion of rights and parallel importation mechanisms.

5.  The Fragmentation of Intellectual Property Systems in Latin America: Bilateralism Sets In The WTO has been the most institutionally well-​established multilateral trade organization in international law for over 20 years. The trade-​off between large-​scale market access and IP that the WTO is able to offer is one of the main reasons why negotiations in this realm have been so successful, especially in terms of advancing a set of minimum rules harmonizing relatively high levels of protection for the developing world. In fact, Correa has described105 a sense of expectation from developing countries that, having consented to high standards of IP rules within the WTO,106 they would be “protected from unilateral action and further demands for increased levels of protection by rich countries.” History has proven this assumption to be wrong. 102 

Available at . 103  For a detailed analysis of the terms of both Protocols, see FV Fernández, “The Protection of Intellectual Property in MERCOSUR” in MT Franca Filho, L Lixinski, and MBO Giuppon (eds), The Law of MERCOSUR (Hart Publishing 2010) 317. 104 ibid. 105  CM Correa, “Bilateralism Intellectual Property: Defeating the WTO System for Access to Medicines” (2004) 36 Case Western Reserve Journal of International Law 79. 106  For a quantitative and substantive analysis of Free Trade Agreements notified to the WTO until the end of 2010, see R Valdés and T Runyowa, “Intellectual Property Provisions in Regional Trade Agreements” (2012) World Trade Organization Economic Research and Statistics Division, Staff Working Paper ERSD-​2012-​21, .

454    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina Over the past two decades, the US and the EU107 have worked hard towards an explicit strategy of bilateral trade agreements that comprise substantively higher levels of IP protection than that required by WTO rules. Okediji, in reviewing the literature on the matter, has found that bilateral and regional agreements are aggressively used to “expand global ­intellectual property rights, particularly at the expense of developing countries whose interests in market access are often of more immediate political and economic relevance to their domestic constituents.”108 In fact, the narrative Okediji offers is one of “illicit exercises of power ( . . . ) to undermine and in some cases completely eliminate policy options and sovereign discretion granted by the TRIPS Agreement.”109 And, as Liberti points out:110 The IP chapter of post-​TRIPS FTAs signed with the US contains substantial intellectual property provisions that exceed TRIPS minimum standards (frequently referred to as TRIPS-​Plus obligations). These provisions do not always provide for the full range of flexibilities offered by the TRIPS Agreement with regard to compulsory licences, revocation of patents or the option to exclude the patentability of plant and animal varieties. These provisions are often combined with extended copyright and trademark protection period, extended patent protection term for unreasonable curtailment of the patent term as a result of the marketing approval process, data exclusivity, new use protection, and obligations to ratify international treaties on IPR protection.

The South American case is no stranger to this rationale. Bilateral Investment Treaties (BITs), Economic Partnership Agreements (EPAs), Trade Promotion Agreements (TPAs), and Free Trade Agreements (FTAs) are the primary means by which TRIPS-​plus and TRIPS-​ extra levels of IP protection have been pushed into the region. In general, IP rights are not the main focus of such agreements, but rather part of the larger trade-​off package that countries have negotiated. Their provisions, however, have a strong impact on how international standards of IP protection are to be implemented nationally. García argues that there is a new approach to international trade from Latin American countries: One that is based on the search for new and bigger markets and that has resulted in “the proliferation of free trade agreements that seek to promote international trade, and at the same time establish instruments to introduce structural and institutional reforms.”111 From a trade perspective, the preferences embodied in these agreements have meant a significant advantage for exports to the US.

107  For a comprehensive study on the EU’s Free Trade Agreements, see J Drexl, “Intellectual Property and Implementation of Recent Bilateral Trade Agreements in the EU” in J Drexl, H Grosse Ruse-​Khan, and S Nadde-​Phlix (eds), EU Bilateral Trade Agreements & Intellectual Property for Better or Worse? (Springer 2014) 265. 108  RL Okediji, “Back to Bilateralism? Pendulum Swings in International Intellectual Property Protection” (2004) 1 University of Ottawa Law and Technology Journal 125. 109 ibid. 110  L Liberti, “Intellectual Property Rights in International Investment Agreements: An Overview” (2010) 1 OECD Working Papers on International Investment, . 111  LA García, “Intellectual Property in the US-​Peru Trade Promotion Agreement” (2008) 3 Intellectual Property, Bilateral Agreements and Sustainable Development Series The Centre for International Environmental Law, .

Intellectual Property Law in South America    455 There are, however, significant concerns when it comes to the IP chapters of such agreements. For example, those chapters have severe consequences for areas such as public health, as Bernieri highlights,112 including as a result of their broad definitions of patentable subject matter,113 limited exceptions114 and compulsory licensing provisions,115 limited rights of parallel importation116 and patent revocation,117 and protection for test data,118 among other things. While a few countries—​like Brazil—​have chosen to remain out of the bilateral agenda, others have dived in. Chile, Peru, and Colombia are good examples of countries that have enabled the pro-​expansionist bilateral agenda to work its way into the region. Chile has pursued a “multidimensional trade policy” since the early 1990s.119 Having free trade and tariff agreements as important goals to be achieved, Chile has been an intrepid actor on different fronts: regional, inter-​American, multilateral, and bilateral. The US–​Chile Free Trade Agreement entered into force on 1  January 2004. While Fischer120 has challenged the general perception that developing countries are the least sophisticated negotiators and weaker negotiating party, there was a significant escalation of existing IP levels as a result of this FTA, as well as the establishment of new protection standards. For example, Bernieri121 highlights the following features of the FTA, which are directly related to patents and access to affordable drugs: (i) its exclusion of the right to implement exemptions to patentability based on public interest reasons; (ii) its limited grounds for patent revocation (eg, grounds that would have justified a refusal to grant a patent, including fraud in obtaining it); (iii) its extension of patent duration to compensate for unreasonable 112 

R Bernieri, “Intellectual Property Rights in Bilateral Investment Treaties and Access to Medicines: The Case of Latin America” (2006) 9(5) The Journal of World Intellectual Property 548. 113  US–​Jordan, US–​Singapore and US–​Australia, US–​Peru. 114  An example is the Bolar Exception for generic drug production. For a more in-​depth discussion, see C. Deere, The Implementation Game: the TRIPS Agreement and the Global Politics of Intellectual Property Reform in Developing Countries (Oxford University Press 2009). The US–​Singapore, US–​Chile, US–​Morroco, and CAFTA–​DR (Dominican Republic Central America Free Trade Agreement with the US) limit the use of the Bolar Exception. 115   US–​Jordan, US–​Singapore, and US–​Australia. See Bernieri (n 112) 9 (“Even though Latin American BITS (except for the FTAA draft) do not specifically contain a measure for compensation, the application of investment provisions to IPR regulation could lead to applying the standards for expropriation to compulsory licensing with a similar effect. While under the TRIPS Agreement, the level of compensation is ‘adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization’ (art 31(h)), under investment provisions in BITS, the standard is prompt, adequate and effective compensation. The article that regulates with great detail the ‘expropriation and compensation’ in some BITS states that it does not apply to the issuance of compulsory licenses granted in accordance with the TRIPS Agreement or to revocation, limitation or creation of IPR to the extent that is consistent with the IPR chapter. The latter statement, however, presumes that the IPR chapter will prevail over the TRIPS Agreement flexibilities.”) 116   US–​Singapore, US–​Australia, US–​Morocco. 117  US–​Chile, US–​Singapore, US–​Peru and CAFTA–​DR. 118  US–​Peru TPA (Trade Promotion Agreement). 119  R Fischer, “The Expansion of Intellectual Property Rights by International Agreement: A Case Study Comparing Chile and Australia's Bilateral FTA Negotiations with the US” (2006) 28 Loyola of Los Angeles International and Comparative L Rev 129. 120 ibid. 121  Bernieri (n 112) 14.

456    Fabrício Bertini Pasquot Polido and Mônica Steffen Guise Rosina delays in granting the patent and for unreasonable curtailment of the patent term as a result of the marketing approval process (which could lead to 25 or more years); (iv) its barriers to compulsory licensing through, for instance, a term of exclusivity in relation to test data submitted for the marketing approval of pharmaceutical products, with no indication that the ban only refers to unfair commercial use of submitted undisclosed information; and (v) its limitations to the Bolar exception, as health authorities can deny marketing approval in relation to a patented pharmaceutical product before the patent term expires. The US–​Peru Trade Promotion Agreement entered into force on 1 February 2009, after intense years of negotiation between the parties.122 Like the US–​Chile Agreement, the original text of the IP chapter of this TPA significantly enhanced the scope of IP rights, making it difficult to implement existing TRIPS flexibilities. The final text is more public interest-​friendly, with specific references to important flexibility instruments, such as paragraph 6 of the Doha Declaration on TRIPS and Public Health, in what Eugui123 calls “a shift in intellectual property policy in US FTAs.” Nonetheless, levels of IP are raised. More recently, the US–​Colombia Trade Promotion Agreement entered into force in May 2012. It contains noteworthy TRIPS-​plus provisions in different areas. For instance, it limits the grounds for patent revocation, expands test data periods, provides protection for plant varieties, and requires governments to use only legitimate computer software. Like its Peruvian counterpart, the parties expressed their understanding that the IP chapter “would not prevent either party from taking measures to protect public health by promoting access to medicines for all,” corroborating the shift identified by Eugui124 but still considerably raising IP protection levels across a broad range of areas.

6. Conclusion IP regimes in South America have resulted from a formal coexistence of and rudimentary convergence between Pan-​American conventions and national laws, statutes, and codes. Most countries in the region only adopted the classic multilateral instruments, such as the Paris and Berne Conventions and the TRIPS Agreement, in a very late stage in the development of international IP law institutions, either after the establishment of WIPO in 1967, or after the establishment of the WTO in 1994. There is solid evidence that regimes for IP protection in South America have indeed strongly been shaped by national IP statutes and constitutional provisions dealing with the protection of inventive and creative activity and the recognition of IP rights vesting in authors and inventors. As discussed, a variety of legal patterns can be identified across South American constitutions (basic rules anchored in the Rule of Law, democratic principles, and social justice and welfare goals and values). Such patterns have contributed to the design of the

122 

See García (n 111) for a detailed analysis of the negotiation process. DV Eugui, “A shift in Intellectual Property Policy in US FTAs?” (2007) 11(5) Bridges . 124 ibid. 123 

Intellectual Property Law in South America    457 region’s main statutes and laws articulating the political, economic, and social impacts of IP policies on local innovation and industrial and technological environments. A national phase in IP norm-​setting has been equally indispensable for South American countries to better experience the internationalization of IP rights achieved by the TRIPS Agreement and other bilateral and regional instruments. The Andean Community of Nations and MERCOSUL illustrate how well and how poorly South American efforts towards integrated IP systems have been. The region is portrayed as a fragmented one, in view of its own contradictory integration approaches, but also due to the new bilateralism that has emerged in it.

Pa rt  I V

R IG H T S

Chapter 17

Patents a nd Rel ated Ri g h ts A Global Kaleidoscope Dan L. Burk * 1. Introduction Patent law is the form of intellectual property (IP) most closely associated with technological innovation, and most often discussed in public initiatives to promote such innovation. Patents have a long history; some form of patent grant can be traced back to at least the Renaissance Venetian Republic, and possibly before.1 Initially, the legal control associated with patents seems intended to either attract or perhaps misappropriate advantageous technology from foreign jurisdictions. Over time, the patent became increasingly associated with original, rather than with copied, innovations. Currently some form of patent system is found in essentially all modern states; common features of these systems are provided for by membership in the international TRIPS trade treaty that is discussed by Sam Ricketson in Part III of this volume. Thus, patents have grown to be a ubiquitous feature of the global legal and technical environment. At any given point in time, a written exposition of patent law can at best offer a snapshot of what is happening in certain jurisdictions during particular moments. This chapter offers a series of such vignettes, recognizing that in a highly dynamic area of law, where the doctrine in any given jurisdiction changes on a monthly, if not a weekly, basis, and where this constant evolution of doctrine is occurring simultaneously in multiple jurisdictions, any particular example or explication of doctrine is likely to be short lived. Nonetheless, it is hoped that this may prove an asset, rather than a shortcoming. The shifting diversity of national approaches offers the opportunity to consider comparatively how characteristic themes and problems of patent law have been approached from different perspectives, and lend a sense * 

Dan L Burk has asserted his moral right to be identified as the author of this Contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  LR Bradford, “Inventing Patents: A Story of Legal and Technical Transfer” (2015) 118 West Virginia L Rev 267.

462   Dan L. Burk of better, worse, and alternative solutions to the problem of prompting technical innovation. Consequently, this chapter features particular doctrinal problems in patent law to illustrate certain broad theoretical issues endemic to the patent system and ties those issues to ongoing controversies that have attracted widespread interest. Although the diversity of patent approaches offers an opportunity for comparative scholarship and analysis, in practice it presents a series of applied challenges. The international law principle of territoriality has historically been paramount in patent law; patents are issued by particular nations and are effective only within the borders of the issuing state. At the time of this writing, no international or regional patents exist, although Member States of the European Union (EU) have been slowly moving toward designation of a patent document that would be recognized as having unitary effect throughout most, or perhaps even all, of their territories.2 The practical necessity of securing individual patents in each of the territories where exclusive rights are desired continues to confront inventors with a stark business decision: The administrative costs of obtaining patents in every jurisdiction is prohibitive; consequently, patent applicants must decide which countries are important to their business plan, and forego protection in other nations. Typically, patent applicants seek protection in major business markets with well-​developed patent systems, such as the United States and nations covered by the European Patent Convention (EPC), as well as in other important markets, such as Japan and Australia. Increasingly, significant developing markets such as China and India figure in patent procurement strategies. Certain international conventions, for example, the Patent Cooperation Treaty of 1970, serve to harmonize the application mechanics by standardizing the physical and textual format of applications, as well as the procedures by which the application is examined. The EPC establishes an intergovernmental organization, the European Patent Office (EPO), that offers a unified application for obtaining patents from signatory nations. But EPO applicants emerge with a bundle of national patents that are recognized and enforced on a national, not regional, level. And even within the states of the EPC, applicants typically choose to forego all but the three or four jurisdictions of Germany, France, the Netherlands, and the UK. Increased global availability of patents may not be viewed universally as beneficial. Even when viewed from the most benevolent perspective, the patent system is socially costly, as it imposes extra restraints on normal commerce.3 This has historically produced a deep-​seated suspicion of patents as perhaps necessary evils, but evils nonetheless. In the United States, this view shifted radically during the 1980s, when, with the ascendancy of politically conservative economic analysis of law, patents became celebrated rather than tolerated. This newer American view has increasingly become dominant in global discussions regarding patent policy, harmonization, and reform. Nonetheless, in many jurisdictions, patents are still considered at best a mixed blessing, and may still be viewed with considerable caution. Under this more cautious view of patents as extraordinary grants to the private sector, deployment of exclusive patent rights must be kept in check either by mechanisms endogenous

2 

CS Petersen, JH Schovsbo, and T Riis, “The Unified Patent Court (UPC) in Action: How Will the Design of the UPC Affect Patent Law?” in RM Ballardini, M Norrgård, and N Bruun (eds), Transitions in European Patent Law—​Influences of the Unitary Patent Package (Kluwer Law International 2015) 37. 3  MA Lemley, “Property, Intellectual Property, and Free Riding” (2005) 83 Texas L Rev 1031.

Patents and Related Rights: a Global Kaleidoscope    463 to patent law, such as limitations or exemptions, or by external mechanisms, such as competition law. Much of the current discourse on justification of patents draws on the innovation rationale, discussed in Parts I, II, and V of this volume, of providing an economic incentive for investment in the development of new technologies. This justification is common among many areas of IP. But patent law entails alternative justifications that are less commonly associated with other forms of IP, and which are closely related to certain idiosyncrasies of the patent system. Chief among these is the rationale of disclosure, the argument that patents are intended to induce publication, by means of the patent document, of valuable technical information that an inventor might otherwise keep concealed, either as a legal trade secret or as an actual secret.4 On this theory, the grant of exclusive rights under the patent system represents a bargain between the inventor and the public: In return for full disclosure to the public as to how to make and use the claimed invention, the inventor receives approximately 20 years of legal exclusivity. It is unclear how well this theory works in practice, given that the alternative to patenting is trade secrecy. Trade secrecy lasts so long as the invention can be kept a secret, in particular, so long as a third party is able to independently re-​create or reverse engineer the secret. For technologies that lend themselves to such concealment, the period during which the inventor could exploit the invention might be much longer than 20 years. This suggests that the inventions for which patenting is most attractive are those that cannot be easily concealed, which is to say, inventions that would have become public knowledge without the inducement of a patent. Nonetheless, the bargain or “quid pro quo” theory of disclosure permeates many aspects of patent doctrine.

2.  Patent Formalities Unlike many other forms of IP, patent rights come into existence only after an administrative process of application, examination, and approval by a governmental agency. The rights conferred by the patent are thus defined by a text—​a governmentally certified document—​ that defines the outer limits of the technology covered by the patent. Applicants for a patent are expected to submit to a designated government office a document that explains in detail the invention for which exclusive rights are sought; much of the explanation consists of written text, although drawings are frequently included. The document concludes with a series of numbered statements indicating the scope of the technology over which the applicant hopes to claim exclusive rights, and is examined by an official with expertise in the relevant area of technology for compliance with the substantive and procedural requirements for a patent. The requirements for patentability include novelty, utility or industrial application, and non-​obviousness or “inventive step.” Often, the examiner will decline to approve the application unless the applicant alters the claims to cover a more restricted or somewhat different area than that indicated in the initial

4  DL Burk, “Law and Economics of Intellectual Property: In Search of First Principles” (2012) 8 Annual Review of Law and Social Science 397.

464   Dan L. Burk application. Generally, only the claims can be altered once the application is filed; altering the description of the technology would by definition mean that a different invention was under consideration than that in the original application, so that the applicant was starting over. The applicant may also have the option of responding in order to persuade the examiner, creating an epistolary record that may in some jurisdictions be used to understand the meaning or the intent behind the text of the final issued document. Once the application is approved, and the patent issued, the patent holder enjoys a period of time, generally about 20 years, during which he is able to exercise or license exclusive rights over the invention as defined by the claims. Unauthorized activity falling within the patent claims may be the subject of legal action by the patent owner. A court enforcing the patent will look to the patent document to determine whether infringement has occurred, by comparing the accused device or activity to the claims. Accused infringers typically have the option of defending on grounds of either non-​infringement or invalidity; that is, showing that either the accused activity does not fall within the scope of the patent rights, or that the patent is legally defective and so unenforceable. Patents are thus highly intertextual: They issue on the basis of a purely textual description of an invention, with reference to other, older texts that define what the inventor may claim.5 The physical invention itself need never appear at any stage of the life of the patent, from application through expiration. Although it was common in the nineteenth century to require a working model of a patent to accompany a patent application, this practice has long since ceased.6 Indeed, in jurisdictions such as the United States, an inventor who is able to offer a sufficiently detailed textual description of his concept can secure a “paper patent” which describes an invention that has never actually been built. Neither is the physical invention required when it comes to judging infringement: The accused device or process is judged to be infringing or non-​ infringing by comparison to the text of the patent document only. Similarly, determining whether infringement has occurred, or what relationship the patent claims bear to prior art documents, is necessarily an exercise in textual interpretation. Courts have adopted a range of interpretive strategies, which are often similar to those used in determining meaning for other legal texts, such as statutes, constitutions, or contracts. As in their interpretation of other legal texts, American courts have tended toward defined “plain meaning” or “literal meaning” of the words in a claim. Claim interpretation in British courts, on the other hand, has been characterized by “purposive” readings, in which an understanding of the objective purpose of the drafter is sought: A claim means what the person having ordinary skill in the art (abbreviated PHOSITA) would understand the drafter by his or her choice of language to have intended it to mean. When a plain meaning cannot be easily determined, American courts may by contrast resort to examination of the correspondence or “prosecution history” between the inventor and the patent issuing authority, to glean clues as to the applicant’s subjective intent. Sometimes dictionaries or other external references are consulted to divine popular or likely word meanings.

5 

DL Burk and J Reyman, “Patents as Genre: A Prospectus” (2014) 26 Law & Literature 163, 171–​172. A Pottage, “Law Machines: Scale models, forensic materiality and the making of modern patent law” (2011) 41 Social Studies of Science 621. 6 

Patents and Related Rights: a Global Kaleidoscope    465 Such intertextuality stands in sharp contrast to other forms of IP.7 The detail and intensity of the application process are not found in other forms of IP, nor is the reliance of patent law on the text of the published patent document. For example, in copyright there is no examination process; rights arise spontaneously with the creation of the work, and the scope of rights in the work is determined with reference to examples of the work itself, not with reference to a document that describes the work.8 The scope of a trademark, too, is judged with reference to the mark itself, and not from a text describing the mark. The scope of copyright and trademark rights may be limited by prior works or existing marks, but nothing in these systems requires advance delineation of their ambit as in the case of patent claims. Indeed, the application process requires the inventor to define the invention in reference to other documents—​the prior art, against which the application’s compliance with statutory requirements is measured.9 The inventor is required to disclose any relevant prior art documents of which she is aware; the examiner will search library databases looking for relevant prior art as well. The patent document will reference any prior art documents that may bear on the patentability of the claimed invention. The applicant may be required to adjust the scope of what is claimed in the patent so as to avoid encompassing technical knowledge that is already found in references available to the public. The current practice regarding patent claims entails yet another peculiar form of textuality, that of “peripheral claiming.”10 This practice evolved along with the textual practice of claiming itself. As a textual form, separate claims evolved over a period of decades, largely as a matter of informal convention in response to judicial preferences. The earliest versions of the US patent statute required only that an applicant supply what we would now call a specification to disclose the invention that was the subject of the patent.11 Patents from this period contained no separate statements constituting claims, and courts determined both invalidity and infringement on the basis of the disclosure. However, in response to the need to clarify which aspects of the invention were novel and so the proper subject of the patent, patent drafters began to break out of the text a distinct, separate statement of the novel features of the invention as a one sentence “claim” in order to avoid the possibility that the patent might be viewed as intended to claim everything in the full description of the invention.12 Once claims took the form of separate textual elements, their function and interpretation began to evolve as well, from what has been called “central claiming” to the current practice of peripheral claiming. The idea behind peripheral claiming, which US patent law adopted in the 1870s, was to establish the “metes and bounds” of the invention in a manner analogous to real property deeds. But before 1870, the scope of US patents was determined using a system of central claiming. Under a central claiming approach, the patentee does not delineate the outer reach of what it claims. Rather, the patentee discloses the central features of the 7  DL Burk, “Dynamic Claim Interpretation” in S Balganesh (ed), Intellectual Property and the Common Law (CUP 2013) 107, 109–​110. 8  JC Fromer, “Claiming Intellectual Property” (2009) 76 University of Chicago L Rev 719. 9  Burk and Reyman (n 5). 10  DL Burk and MA Lemley, “Fence Posts or Sign Posts? Rethinking Patent Claim Construction” (2009) 157 University of Pennsylvania L Rev 1743. 11  KB Lutz, “Evolution of the Claims of U.S. Patents (pt. 1)” (1938) 20 Journal of the Patent Office Society 134, 139–​141. 12  WR Woodward, “Definiteness and Particularity in Patent Claims” (1948) 46 Michigan L Rev 755, 757–​758.

466   Dan L. Burk invention—​what sets it apart from the prior art—​and later, for example, in an infringement action, the courts determine how much protection the patent is entitled to by looking at the prior art that cabins the invention, how important the patentee’s invention was, and how different the accused device is. If the goal of peripheral claiming was to establish fence posts marking the boundary of the patent, we can think of central claiming as replacing fence posts with signposts identifying new inventions.13 Whereas peripheral claiming purports to mark the outermost boundary of the patentee’s claims, central claiming describes the core or gist of the patentee’s contribution to technology. In some countries, elements of that system remain to this day,14 and indeed there are vestiges of central claiming in the US patent system, for example, in jurisprudential forms such as the doctrine of equivalents. Central claiming is also the norm in copyright, trademark, and trade secret law. As indicated, these other forms of IP are not defined by reference to a descriptive text, but by reference to themselves. Thus, the scope of copyright in a given work is determined by looking at that work, and then determining what additional scope, such as substantially similar works, might be covered by the copyright. This is the same central claiming practice that was conducted for patentable inventions prior to the emergence of peripheral claiming. Central patent claiming also operated as the norm in many major industrialized nations well into the late twentieth century. For example, Korea employed central claiming until a statutory change in 1980 instituted peripheral claiming; even then, courts continued to apply central claiming methods well into the 1990s.15 Central claiming was also the approach in Germany until accession to the EPC required harmonization with the peripheral approaches of other EPC Member States; at that point Germany moved somewhat reluctantly to an intermediate position that continues to incorporate many aspects of central claiming.16 For the last several decades it has sought to integrate the two, using peripheral claiming as a starting point, but making liberal use of the doctrine of equivalents and purposive claim interpretation.17 Nonetheless, the German Federal Supreme Court has endorsed the central claiming-​based “substantial difference” test.18

2.1 Doctrine of Equivalents Among the vestiges of central claiming found in the US system is the doctrine of equivalents.19 Claims are developed in the context of an administrative procedure, but 13  This terminology originates from WR Cornish, Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights (4th edn, Sweet & Maxwell 1999) 165. 14  T Takenaka, Interpreting Patent Claims: The United States, Germany and Japan 17 IIC Studies (Weinheim 1995) 6–​9. 15  CL Kim, “Transition from Central to Peripheral Definition Patent Claim Interpretation System in Korea” (1995) 77 Journal of Patent & Trademark Office Society 401. 16  W Stockmair, The Protection of Technical Innovations and Designs in Germany (Verlag CH Beck 1993) 93. 17  AM Soobert, “Analyzing Infringement by Equivalents: A Proposal to Focus the Scope of International Patent Protection” (1996) 22 Rutgers Computer & Technology LJ 189, 207–​211. 18  “Moulded Curbstone” (Formstein) (1987) 18 IIC 795, 798 (BGH) (reporting decision in English). 19  JR Thomas, “Claim Re-​Construction: The Doctrine of Equivalents in the Post-​Markman Era” (2005) 9 Lewis & Clark L Rev 153.

Patents and Related Rights: a Global Kaleidoscope    467 are generally enforced by means of judicial proceedings. Claim interpretation by a court determines the applicability and scope of the patent. But at some point in the enforcement of a patent, meaning beyond the narrowest reading must be attributed to the language of the claims. If the scope of patent rights is confined to a very strict reading of the claims, infringers can easily escape the claim language by making trivial alterations to their activities; if the variants are not explicitly stated in the claims, the infringing products or processes will not literally infringe. Many nations therefore allow the patent holder to enforce the patent against infringement that is not explicit in the text of the patent claims. The doctrine of equivalents is perhaps the best-​known version of such expansive claim enforcement, under which a variation that is equivalent to elements of the claimed invention still triggers infringement. Equivalents have been defined as something which is known in the technological art to be a substitute, or something which performs the same function in the same way with the same result as the element it replaces in the claimed invention. Such attribution of patent scope is of course a version of central claiming, rather than peripheral claiming, and so sits uncomfortably in the modern peripheral claiming system. In particular, such equivalents pose a problem with regard to the definiteness and notice function of claims. Peripheral claiming is often said to provide the public with a definition of the outer boundaries of the patent holder’s rights, so as to warn possible infringers away from exclusively held technology. At the same time, the peripheral claim is said to provide an outer limit to the rights of the patent holder, which prevents the patent holder from encroaching on technical areas outside his scope of legal exclusivity. The doctrine of equivalents potentially undermines both of these functions by providing to the patent holder a scope of exclusivity not explicitly articulated in the patent claims: Patent holders then have an incentive to assert legal exclusivity over unspecified equivalents to his technology, and the public is left uncertain as to where the patent’s boundaries lie. For such reasons, Lord Hoffmann famously opined in Kirin-​Amgen that unlike the United States, the UK recognizes no such doctrine of equivalents: While equivalence forms part of the background of facts in the light of which claims are purposively construed, it cannot be used to extend protection outside their scope.20 This view has been controversial even within British patent circles; the late Sir Hugh Laddie argued that Lord Hoffmann’s interpretive approach involved a misreading of UK precedent.21 But in any event, by focusing on what the PHOSITA would understand the drafter to have intended by his or her choice of language to claim, the British approach rejects literal claim exclusivity and supports non-​literal infringement in any case in which a purposive construction of the claim produces that result. The patent law of the UK—​as well as Germany and most of its continental neighbors—​is constrained by the requirements of the EPC. Article 69 of the EPC states that patent scope is to be based upon the patent’s claims, in light of the description and the drawings.22 If read strictly and literally, this would seem to preclude any standalone doctrine of equivalents or other influences external to the patent document, and indeed (somewhat ironically) this is exactly how Lord Hoffmann has regarded the provision. As he has also emphasized, however, it does not follow from Article 69 that patent claims are to be interpreted literally. Indeed,

20 

Kirin-​Amgen v Hoechst Marion Roussel Ltd [2005] RPC 9 (HL) 188–​189. H Laddie, “Kirin Amgen—​The End of Equivalents in England?” (2009) 40 IIC 3. 22  Convention on the Grant of European Patents (opened for signature 5 October 1973, entered into force 7 October 1977) 1065 UNTS 255, 275–​276, as amended (hereafter EPC) art 69. 21 

468   Dan L. Burk the agreed-​upon interpretive protocol that accompanies Article 69 instructs—​apparently in an attempt to accommodate the traditional British and continental interpretive views—​that claims are neither to be regarded as mere guidelines, nor to be regarded as rigid definition of the patent holder’s rights.23 Rather it mandates that claims are to be read so as to combine both fair notice to the public and a reasonable scope of protection for the patent holder. In Lord Hoffmann’s view, purposive construction is the only way to achieve this. Since 2007, the protocol has been amended to include a provision mandating that “due account” be taken of equivalents to any element of the claims. The addition of an explicit reference in the amended protocol to “equivalents” might seem to infuse an almost American meaning into Article 69, or at least to recognize the primacy of the continental approach. But the protocol is guidance for interpreting the mandate of Article 69, and so might equally well be viewed as consistent with the UK approach, which instructs the interpreter to consider equivalents included within the terms of the claim—​perhaps in the manner suggested by Lord Hoffmann.24

3.  Patent Enforcement Due to the technical nature of patent law, and not merely that of patentable subject matter, several leading jurisdictions have developed specialty courts to deal with patent issues. In the United States, since 1982 the Court of Appeals for the Federal Circuit has had exclusive appellate jurisdiction over patent cases arising in the Federal District Courts across the United States, as well as those coming from the USPTO. Within Federal District Courts, the United States has also implemented a program whereby certain judges may specialize in patent trials. In the UK, patent holders have access to both a specialty Patents Court and streamlined Intellectual Property Enterprise Court for simpler cases below a £500,000 damages cap, which also includes a small-​claims track. In Germany, a Federal Patent Court sits as a court of first instances for validity challenges against issued patents, and as an appellate court hears matters that are appealed out of the patent office. An ongoing question remains whether specialization at the level of the trial court (court of first instance) would be preferable to specialization at the appellate level, or perhaps even designation of an entirely specialized patent court system.25 Many areas of law involve complex technical questions of fact that might lend themselves to expert adjudication. But it is not feasible to create separate courts for environmental, products liability, competition, health, medical malpractice, and other areas of law that routinely involve complex factual details. Patent law, however, in addition to involving technical facts, is itself a highly complex legal field, perhaps one which merits special treatment. To the extent that the facts of patent cases are difficult, specialized trial courts might be beneficial; to the extent that the law itself poses special challenges, specialized appellate courts may be called for. 23 

Protocol on the Interpretation of Article 69 EPC, art 1. N Pumfrey et al “The Doctrine of Equivalents in Various Patent Regimes: Does Anybody Have It Right?” (2009) 11 Yale Journal of Law & Technology 261, 284–​285. 25  AK Rai, “Specialized Trial Courts: Concentrating Expertise on Fact” (2002) 17 Berkeley Technology LJ 877–​898. 24 

Patents and Related Rights: a Global Kaleidoscope    469 Specialized courts such as those found in the United States, the UK, and Germany accumulate experience in the intricacies of patent law, and potentially give litigants the benefit of their particularized legal expertise.26 Specialized courts may also provide other benefits; for example, the Federal Circuit is widely understood to have been created by the US Congress in order to create national uniformity in patent law, so as to prevent forum shopping for adjudication that would yield a preferred outcome.27 At the same time, the potential downsides of such specialty courts are also the subject of ongoing debate. Specialized fora may be subject to capture as judges begin to identify with the litigants or advocates who regularly appear before them, or they may become myopic with regard to the place of patents within the larger network of legal and social policy.28 Specialized courts may also create procedural anomalies within a larger generalist judicial system. For example, in the United States the Supreme Court often uses “circuit splits,” which is to say conflicting decisions between inferior appellate courts, as a signal to identify issues that it needs to address via discretionary review. But because there is only one inferior appellate court that hears patent cases, this mechanism is unavailable to signal the importance (or unimportance) of patent issues.29 In the absence of its usual indicator for legal importance, the Court has begun frequently asking for the views of the executive branch on patent matters, in the form of invited briefs from the Solicitor General’s office.30 An alternative to judicial patent adjudication may be some form of administrative proceeding. Many jurisdictions offer the possibility of challenging the government grant of exclusivity via proceedings in the agency that issues the patent. Many jurisdictions allow such challenges in the form of opposition proceedings, some of which may occur prior to grant of the patent, but which often occur after the grant of the patent. In the United States, pre-​grant opposition proceedings do not exist, but post-​grant proceedings do, and are referred to as either “post grant review” or “inter partes review.” The first type of (post grant) review may occur immediately after grant of the patent, for a limited period of nine months, on nearly any of the grounds related to the statutory criteria for a patent. The other type of (inter partes) proceeding can be initiated later in the life of the patent, on more limited grounds. These types of proceedings are relatively new in the United States, which adopted them in order to defray the high cost of litigating patents through the US court system. Other countries have a longer history of experience with such oppositions, where they are often the preferred route for competitors to challenge defects in the patent grant. In the EPO, opposition proceedings may be brought within nine months of the patent grant, and offer a chance to nullify the patent with respect to all the EPC Member States in which it is designated for protection. In Germany, opposition proceedings ameliorate the peculiarity of the German court system that bifurcates actions for infringement from actions regarding

26 

RC Dreyfuss, “Specialized Adjudication” (1990) Brigham Young University L Rev 377. RC Dreyfuss, “The Federal Circuit: A Case Study in Specialized Courts” (1989) 64 New York University L Rev 1. 28  RC Dreyfuss, “The Federal Circuit: A Continuing Experiment in Specialization” (2004) 54 Case Western Reserve L Rev 769. 29  CA Nard and JF Duffy, “Rethinking Patent Law’s Uniformity Principle” (2007) 101 Northwestern L Rev 1619. 30  JF Duffy “The Federal Circuit in the Shadow of the Solicitor General” (2010) 78 George Washington L Rev 518. 27 

470   Dan L. Burk invalidity, and requires separate proceedings in separate courts. There, too, opposition proceedings can be brought within nine months of the patents issuance, and may be appealed to the Federal Patent Court. After the nine-​month period, proceedings to nullify a patent may be brought in the Federal Patent Court, but proceedings for infringement are brought in the civil district courts. The bifurcation of such issues sometimes results in the bizarre circumstance where a patent is deemed by separate proceedings “invalid but still infringed.”

4.  Patent Eligibility No area of patent law has received more attention in the past several decades than that of patent eligibility, which is to say, the subject matter that is properly eligible to receive a patent. The definition of proper subject matter has been the topic of copious scholarly commentary, protracted litigation, extensive judicial and administrative opinions, and has received a surprising degree of attention in the popular press. One might perhaps expect the issue to be non-​existent, as Article 27 of the TRIPS Agreement requires signatories to make patents available for inventions in all fields of technology, with only a couple of allowable exceptions for patents contrary to public order, medical processes, and complex living organisms.31 However, the fundamental question that has repeatedly arisen is whether certain developments or discoveries constitute inventions, a question not addressed by the treaty. If then certain subject matter falls outside the definition of invention, or does not lie within a field of technology, Article 27 never comes into play. The problems encountered in determining patent eligibility are well illustrated in the opinion of the Canadian Supreme Court, Harvard College v Commissioner of Patents, where the issue was the patent eligibility of a genetically modified mammal, the so-​called “Oncomouse.”32 The mouse, which was developed as a laboratory model for cancer research, had received patents from patent offices in a number of other jurisdictions, including the USPTO and (after extended proceedings) the EPO. However, the application was refused by the Canadian patent office on the grounds that a living organism was not patentable subject matter under the Canadian patent statute, which lists the categories of art, manufacture, process, machine, and composition as patent-eligible subject matter. When the case reached the Supreme Court, the majority of the Court agreed—​over a strident dissent—​that a complex living organism such as a mouse did not fit any of the available statutory categories. In particular, the Court reasoned that a mouse did not fit the category of “composition of matter,” because the common meaning of this term would not include living creatures, but only inanimate materials. Thus, according to the Court, the term Parliament used did not contemplate complex organisms, which indicated that the Legislature did not have animals such as a mouse in mind when the statute was enacted. Absent new legislative direction to the contrary, a living creature was therefore excluded from any of the statutory categories.33 31  TRIPS Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS) (opened for signature 15 December 1993, entered into force 1 January 1995) 1869 UNTS 299 (hereafter TRIPS) art 27. 32  Harvard College v Canada (Commissioner of Patents) 2002 SCC 76. 33  DL Burk, “Reflections in a Darkling Glass: A Comparative Contemplation of the Harvard College Decision” (2003) 40 Canadian Business LJ 219.

Patents and Related Rights: a Global Kaleidoscope    471 The decision is particularly notable in light of a previous decision by the United States Supreme Court 30 years prior. Canada shares with its neighbor immediately to the south virtually the same statutory definitions of patentable subject matter; the language of the two countries’ statutory provisions is nearly identical. In the landmark case Diamond v Chakrabarty,34 interpreting the same language as that interpreted by the Canadian Supreme Court in Harvard College, the United States Supreme Court reached the opposite conclusion:  the US Court interpreted the term “composition of matter” as including living organisms. According to the Court, the intent of the United States Congress was that the subject matter provisions be broad and inclusive so as to incorporate unforeseeable technologies, for example, a genetically modified living organism. Canada has since effectively eviscerated the holding of the Harvard College case, via a subsequent Supreme Court case, opining that even if a genetically modified organism is not patentable under their statute, the genetic sequence underlying the modification may be.35 Thus, rather than drafting claims to a genetically modified mouse, an inventor in Canada might do better to draft claims to the gene itself, which may happen to be situated in a mouse. But this solution to biotechnology patent eligibility itself rests upon a controversial question of patent subject matter. Specifically, an ongoing controversy has surrounded the patent eligibility of molecules isolated and purified from their native state, and most particularly, patents on genetic nucleotide sequences, or “genes” drawn from living organisms.36 As in Canada, the USPTO and many other national patent offices granted such patents over the latter part of the twentieth and beginning of the twenty-​first century, despite questions over whether such molecules constitute “products of nature,” rather than human inventions. Clearly these molecules are not naturally found in a purified or isolated state that can be put to technical uses, but nonetheless some version of the molecule exists prior to human intervention. Some critics asserted that isolation and purification of an existing substance fell short of the requirement for patent eligibility. This question was taken up by the United States Supreme Court in 2013 in Myriad Genetics, where, in a somewhat incoherent decision, the Court held that at least some nucleotide sequences constituted ineligible products of nature.37 These patent-​ineligible molecules displayed the same sequence found in human chromosomes. Other versions of the molecule, which were synthesized via laboratory processes, and had a somewhat different sequence than that found in human chromosomes, were at the same time held to constitute patentable subject matter. The opinion left unclear the precise doctrinal distinction between the two types of molecules, but placed into doubt a wide array of previously accepted biotechnology patents. Additionally, as of this writing, the Myriad decision appears to place the United States out of step with many of its trading partners, at least some of whom adopted laws permitting gene patents in order to harmonize their approach with the now-​defunct rule in the United States. The EU Biotechnology Directive, for example, expressly includes isolated and purified genetic molecules within patentable subject matter, which follows the position adopted by the EPO in administering the EPC, while it also limits the scope of protection for genetic 34 

35  Monsanto Canada Inc v Schmeiser 2004 SCC 34. 447 US 303 (1980). RS Eisenberg, “How Can You Patent Genes?” in D Magnus et al (eds), Who Owns Life (Prometheus Books 2002) 117–​134. 37  133 SCt 2107 (2013). 36 

472   Dan L. Burk products to the product when performing the specific function for which it was patented.38 But in Australia, the High Court, reviewing Myriad’s patents to the same genetic sequences as those considered in the United States, followed suit, with a majority opining that such molecules constituted “information” which was not of human manufacture, and were otherwise unsuited to protection having regard to the purpose and coherence of patent law.39

4.1 Software Subject Matter The second technological “problem child” for patent subject matter has been computer software, where eligibility questions have been addressed in parallel with those in biotechnology.40 The software cases, rather than dealing with the “product of nature” exclusions from subject matter, have grappled with other excluded categories such as abstract ideas, mental processes, mathematical algorithms, and laws of nature. These forbidden categories are not mentioned in the US statute, but are rather the product of common law judicial interpretation of the statute. By contrast, these are explicitly set forth in the EPC as lying outside patent eligibility when claimed “as such.”41 Software, too, is explicitly denominated by the EPC as failing patent eligibility, as are business methods and methods of playing games, when claimed “as such.” The explicit articulation of software and business methods as forbidden categories of subject matter under the EPC might initially appear to preclude patents that have routinely issued for such inventions in the United States. But the EPC exclusion is subject to the qualifier “as such.” The meaning of this qualification has been elusive, and suggests that excluded subject matter such as software or other business methods cannot be claimed as software or business methods, but potentially could be claimed as something else. Consequently, many EPO decisions have grappled with the question of tangibility, that is, whether the specification of some type of physical apparatus is necessary or desirable for software or business methods to constitute patentable subject matter. After periods of applying and then discarding various subject matter tests, the EPO currently seems satisfied to accept as patent-eligible any invention that recites an apparatus or physical embodiment.42 However, inventions that pass this subject matter test may still fail patentability on other grounds, such as the requirement of non-​obviousness, which the EPO assesses having regard to the technical aspects of the subject matter exclusively. For this reason, implementing a business method or other suspect process on standard computer hardware is likely to lack an inventive step. In the United States, over the same period, decades of software subject matter cases have yielded a hauntingly similar outcome. Repeated revisiting of software subject matter questions has culminated in the holding of Alice Corp v CLS Bank International, where the 38 

Directive 98/​44/​EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions [1998] OJ L 213/​13 (hereafter Biotech Directive) arts 3(2) and 9; Case C-​428/​08 Monsanto Technology LLC v Cefetra BV [2010] ECR I-​06765. 39  D’Arcy v Myriad Genetics [2015] HCA 35. 40  DL Burk, “Patent Law’s Problem Children: Software and Biotechnology in Trans-​Atlantic Context” in RL Okediji and MA Bagley (eds), Patent Law in Global Perspective (OUP 2014) 187. 41  EPC, art 52(3). 42  RM Ballardini, “Software Patents in Europe: The Technical Requirement Dilemma” (2008) 3 Journal of Intellectual Property Law & Practice 563, 567–​568.

Patents and Related Rights: a Global Kaleidoscope    473 Supreme Court articulated a two-​step test for patent eligibility: First, determine whether the patent claims an excluded category such as an abstract idea or law of nature; if it does, then determine whether the patent articulates some inventive concept that makes the claims something more than an attempt to patent the forbidden subject matter.43 Each of these steps appears oriented toward fostering narrower, apparatus-​oriented claims. Claims are more likely to pass the first prong of the test if they are tied to a concrete embodiment, so as not to be abstract; and claims that fail the first step are most likely to pass the second when wedded to an unconventional implementation. In general, the test appears intended to penalize, and so deter, overly broad and ambitious claiming. In the short period subsequent to the Alice decision, the trend appears to be frequent invalidation for litigated software patents, and frequent denial of software patent applications.

5.  Patentability Requirements To qualify for a patent, the invention, as defined by its written specification, must be judged to meet certain substantive legal criteria. The substantive requirements constitute some version of novelty, usefulness, or industrial application, and inventive step or non-​ obviousness. Each of these poses a substantive challenge, but the last is often considered the highest barrier to patentability. The United States patent statute defines obviousness in terms of what the PHOSITA would judge to be obvious at the time the patent application was filed.44 This metric is not unusual; Article 56 of the EPC similarly defines the inventive step in terms of what would be obvious to the person of skill in the art.45 This standard implies that different technologies or “arts” may have different levels of ordinary skill. For example, the ordinary practitioner in molecular biology may have a high degree of formal training at the PhD level, whereas some types of mechanical arts, or for that matter software coding, may be largely self-​taught. PHOSITAs in these different technologies might view innovation quite differently. The skill of the PHOSITA is similarly linked to the universe of available information. The PHOSITA, constituting a legal construct rather than any natural person, is presumed to know all of the relevant prior art, and the obviousness of the invention is judged against the universe of prior art that the PHOSITA is presumed to know. But this of course leaves the question as to what the universe of relevant prior art should be: If the invention is, let us say, a new type of monoclonal antibody, is the relevant universe of prior art all biological knowledge? Or is it a smaller subset of knowledge, such as all immunology? Are related bodies of information, such as molecular genetics and biochemistry, included in the body of prior art, or not? This “prior art” question is critical to the obviousness inquiry, because a smaller, narrower body of prior art makes a finding of obviousness less likely. The larger the universe of knowledge in which the PHOSITA is presumed to operate, the more likely that references will be found that will render the claimed invention obvious. Stated differently: A smarter, more knowledgeable PHOSITA is more likely to find the invention obvious, and the definition of 43 

134 S Ct 2347 (2014).

44 

35 USC §103 (2012).

45 

EPC, art 53.

474   Dan L. Burk relevant prior art defines the knowledge of the PHOSITA. In the United States, courts have addressed the prior art question with a two-​step test for analogous arts: Asking first whether the prior art reference is from the inventor’s field of endeavor, and if not, whether the reference might nonetheless be one that was pertinent to the problem that the inventor was trying to solve. This variation among technologies in the legal metric for innovation constitutes a central feature of the patent system. The obviousness function follows the economics of risk and decision-​making, as demonstrated in pioneering work by Richard Nelson and Robert Merges on the economics of patents.46 Merges and Nelson explain how the obviousness standard serves to reward risk-​taking in technological development. The less obvious an invention would be to those of ordinary skill, the more uncertain the outcome will be when pursuing it. Increased investment into research and development of non-​obvious inventions is therefore risky; the outcome is uncertain and the effort may fail. Risky research investments require a larger pay-​off, or the risk will not be taken. Obviousness thus helps calibrate the patent reward to uncertainty and investment risk: The riskier and more uncertain the investment in a new technology, the higher the likelihood of receiving a patent when the risk-​taking pays off. This calibration mechanism is closely tied to the distinction that is often drawn between legal rules and legal standards.47 The designation of rules has gone to legal imperatives that are clear-​cut, bright-​line, often binary requirements. The novelty and priority provisions of patent law are full of such imperatives: For example, prior art available to the public before the date a patent application is filed is considered in determining novelty, prior art available to the public after the date of filing is not. Such legal rules are fairly straightforward; their application and effect can be easily determined once the relevant criterion—​such as the date of filing—​is known. They are easier to administer, and to follow, but their simplicity and clarity often makes them rigid and inflexible, and literal application sometimes yields harsh results that might be considered unfair. In contrast, legal imperatives designated as standards lack the binary structure of rules. Standards are typically more fact-​specific and more flexible, taking specific circumstances into account. They often encompass multifactor balancing tests, which incorporate diverse and complex considerations. The strengths and weaknesses of standards are reciprocal to those of rules: Standards are more flexible, and can be adapted to produce a customized result under any given set of factual conditions. At the same time, this flexibility makes them less predictable, so that notice of, and compliance with, legal expectations becomes difficult. In practice, few legal imperatives are pure rules or pure standards; legal provisions span a continuum anchored on one end by rules, modulating toward standards at the other. Different types of imperatives are found in different sections of the patent system. If patent novelty provisions often fall on the rules end of the continuum, then the PHOSITA standard for obviousness more closely resembles a standard. It is highly malleable depending on the facts at issue, and produces different legal outcomes for different technical situations. The technology-​dependent nature of the PHOSITA offers flexibility, but also comes with

46  RP Merges and RR Nelson, “On the Complex Economics of Patent Scope” (1990) 90 Columbia L Rev 839. 47  CM Rose, “Crystals and Mud in Property Law” (1988) 40 Stanford L Rev 577.

Patents and Related Rights: a Global Kaleidoscope    475 the accompanying drawback that the obviousness determination often seems uncertain or vague, and is difficult to predict in advance. The mechanisms at work in obviousness are not unique in the patent system. In work with Mark Lemley, I have argued that the PHOSITA standard provides a paradigm case of the statutory “policy levers” that allow the patent system to perform its incentive function across a range of constantly changing technologies.48 Different technological sectors have vastly different requirements for investment; developing a new pharmaceutical may cost hundreds of millions of dollars, and developing a new semiconductor device may be similarly expensive, but developing a new software product will cost orders of magnitude less. At the same time, different industries experience entirely different commercial production cycles; software and semiconductor products typically have a very short product life, measured in months or perhaps a few years, before the product is superseded and obsolete. Chemical and pharmaceutical inventions, on the other hand, may be commercially viable for decades. The correspondence between inventions and products also differs; commercial products in biotechnology and chemical arts typically entail a single invention, such as a novel molecule, whereas commercial products from semiconductor manufacturers typically entail hundreds of patented inventions within a single device. If investment is to be encouraged in all these differing industries, the incentives need to differ radically: A very substantial incentive will be needed for pharmaceuticals, whereas much less incentive is needed for software. The policy question is how to accommodate the diverse innovation profiles of different technical fields within a single statutory scheme. One approach could be to enact specialized statutes custom tailored for each technology. Setting aside the problem of the considerable and unlikely degree of legislative attention that would be necessary to stay abreast of new technologies and enact statutes for them, experience teaches that specialized statutes, designed for a particular technology, do not fare well over time. There is, for example, little evidence that the European Directive on Legal Protection of Databases has promoted innovation in its specialized field.49 The same is true for the United States’ Semiconductor Chip Protection Act.50 One clear danger of such sui generis systems is that they rapidly become obsolete; technology progresses, and statutes written for a particular technology require constant updating if they are not to fall into desuetude. Instead, statutes of general technical application, such as those found in the patent system, fare much better, as they are generally designed to accommodate a wide range of technologies, including technologies not yet discovered. Standards-​based “policy levers” in patent statutes allow courts or administrative agencies to adapt the requirements of the law to the innovation profiles of existing and emerging technologies. The PHOSITA standard is one example of a number of patent doctrines that explicitly ask legal decision-​makers reviewing a patent to consider the invention with regard to its particular technical field. As Nelson and Merges realized, the incentive for a given invention is thus directly connected to the risks taken in that field—​ the risks taken and the incentive provided for software will be entirely different than those associated with pharmaceuticals, or semiconductors, or other fields of innovative endeavor. 48  DL Burk and MA Lemley, The Patent Crisis and How the Courts Can Solve It (University of Chicago Press 2009). 49  SM Maurer, PB Hugenholtz, and HJ Onsrud, “Intellectual Property. Europe’s Database Experiment” (2001) 294 Science 789. 50  Burk and Lemley (n 10) 98–​99.

476   Dan L. Burk

6. Exemptions User privileges and exemptions are on the whole less common in the patent system than they are in other areas of IP, such as copyright, where jurisdictions typically recognize a wide range of exceptions to the exclusive rights of the IP owner. For example, many jurisdictions include in their patent law an exception for private use much like the private use exception often found in copyright. In the UK, a statutory exception excuses unauthorized private uses of the invention, which are also to be “non-​commercial.”51 In many cases such private use exceptions complement, and sometimes overlap with, an experimental use exception, which is also often codified as a statutory provision. Experimental use exceptions allow for experimentation and improvement of a patented invention, even though such activity might otherwise constitute an infringing use. Typically, this exception may encompass commercial uses, as it does in the UK, Germany, and elsewhere. However, in the United States exceptions to the exclusive rights of the patent holder are almost unknown. The United States patent statute is an outlier in this regard, as it contains no provision for private or experimental use. The United States does have a narrow statutory provision for uses related to regulatory approval of some medical and pharmaceutical inventions.52 There is also a separate limited common law exception recognized in some older judicial decisions. These decisions recognize an experimental use exception that resembles an exception for personal use, which covers only non-​commercial use of a patented invention for purely “philosophical” and personal investigation. Recent Federal Circuit jurisprudence has held that this exception, to the extent it may continue to be recognized at all, is so extremely narrow as to be essentially non-​existent, excluding any use of the invention where money may have changed hands. Thus, for example, unauthorized use of an invention in university research would not qualify for the exception, as tuition and grant money will almost certainly be moving through university accounts.53 In contrast to the US position on experimental use, it is worth briefly considering the development of the experimental use exception in Canada, another jurisdiction with a strong common law tradition. The Canadian patent statute contains explicit experimental use exemptions, but as in the United States, experimental use in Canada has been primarily the subject of judicial consideration. Unlike in the United States, in Canada experimental use has developed as a broad and robust common law doctrine that encompasses a rather wide range of testing and investigation.54 Unauthorized uses to determine how an invention works, to evaluate the commercial viability of an invention, or to assess whether to purchase the invention from the patent holder, all would likely fall within the broad Canadian exception. Many jurisdictions also recognize subject matter exclusions for inventions that might disrupt morality or public order, and this is explicitly permitted under TRIPS.55 In general such exclusions have tended to involve controversial biotechnology inventions, such as human embryonic stem cells, although potential harm to the environment or non-​human animal 51 

52  35 USC §271(e) (2012). Patents Act 1977 (UK), as amended (hereafter PA) s 60(5)(a). Madey v Duke University 307 F3d 1351 (Federal Circuit 2002). 54  Dableh v Ontario Hydro (CA) [1996] 3 FC 751. 55  TRIPS, art 27(2). 53 

Patents and Related Rights: a Global Kaleidoscope    477 welfare may also be grounds for a public order exclusion. But here again the United States differs quite substantially from its trading partners. The view of both the judiciary and the USPTO has been that judicial and administrative bodies are in a poor position to gauge morality, and that developments such as, for example, gambling devices or contraceptives that are considered immoral at one point in time may be viewed as commonplace or even favorably by future generations.56 Consequently, neither the courts nor the USPTO are inclined to invalidate patents on moral grounds, and so long as some legal utility can be found for the invention, regulation of its use is left to the legislature. The lack of experimental use or similar provisions in the US statute has led to a series of proposals for a flexible “fair use” provision in patent law similar to that found most famously in the copyright law of the United States and a handful of other jurisdictions, and discussed by Jane Ginsburg in her chapter of this volume.57 Rather than a specific, defined exemption, a “fair use” exemption would be a fact-​specific, circumstantial standard. In the copyright context, fair use has raised some question as to whether such a flexible standard can be considered compatible with the “three step test” set forth in TRIPS for exceptions to exclusive rights: The exception must be limited, must not unreasonably conflict with exploitation of the right, and must not unreasonably prejudice the legitimate interest of the rights holder.58 However, a less-​punctilious reading of TRIPS suggests that exceptions that are reasonable and proportionate to a legitimate policy purpose comport with the test, whether considered as a matter of copyright or of patent.59 Such an exemption might also ameliorate other issues. Infringement of the patent owner’s exclusive rights typically involves manufacturing, selling, importing, or making other uses of the claimed invention. The scope of the rights is generally broad, and may not entail knowledge of wrongdoing; for example, the US statute does not indicate any type of intent requirement for the act of infringement. The result is effectively a regime of strict liability, where any unauthorized use of a patented invention, knowing or unknowing, is penalized. Such a strict liability regime may lead to perverse results, particularly where modern technologies are concerned, as illustrated by the now-​ infamous infringement scenario advanced in the Canadian Supreme Court decision Monsanto Canada v Schmeiser.60 Monsanto was the holder of patents to genetically modified, herbicide-​tolerant “Round-​Up Ready” crops, including genetically modified canola plants. Schmeiser, a canola farmer, was found to be growing Monsanto’s patented plants on his farm, and was sued for infringement of the Monsanto patent. Schmeiser asserted that he was unaware of how he came to be growing crops with the traits claimed in the patents; he offered the possibility that seeds had blown onto his land from a passing truck, or perhaps that the previous growing season pollen from another farm growing plants from Monsanto seed had drifted downwind and fertilized his crop, so that seed he saved from the previous year inadvertently included the genetic modifications covered by the patent. 56 

Juicy Whip Inc v Orange Bang Inc 185 F3d 1364 (Federal Circuit 1999). MA O’Rourke, “Toward a Doctrine of Fair Use in Patent Law” (2000) 100 Columbia L Rev 1177; KJ Strandburg, “Patent Fair Use 2.0” (2011) 1 University of California Irvine L Rev 265. 58  TRIPS, art 30. 59  C Geiger, D Gervais, and M Senftleben, “The Three-​Step Test Revisited: How to Use the Test’s Flexibility in National Copyright Law” (2014) 29 American University International L Rev 581. 60  Monsanto Canada Inc v Schmeiser 2004 SCC 34. 57 

478   Dan L. Burk It was clear that the trial court did not find Schmeiser’s protestations credible, as there was evidence that the collection and planting of seed on Schmeiser’s land was intentional. Nonetheless, even though Schmeiser failed to prove involuntary infringement, the scenario of inadvertent cross-​pollination might not be implausible in other cases where living organisms are the subject of patents, and raises questions regarding not merely unintentional infringement, but non-​volitional infringement. As the Canadian Supreme Court pointed out, under the Canadian statute (much like under the US statute), intent to infringe was largely irrelevant, although it might provide a defense to negate elements of the act of infringement in some circumstances. A  number of commentators,61 and at least one US judge,62 have been troubled by this potential outcome, and have suggested that some type of volition requirement, if not intent, should perhaps be incorporated into infringement.

7. Remedies A patent is only as good as the rights it grants, and there are as a practical matter no rights without a remedy. Thus, the increased focus on patents around the world has led to an increasing focus on patent remedies, although they remain one of the least-​studied and most under-​theorized areas of patent doctrine. Generally, patent damages include injunctive relief and monetary damages, although the specific forms of relief vary to some degree among jurisdictions. For example, in Canada, either damages or an accounting for profits may be elected.63 In the United States, due to a historical limitation on the patent statute, damages equal to lost profits or a reasonable royalty are available, but restitutionary relief is not.64 The scope of available remedies is particularly important as a counterbalance or rectification for problems arising elsewhere in the patent system. The salience of damages is for example clear from the Canadian Schmeiser case mentioned previously. Having found that any use, including inadvertent and possibly even involuntary use of the genetically modified crops constituted infringement, the Court declined to award damages. Monsanto had sought an accounting for profits, or in other words, disgorgement of whatever Schmeiser had gained by his infringement. But the Canadian Supreme Court pointed out that this measure of damages entitles the patent owner only to whatever portion of the defendant’s profits are attributable to use of the invention. The Court reasoned that Schmeiser had gained no profit from use of the invention; all of his profits were attributable to simply growing and selling seed, not to growing and selling genetically modified seed. Consequently, Monsanto was entitled to nothing and recovered nothing. Thus, a prudent application of remedies doctrine ameliorated a controversial finding under infringement doctrine. Injunctions frequently issue against infringing parties once a violation of the patent holder’s rights has been determined, but this may be a point where limitations or exemptions 61  P Heald and JC Smith, “The Problem of Social Cost in a Genetically Modified Age” (2006) 58 Hastings LJ 87; S Munzer, “Plants, Torts, and Intellectual Property” in T Endicott, J Getzler, and E Peel (eds), Properties of Law: Essays in Honor of Jim Harris (OUP 2006) 189. 62  Smith-​Kline Beecham Corp v Apotex Corp 403 F3d 1331 (Federal Circuit 2005) 1361 (Gajarsa J, opining that hypothetical patent liability based on the Schmeiser scenario “cannot possibly be correct”). 63  Patent Act 1985 (Canada) s 57(1)(b). 64  35 USC §284 (2012).

Patents and Related Rights: a Global Kaleidoscope    479 unexpectedly come into play. United States courts have historically tended to issue such permanent injunctions, but have sometimes withheld them in the public interest, as, for example, in the famous case of City of Milwaukee v Activated Sludge,65 where the inventor brought suit against a municipality for infringement of his patented method of sewage treatment. Although the city was found to be infringing, the court was reluctant to issue an injunction that would potentially shut down the sewage treatment for the city, and thus endanger public health. The victorious patent holder was therefore limited to receiving only monetary damages—​a decision that effectively conferred on the infringer a compulsory license at a royalty rate set by the court. The incorporation of public interests into the calculus of American injunctions has been formalized by the recent decision of the United States Supreme Court in eBay v Merc Exchange.66 According to the Court, the statutory requirement that permanent injunctions be issued on “equitable” grounds requires consideration of factors traditionally taken into account for relief in courts of equity. Specifically, the Court held that petitions for injunctive relief must consider: first, whether an adequate remedy is available in the form of damages; second, whether the petitioner is likely to suffer irreparable harm in the absence of injunctive relief; third, the balance of hardship between the patent holder and the infringer if an injunction is granted; and finally, the public interest. The result of this balancing test has been more frequent imposition of judicially created compulsory licenses, particularly where the public interest in favor of a liability rule is compelling. The eBay holding has been widely understood to constitute a judicial response to the problem of patent “trolling” or of non-​practicing entities (NPEs), which although troubling, and widely discussed, is largely confined to information technologies, and which to date is more typical in the United States than elsewhere.67 The “trolling” scenario involves repeated assertion of obscure and sometimes questionable patents that purport to cover basic functions of widely used technologies. Companies acquire portfolios of such patents, and then threaten nuisance lawsuits against companies that have already established businesses around the purportedly covered technologies. The threat is typically accompanied by a strategically priced offer to license or to settle at a cost far lower than the very high cost of American patent litigation. Accused infringers who might otherwise be skeptical about the validity of the patent will tend to settle rather than incur the costs of defending a lawsuit. Additionally, unsuccessfully defending a lawsuit may be disastrous if a permanent injunction becomes a reality—​ such a court order can entirely shut down a company, giving the NPE enormous bargaining leverage. But if monetary gain is the goal of such lawsuits, then under eBay injunctions are not necessary—​a damages remedy is adequate to provide money, and if money is adequate, the eBay factors militate against providing the additional leverage of an injunction. Consequently, injunctive relief to NPEs has fallen substantially since the eBay decision.68 At the same time, perhaps the most dramatic and visible instances of the debate over injunctions have emerged amid the long series of legal disputes over mobile telecommunication devices. These so-​called “smartphone wars” have produced a string of judicial decisions 65 

66  547 US 388 (2006). 69 F2d 577 (7th Circuit 1934). CV Chien, “Startups and Patent Trolls” (2014) 17 Stanford Technology L Rev 461. 68  CV Chien and MA Lemley, “Patent Holdup, The ITC, and the Public Interest” (2012) 98 Cornell L Rev 1. 67 

480   Dan L. Burk around the globe, including multiple decisions in the United States and in Germany, and additional decisions in Korea, the Netherlands, the UK, and elsewhere. The claims asserted by the device manufacturers have encompassed assertions of patent, design protection, trademark, trade dress, and copyright. But many of the disputes have centered on standard essential patents (SEPs) which encompass exclusive rights over technologies that are required for interoperability with other devices and with telecommunications networks. Such patents display an unusual economic profile, and so pose special remedies problems when they are enforced. Their unusual character arises from the technical necessity of interoperability. Interoperable technologies such as computers or telecommunications devices tend to converge on a standard: Technical commonality is necessary in order for devices to function together.69 Technical diversity becomes less feasible in such circumstances. This convergence leads to so-​called “network effects”: the technical standard becomes increasingly valuable as additional users adopt it, conforming to the standard.70 In some instances, standards emerge as users naturally gravitate toward a given technology, and incompatible technologies become increasingly marginalized, often disappearing altogether as the market for the dominant standard evolves. In other cases, standards are deliberately chosen by standard setting organizations (SSOs).71 These are often private industry groups, although sometimes they are governmental or quasi-​governmental organizations. Network externalities are a particular concern when the standard chosen is subject to IP rights, such as patents. Because of network effects, the adoption of the standard typically gives the standard owner enormous market leverage. The addition of exclusive legal rights in the form of a patent may greatly enhance such leverage. Competitors must adopt the chosen technical standard in order for their products to interoperate with one another; products that do not conform to the standard are technically excluded from functionality. Patents add an additional layer of exclusivity: The holder of a patent could use its exclusivity to pick and choose who is able to compete in the market for the particular technology, and possibly to exclude some potential rivals altogether.72 The potential for such market leverage has led most SSOs to require from patent holders some promise to license their patented technology on “fair, reasonable, and non-​discriminatory” (FRAND) terms, as a condition of adoption of their technology as a technical standard.73 Once such a promise is in place, adoption and incorporation of the standard can proceed, but in a number of instances, disputes may arise either when the patent holder declines to license the technology as promised, or offers licenses that arguably require excessive royalties or other terms not taken by the licensee to constitute FRAND terms. Enforcement of the patent in such cases often leads to a finding of infringement: The defendant is likely to be using the technical standard; indeed, in order for his products to interoperate, he has little choice but to employ the patented standard. At the same time, the 69 

C Shapiro and HR Varian, Information Rules: A Strategic Guide to the Network Economy (Harvard Business School Press 1999) 45–​46. 70  MA Lemley and D McGowan “Legal Implications of Network Economic Effects” (1998) 86 California L Rev 479. 71  MA Carrier, Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law (OUP 2009) 325. 72  J Farrell et al “Standard Setting, Patents, and Hold-​Up” (2007) 74 Antitrust LJ 603, 616. 73  JS Miller, “Standard Setting, Patents, and Access Lock-​In: RAND Licensing and the Theory of the Firm” (2007) 40 Indiana L Rev 351.

Patents and Related Rights: a Global Kaleidoscope    481 patent holder has promised authorization for such activity, which is a promise that may not have been honored. Such disputes over mobile telecommunications interoperability have repeatedly foundered on the question of injunctive relief. Many jurisdictions have adopted the routine, almost automatic, grant of a permanent injunction upon a finding of infringement.74 Such reflexive grants stem from a deeply formalist stance toward IP. Property regimes are characterized by a legal right to exclude—​as opposed to liability regimes, which are generally characterized by a legal right to receive payment. Thus, the reasoning goes, property requires exclusive rights, which inure in the form of injunctions. If patents are indeed a form of property, then an injunction must always attend the patent. This was effectively the stance adopted by the United States Court of Appeals for the Federal Circuit prior to the Supreme Court decision in eBay v Merc Exchange, and a similar view has dominated UK and German courts reviewing patent cases. A more nuanced justification for such automatic injunctions arises from the fear that refusing an injunction would promote a kind of probabilistic opportunism on the part of potential infringers:  They could infringe and, if detected and successfully sued, might end up paying royalties. If the infringement were undetected, or enforcement were unsuccessful, then they might escape without payment. The worst-​case scenario thus entails paying the royalties that they would have paid had they sought permission in the first place, accompanied by a substantial probability of paying no royalties at all. This calculus can of course fairly easily be disrupted by adding deterrents in the form of enhanced damages, restitutionary payments, or other monetary penalties that would make the risk of successful enforcement sufficiently forbidding that bargaining for a license would seem attractive after all. Thus, as the Mannheim regional court stated in its opinion in the FRAND licensing dispute between Motorola and Microsoft: If the seeker of the license were in a position to successfully defend against claims for an injunction by the patent owner by arguing that the latter was obligated to grant a license anyhow, on its own volition, the patent owner would be at the mercy of any dishonest licensee, for whom there would be no more incentive to enter into licensing negotiations.75

Consequently, in FRAND licensing cases, German courts have until recently tended to enforce the “Orange Book Standard” precedent, which largely shifts the burden of compliance and demonstration of good faith onto the accused infringer.76 Under the Orange Book Standard approach, the user of a technical standard may defend against infringement by unconditionally offering to enter into a license at a rate determined by the patent holder, and must behave as a licensee, if necessary paying reasonable royalties into an escrow account, even if the patent holder will not accept them. A patent holder who continues to refuse such munificence may be then judged to be abusing a dominant position under competition law.77

74 

TF Cotter, Comparative Patent Remedies (OUP 2013) 245. Regional Court of Mannheim, 2nd Civil Division, Case 2:10-​cv-​01823-​JLR, Document 324–​326, filed 5/​21/​2012. 76  (2009) GRUR International 747 (BGH). 77  Cotter (n 74) 247–​248. 75 

482   Dan L. Burk A more utilitarian approach has been adopted elsewhere, including the United States since the eBay decision. Contrast the Mannheim Court’s statement with that of United States Federal Judge Richard Posner, sitting as a trial judge in Apple v Motorola: By committing to license its patents on FRAND terms, Motorola committed to license the ’898 [patent] to anyone willing to pay a FRAND royalty and thus implicitly acknowledged that a royalty is adequate compensation for a license to use that patent. How could it do otherwise? How could it be permitted to enjoin Apple from using an invention that it contends Apple must use if it wants to make a cell phone with UMTS telecommunications capability . . .78

Richard Posner is of course well-​known as one of the major proponents of the economic analysis of law that has become predominant in the United States; it is therefore no surprise that this view takes certain economic principles, such as network effects and revealed preference, as given. From the purely doctrinal standpoint of the eBay test, the legal remedy of damages is clearly adequate, because the patent holder has essentially opted into a liability regime of royalties only by promising FRAND licenses to all comers. From the standpoint of economic analysis, injunctive relief is likely to overcompensate the patent holder who has already indicated his valuation of the patent: the value of a FRAND license. Instrumentally, injunctions are often useful to place the parties in a position where they must bargain, causing public revelation of private valuations that a court otherwise would be required to estimate. But again, the patent holders’ valuations have already been revealed and the bargaining has already essentially occurred when the patent holder agreed to FRAND licensing. The German approach in SEP cases appears to have been largely rejected by the Court of Justice of the European Union, which adopted something closer to the American approach.79 This leaves some question as the extent to which European courts have the latitude to adopt an eBay type of approach to patent injunctions. At least some language in the Directive on Enforcement of Intellectual Property Rights suggests that such latitude exists.80 Article 3(2) states that enforcement measures should be “proportionate” as well as “effective.” Article 11 of the Directive, specifically addressing injunctions, uses permissive language regarding the availability of injunctive relief: Injunctions may issue, indicating that there are also instances in which they might not. And Article 12 of the Directive provides for “Alternative Measures,” authorizing pecuniary compensation on the grounds of a sort of eBay test that takes into account the culpability of the infringer, the proportionality of the harm that might be done by an injunction, and the adequacy of monetary damages as a reasonably satisfactory remedy.

8. Related Rights In many jurisdictions, the patent system exists in association with systems of similar rights, which often go by the name “utility model” or “petty” (from petite) patent.81 In Australia this

78 

869 F Supp 2d 901, 914 (ND Ill 2012) affirmed in part 757 F3d 1286 (Federal Circuit 2014). Case C-​170/​13 Huawei Technologies Co Ltd v ZTE Corp ECLI:EU:C:2015:477. 80  Directive 2004/​48/​EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights [2004] OJ L 159/​16. 81  MD Janis, “Second Tier Patent Protection” (1999) 40 Harvard International LJ 151. 79 

Patents and Related Rights: a Global Kaleidoscope    483 form of IP is termed the innovation model. Utility models offer a shortened term of protection, typically six years, and while novelty is still required, they entail a lower standard for inventive step than that demanded by fully-​fledged patents. Rather than a full examination, utility models require only registration of the invention, with perhaps a quick review to ensure compliance with formalities. Such truncated patents offer a lower level of protection in return for a quicker, simpler application process. By doing so, utility models may provide a method of encouraging sub-​patentable innovation, which would not otherwise warrant the effort and expense of full patent examination. But utility models may also point the way toward resolution of ongoing difficulties attending the grant of full patents. Full patent examination is costly and time consuming, and yet, patent applications receive relatively little scrutiny; given the thousands of applications filed every year, no patent office has the resources to thoroughly examine all of them. Examiners spend only a few hours with a given application. The number of patent applications has grown enormously over the past two decades and continues to grow. Claims to obvious or inadequately disclosed inventions are inevitably allowed, and such patents become a threat to subsequent innovators, and used to extract royalties where none should be available Thus, many of the real or perceived evils of the patent system are blamed on a proliferation of bad patents, which in turn is often blamed on lackadaisical review by patent offices. Some commentators have complained that the brief scrutiny given to patents is insufficient to weed out all of the poor-​quality applications, which are perhaps statutorily ineligible for a patent, but nonetheless issued due to inadequate review. In the United States and elsewhere, such complaints have led to modest increases in the resources devoted to patent examination. However, detecting and filtering out the majority of poor-​quality applications would require substantially increasing the level of scrutiny for patent applications, which in turn would require enormous investment in hiring additional examiners and expanding patent office administration. The prospect for such massive investment in governmental offices is unrealistic. Neither would it likely be desirable, even were the resources to be allocated for such a substantial bureaucratic expansion. Very few patents in fact turn out to be valuable enough to justify increased scrutiny: The vast majority of patents are never enforced, and appear never to be licensed. They prove to be commercial failures, or at best are stockpiled by their owners as future trading chits in business exchanges, or perhaps as a kind of insurance against being sued by someone else employing similar technology. Such patents effectively disappear after they issue, and resources spent on heightened scrutiny of unused patents would be wasted. And yet this problem with the system may in fact be a feature, or at least a credible strategy, for dealing with the vicissitudes of administrative practice—​a strategy that Mark Lemley dubs “rational ignorance.”82 Rather than expending the resources to increase scrutiny of patents across the board, it would be preferable to identify those that will prove to be valuable or important and focus greater attention on them. Time accomplishes much of this identification function. Although the majority of patents are worth very little, over time it becomes clearer which patents are valuable and which merit increased scrutiny. These patents show up in litigation; they are sufficiently valuable that their owners expend the sometimes quite

82 

MA Lemley, “Rational Ignorance at the Patent Office” (2001) 95 Northwestern University L Rev 1495.

484   Dan L. Burk considerable resources necessary to enforce them. Patent enforcement thus acts as a filter that helps to identify which patents are worth additional scrutiny. Under this view, the patent office examination process provides a “quick look” at the beginning of a patent’s life to screen out the very most obviously unsuitable candidates, and later on the courts provide a more searching review to the valuable patents that turn up in litigation. This raises the question as to whether a simple registration system might provide nearly the same benefits, and essentially do away with the costs of providing any screening of applications on the front end. Formal examination likely screens out a number of the very worst applications, but it is not entirely clear that enough are removed to justify the cost, not only to the applicants who traverse the long and sometimes harrowing application process, but also of maintaining the extensive government apparatus that conducts patent examination. At the same time, using time as a filter is itself an expensive proposition, making attractive the attempt to identify on the front end which patents are likely to prove valuable and worthy of heightened scrutiny. As already suggested, the patent office is in a poor position to make such an assessment, even with greatly enhanced resources. Rather, the inventor or applicant is likely to be in the best position to make such an assessment, as he has the most information about the invention. Thus, a system for identifying valuable patents for scrutiny might best succeed by aligning the inventor’s interests with the public interest in identifying potentially valuable patents. A related proposal has been to adopt a tiered system, with certain preferred patents, sometimes dubbed the “gold-​plated patent.”83 Under this approach, applicants who believe their inventions are likely to prove valuable, and who wish to invest in a higher degree of review for their patents, would be required to pay enhanced fees in return for a comprehensive, in-​depth examination of their applications. The enhanced fees would defray the cost of more extensive examination, and would result in a patent that would be accorded a higher degree of deference in subsequent legal proceedings. Other patents would be as cursorily examined as they are today, or perhaps merely registered as utility models are. Patents issuing from regular examination, or from registration, would be accorded no deference when later scrutinized in a court proceeding. Utility models, coupled with a system of full utility patents, essentially offer such a tiered system, and create a proof of concept for tiered systems of protection.

9.  Plant Breeders’ Rights For novel plant varieties, specialized systems of plant breeders’ rights offer an alternative to patenting. Under the subject matter provisions of the TRIPS Agreement, signatory nations are permitted to exclude plants and animals from their patent law, but must offer some form of IP protection for plant varieties, either by means of patents or by a form of IP specific to patent varieties, or some combination of the two. Many signatories have chosen to satisfy

83  M Lemley, D Lichtman, and B Sampat, “What to Do About Bad Patents?” (2005-​2006) Regulation 10.

Patents and Related Rights: a Global Kaleidoscope    485 this requirement by adherence to the convention of the International Convention for the Protection of New Plant Varieties, or UPOV Convention.84 In the EU implementation comes as a community-​wide plant breeder’s right, known as the Community Plant Variety Right (CPVR), which is effective in all the Member States. However, the majority of Member States also maintain their own national system of plant breeders’ rights, and plant breeders can opt for either the community right, or for selected national rights. Rather than the patentability criteria of novelty, utility, and nonobviousness, UPOV requires plants to be novel, distinct, uniform, and stable. Similar to patents, UPOV compliant rights extend at least 20 years. However, UPOV differs somewhat from patent protection in offering specifically tailored exceptions to the rights of the plant breeder, including exceptions for experimental use, for breeding new varieties, and for private non-​commercial uses of a covered variety. Adherents to the Convention may also provide a farmer’s exemption, allowing farmers to save seed from year to year for re-​planting without violating the breeder’s right. Due to historical and political reasons, the United States falls into the TRIPS category of providing IP in respect of plant varieties through a combination of patents and sui generis law. The United States protects sexually reproducing plants by means of the Plant Variety Protection Act (PVPA), which largely conforms to the UPOV Convention. However, US Supreme Court decisions have held that utility patents subject matter extends to genetically modified plants, and that both patents and PVPA protection may simultaneously apply to the same plant variety.85 The practical effect of this simultaneous coverage is that the research and farmers’ exemptions to PVPA protection are negated by the utility patent, which has no such exemptions: Farmers who save seed under the PVPA exemption would still infringe under the utility patent. Additionally, the use of PVPA protection appears to be declining since the utility patent alternative became available.86 The EU has addressed this matter differently, but after a long and tortuous journey seems to have arrived at the same position as the United States. Both the EPC87 and the EU Biotechnology Directive88 exclude plant varieties as such from patentable subject matter; they also exclude essentially biological processes for producing plants. This appeared to prevent conventionally bred plants from being encompassed within the scope of utility patents. However, the Enlarged Board of Appeal of the EPO has interpreted the language regarding plant varieties quite strictly, so that individual plants and traits covering multiple varieties may be patented.89 Additionally, the products of conventional breeding have been held to be patent-eligible.90 The result appears to be that conventionally bred plants may be patented, so that the exemptions for farmers and research entailed by the CPVR would be superseded, just as in the United States.

84   1991 Act of the International Convention for the Protection of New Plant Varieties (UPOV Convention) (opened for signature 3 December 1961, entered into force 10 August 1968) 815 UNTS 89. 85  JEM Ag Supply Inc v Pioneer Hi-​Bred International Inc 534 US 124 (2001). 86  MD Janis and JP Kesan, “U.S. Plant Variety Protection: Sound and Fury . . .?” (2002) 39 Houston L Rev 727. 87  EPC, art 53(b). 88  Biotech Directive, art 4. 89  G1/​98 (Transgenic Plant/​NOVARTIS II) [2000] OJ EPO 111. 90  G2/​12 (Tomato II) and G2/​13 (Broccoli II) ECLI:EP:BA:2015:G000213.20150325.

486   Dan L. Burk TRIPS also allows signatories to develop their own sui generis alternatives to plant breeders’ rights. India, for example, has developed a variation on plant breeders’ rights that provides remuneration to the community in which the variety was developed. The United States offers a peculiar sui generis form of IP protection, the plant patent, for asexually reproducing plants.91 Plant patents are situated within the same statute as the more familiar utility patents, meaning that plant patents must satisfy the same statutory criteria of novelty, utility, disclosure, and non-​obviousness as more generalized patents. But this necessitates certain adaptations, as plants have certain idiosyncrasies that do not easily fit the general statute. For example, as a concession to the difficulty of textually describing vegetable inventions, the disclosure in plant patents is typically visual, such as a photograph of the claimed plant. And as a practical matter, infringement of a plant patent typically must occur by means of unauthorized grafting or sprouting of the existing plant. Thus, plant patents effectively block misappropriation or copying of vegetable material, rather than independent recreation of the plant.

10. Conclusion The fragmentation and constant evolution of international patent regimes is both a blessing and a curse. While the changing, intersecting diversity of approaches creates enormous complexity in the patent system, recombination of different doctrines and perspectives is our best source of solutions to the innovation needs of a multifaceted global economy that is also in constant motion.

91 

35 USC §§ 161–​164 (2012).

Chapter 18

C op y ri g h t Jane C. Ginsburg * 1.  History and Philosophies of Copyright (Authors’ Right) Copyright is the law of literary and artistic property. It regulates the ownership and exercise of rights in creative works. Copyright laws vest exclusive rights in the creators of works of authorship.1 The justifications for copyright spread along a spectrum from natural rights-​ based ownership of the fruits of one’s intellectual labors to utilitarian expectations that granting authors property rights in their works will encourage them to create works for the greater benefit of society. On the one end, authorship alone commands strong proprietary rights; on the other, those rights result only, and sparingly, from a necessary bargain on behalf of the broader public. Civil law regimes most often tend toward the creators’ entitlement end of the spectrum, and common law systems generally situate at the social contract end. But these characterizations are largely caricatures: Mixed motives in fact pervade civilian and common law copyright systems alike, and a given national law’s location on the spectrum is often more a matter of emphasis than of fundamental orientation. Moreover, evolving economic, social, and technological conditions inevitably alter the intensity of that emphasis. Copyright laws emerged from printing monopolies. Following the invention of printing, a system of printing privileges, paired with State control over the content of the works, developed in many European States, particularly in Venice, the Papal States, and France. The governing authority, having verified the work’s political and religious orthodoxy, granted the petitioner, usually a printer-​bookseller, but sometimes the work’s author, a time-​limited *  Jane C Ginsburg has asserted her moral right to be identified as the author of this contribution. Thanks go to Jacob Grubman, Columbia Law School class of 2016, for research assistance. All websites were last accessed in February 2018, unless otherwise specified. 1  The regime that common law countries denominate “copyright” in civil law countries is generally called “author’s right” (eg, “droit d’auteur” in French, “diritto d’autore” in Italian, “Urheberrecht” in German). Although the difference in nomenclature may denote philosophical differences of orientation, with common law countries focusing on the object of protection, and civil law countries on the subject of protection, these differences are relatively insignificant in practice, and therefore for simplicity, this article will refer throughout to “copyright.”

488   Jane c. Ginsburg monopoly over the printing, selling, and importation of copies of the work.2 England departed from this scheme in vesting in the publishers themselves the control over the dissemination of books. In 1556, the Queen granted to the Stationers’ Company, made up of the leading publishers of London, a monopoly over book publication, thus placing in the hands of the guild the power to restrain the publication of seditious or heretical works. Publishers were given an exclusive and perpetual right of publication of works that passed muster with the Government and the Church (by way of the Star Chamber).3 As with many systems of printing privileges, the English monopoly primarily promoted investment in the material and labor of producing and distributing books; protecting or rewarding authors was generally an ancillary objective.4 After the English licensing laws lapsed at the end of the seventeenth century, Parliament enacted the Statute of Anne in 1710. The Act’s title and first section announce the objectives that underlie much copyright law and policy. Titled “An act for the encouragement of learning,” the Statute of Anne continues: “Whereas printers, booksellers, and other persons have of late frequently taken the liberty of printing, reprinting, and publishing, or causing to be printed, reprinted, and published, books and other writings, without the consent of the authors or proprietors of such books and writings, to their very great detriment, and too often to the ruin of them and their families: for preventing therefore such practices for the future, and for the encouragement of learned men to compose and write useful books . . .” The Act granted to authors exclusive rights of printing, reprinting and importation of copies to last for 21 years for existing works and for 14 years for works published in the future. Moreover, were the author still living at the end of the first 14-​year term, the exclusive rights of reproduction and distribution would revert to the author for an additional 14 years. A condition of statutory copyright was the registration of the title at Stationers’ Hall and the deposit of nine copies at official libraries. Where justifications for printing privileges most often rested on the need to prevent free-​riding off of the printer’s investment,5 the Statute of Anne echoed this theme, but focused instead on authors. It thus became the first law explicitly and systematically to vest 2  On printing privileges see, eg, E Armstrong, Before Copyright: The French Book-​Privilege System 1498–​1526 (CUP 1990); MG Blasio, Cum Gratia et Privilegio: Programmi editoriali e Politica Ponteficia a Roma 1487-​1527 (Rome 1988); C Castellani, “I privilegi di stampa e la proprietà” letteraria in Venezia dalla introduzione della stampa nella città’ (1888) 36 Archivio Veneto 127–​139; P Fontana, “Inizi della proprietà letteraria nello stato pontificio (saggio di documenti dell”Archivio vaticano)” (1929) 3 Accademie e Biblioteche d’Italia 204–​221; R Hirsch, Printing, Selling and Reading, 1450-​1550 (Otto Harrassowitz 1974); A Nuovo and C Coppens, I Giolito e la stampa nell’Italia del XVI secolo (Droz 2005); JC Ginsburg, “Proto-​property in Literary and Artistic Works: Sixteenth-​Century Papal Printing Privileges” (2013) 36 Columbia Journal of Law & the Arts 345. See also sources cited in (n 3). 3  See J Feather, A History of British Publishing (Routledge 1988) 31–​32 (describing how the Stationers’ Company “became an equal partner with the Crown in the suppression of undesirable books”). 4  See, eg, C Bladgen, The Stationers’ Company: A History 1403–​1959 (George Allen & Unwin 1960); L Hellinga and JB Trapp (eds), Cambridge History of the Book in Britain, Vol. 3, 1400–​1557 (CUP 1998); M Rose, Authors and Owners: The Invention of Copyright (Harvard UP 1993); Feather (n 3). Authors could directly hold privileges, however, and in some systems of printing privileges, particularly the Papal privileges, but to a lesser extent in Venice and France as well, authors in fact frequently applied for and received monopolies over their works’ publication and distribution. 5  That said, authors who received printing privileges also often invoked the need for a privilege to prevent others from reaping the benefits of their labors: see, eg, Ginsburg (n 2).

Copyright   489 copyright in the work’s creator. Two factors, one philosophical, one economic, motivated this shift in orientation. First, making authors the owners of the exclusive right reflects the Enlightenment tenet that property derives from labor. From ownership of the physical fruits of agricultural and other labors, it is not a long step to ownership of the incorporeal fruits of intellectual labor. Indeed, if John Locke voiced the former argument in his Two Treatises of Government, he made the latter in his writings on the expiration of the Licensing Act.6 The replacement of the Licensing Act with laws vesting property rights in authors also sought to break the monopoly of the Stationer’s Company by promoting the rise of other publishers with whom authors might negotiate.7 In that respect, one may perceive the author’s reversion right not only as a creator-​oriented endeavor to ensure that authors share in the success of their works, but also as a measure to promote competition among booksellers, for the author who retrieves his rights is free to grant the second 14-​year term to another publisher.8 The United States (US) copyright tradition also recognizes both the general public interest in fostering creativity, and the individual rights of creators—​for limited times—​ over the fruits of their intellectual labors. The Constitution’s copyright clause provides “The Congress shall have power . . . To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”9 The clause echoes the Statute of Anne’s incentive rationale, but its authorization to Congress to promote the progress of learning “by securing for limited times to authors . . . the exclusive right to their . . . writings” also reveals undercurrents of natural property claims, for “securing” suggests that some kind of exclusive right already inhered in works of authorship. Hence Madison’s reference in Federalist 43 to copyright in Britain as “a right of common law.” The clause’s direction that the exclusive right be “for limited times,” in the plural, may also advert to the Statute of Anne’s conditional second term of copyright, and thereby implicitly endorse the author’s reversion right established by the English example. The first US copyright statute adopted many features of the Statute of Anne, including the dual 14-​year terms with reversion to the surviving author, and registration and deposit formalities. The rights secured were to “print, publish and vend,” and the subject matter covered “any map, chart or book.” In the handful of major copyright revisions (principally, 1831 and 1909) through the 1976 Act (and in the more frequent amendments since), Congress has gradually increased the kinds of works that are eligible for copyright and the kinds of exclusive rights afforded to the copyright owner. As Congress has increasingly aligned the US copyright system with international norms, it has also progressively extended the period of copyright protection and reduced the significance of compliance with statutory formalities.

6  On these writings, see L Moscati, “Un ‘Memorandum’ di John Locke tra Censorship e Copyright” (2003) LXXVI Rivista di storia del diritto italiano 69. 7  See Feather (n 3); Moscati (n 6); Rose (n 4). 8  On the reversion right in the Statute of Anne and its successors in British and US Copyright law, see L Bently and JC Ginsburg, “‘The sole right shall return to the Author’: Anglo-​American Authors’ Reversion Rights from the Statute of Anne to Contemporary US Copyright” (2011) 25 Berkeley Technology LJ 1475. 9  US Constitution, art 1, § 8, cl 8.

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2. Subject Matter Copyright protects creative works of the human mind. The threshold of creativity is low, and carries no requirement of artistic merit, civic virtue, or commercial value. In the European Union (EU), a showing that the work is the “author’s own intellectual creation,”10 or in the US, a showing of “at least some minimal degree of creativity,”11 meet the standard. Nor, despite the grounding of one rationale for copyright in entitlement to the fruits of intellectual labor, need an author demonstrate that she labored mightily: The fruit of a moment’s inspiration, as well as the result of long hours of research and reflection both can qualify. By the same token, expenditure of labor (or “sweat of the brow”), without some increment of creativity, for example, in the selection or arrangement of information, however painstakingly gathered, does not suffice. Human agency in the creation of a work is implicit, hence no copyright inheres in objects produced by purely natural or feral forces, for example, driftwood or paintings by chimpanzees. By contrast, copyrightable authorship can result when human beings manipulate or build on such objects, for example, by reshaping, combining, or coloring pieces of driftwood. Similarly, computer-​assisted works, such as digitally altered images, can qualify, but purely computer-​ generated outputs, such as automatic translations, would not.12 Most copyright systems distinguish the creation of works from their “interpretation” through performance, reserving “copyright” to the former (such as musical compositions) and denominating the latter (such as vocal or instrumental performances of the compositions) as the subject matter of “neighboring rights.” (The US, however, considers audio-​recorded performances—​called “sound recordings”—​to come within copyrightable subject matter.) Apart from their characterization of performances or interpretations of works, national copyright laws may also diverge in their expression of what constitutes copyrightable subject matter: Some laws provide only a general description, such as “works of the mind,” while others, primarily in common law countries, list categories of works, such as literary works, musical compositions, audiovisual works, etc. It is not clear whether these categories are illustrative or limitative, thus whether an unlisted type of work would still be protected if it manifests original creativity but cannot be analogized to a recognized category.

10  Directive 2001/​29/​EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society [2001] OJ L167/​10 (hereafter InfoSoc Directive); Case C-​5/​08 Infopaq International A/​S v Danske Dagblades Forening [2009] ECR I-​6569 (hereafter Infopaq). 11  Feist Publications Inc v Rural Telephone Service Co 499 US 340, 345 (1991). 12  The UK Copyright Designs and Patents Act 1988, however, includes a provision on computer-​ generated works. It is not clear whether their copyright coverage is consistent with the autonomous EU norm of originality articulated in Infopaq.

Copyright   491

2.1 Fixation In addition, many, mostly common law, national regimes require that the work be fixed in a tangible medium of expression before copyright will attach. In the US the Constitutional reference to “writings” has been thought to require fixation. These national laws, however, are generally open-​ended as to the medium of fixation; it need not be a traditional format, such as paper, and the work need not be directly perceptible, for example, it may be a musical composition fixed in a phonogram. The media of fixation also encompass new technologies such as computer memory. National laws also differ regarding whether the author must authorize the fixation to bring the work within the subject matter of copyright. For example, the US requires that the author, or someone authorized by her, make the fixation,13 while the United Kingdom (UK) considers that even an unauthorized fixation (such as a surreptitious recording) brings the work within copyright (and also may make the person doing the unauthorized fixation an infringer). Fixation serves an evidentiary purpose; it makes it possible to ascertain what the work is. The probative role of fixation may explain why, in the US the fixation must permit the work to be “perceived, reproduced or otherwise communicated for a period of more than transitory duration.”14 But the medium of the fixation should not be confused with the work itself. The work is incorporeal. Fixation is the threshold which all works must cross to qualify for copyright protection in those countries that require fixation, but once across, the work exists independently of any particular material object in which it may be concretized. For example, a choreographic work may be filmed, or fixed in notation, but neither of these instantiations are the work. Once a work is “fixed,” and therefore within the scope of copyright coverage, it no longer matters for purposes of infringement whether the work was copied from a fixed or unfixed source. Thus, for example, copying a protected dramatic work from a book containing the text of the play will infringe the work (assuming no applicable exceptions), but so will the unauthorized recording or transcription of the dialog from a live performance of the work. By the same token, even when the medium of fixation, for example, a photograph of an ice sculpture, may be a work of authorship in its own right, the second-​level work of authorship that portrays an underlying work should not be confused with, and for the reasons discussed above, confers no rights in, the work portrayed. The photograph may fix the ice sculpture, thus preserving the record of the work after the original has melted, but the two works are as distinct as if the photograph had depicted a previously fixed sculpture, such as a statue in bronze.

13  Exceptionally, and pursuant to international obligations under art 14(1) of the World Trade Organization Agreement on Trade-​Related Aspects of Intellectual Property (opened for signature 15 April 1994, entered into force 1 January 1995) 33 ILM 81 (hereafter TRIPS), the US Copyright Act has since 2004 provided for musical performers’ rights to authorize the fixation or transmission of their unfixed performances, 17 USC § 1101; the US criminal code also imposes penalties for unauthorized audio or audiovisual fixation and distribution of musical performances, see 18 USC § 2319A. 14  17 USC § 101.

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2.2 Quantum of Creativity If the level of creativity is low, it is nonetheless unclear whether the work itself must achieve some degree of heft. In US copyright doctrine, short phrases and commonplace designs are thought to lack minimal creativity,15 or are likely to be needed as basic elements for others’ creations. The more a phrase is generic or descriptive, or the more it gives instructions to accomplish a functional objective, the less US courts are inclined to permit copyright to interfere with others seeking to make practical use of the words.16 But, as the headlines to news stories often demonstrate, a short phrase may in fact be very creative, yet also be very brief. Brevity is, after all, the soul of wit; why should it be a bar to copyright? The building blocks rationale makes sense if the objective of excluding short phrases is to prevent private claims of right in elements so basic as to belie anyone’s “creation.” By contrast, if the goal is simply to expel expressions that fail to cross some unstated threshold of heft regardless of their level of creativity, then it is not clear what if any sensible copyright policy the exclusion advances. EU copyright doctrine appears less wedded to quantity. The Court of the Justice of the European Union (CJEU), construing the EU Information Society Directive, ruled in Infopaq International A/​S v. Danske Dagblades Forening that a sequence of 11 words could meet the “author’s own intellectual creation” standard.17

2.3 Derivative Works and Compilations Because the threshold of originality is low, copyright also protects works that are based on or build on pre-​existing works (“derivative works”). Thus translations, musical arrangements, motion pictures derived from novels, and other adaptations all can be copyright subject matter (though if the pre-​existing work is still under copyright, the author’s or proprietor’s permission to adapt the underlying work will generally be necessary). Similarly, compilations of works or of data may be protected if either their selection or organization is minimally creative. In the cases both of derivative works and of compilations, the adapter’s or compiler’s copyright covers only the “new matter,” that is, the original contribution to the underlying material, and does not extend to or affect the copyright status of that material. For example, a modern-​day sequel to a nineteenth-​century novel will enjoy a copyright in its expression of new plot and character elements; the sequel will not remove the prior literary work from the public domain, nor will it prevent other authors from going back to the nineteenth-​century 15  See Copyright Office Regulations, 37 CFR § 202.1(a) (excluding, inter alia, “Words and short phrases such as names, titles, and slogans; familiar symbols or designs”). 16  See, eg, Magic Marketing v Mailing Servs 634 F Supp 769 (District Court (Western District of Pennsylvania) 1986) (refusing to extend copyright to such phrases as “priority message: contents require immediate attention”). See also Southco Inc v Kanebridge Corp 390 F 3d 276 (3rd Circuit 2004) (en banc) (holding part numbers used to assemble machine parts not copyrightable); Spilman v Mosby-​Yearbook Inc 115 F Supp 2d 148 (District Court (Massachusetts) 2000) (holding grammatical alterations and “stylistic tweaking” are not copyrightable); Apple Computer v Microsoft Corp 799 F Supp 1006 (District Court (Northern District of California) 1992) (holding phrase “Get Info,” used as part of computer graphical interface, was not copyrightable). 17  See (n 10).

Copyright   493 source to create works using the characters and plots as they were developed in the source work. A compilation of data does not confer protection on the compiled information, apart from its original presentation in the compilation. Thus, for example, the author of a guide that lists and rates restaurants may prevent the wholesale copying of the ratings, which constitute the author’s original contribution to the information, but she may not prevent others from reproducing the information in her guide regarding the names and addresses of the restaurants she listed.

2.4 Idea/​Expression Distinction Copyright does not protect everything contained within an original work of authorship. We have seen that with respect to works incorporating preexisting public domain works or data, copyright covers only the author’s original treatment of those elements, and not the underlying material itself. Copyright excludes not only information (data), but also ideas and processes. While the latter two might be original and creative, the law considers them to be necessary building blocks toward everyone’s creativity, and thus leaves them “to range freely.”18 This doctrine is known in some countries as the “idea/​expression dichotomy.” Thus, for example, Marcel Duchamp’s drawing of a moustache and a goatee on a postcard of the Mona Lisa may have been highly creative (as well as provocative), but any copyright in the work which Duchamp (equally provocatively) titled “L.H.O.O.Q.”19 would not have entitled him to prevent others from acquiring reproductions of the Mona Lisa or any other public domain iconic image and superimposing different combinations or depictions of facial hair or coiffure. The exclusion of processes further seeks to separate the domains of copyright and of patent. Patents protect functional works, if they meet the much higher standard of prerequisite creativity (novelty and non-​obviousness, or “inventive step”). Copyright doctrine does not permit “end-​runs” around the more restrictive standard for a patent by resort to copyright’s lesser level of creativity.20 Where a work of authorship combines expressive and functional elements, copyright will protect only the form of expression in which the ideas or processes are communicated. Moreover, if in order to duplicate or put into use an unprotected idea, concept, or system, it is necessary substantially to copy another’s otherwise copyrightable expression, such copying is not an infringement. In those instances, the expression “merges” with the idea, and shares the idea’s unprotectable status.21

18  See H Desbois, Le droit d’auteur (3rd edn, Dalloz 1978) 22 (“[les idées] sont par essence et par destination de libre parcours”). 19  Pronounced aloud in French, the letters read “elle a chaud au cul” (more delicately translated as “she is in a state of sexual desire”). 20  For a discussion of patent and copyright overlaps, see the chapter by Estelle Derclaye in this volume. 21  Software may present the most frequent example of the difficulties of distinguishing expression from function. International treaties mandate copyright protection for computer programs, but also declare the exclusion of “ideas, procedures, methods of operation or mathematical concepts as such.” Compare TRIPS, art 10(1) and WIPO Copyright Treaty (opened for signature 20 December 1996, entered into force 6 March 2002) 36 ILM 65 (hereafter WCT), art 4(1) with TRIPS art 9(2) and WCT art 2.

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2.5 Applied Art Works of applied art, such as furniture design, present particular difficulties, to which national laws have responded differently. In some countries, the original design of a useful article may enjoy a copyright so long as the article’s function does not command the design elements. In other countries, including the US, the availability of a “multiplicity of forms” through which the same function might be achieved does not suffice; the design elements must be “separable” from the article’s function. Such a rule tends to confine most works of applied art to the realm of design patents or other specific design protection laws.

3. Formalities Copyright formalities—​conditions precedent to the existence or enforcement of copyright, such as provision of information about works of authorship that will put the public on notice as to a work’s protected status and its copyright ownership, or deposit of copies of the work for the national library or other central authority—​have performed a variety of functions in copyright history. Formalities that condition the existence or enforcement of copyright on supplying information about works of authorship may have been intended to enable effective title searching, thereby furthering the economic interests both of copyright owners and of potential exploiters. Copyright-​constitutive formalities, such as notice of copyright, deposit, registration, and renewal, erect a barrier to the existence of protection, concomitantly casting into the public domain published works that fail to comply. These formalities thus (at least in theory) have divided works of perceived economic significance worth the effort of compliance from the mass of other creations, leaving the latter free for others to exploit. When failure to comply with formalities results in forfeiture of the copyright, this extreme sanction arguably protects exploiters who, in the absence of notice, might not otherwise have known that its author has claimed copyright in the work. Authors might have exclusive rights to print, reprint, and vend, but they first would be put to the burden of making their claims clear. The extent to which any system of formalities in fact achieved all or any of the above objectives is open to question. By the beginning of the twentieth century most countries had abandoned formal prerequisites to protection and had made the obligation to deposit copies for the national library a free-​standing duty, thus divorcing it from the existence or enforcement of copyright. The US, however, retained the notice formality until it joined the Berne Convention in 1989 and modified its law to comply with that treaty’s prohibition on conditioning the enjoyment or exercise of copyright on fulfillment of formalities. The US continues to make registration of works with the Copyright Office a prerequisite to judicial enforcement of copyright (for works of US origin) and to awards of statutory damages or attorney’s fees (for all works regardless of country of origin).22

22  17 USC §§ 411, 412. See generally JC Ginsburg, “The US Experience with Mandatory Copyright Formalities: A Love/​Hate Relationship” (2010) 33 Columbia Journal of Law & the Arts 311.

Copyright   495 The waning of mandatory formalities has, some contend, rendered rights clearance excessively complicated because without notice or registration it is difficult to ascertain if the work is still protected, or who owns the rights that a third party might seek to exploit. As a result, works might be “orphaned,” that is, cast in a limbo in which they retain copyright protection, but resist licensing because the would-​be licensee cannot locate an owner with whom to transact. The public thus is deprived of beneficial republications or adaptations of these works. It is not clear to what extent the “orphan works” problem in fact flows from the waning of mandatory formalities, as opposed to longer copyright terms (see Section 5). In many countries, collecting societies maintain records of copyright ownership, or there are other voluntary registries of works and their owners, and digital identifiers may now and in the future facilitate locating and transacting with copyright owners even in the absence of a centralized, State-​managed registry.

4.  Entitlement/​O wnership 4.1 Initial Ownership Copyright laws generally vest the exclusive rights that comprise a copyright in the author, the human creator of the work. Where the work results from the collaboration of more than one author it may be considered a “joint work” or “work of collaboration,” and its rights will be held in common, absent a contract to the contrary. But countries differ over the characterization of a work as “joint.” For example, in the UK “a ‘work of joint authorship’ means a work produced by the collaboration of two or more authors in which the contribution of each author is not distinct from that of the other author or authors.”23 But in the US, “a ‘joint work’ is a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole” (emphasis supplied).24 Thus, for example, under UK law, a song produced by the collaboration of a composer and a lyricist would be two separate distinct works, words and music, while under US law, music and lyrics created in collaboration would be a single “musical work[], including any accompanying words.”25 On the other hand what constitutes a collaboration may differ not only across national copyright regimes, but, in the US, across federal circuit courts of appeal. In some jurisdictions, an intent to collaborate may not suffice; it may in addition be necessary to show that each co-​author’s contributions would separately have been copyrightable26 (a standard perhaps in tension with the statutory inclusion of inseparable contributions), or that the alleged co-​author was the “mastermind” of the resulting work27 (a standard perhaps in tension with a concept of shared authorship). In some countries, all co-​authors must agree on the grant of exclusive or non-​exclusive rights in a joint work; in others, including the US, any one joint author may license non-​ exclusive rights without the others’ accord, but must account to them for profits. Co-​authors need not each have contributed equally to the work’s creation, but courts may exclude from 23 

24  17 USC § 101. UK Copyright Designs and Patents Act 1988, s 10(1). 26  See, eg, Thomson v Larson 147 F 3d 195 (2nd Circuit 1998). 17 USC § 102(a)(2). 27  Aalmuhammed v Lee 202 F 3d 1227, 1233 (9th Circuit 2000). 25 

496   Jane c. Ginsburg co-​authorship status a person who has merely brought ideas to the development of the work, such as an editor in a publishing house, or whose contribution consisted primarily of executing the technical know-​how to give a work concrete form, such as a welder who assembles a monumental sculpture under the artist’s direction.

4.2 Employee and Commissioned Works National copyright laws diverge over the initial ownership of copyright by employers or other hiring parties. In the US, but also in the UK and the Netherlands, for example, the copyright in works prepared by employees in furtherance of their employment vests in the employer.28 The US copyright act goes so far as to denominate the employer of the creator of a “work made for hire” the “author” of that work. US “works made for hire” come in two varieties, (i) employee-​ created works; and (ii) certain specially ordered or commissioned works, so long as the type of work figures among a limitative list set out in the copyright act (the list includes contributions to audiovisual works and compilations and collective works; the latter category covers newspapers and periodicals), and both parties to the commission have signed a writing that states that the work will be “for hire.” If these conditions are met, the hiring party will own all rights in the work. If not, for example, if the commissioned work does not fall within the statutory categories, or if a proper writing is not executed, then the creator remains the “author” and first owner of all rights under copyright. With respect to certain categories of work, particularly audiovisual works and computer software, some countries either deem employers the initial owners of copyright or presume that the actual creators have transferred their rights to the employer or producer.29 Some suspicion that the nature of the authorship entailed in a computer program is more industrial than artistic may underlie those countries’ departure from the usual rule of creator-​ownership. By contrast, with respect to audiovisual works, practical considerations, rather than perceptions of a lack of the right kind of creativity, explain the vesting of, or presumption of transfer of, copyright to producers of audiovisual works: These works often involve too many creative contributors for a co-​authorship ownership regime feasibly to enable the work’s exploitation.

4.3 Transfers of Ownership Copyright, like other forms of tangible and intangible property, can be transferred from the author to another, inter vivos or by will or by intestate succession, in whole or in part.30 To be an effective transfer, an assignment of copyright or a grant of exclusive rights must be 28 

17 USC § 201(b); Copyright, Designs, and Patents Act 1988, c 48, s 11 (UK); Auteurswet [Copyright Act], Stb 1912, 60, art 7 (Netherlands). 29  See, eg, Code de la propriété intellectuelle [Code of Intellectual Property] (hereafter France, Code of Intellectual Property) arts L 113-​9 (employers are presumptive owners of employee-​created software); L 132-​24 (presumption of transfer of rights from statutory co-​authors to producer of audiovisual work). 30  In “monist” systems that follow the German copyright tradition, the economic rights and moral rights are inseparably linked in one common right (like the trunk of a tree with two branches); because the moral right/​personality right is inalienable, the entire right cannot be transferred except upon the death of the author. As a result, during the author’s lifetime, rights to economic uses may be licensed but

Copyright   497 in writing and signed by the grantor; in some countries, including the US, a non-​exclusive grant may be valid even though oral or inferred from conduct. Copyright ownership is “divisible:” the author need not assign all her copyright interest, but may limit the scope of the grant to a particular time period or territory, for example, a one-​year license to perform a dramatic work in New York City, or to a medium of expression, for example, the right to publish a novel but not the right to adapt it into a motion picture. Similarly, having granted some exclusive or non-​exclusive rights to one co-​contractant, the author or copyright owner can grant other rights to other parties, for example, the novelist might grant English-​language rights to one publisher, and foreign language rights to other publishers.

4.4 Protections of Authors as Weaker Parties Because, at least until recently, most authors have been ill-​equipped to commercialize and disseminate their works on their own, authors have granted rights to intermediaries to market their works. Since most authors are the weaker parties to publishing, production, or distribution contracts, the resulting deal may favor the interests of the intermediary to the detriment of the authors. Even putting aside the parties’ relative bargaining power, the highly speculative value of literary, artistic, and musical works at the time of their creation can mean that a contract for the exploitation of a work of authorship may not fairly allocate the benefits of the work’s subsequent success. Many national copyright laws have introduced a variety of corrective measures, starting with the very first copyright act, the 1710 British Statute of Anne, which instituted the author’s reversion right31 (still in force, albeit much modified, in US copyright law)32 precisely in order to enable authors to grant rights anew, with fuller knowledge of the work’s market value. Many continental European copyright laws have imposed detailed limitations on the form and scope of grants, for example, ruling some rights to be inalienable, and/​or requiring the precise articulation of the scope of the rights granted (thus requiring ambiguities, such as the coverage of new media, to be construed against the grantee), the provision of royalties for each mode of exploitation, and “bestseller clauses” that grant or allow the author to negotiate for a higher percentage return in the event of a significant disproportion between the agreed-​upon remuneration and the work’s actual success.33 not assigned. See M Gruenberger, “Germany,” sec 4[2]‌[a] in L Bently (ed), International Copyright Law and Practice (Matthew Bender 2015). Thanks to Dr Silke von Lewinski for the arboreal metaphor. 31 

Act for the Encouragement of Learning, 8 Ann, c 19, s 11 (1710) (Gr Brit) (hereafter Statute of Anne) (“the sole right shall return to the author” if still living at the expiration of the initial 14-​year copyright term). 32  17 USC § 203 (inalienable right to terminate grants 35 years after the execution of the contract). 33  See, eg, France, Code of Intellectual Property, arts L 131-​1–​132-​30; §§ 31–​32(B) Urheberrechtswahrnehmungsgesetz [Copyright Administration Act] v 9.9.1965, BGB1 I S 1294 (FRG); Loi Relative au Droit D’Auteur et aux Droits Voisins [Law on Copyright and Neighboring Rights] of 30 June 1994 (as amended by the Law of 3 April 1995), Moniteur Belge [MB] [Official Gazette of Belgium], 27 July 1994, 19297, arts 3, 11, 24, 26, 55. For analysis of particular national laws’ provisions on authors’ contracts, see, eg, Bently (n 30). On amendments to the German author-​protective provisions, see, eg, W Nordemann, “A Revolution of Copyright in Germany” (2002) 49 Journal of the Copyright Society 1041; WR Cornish, “The Author as Risk-​Sharer” (2002) 26 Columbia Journal of Law & the Arts 1, 8–​16.

498   Jane c. Ginsburg

4.5 Chattel Rights Finally, copyright law distinguishes between ownership of a copyright, or of any of the exclusive rights under a copyright, and ownership of the material object in which the work is embodied. The distinction first arose in the common law world in the 1741 Chancery decision in Pope v.  Curll,34 which concerned the unauthorized publication of letters by Alexander Pope, of which Edmund Curll had obtained lawful possession. Pope contended that, as the letters’ author, he retained the exclusive right to publish them; Curll rejoined that the publication right belonged to him as the owner of the letters. Lord Chancellor Hardwicke distinguished the corporeal “property of the paper,” which passed to the recipient of the letter, and thence to Curll, from the incorporeal property in the words, which remained with their author. In modern copyright law, this principle has been generalized to all kinds of works of authorship.35 Thus, for example, if an artist paints a work and sells the finished canvas, she retains all exploitation rights in the work, absent a contract to the contrary. As a result, the artist, not the purchaser of the painting, would have the sole right to create postcards—​a derivative work—​based on the painting. But the artist cannot prevent the buyer from selling the physical object—​the canvas—​which the buyer now owns, because disposal of the chattel falls within the ownership rights of the purchaser of the physical object that embodies a copy of the work of authorship.36 Neither, in the US, can the artist prevent the owner of the physical object from publicly displaying it so long as the viewers are present in the place where the object is displayed.37

5. Duration The copyright term begins with the creation of the work. It is no longer necessary to publish the work, or to comply with formalities of notice, registration, or renewal of registration, for copyright to attach or to persist. The minimum term of protection under the Berne Convention is 50 years post mortem auctoris. Many countries, including the US and the Member States of the EU, have adopted a longer term of 70 years pma. When the work is of joint authorship, the term is calculated from the death of the last surviving co-​author.

See generally, P Katzenberger, “Protection of the Author as the Weaker Party to a Contract under International Copyright Contract Law” (1988) 19 IIC 731. 34  Pope v Curll (1741) 2 Atk 342 discussed, eg, in M Rose, “The Author in Court: Pope v Curll (1741)” (1991–​92) 10 Cardozo Arts & Entertainment LJ 475; R Deazley, “Commentary on Pope v Curll (1741)” (Primary Sources on Copyright (1450-​1900), 2008) accessed 21 February 2017. 35  In the nineteenth and first half of the twentieth centuries, however, some countries, including France, and some states within the US, imposed a presumption that sale of the original copy of a work of art transferred the rights to publish the image in prints or engravings, and thus placed the burden on the artist to reserve publication rights. 36  See, eg, 17 USC §§ 109, 202. In some countries, the resale of the painting may give rise to an obligation to pay royalties to the artist, see discussion infra (“droit de suite”). 37  17 USC § 109(c).

Copyright   499 The duration of copyright in works whose terms cannot be calculated by reference to the death of a human author generally runs from a period of years from publication or creation of the work. In the EU, anonymous and pseudonymous works endure for 70 years from the date on which the work was first lawfully made available to the public;38 in the US the term of copyright in anonymous and pseudonymous works and works made for hire is 95 years from publication or 120 years from creation, whichever expires first.39 The duration of neighboring rights in the EU was extended in 2011 from 50 to 70 years from publication or first lawful communication to the public. The 2011 Directive also included elaborate provisions for the reversion of rights to performers if, following 50 years from first publication or communication to the public, the phonogram producer does not exploit the phonogram.40 Coupling reversion rights with term extension echoes the first copyright act: The Statute of Anne provided that were the author still living at the end of the initial 14-​year term, “the sole right shall return to the Author” for a new 14-​year term.41 Performers’ (much watered-​down) recapture of rights may also have made the controversial addition of 20 years to the period of protection more palatable, particularly for those unimpressed with pleas for parity with a copyright term that the EU had extended by 20 years in 1993. In both cases, a term of protection 20 years in excess of the already-​long international standard of life + 50 for copyright, and the more modest 50  years from fixation for neighboring rights,42 has provoked criticism on at least two grounds. First, the extension keeps works out of the public domain for an additional 20 years, thus depriving the public, and other authors, of free use of the works, with little evidence that authors and performers (or their heirs) of these aging works in fact benefit from the additional period of protection. Second, the longer the term of protection, the more difficult it may become to locate a work’s current rightholders, thus increasing the transaction costs of obtaining licenses, or making licenses unobtainable. Initiatives to facilitate exploitation of “orphan works” or “unavailable works” have been adopted or are under discussion in the EU and other countries.43

38 

Directive 2006/​116/​EC of the European Parliament and of the Council of 12 December 2006 on the term of protection of copyright and certain related rights [2006] OJ L372/​12, art 1(3). 39  17 USC § 302(c). 40  Directive 2011/​7 7/​EU of the European Parliament and of the Council of 27 September 2011 amending Directive 2006/​116/​EC on the term of protection of copyright and certain related rights [2011] OJ L 265/​1, art 1(2)(c). See generally, JC Ginsburg, “Durée de la protection des enregistrements sonores: Comparaison des régimes EU et UE” (2012) 1 Juris Art et Culture 27. 41  Statute of Anne, s 11. 42  Berne Convention for the Protection of Literary and Artistic Works (opened for signature 9 September 1886, entered into force 5 December 1887) 1161 UNTS 30, art 7; Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations (opened for signature 26 October 1961, entered into force 20 December 1996) 496 UNTS 43, art 17. 43  See, eg, Directive 12/​28/​EU of the European Parliament and of the Council of 25 October 2012 on certain permitted used of orphan works [2012] OJ L 299/​5; US Copyright Office, Report on Orphan Works and Mass Digitization (June 2015)  accessed 21 February 2017; Loi no 2012-​287 du 1er mars 2012 relative à l’exploitation numérique des livres indisponibles du XXe siècle (1) [Law 2012-​287 of 1 March 2012 on the Digital Exploitation of Unavailable Books of the Twentieth Century], JO du 2 mar 2012, p 3986, (effective as of the publication of décret n°2013-​182 of 27 February 2013 on the application of arts L.134-​1 à L.134-​9 of the Code of Intellectual Property).

500   Jane c. Ginsburg

6. Rights 6.1 Moral Rights Authors’ rights are both “moral” and economic. The civil law tradition has long recognized the moral dimension of author’s rights, linked to the personality of the author and inherent in the property right that arises from the act of creation. Moral rights encompass the author’s right to be recognized as the creator of the work (right of attribution or “paternity”), and the right to prevent alterations to her work that are deleterious to her honor or reputation. The latter prerogative is known as the right of integrity, but the denomination is somewhat misleading to the extent that the right entitles the author to a remedy for deleterious changes to her work, but, in most countries, not against the total destruction of her work. The right to determine whether, when, and how to disclose her work to the public (right of divulgation) shares both moral and economic features; in the latter guise, common law countries have recognized a “right of first publication.” Common law systems have adopted the moral rights of attribution and integrity more recently, and more sparingly, than in civil law states; the US, notwithstanding its 1989 adherence to the Berne Convention, still fully protects neither interest. The only moral rights-​specific legislation in the US is limited to a narrowly-​defined class of “works of visual art.”44 The Berne Convention, Article 6bis, establishes that moral rights subsist independently of a transfer of economic rights, but that instrument does not declare moral rights to be inalienable. National laws diverge: In some states, notably France, their inalienability extends not only to authors residing in France, but to exploitations in France of the works of foreign authors. Thus, France will, for example, protect the right of an American creator to oppose the dissemination in France of altered versions of her work, even though she may have signed a contract governed by US law that specifies that she transfers any moral rights she may have respecting any country covered by the contract.45 By contrast, in most common law countries, moral rights (or the economic rights that protect analogous interests) are freely alienable, although the law may require the contract to specify which moral rights are transferred for what purposes.46 The duration of moral rights also varies by country. In some states they endure for the life of the author, in others for the duration of the term of economic rights, and in a few states, including France, they are perpetual.47 Because enforcement of moral rights may dissipate over time, particularly if there are no longer any heirs, the state may confer standing on an authors’ society or on the ministry of culture to advance interests in the work’s integrity or attribution.48 44 

17 USC §§ 101, 106A. See, eg, Huston v Turner Ent, Cass civ [Supreme Court], 1re ch, 28 May 1991, 149 RIDA 197 (1991), 23 IIC 702 (1992) (English translation); JC Ginsburg and P Sirinelli, “Authors and Exploitations in International Private Law: The French Supreme Court and the Huston Film Colorization Controversy” (1991) 15 Columbia-​VLA Journal of Law & the Arts 135. 46  Eg, Visual Artists Rights Act of 1990 (VARA), 17 USC § 106A. 47  See, eg, France, Code of Intellectual Property, art L 121-​1, cl 2. 48  A Lucas, H-​J Lucas, and A Lucas-​Schloetter, Traité de la propriété littéraire et artistique (4th edn, LexisNexis 2012) 537, para 614 suggest that art L 121-​3 authorization to the ministry of culture to act in 45 

Copyright   501

6.2 Economic Rights 6.2.1 Reproduction Right Among the exclusive rights comprised within a copyright, the reproduction right, or right to produce copies, is historically the most basic of all. The right protects against copying in any medium, including within the temporary memory of a computer. Just how temporary the copy may be before it is deemed too transient to constitute an actionable reproduction is a matter of some dispute in the US, in contrast to the EU. The 2001 EU Information Society Directive addresses “temporary acts of reproduction . . ., which are transient or incidental [and] an integral and essential part of a technological process” and, under specified conditions, requires their exemption from the scope of the reproduction right.49 The provision of a mandatory exception for these transient copies suggests that they would otherwise be considered actionable copies. In the US, by contrast, the Second Circuit Court of Appeals has held that the statute’s equation of copies with fixations, which are defined as “permit[ting] the work to be perceived, reproduced or otherwise communicated for a period of more than transitory duration,”50 means that a buffer copy lasting 1.2 seconds cannot be a copy for purposes of infringing the reproduction right.51 The court declined to indicate how much longer a transient fixation in computer memory must endure to become an actionable copy, although it acknowledged that some minutes (rather than seconds) might suffice. The reproduction right is not limited to verbatim (or the visual or musical equivalent) copying; it also protects against paraphrasing. But the right prohibits only actual use of the copyright owner’s work as a model, either directly or indirectly; it does not cover coincidental similarities in a work created independently and without reference to the first. Thus, for example, resemblances that result from the contending authors’ independent resort to common prior sources (as not infrequently occurs in the case of popular songs) are not actionable. Independent generation is therefore a complete defense to an infringement action. But if copying occurred, it need not have been willful; even unconscious copying can infringe.52 In all events, the second author must have copied protected material. As explained earlier, a second author may freely copy a copyrighted work’s ideas and discrete facts, so long as he or she does not also copy the expression or particular manner in which the first author set forth these ideas and facts. In addition, to violate the exclusive right of reproduction, the second author’s copying must be “substantial.” Substantiality of copying depends very much on context; even a small, but qualitatively important, extract from a larger work may be found to infringe, depending on the nature of the copyrighted work and of the portion copied. Many of these precepts are easier said than applied. For example, the line between unprotected “idea” and protected “expression” is notoriously indistinct. As one of the greatest US copyright jurists, Learned Hand, admitted, “Obviously, no principle can be stated as to when the event of the heirs’ abusive exercise or non-​exercise of the deceased author’s divulation right could be extended to authorize the ministry of culture to act on behalf of the deceased author’s attribution and integrity rights in the absence of heirs. 49 

50  17 USC § 101 (emphasis supplied). InfoSoc Directive, art 5(1). Cartoon Network v CSC Holdings 536 F 3d 121 (2nd Circuit 2008). 52  See, eg, Bright Tunes Music Corp v Harrisongs Music Ltd 420 F Supp 177 (Southern District of New York) (1976). 51 

502   Jane c. Ginsburg an imitator has gone beyond copying the ‘idea,’ and has borrowed its ‘expression.’ Decisions must therefore inevitably be ad hoc.”53 The same federal judge coined the “abstractions test” for analyzing claims of infringement when the defendant has not lifted verbatim extracts. The “test” in fact is less a rule or standard than a restatement of the problem: [W]‌hen the plagiarist does not take out a block in situ, but an abstract of the whole, decision is more troublesome. Upon any work, and especially upon a play, a great number of patterns of increasing generality will fit equally well, as more and more of the incident is left out. The last may perhaps be no more than the most general statement of what the play is about, and at times might consist only of its title; but there is a point in this series of abstractions where they are no longer protected, since otherwise the playwright could prevent the use of his “ideas,” to which, apart from their expression, his property is never extended. Nobody has ever been able to fix that boundary, and nobody ever can.54

The determination of how generously to mark off protectable “expression” will also depend on the nature of the work, for example, whether the work is fictional or fanciful, on the one hand, or is factual or functional, on the other. Too narrow a characterization of material in the latter kinds of works as protectable expression risks rendering the copyright so “thin” as to discourage the effort or investment in the work’s production. But too broad a characterization runs a greater risk of interfering with the copyright policies favoring free access to ideas, methods, systems, and the like. Judge Easterbrook of the Seventh Circuit Court of Appeals recognized this quandary in a controversy concerning a work of historical exposition and speculation: Intellectual (and artistic) progress is possible only if each author builds on the work of others. No one invents even a tiny fraction of the ideas that make up our cultural heritage. Once a work has been written and published, any rule requiring people to compensate the author slows progress in literature and art, making useful expressions “too expensive” forcing authors to re-​invent the wheel, and so on. Every work uses scraps of thought from thousands of predecessors, far too many to compensate even if the legal system were frictionless, which it isn’t. Because any new work depends on others even if unconsciously, broad protection of intellectual property also creates a distinct possibility that the cost of litigation—​old authors trying to get a “piece of the action” from current successes—​will prevent or penalize the production of new works, even though the claims be rebuffed. Authors as a group therefore might prefer limited protection for their writings—​they gain in the ability to use others’ works more than they lose in potential royalties. . . .. Yet to deny authors all reward for the value their labors contribute to the works of others also will lead to inefficiently little writing, just as surely as excessively broad rights will do. The prospect of reward is an important stimulus for thinking and writing, especially for persons . . . who are full-​time authors. Before the first work is published, broad protection of intellectual property seems best; after it is published, narrow protection seems best. At each instant some new works are in progress, and every author is simultaneously a creator in part and a borrower in part. In these roles, the same person has different objectives. Yet only one rule can be in force. This single rule must achieve as much as possible of these inconsistent demands. Neither Congress nor the courts has the information that would allow it to determine which is best. Both institutions must muddle through, using not a fixed rule but a sense of the consequences of moving dramatically in either direction.55 53 

Peter Pan Fabrics Inc v Martin Weiner Corp 274 F 2d 487 (2nd Circuit 1960). Nichols v Universal Pictures Corp 45 F 2d 119, 121 (2nd Circuit 1930). 55  Nash v CBS Inc 899 F 2d 1537, 1540–​41 (7th Circuit 1990). 54 

Copyright   503 Ultimately, in copyright law, unprotectable “ideas” and “facts” are not epistemological concepts, but legal conclusions; the scope of the reproduction right turns on notions—​often unarticulated and unproven—​of appropriate competition. Thus, copyright doctrine attaches the label “idea” to aspects of works which, if protected, would (or, we fear, might) preclude, or render too expensive, subsequent authors’ endeavors.

6.2.2 Adaptation (Derivative Works) Right The adaptation right, or right to make derivative works, overlaps somewhat with the reproduction right, since an adaptation, whether into another medium, such as a poster depicting a painting, or into another language, or into a different form of expression, such as a play based on a novel or a motion picture based on a play, will necessarily incorporate the adapted work in whole or in part. Indeed, some copyright laws, such as France’s, do not provide explicitly for a right of adaptation, and instead treat unauthorized derivative works as infringements of the reproduction right.56 In US copyright law, a derivative work “is a work based upon one or more pre-​existing works,” and includes “any . . . form in which a work may be recast, transformed, or adapted.”57 In countries whose laws expressly cover adaptation rights, the concept embraces not only additions to a prior work, but also deletion, abbreviation, and abridgment as well as elaboration and embellishment. The derivative works right thus provides authors their closest US-​law analog to the moral right of integrity (for those authors who retain derivative work rights). For example, the heavy editing of television programs without the consent of the Monty Python comedy group, who were the copyright owners of the underlying scripts, was held to infringe.58 While capacious, the derivative works right is not unlimited. Not every work that is “inspired by” or “goes with” the underlying work, or, more broadly, that capitalizes on the economic value of the underlying work, is necessarily a “derivative work.” For example, a playwright who, having seen “West Side Story,” is inspired to pen her own ethnic variation on “Romeo and Juliet,” has not created an infringing derivative work, Her work may be “derivative” as a matter of literary criticism, and she may be capitalizing on a market the first author created for ethnic transpositions, but if she has embroidered only on the prior author’s ideas, she has not incorporated the prior work’s expression, and so cannot be deemed to have infringed. Similarly, a work, such as a bibliography or abstract, that recapitulates only factual information from or about a prior work, has not copied or adapted its “expression,” and so does not infringe. By the same token, mere reference to a prior work does not create an infringing derivative work, even if the association of the two works economically benefits the second. For example, if an entrepreneur markets a sound recording of 1920s popular music as a perfect audio background for reading The Great Gatsby, the suggestion that one freestanding work makes an ideal accompaniment to another does not convert the complementary work into a “derivative work.” (By contrast, an audiobook that included the music in the soundtrack of 56  See, eg, Lucas et al (n 48) para 254 (“the rights of translation and of adaptation are considered as corollaries of the rights of reproduction and of public performance and therefore are not elevated to distinct prerogatives”). 57  17 USC § 101. 58  Gilliam v American Broadcasting Companies 538 F 2d 14 (2nd Circuit 1976).

504   Jane c. Ginsburg a recorded reading of the book would, by virtue of the incorporation of the two works into one, probably constitute a recasting, transforming or adapting of the novel, as would the audiobook without accompanying music.)

6.2.3 Rights of Public Performance/​Communication to the Public While exploitation of works of authorship through distribution of copies long dominated the economy of copyright, the rights of public performance and communication to the public, now thanks principally to digital media, equal or surpass the reproduction right in economic significance.59 In most countries, the right of “public performance” refers to performances of works to a public present at the place of performance, while “communication to the public” and its subset, “making available to the public” concern transmissions by wired or wireless means to members of the public, whether separated in space, as for example, with radio and television broadcasting, and/​or in time, as with on-​demand digital transmissions.60 By contrast, the rights of public performance and display in US copyright law cover performances and displays both in places open to the public, and by transmissions to members of the public, including those separated in space and/​or time.61 Under the “making available right,” which addresses individualized access by members of the public, it is not necessary that the enterprise has in fact transmitted the content to any member of the public; it suffices that the enterprise has offered to transmit the content. The right, as its name indicates, covers the proposal of individualized access to the work. In most countries, the making available right covers both streaming and downloading. The US copyright act does not explicitly include a “making available right;” the public performance right extends to offers of transmissions of performances of works, that is, of works that can be viewed or listened to contemporaneously with their transmission (streams), but not to transmissions of digital files that will not be heard or seen until the user opens the file that has been sent to her computer (downloads).62 As we will see, the US distribution right encompasses the digital delivery of files, but there may be some uncertainty whether that right also reaches the offer to deliver a digital file. That ambiguity may cast doubt on whether the US protects all aspects of the making available right as envisioned by international norms.63 In most countries, musical performers have the exclusive right to authorize the fixation or transmission of their live performances,64 and performers and producers of phonograms enjoy neighboring rights of reproduction, and communication to the public. In the US, sound recordings have no right of public performance in places open to the public or by

59  See, eg, JC Ginsburg, Essay, “From Having Copies to Experiencing Works: The Development of an Access Right in US Copyright Law” (2003) 50 Journal of the Copyright Society 113. 60  See, eg, InfoSoc Directive, art 3. 61  17 USC §§ 101, 106(4)(5)(6). 62  See, eg, US v American Society of Composers, Authors and Publishers 627 F 3d 64 (2nd Circuit 2010). 63  But see US Copyright Office, The Making Available Right in the United States: A Report of the Register of Copyrights (2016) 74–​76 (concluding that US copyright law adequately covers all aspects of the making available right set out in international treaties). 64  Art 14(1) of the TRIPs Agreement requires that WTO Member States protect performers’ rights of fixation and transmission.

Copyright   505 broadcasting, but their digital communication gives rise to remuneration rights for non-​ interactive transmissions, and to exclusive rights for interactive transmissions. 65

6.2.3.1 “The Public” The exclusive right to perform works in public entered most copyright laws at least a generation later than the right to reproduce the work in copies, although in France, the right of playwrights to authorize or prohibit the public performance of their works, introduced as part of the 1791 revolutionary law regulating theaters, preceded by two years the general right of authors to control copying and publication of their works. Most controversies concerning the right have tested the meaning of “in public” or “open to the public” in light of most laws’ exemptions for performances within a “family circle” or “circle of family and social acquaintance.”66 The meaning of “the public” with respect to the right of communication to the public (or, in the US, of public performance or display by transmission) encompasses a broad variety of modes of remote communication. These include traditional “push” technologies, in which the transmitting entity, such as a broadcaster or a cable or satellite operator, communicates works simultaneously to as many members of the public as choose to turn on their receiving devices. The right of communication to the public also covers “pull” technologies in which individual members of the public receive transmissions of on-​demand content at a place and time chosen by them. The right also reaches hybrid models in which the members of the public individually access the service, but the transmitting entity selects the specific content to transmit, perhaps based on profiles of individual user preferences. Construing “the public” has proved much more fraught in the context of secondary transmissions of an initial authorized transmission.67 Case law in the US and the EU has created more complexity than clarification. In the US, there is uncertainty regarding when services that offer individualized transmissions from remotely stored digital copies made from initial public transmissions should be considered to be providing the works “to the public.”68 In the EU, the Court of Justice has ruled that secondary transmissions to the public do not violate the right of communication to the public unless the transmission reaches a “new public” not contemplated by the original transmission, or is achieved by a “different technical means” from the initial mode of transmission.69 Under this approach, a hyperlink that leads directly to the targeted content makes the work available, but not to a “new public,” because the mode of access is “the Internet,” and the public that accesses the work via the link is the same public as could have accessed the content directly from the source website (provided that content was initially made available without access restrictions). US courts have reached a similar result on different reasoning, holding that the source website publicly performs or displays the work because the content resides on its server; the website or search engine that provides the link, but on whose server the content does not reside, accordingly does not “perform” or “display” the work even though the user accesses the content by means of the linking site.70 65 

17 USC §§ 106(6), 114(d)–​(j). Eg, 17 USC § 101. 67  Many secondary transmissions may also be the objects of compulsory licensing in national laws. 68  American Broadcasting Companies Inc v Aereo Inc 134 S Ct 2498 (2014). 69  Case C-​466/​12 Nils Svensson and Others v Retriever Sverige AB ECLI:EU:C:2014:76. 70  See, eg Perfect v Amazon, 508 F 3d 1146 (9th Cir 2007). 66 

506   Jane c. Ginsburg 6.2.3.2 Performing Rights Organizations Public performances and communications to the public tend to be both ubiquitous, given the multiple venues for live performances and the pervasive media of communication, and to exploit large quantities of works. It may be burdensome and expensive for exploiters to locate and obtain licenses from all the individual right holders, as well as for the right holders to police all the exploiters. These difficulties, albeit augmented with the development of remote communications, were already present well before the advent of the radio. Once legislatures brought within the scope of authors’ exclusive rights live public performances, not only in theaters, but also restaurants, taverns, and other places where music is performed, it became apparent that individual composers could not separately enforce their rights against the plethora of enterprises who owned or controlled the places where music was played. The need for effective enforcement gave rise to the formation of performing rights societies, first in Europe, and subsequently throughout the world. These societies license the public performance and communication to the public rights in nondramatic musical compositions, pursue unlicensed users, and distribute royalties to their composer, lyricist, and publisher members. By representing the interests of large numbers of copyright holders, the performing rights societies are able to secure better enforcement and compensation than could individual claimants. The collective nature of the licensing also benefits users: Rather than seek out individual authors, a party wishing to perform quantities of copyrighted music may obtain all the requisite authorizations from one or two sources in each country of exploitation (multi-​territorial licenses are currently in prospect, but local licensing still enables performing rights societies to include foreign works within the scope of the licenses because of reciprocal agreements among the societies). Performing rights societies are the most well-​ established examples of collective licensing entities and have served as a model for licensing arrangements for institutional and enterprise photocopying and digital copying of books and periodicals, as well as (principally outside the US) for other high-​volume exploitations of the subject matter of copyright and neighboring rights. Because collective licensing societies pool works and fix prices, they invite antitrust scrutiny. ASCAP and BMI, the major US performing rights societies, operate under antitrust consent decrees, and EU and national competition authorities regulate the activities of local collective management entities.

6.3 Distribution Right The copyright owner also has the exclusive right to distribute copies of the work to the public. In most countries, the distribution right covers only tangible copies, while in the US, the right also includes digital copies disseminated over digital networks, such as the Internet. US authorities consider that a digital delivery that results in the fixation of a copy of the work in computer memory without contemporaneous perception of the work by the recipient—​that is, a download rather than a stream—​comes within the statutory distribution right; the latter, as we have seen, is considered a public performance by transmission. (In many other states, delivering or offering to deliver a download is considered a communication to the public.) The US statute equates distribution with “transfer of ownership,” a concept that may initially have presumed an analog environment. A transfer of ownership of an analog copy implicitly involves the transferor’s divestiture of her copy so that the transferee

Copyright   507 may take possession. A book sold by a bookstore leaves the store with the customer; there is one less copy in the store’s inventory. With digital copies, by contrast, a copy is typically “sent,” but the “original” or “owned” copy remains in the initial computer’s memory. There is no divestiture; rather at least two people now own copies where before there was only one owner. Nonetheless, in the context of digital dissemination, US courts focus not on the sender’s retention of a copy, but on the creation of a new copy in the computer of the recipient, a copy that the recipient now owns.71 The distribution right entitles the copyright owner to authorize or prohibit the first sale of the copy of the work. The corollary right to prevent importation of copies (a right that goes back to the first days of printing privileges) also enables the copyright owner to prevent entry onto a given territory of copies made abroad; though, as we shall see, national laws differ regarding the right of the copyright owner to prevent importation of authorized foreign-​made copies. After the first lawful sale within a given territory, the right is “exhausted,” and the copyright owner cannot control further sale of that copy. National laws diverge over whether rightholders can control, or be remunerated for, other forms of disposition of the physical copy after its first sale, most importantly by leasing or lending it. While the EU provides for rental rights, and for mandatory remuneration to authors and performers,72 US law, with two exceptions for phonograms and copies of computer programs, considers that the right to control the disposition of the tangible copy by rental is transferred with the ownership of the physical copy.73 From the US perspective, it follows from the distinction between incorporeal intellectual property (IP) rights on the one hand and chattel rights in the physical object on the other, that the owner of the latter has the right to exploit or dispose of the physical object, so long as she does not make further copies; the additional copies come within the domain of the copyright, while the single tangible copy acquired by sale or gift is an item of personal property. Courts in several countries have addressed what the “copy” means for purposes of the exhaustion doctrine. A change in the tangible medium of fixation may result in the creation of a different copy than the one sold under the authority of the copyright owner. The CJEU has recently ruled that the exploiter of a process that separates a photographic image from the paper on which it was printed, allowing the image to be transferred to a different medium, 71 

London-​Sire Records Inc v Doe 542 F Supp 2d 153 (District Court (Massachusetts) 2008). See also 17 USC § 115(d): “A ‘digital phonorecord delivery’ is each individual delivery of a phonorecord by digital transmission of a sound recording which results in a specifically identifiable reproduction by or for any transmission recipient of a phonorecord of that sound recording . . .” Accord, US Copyright Office (n 63) 21–​22 (distribution right covers digital copies created in recipient’s computer memory). Moreover, on further examination, a “distribution” need not always result in a loss of possession, even in the analog world. For one very old technological example, consider the biblical loaves and fishes. English versions of the gospels recount that Jesus ordered his disciples to “distribute” the loaves and fishes to the public. Though the supply seemed inadequate, all the public were served, yet at the end, the same number of loaves and fishes remained in the baskets as at the outset. Matthew 14:20 (King James); Mark 6:41 (King James); Luke 9:16 (King James); John 6:11 (King James). For another bread-​related example of a distribution which does not require the donor to part with her possession, a baker can parcel out to other bakers batches of sourdough “starter” yet retain an amount sufficient to prepare her own loaves. 72  Council Directive 92/​100/​EEC of 19 November 1992 on rental right and lending right and on certain rights related to copyright in the field of intellectual property [1992] OJ L 346/​61, art 4. 73  17 USC §§ 109(a)–​(b).

508   Jane c. Ginsburg could not shelter under the exhaustion doctrine, even though no additional copies were made, because the process yielded a different object: The fact that the ink is saved during the transfer cannot affect the finding that the image’s medium has been altered. What is important is whether the altered object itself, taken as a whole, is, physically, the object that was placed onto the market with the consent of the rightholder.74

By contrast, the Supreme Court of Canada, on almost identical facts, came to the opposite conclusion.75 In the US, the US Copyright Office and lower courts have construed the statutory limitation of the first sale doctrine to “that copy” to preclude a “digital first sale doctrine,” because, even if the sender deletes the copy from her own computer’s memory, the process of digital dissemination entails the creation of a new copy in the computer of the recipient.76 National laws also differ with respect to the geographic scope of the exhaustion doctrine. Under EU law, once a lawfully-​made copy has been sold within the EU, the principle of free movement of goods requires that it may be resold in every other EU Member State. But the copyright owner may prevent the entry into the EU of a copy from outside it, even if that extra-​EU copy was lawfully made under license from the copyright owner.77 By contrast, in the US, the Supreme Court has held that the statutory right to prevent importation of copies does not apply to copies lawfully made abroad under license from the US copyright holder.78

6.3.1 Contractual Avoidance of the Exhaustion Doctrine? As discussed, the sale (or other transfer of ownership) of a copy triggers the exhaustion doctrine. By contrast, if the copyright owner alienates possession of a copy without in fact selling it, and thus engages in rental, lease, or lending, the copyright owner can control secondary markets for the recirculation of the copy because the distribution right will not yet have been “exhausted” by a sale; lawfully possessing a copy does not suffice without ownership. Not surprisingly, then, some copyright owners, particularly in certain industries, prefer to “lease” rather than to “sell” copies of their works. If copyright owners could simply recharacterize any “sale” as a “lease,” however, there would be little left to the exhaustion doctrine, because, if the apparent sale is in fact only a “lease,” the copyright owner may prevent the possessor-​lessee from reselling the copy. The case law addressing the question whether a purported “lease” should be deemed a “sale” appears to turn on the degree of restrictiveness of the license conditions and their effectiveness.79 74 

Case C-​419/​13 Art & Allposters International BV v Stichting Pictoright ECLI:EU:C:2015:27, para 45. Théberge v Galerie d’Art du Petit Champlain Inc 2002 SCC 34. 76  See US Copyright Office, DMCA Section 104 Report (August 2001) 111 accessed 21 February 2017; US Copyright Office (n 63) 22 n 94; Capitol Records, LLC v ReDigi Inc 934 F Supp 2d 640 (SDNY 2015); US Department of Commerce Internet Policy Task Force, Copyright Policy, Creativity, and Innovation in the Digital Economy (January 2016) 35–​69. 77  See, eg, Case C-​355/​96 Silhouette International Schmied GmbH v Hartlauer Handelsgesellschaft mbH ECLI:EU:C:1998:374 (trademarks, but same result would apply to regional exhaustion of copyright). 78  Kirtsaeng v John Wiley & Sons Inc 133 S Ct 1351 (2013). 79  See, eg, Vernor v Autodesk 621 F 3d 1102 (9th Circuit 2010) (whether the work has traditionally been distributed with restrictive license conditions so that the possessor would not have expected 75 

Copyright   509

6.3.2 Droit de Suite The “droit de suite,” or artists’ resale royalty right, qualifies the exhaustion doctrine:  The right requires that, for the duration of the copyright term, the creator receive a specified percentage of the price of every subsequent public resale. Because there may be no market for reproduction or communication to the public of many works of art, exploitations of incorporeal copyright rights may not benefit many artists; the droit de suite therefore seeks to provide artists a revenue stream by ensuring that they share in the subsequent profitable disposition of lawfully owned copies of their works. Though the droit de suite is the subject of an EU Directive, many non-​EU countries, including the US, have not yet adopted it.

7.  Exceptions and Limitations Copyright protection is not absolute. We have seen that copyright provides no remedy for the copying of “ideas,” information, and processes, no matter how laboriously derived, and no matter what their commercial value. Nor does copyright protect against independent generation of the same or similar expression. Moreover, not all copying or communication of protected expression infringes. National copyright laws, which act within the framework imposed by international agreements, impose a variety of exceptions and limitations on the scope of copyright. Exceptions entitle the user to engage in the permitted act without having to pay the copyright owner; limitations permit the use, but require payment, at rates usually set by government authorities who establish compulsory licenses. Compulsory licenses may be particularly widespread in the realm of secondary transmissions of broadcast performances, given the Berne Convention Article 11bis explicit authorization of that limitation. They also exist in many states to provide compensation for private copying and for a variety of non-​profit educational purposes.80 The Berne Convention, Article 13, authorizes Member States to permit the recording of non-​dramatic musical compositions on to phonograms for distribution to the public, subject to compulsory licenses, but the US is one of the few countries that continue to impose this limitation. Unremunerated exceptions vary considerably across national laws, but some of the most widespread include copying for purposes of research and private study, quotations

to be able freely to dispose of her copy); Case C-​128/​11 UsedSoft GmbH v Oracle International Corp ECLI:EU:C:2012:407 (whether a copy has been “sold” depends on whether “licensee’s” right to use is unlimited in time, and on other restrictions). Compare UMG Recordings Inc v Augusto 628 F 3d 1175 (9th Circuit 2011) (CDs bearing legend that they remained the property of producer held insufficient to convert a sale into a license; producer lacked control over disposition of copies and, unlike software, CDs traditionally were sold, not leased). 80  For example, the 2001 EU Information Society Directive, art 5(2)(e) permits “in respect of reproductions of broadcasts made by social institutions pursuing non-​commercial purposes, such as hospitals or prisons, on condition that the rightholders receive fair compensation.” Art 5(2)(b) permits private copying, subject to fair compensation, but the CJEU has held that a condition of the application of private copying limitations is their confinement to copies made from a legitimate source. See Case C 435/​12 ACI Adam BV and Others v Stichting de Thuiskopie ECLI:EU:C:2014:254.

510   Jane c. Ginsburg from works for purposes of criticism and commentary, including parody, and public performances or displays of works for purposes of teaching. In all events, international norms require that national laws creating exceptions and limitations satisfy the “3-​step test,” set out at Article 9(2) of the Berne Convention with respect to the reproduction right, and reiterated in Article 13 of the TRIPS Agreement and Article 10 of the WIPO Copyright Treaty with respect to all rights under copyright. It shall be a matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author.

As interpreted by the WTO dispute resolution panel in a proceeding contesting a US exemption for retransmissions of public performances of radio and television broadcasts in bars, restaurants and retail establishments,81 national legislatures must ensure:

(i) that the exemption is limited to a narrow and specifically defined class of uses [“certain special cases”]; (ii) that the exempted use does not compete with an actual or potential source of economic gain from the ways rightholders normally exercise rights under copyright [“conflict with a normal exploitation of the work”]; and (iii) that the exempted use does not unreasonably harm rightholder interests that are justifiable in light of general copyright objectives [“not unreasonably prejudice the legitimate interests of the rightholder”]; the unreasonableness of the harm may be allayed if the Member State imposes a compensation-​ensuring compulsory license in lieu of an outright exemption. Significantly, “[t]‌he three conditions apply on a cumulative basis, each being a separate and independent requirement that must be satisfied. Failure to comply with any one of the three conditions results in the Article 13 exception being disallowed.”82 Thus, for example, if the exploitation at issue is “normal,” then subjecting it to a compulsory license would not be permissible. As a result, if educational uses constitute the principal market for a book (such as a collection of grammar exercises), then a Member State would violate Article 13 if it imposed a compulsory license to permit the book’s reproduction for educational purposes. By the same token, a Member State would not comply with Article 13 if its exception or limitation were not confined to “certain special cases,” even if the impact of the exception or limitation did not “conflict with a normal exploitation” nor “unreasonably prejudice the legitimate interests of the rightholder.” Some commentators have disputed the WTO Panel’s requirement that each step be independently satisfied. For example, the Wittem Project “European Copyright Code,”83 Article 5.5, essentially foregoes the first step:

81 

Panel Report, United States—​Section 110(5) of US Copyright Act, WTO Doc WT/​DS 160/​R (adopted 27 July 2000). 82  ibid para 6.97. 83  European Copyright Code accessed 21 February 2017.

Copyright   511 Any other use that is comparable to the uses enumerated in article 5.1 to 5.4(1) [Uses with minimal economic significance; Uses for the purpose of freedom of expression and information; Uses Permitted to Promote Social, Political and Cultural Objectives; Uses for the purpose of enhancing competition (advertising and reverse engineering)] is permitted provided that the corresponding requirements of the relevant limitation are met and the use does not conflict with the normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author or rightholder, taking account of the legitimate interests of third parties.

The first step, as interpreted by the WTO Panel, would appear to favor “closed list” systems of exceptions and limitations, such as that found in the 2001 EU “Information Society” Directive,84 over open-​ended systems, of which the US “fair use” exception is the best-​ known example. In “closed list” systems, the ability to fit the challenged use within one of the enumerated categories is determinative. Uses that fall outside the categories do not qualify. The flexibility of the system thus depends on the capaciousness and adaptability of the categories.85 In open-​ended systems, there is no per se barrier to the types of uses that may qualify. Consistency with the WTO panel’s requirement that the exemption be clearly articulated and narrowly defined thus turns on the success of the argument that the uses for which a fair use defense prevails will ultimately fit the bill.86 Even were that so (as we shall see, it is in fact uncertain that the class of uses qualifying as “fair” are so limited), that determination would be arrived at only after assessment of the facts and law relating to the second two steps, so the US approach does not appear to treat the first step as a necessary and exclusive threshold for analysis of the “normal market” and “unreasonable prejudice” considerations. Originally a judge-​made doctrine devised in the mid-​nineteenth century, albeit with British antecedents dating to the mid-​eighteenth century, fair use was codified in Congress’ general revision of copyright law in 1976.87 Section 107 of the US Copyright Act applies to all works of authorship and to all exclusive rights. That section lists several illustrative uses subject to the defense, including criticism, comment, news reporting, teaching, scholarship, and research. Nonetheless, a defendant who has reproduced, adapted, or publicly distributed, performed, or displayed a copyrighted work without authorization must do more than invoke one of the above socially beneficent purposes. The statutory examples do not operate 84 

InfoSoc Directive, art 5. See PB Hugenholtz and MRF Senftleben, “Fair Use in Europe: In Search of Flexibilities” (2011) accessed 21 February 2017 (analyzing EU categories and arguing that they are not as restrictive as might appear). 86  Council for Trade-​Related Aspects of Intellectual Property Rights, Review of Legislation on Copyright and Related Rights, United States, WTO Doc IP/​Q/​USA/​1 (30 October 1996) 4 (US delegation’s report to TRIPS Council asserts that “The fair use doctrine of US copyright law embodies essentially the same goals as Article 13 of TRIPS, and is applied and interpreted in a way entirely congruent with the standards set forth in that Article.”). 87  Fair use is codified at 17 USC § 107. Folsom v Marsh 9 F Cas 342 (District Court (Central District of Massachusetts) 1841) (No 4901), is generally credited as the first US case law iteration of the doctrine; Folsom synthesized a century of British case law expounding the “fair abridgement” doctrine. For a full analysis of the English decisions, see I Alexander, Copyright and the Public Interest in the Nineteenth Century (Hart Publishing 2010). On fair abridgement as a precursor to fair use, see, eg, M Sag, “The Prehistory of Fair Use” (2011) 76 Brooklyn L Rev 1371; on Folsom v Marsh and its role in US fair use law, see, eg, RA Reese, “The Story of Folsom v. Marsh: Distinguishing Between Infringing and Legitimate Uses” in RC Dreyfuss and JC Ginsburg (eds), Intellectual Property Stories (Foundation Press 2005) 259. 85 

512   Jane c. Ginsburg like a closed list; the statute also enumerates four factors to be reviewed in the disposition of the defense, and application of the factors may render an unlisted use fair, just as it may disqualify a listed use. These factors are the nature of the defendant’s use; the nature of the copyrighted work; the amount and substantiality of the portions taken from the copyrighted work; and the effect of the taking upon the potential market for the copyrighted work. These four factors are not exhaustive. Because the fair-​use doctrine is still “an equitable rule of reason,” courts are free to consider other factors, or to give greater weight to some factors than to others, depending on the given case. A defendant invoking the fair-​use defense must establish that the balance of the statutory and any additional judicial criteria weighs in his or her favor. The potential disparities between the US fair-​use exception and the three-​step test have long attracted the attention of scholars.88 First, as discussed, section 107 on its face is not limited to “certain special cases.” Second, while the fourth fair-​use factor’s consideration of the impact of the use upon the potential market for the work seems to echo the second of the three steps (not conflict with a normal exploitation), section 107 does not offer a third step fallback of substituting compensation for control over the use at issue. Rather, fair use is an on/​off switch: all or nothing. Either the challenged use is an infringement of copyright,89 or it is a fair use, which section 107 declares “is not an infringement of copyright.” As a result, either the copyright owner can collect damages and/​or stop the use, or the user not only is dispensed from obtaining permission, but also owes no compensation for the use.

8. Remedies The most important, and most ancient, remedy for copyright infringement is injunctive relief. The copyright owner’s principal objective often will be to ensure that infringing copies or communications are no longer available to the public. Hence, the frequent corollary remedy of seizure and destruction of infringing copies and even their means of protection, or, as the 1710 Statute of Anne provided, the “Offender or Offenders shall forfeit such [infringing] Book or Books to the Proprietor or Proprietors of the Copy [exclusive rights] thereof, who shall forthwith Damask and make Waste Paper of them . . .”90 Monetary remedies include damages for lost sales and the infringer’s profits. US remedies permit the successful copyright plaintiff to elect statutory damages in lieu of actual damages. Statutory damages may exceed the cost of a market-​rate license, and thus may play an admonitory—​albeit not punitive—​role, but 88  See, eg, S Ricketson and JC Ginsburg, International Copyright and Neighbouring Rights: The Berne Convention and Beyond (OUP 2006) para 13.33; R Okediji, “Toward an International Fair Use Standard” (2006) 39 Columbia Journal of Transnational Law 75, 161–​162; J Bongiorno, “Fair Use of Copyrighted Images After Perfect 10 v. Amazon.com: Diverging From Constitutional Principles & United States Treaty Obligations” (2009) 12 Touro International L Rev 107, 153–​154. 89  For which, in addition to damages, a usual remedy is injunctive relief, see 17 USC §§ 502, 504. The Supreme Court has suggested, however, that a court might withhold injunctive relief if a fair use defense fails but the defendant’s work advances expression or learning. See Campbell v Acuff Rose 510 US 569, 577 n 10 (1994). To date, it appears that no court has taken up the invitation to impose a judge-​made compulsory license in a fair use case. 90  Statute of Anne, s 2.

Copyright   513 their greatest utility may be in cases in which actual damages are difficult to prove, notably because the defendant has not kept reliable records of its sales of infringing copies. Statutory damages are, however, available only if the work was registered with the US Copyright Office before the occurrence of the infringement, or, if the work was infringed upon its initial publication, if the copyright owner registered within three months of first publication.91 The judge has discretion to award statutory damages within a statutory range. For non-​profit educational institutions who believed in good faith that their uses were not infringing, the court has power to remit an award of statutory damages altogether.92 Statutory damages have the greatest deterrent and remedial bite when the defendant infringes large quantities of works; phonogram and film piracy by commercial actors furnished the traditional instances for the application of statutory damages for willful infringement. More recently, however, individual end-​users engaged in massive “file-​sharing” have faced the prospect of millions of dollars of personal liability, although the few adjudicated cases have awarded substantially less, albeit nonetheless considerable amounts.93 The attention these awards have drawn has enhanced prior criticisms of heavy-​handed copyright enforcement and excessive damages awards.94

8.1 New Copyright Obligations: Protection of Technological Protection Measures and Copyright Management Information Since 1996, international agreements have imposed two additional obligations devised for the digital environment, one regarding technological protection measures, and the other concerning copyright management information.95 The first requires Member States to “provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors in connection with the exercise of their rights under the World Intellectual Property Organization Copyright Treaty (WCT) or the Berne Convention and that restrict acts, in respect of their works, which are not authorized by the authors concerned or permitted by law.” The second protects against the knowing removal or alteration of electronic information “which identifies the work, the author of the work, the owner of any right in the work, or information about the terms and conditions of use of the work.” These obligations respond to the perception that the development of a digital marketplace would require building copyright owner confidence that digital dissemination would not result in rampant unauthorized redissemination. Their implementation, notably in the US through the Digital Millennium Copyright Act (DMCA)

91

92  17 USC § 504(c).   17 USC § 412. Capitol Records Inc v Thomas-​Rasset No 06-​1497, slip op (District Court (Minnesota) 2009); BMG Music Ent v Tenenbaum No 07cv11446-​NG (District Court (Massachusetts) 2009). 94  See, eg, P Samuelson and T Wheatland, “Statutory Damages in Copyright Law: A Remedy in Need of Reform” (2009) 51 William & Mary L Rev 439, 454–​455. The US copyright act also provides for criminal penalties, see 17 USC § 506, 18 USC § 2319. 95  WCT, arts 11, 12; WIPO Performances and Phonograms Treaty (opened for signature 20 December 1996, entered into force 20 May 2002) 36 ILM 76, arts 18–​19. 93 

514   Jane c. Ginsburg of 1998,96 and in the EU through the 2001 Information Society Directive,97 seeks to promote lawful digital dissemination by ensuring that “technological protection measures” that copyright owners choose to apply to their works—​such as scrambling or encrypting digital versions of recordings, films, and books—​are not circumvented without proper authorization. Such technological protection measures are intended to prevent usable copies of the copyright-​protected work from being copied, stored, or communicated to others. By the same token, protection of identifying information promotes electronic commerce by ensuring that information regarding the author, the work and the prices for its enjoyment are easily accessible and reliable. With respect to technological protection measures, several questions arise. First, do states party to the WCT incur an obligation to protect not only against the act of circumvention, but also against the distribution of circumvention devices? Second, what kinds of measures are covered:  controls against copying or communicating the work, or also controls over access to the work? Third, how can legal protection of technological measures accommodate copyright exceptions or limitations? While the text of Article 11 specifies “the circumvention” and therefore arguably addresses only the act of circumvention, protection would largely be ineffective were circumvention devices to circulate freely. Hence, national laws implementing Article 11 generally cover both. National laws also generally cover access controls as well as copy controls; while simply apprehending a work is not necessarily a copyright-​infringing act (depending on whether an actionable copy is made in the user’s computer), authors use technological measures “in connection with the exercise of their rights,” notably of communicating the work to the public. By contrast, some technological measures control access to spare parts, telephone networks, or other goods or services that are not works of authorship. US courts have generally rejected attempts to leverage control over access to computer programs that in turn control access to non-​copyright goods or services.98 Similarly, the US Copyright Office, in its triennial rulemaking procedures to declare exemptions for certain classes of copyrighted works as to which acts of circumvention may be permitted in order to ensure the availability of non-​infringing uses, has authorized such acts as “jailbreaking” of cellphones so that users can retain their hardware when changing service networks.99 Finally, with respect to exceptions and limitations, WCT Article 11 requires protection only for those technological measures “which are not authorized by the authors concerned or permitted by law.” Thus, a technological measure that impedes a lawful use may be circumvented. The difficulty is that the same technological measure may also impede unlawful uses, and the measure may not “know” when its user is making a lawful or unlawful use. National laws have responded differently to this conundrum. The US Copyright Office’s triennial rulemaking offers one approach to accommodating copyright exceptions. The EU Information Society Directive essays another approach: It requires Member States to “take appropriate measures to ensure that rightholders make available to the beneficiary of an 96 

97  InfoSoc Directive, arts 6–​7. 17 USC § 1201. See, eg, Lexmark International v Static Control Components Inc 387 F 3d 522, 547 (6th Cir 2004); Chamberlain Group v Skylink Techs 381 F 3d 1178 (Fed Cir 2004). 99  17 USC § 1201(a)(1)(B)–​(D); the most recent rulemaking was published at Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies, 60 Fed Reg 65944–​64 (28 October 2015). 98 

Copyright   515 exception or limitation provided for in national law in accordance with [certain exceptions and limitations enumerated in the Directive] the means of benefiting from that exception or limitation, to the extent necessary to benefit from that exception or limitation and where that beneficiary has legal access to the protected work or subject-​matter concerned.”100 Where the US approach places the burden on the beneficiaries of the claimed exemption to establish its necessity, the EU puts the onus on rightholders to ensure that lawful uses remain available.101 Regarding copyright management information, the principal implementation issues, at least in the US, have concerned the standard of knowledge required to constitute a violation. Both WCT Article 12 and the DMCA set out a dual knowledge standard: The alleged violator must have knowingly removed or altered the information, or known that CMI had  been removed and known that removal or alteration would facilitate or conceal an infringement. Thus, even intentional removal or alteration of copyright management information is not unlawful if the copyright owner cannot show that the person who removed or altered the information knew that the removal would encourage or facilitate copyright infringement. While the first element of knowledge may be relatively easy to establish, the second has proven more elusive.102

8.2 Liability of Intermediaries Finally, the Internet has accentuated the role of intermediaries, such as search engines, hosting platforms, and link aggregators, in the communication of protected content. Questions have, therefore, arisen concerning the direct or secondary liability of these actors for copyright infringement. While these intermediaries may not always be engaged in acts that (depending on national laws) would constitute reproductions or communications to the public, they often derive considerable economic benefits from their role in the chain of making works available. In the US and the EU, providers of Internet access, hosting services, and (in the US) search engines enjoy exemptions from direct or indirect liability if their conduct meets statutory prescriptions designed to ensure substantive and economic neutrality regarding works that the services host or to which they link.103 In other countries, or with respect to activities falling outside the scope of the statutory exemptions, national principles of tort or unfair competition law may provide a basis of indirect liability. 100 

InfoSoc Directive, art 6(4) para 1. This duty does not, however, apply to technological measures that secure the on-​demand delivery of works of authorship and other protected subject matter. See InfoSoc Directive, art 6(4) para 4. 102 Cf Gordon v Nextel Comms 345 F 3d 922 (6th Circuit 2003); Schiffer Pub, Ltd v Chronicle Books LLC 73 USPQ 2d (BNA) 1090 (District Court (East District of Pennsylvania) 2004) (knowledge standard not met) with McClatchey v AP 82 USPQ 2d 1190 (District Court (Western District of Pennsylvania) 2007) (knowledge standard met when party who deletes or alters the information redisseminates the work to the public without the information). Friedman v Live Nation Merchandise, Inc, 833 F 3d 1180 (9th Cir 2016) (defendant’s “knowledge that photographs are often copyrighted” combined with absence of CMI on plaintiff ’s photographic images on defendant’s merchandise could permit a jury to find the requisite knowledge). 103  17 USC § 512; Directive 2000/​31/​EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“Directive on electronic commerce”) [2000] OJ L 178/​1, arts 12–​15. 101 

516   Jane c. Ginsburg

9. Conclusion Copyright law secures human creativity in works of authorship. Enforceable authorial property rights advance the public interest by promoting an ecosystem of authorship: A robust copyright environment encourages authors to create works that inform and enrich the polity, and from which other authors may draw ideas, information and reasonable amounts of protected expression in their own authorial endeavors. Copyright promotes artistic freedom and free speech by enabling authors to earn a living from their creativity. As Victor Hugo proclaimed at the International Literary Congress convened in 1878 to urge international protection for authors: Literary property is in the public interest. All the old monarchic laws have rejected, and continue to reject literary property. To what end? In order to enslave. The writer who is an owner [of his literary property] is a writer who is free. To take his property away is to deprive him of his independence.104

Copyright thus promotes a diversity of expressions that might otherwise remain unvoiced. Some might hasten to add that it does so, as Lord Macaulay charged, by imposing “a tax on readers for the purpose of giving a bounty to writers.” But the great historian also acknowledged that, “The advantages arising from a system of copyright are obvious. It is desirable that we should have a supply of good books; we cannot have such a supply unless men of letters are liberally remunerated; and the least objectionable way of remunerating them is by means of copyright.”105

104 

Société des Gens de Lettres de France, Congrès Littéraire International de Paris 1878 (Paris 1879) 106 (translation mine). 105  TB Macaulay, “Speech before the House of Commons” (5 February 1841) in GM Young (ed), Macaulay: Prose and Poetry (Harvard UP 1970) 733–​734.

Chapter 19

Trade M arks a nd Allied Ri g h ts Dev Gangjee * 1. Trade marks 1.1 History and Justifications Trade mark law grants exclusive rights to control certain uses of signs in the marketplace. Exclusivity depends upon the recognition of property rights in those signs which indicate the commercial origin of goods or services. This exclusivity ensures that a mark such as Coke can be controlled by a single commercial entity, which facilitates uncluttered signaling in the marketplace. Consumers can trust such marks and are thus spared the effort of having to investigate a product’s provenance. Producers are simultaneously equipped with the legal means to prevent third parties from adopting an identical or similar mark and thereby competing unfairly with them. Since trade mark law is structured around protecting the communicative content of commercial signs, this suggests a functional foundation: Protect signs to protect their messages. However, the history of product marking indicates that these messages have varied across time and place. Historic transitions in product marking have therefore influenced justificatory accounts in this domain of IP law. With trade marks increasingly subsumed within the more expansive notion of brands, the extent to which the law should keep pace with these transitions continues to be debated. Crucially, the happy coincidence of purchaser, proprietor, and public interests may unravel as trade mark law is reshaped along the lines of stronger brand image protection. This chapter provides an outline of trade mark law, selectively emphasizing issues arising from expansions relating to its purpose, subject matter, and

* 

Dev Gangjee has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified.

518   Dev Gangjee scope of protection. It draws primarily on European and US legal materials for illustrative purposes.1

1.1.1 A History of Product Marking The defining feature of a trade mark is that it must be “capable of distinguishing the goods or services of one undertaking from those of other undertakings.”2 This foundational function—​that of identifying the commercial origin of products—​was identified in the latter half of the nineteenth century. In the preceding decades, developments in industrial-​scale manufacturing, transportation, storage, communication, and advertising techniques had led to the consolidation of national markets.3 With the lengthening of distribution chains, products increasingly traveled considerable distances before reaching customers.4 This expansion was further amplified by international trade flows as well as colonial trading circuits, with pressure mounting for more robust international protection.5 Calls to curb fraud and increase reliability across greater distances help to explain the emergence of modern trade mark law during this period. Prior to this, product marking had been regulated for several centuries, if not millennia.6 One early category was the proprietary mark, still prevalent today in the form of cattle branding. Such a mark indicates the ownership of the underlying goods.7 Another is the mark of origin, depicted by means of a stamp or seal and traceable to antiquity. Archaeological excavations reveal that Sumerian, Egyptian, Chinese, Greek, and Roman pottery, earthenware lamps, and ceramics all bore a range of marks conveying useful information. They revealed the identity of the artisanal maker, the place of origin, the name of the ruler, or even the product’s eventual destination.8 These marks enabled a range of tracing functions, including the imposition of appropriate taxes and quality inspection systems. A more proximate predecessor to contemporary trade marks was the medieval guild mark, which had both certification and liability aspects.9 Guilds acted as coordinating institutions

1 

An initial clarification will assist the reader: since it’s a “trademark” in the US but a “trade mark” across the EU, the latter has been adopted for this chapter. 2  TRIPS Agreement, Art 15(1). 3  In the British context, see, eg, N McKendrick, J Brewer, and JH Plumb, The Birth of a Consumer Society: The Commercialization of Eighteenth-​Century England (Europa Publications 1982); R Church, “Advertising Consumer Goods in Nineteenth-​Century Britain: Reinterpretations” (2000) 53(4) Economic History Review 621. 4  W Cornish et al, The Oxford History of the Laws of England Volume XIII: 1820–​1914: Fields of Development (Oxford University Press 2010) 990, 990–​991. 5  S Ricketson, The Paris Convention for the Protection of Industrial Property: A Commentary (Oxford University Press 2015) 12–​13; P Duguid, “French Connections: The International Propagation of Trade Marks in the Nineteenth Century” (2009) 10(1) Enterprise and Society 3 (on bilateral pressure). 6  AS Greenberg, “The Ancient Lineage of Trade-​Marks” (1951) 33 Journal of the Patent Office Society 876; H Dawid, “Preserving History—​Trade Mark Timeline” (1992) 82 TMR 1021; K Moore and S Reid, “The Birth of Brand: 4000 Years of Branding” (2008) 50(4) Business History 419. 7  FI Schechter, The Historical Foundations of the Law Relating to Trade Marks (Columbia University Press 1925) 19–​37. 8  Greenberg (n 6); B Paster, “Trade Marks—​Their Early History” (1969) 59 TMR 551. 9 Schechter, Historical Foundations (n 7) 38–​7 7; D Higgins and G Tweedale “Asset or Liability? Trade Marks in the Sheffield Cutlery and Tool Trades” (1995) 37(3) Business History 1.

Trade Marks and Allied Rights    519 which standardized and subsequently policed product quality within their membership. The unique mark of the guild, indicating production by an authorized guild member, was often accompanied by the individual member’s mark on the product. This allowed for some accountability if the sword shattered in battle or the fabric unexpectedly faded. As the effects of industrialization and the reconfiguration of manufacturing took hold, this liability-​focused regime was replaced in the nineteenth century by the modern conceptualization of a trade mark, which typically indicated commercial source via a sign specific to the product. This sign was distinct from a corporate or trade name, the manufacturer’s family name, or a product description.10 Our story does not end here, as this origin indicating function provided a convenient foundation upon which to layer a message of consistent quality. Reliable quality in turn provided the basis for building a brand identity around the product. Brand imagery associated with a product goes on to provide an image-​rich and evocative palette which consumers draw upon when signaling aspects of their own identities.11 This is particularly true for luxury products; a Louis Vuitton or Gucci handbag does far more than carry everyday personal items. Trade marks today can anchor economically valuable and affectively influential brands, which are commodities in their own right. If this account suggests an evolutionary trajectory leading up to modern brands, it can be countered in at least two ways. First, historical records reveal that marks performed brand-​ like functions well before the nineteenth century.12 Second, any suggestion of evolutionary continuity must confront the disruptive insights of positivist legal history. Modern trade mark law is markedly different from its predecessors. Before this period, rules proscribing misleading uses of sign were dispersed across a range of legal regimes; prominently, those sounding in crime or tort (delict) and including claims based on fraud, forgery, and deceit. The “trade mark” emerged as a term of art only in the nineteenth century, while its status as a voluntary form of marking protected by property rights was reinforced by formal registration.13 This positivist history affords us additional insights. Property status per se cannot be held accountable for relatively recent expansions in the scope of protection, since this legal categorization is over a century old.14 However, the turn to property was a response to demands

10 

J Mercer, “A mark of distinction: Branding and Trade Mark Law in the UK from the 1860s” (2010) 52(1) Business History 17. 11  TD Drescher, “The Transformation and Evolution of Trade Marks—​From Signals to Symbols to Myth” (1992) 82 TMR 301. 12  H von Staden, “Medicinal ‘Brands’ in Ancient Greece and Rome: Authentication, Falsification, ‘Ownership’ and the Trade in ‘Luxury Goods’ ” (Unpublished manuscript, UC Davis 2012) (Seals or labels found in Greco-​Roman Egypt advertised exotic ingredients or extolled the near-​mythical benefits of taking medications); G Richardson, “Brand Names before the Industrial Revolution” NBER Working Paper No. 13930 (April 2008) (Conspicuous characteristics of durable goods—​like pewter which resonates at a particular pitch—​acted as “technological” trade marks as well as geographical brands). 13  L Bently, “The Making of Modern Trade Marks Law: The Construction of the Legal Concept of Trade Mark (1860-​80)” in L Bently, JC Ginsburg, and J Davis (eds), Trade Marks and Brands: An Interdisciplinary Critique (Cambridge University Press 2008) 3. 14  Id See also L Bently, “From Communication to Thing: Historical Aspects of the Conceptualization of Trade Marks as Property” in GB Dinwoodie and MD Janis (eds), Trade Mark Law and Theory: A Handbook of Contemporary Research (Edward Elgar, 2008) 1; MP McKenna, “The Normative Foundations of Trade Mark Law” (2007) 82 Notre Dame Law Review 1839; Cf RG Bone, “Hunting

520   Dev Gangjee that honest producers required effective remedies against unfair competition involving the misleading uses of their marks. While the consumer interest in preventing misrepresentation has always been relevant, from its inception trade mark law was primarily concerned with protecting producers. Having identified trade marks as a form of intangible property, it becomes necessary to justify the grant of such exclusive rights.

1.1.2 Justifying Trade Mark Protection The exclusivity afforded by trade mark protection is contingent in two important ways, both relating to a mark’s signaling function. Firstly, property does not exist in the mark in an absolute sense. Rights over signs are restricted to their use in relation to certain classes of goods or services. This explains why three unrelated commercial entities can claim Polo as their trade mark—​Ralph Lauren (for clothing and cosmetics), Nestlé (for the “mint with the hole” confectionaries), and Volkswagen (for cars). Trade mark protection therefore relates to the entire message communicated by a sign, as opposed to exclusive rights in the front-​end word or symbol per se.15 Secondly, unlike the more generous legal monopoly available under patent or copyright protection, trade mark infringement requires certain effects upon consumer cognition to be established, such as consumer confusion or its likelihood.16 Proprietary interests are therefore contingent, since the modern registration regime was influenced by predecessors preventing misleading or fraudulent conduct. Through use in the marketplace on particular goods or services, the relevant public came to associate a certain sign with a specific producer. Given that the overarching objective was to prevent subsequent deceptive or misleading uses of that sign, this history provides the scaffolding for the dominant theoretical justification today:  the information transmission or search costs model. As opposed to a moral prohibition against deception, this explanatory model, originating within the neoclassical law and economics tradition, postulates that trade marks enhance informational efficiency in the marketplace.17 Many markets are characterized by information asymmetry, whereby sellers have more information than buyers about product quality. As symbols that convey condensed information, trade marks redress this imbalance. Through effective information transmission, they allow consumers to reliably identify the products they wish to purchase. Legal protection allows consumers to trust such marks and reduces Goodwill: A History of the Concept of Goodwill in Trade Mark Law” (2006) 86 Boston University Law Review 547 (Identifying the malleable notion of goodwill—​as the object of property rights—​as the basis for subsequent expansions). 15  This is known as the speciality principle. The scope of a mark’s protection will be restricted to prohibiting subsequent uses on similar or identical goods or services. This principle has been undermined by the expanding scope of infringement claims. See I Simon Fhima, “Same Name, Different Goods—​Death of the Principle of Speciality” in I Simon Fhima (ed), Trade Mark Law and Sharing Names: Exploring Use of the Same Mark by Multiple Undertakings (Edward Elgar 2009) 101. 16  However, effects on consumers may be formally or logically presumed in certain situations, aligning trade mark law more closely with other IP regimes. 17  WM Landes and RA Posner, “Trade Mark Law: An Economic Perspective” (1987) 30 Journal of Law and Economics 265; NS Economides, “The Economics of Trade Marks” (1988) 78 Trade Mark Review 523. However, assumptions about rational choice sustain this model; for the effects of brand bias on the search cost model see J Sheff, “Biasing Brands” (2011) 32 Cardozo Law Review 1245.

Trade Marks and Allied Rights    521 their search costs. Producers can helpfully convey product attributes by promoting the trade mark. For example, advertising the high-​quality sound associated with Bose speakers allows the mark to convey condensed information while incentivizing producers to maintain or improve upon that quality. Without legal protection producers would lose both customers as well as this quality-​sustaining incentive. Trade mark protection therefore enhances efficiency by lowering consumer search costs and incentivizes investment in product quality by ensuring producers reap reputational rewards. Both the Court of Justice of the European Union (CJEU) and the US Supreme Court have endorsed this justificatory account.18 However, this model is specifically premised upon guaranteeing the interrelated origin and quality functions of marks. Today it is widely acknowledged that marks have additional functions. According to the CJEU these “functions include not only the essential function of the trade mark, which is to guarantee to consumers the origin of the goods or services, but also . . . guaranteeing the quality of the goods or services in question and those of communication, investment or advertising” (emphasis added).19 Given the limited focus of the information efficiency model, supplementary accounts of trade mark law have emerged. A  sophisticated semiotic account describes the internal triadic structure of trade mark signification, which, in turn, clarifies key aspects of the fundamental legal requirement of distinctiveness. It also underscores the role of trade marks in producing difference, in the form of distinctions conducive to individual identity formation projects which necessarily involve brand aspects.20 A more overtly normative proposal seeks to defend a layer of trade mark protection that prohibits allusive or so-​called “diluting” uses of a mark, on the basis of protecting the expressive autonomy of the trade mark owner.21 More recently, there have been suggestions that trade marks support innovation,22 or represent a creative investment that is worth protecting.23 The orientations of these accounts suggest that the conventional border between trade marks and the other creative/​inventive domains of IP is increasingly porous.24 These alternative accounts more openly acknowledge a socio-​economic transformation in contemporary consumer societies. Today marks such as Apple, Google, and Coke are not only indications of commercial source but also evocative brands with considerable economic value.25 The extent to which trade mark law ought to embrace this logic of the brand forms a recurrent theme across this chapter. 18 

See respectively SA Cnl-​Sucal NV v Hag GF AG (C-​10/​89) [1990] 3 CMLR 571, 582–​583 (HAG II) (AG Francis Jacobs); Arsenal Football Club v Matthew Reed (C-​206/​01) [2002] ECR I-​10273, at [47]–​[48]; and Qualitex v Jacobson 514 US 159, 163–​164 (1995). 19  L’Oréal SA v Bellure NV (C-​487/​07) [2009] ECR I-​5185; [2009] ETMR 55, [58]. 20  B Beebe, “The Semiotic Analysis of Trade Mark Law” (2004) 51 UCLA Law Review 621. 21  M Spence, “Restricting Allusions to Trade Marks: A New Justification” in Dinwoodie and Janis (eds) (n 14) 324. 22  WIPO Report, Brands—​Reputation and Image in the Global Marketplace (2013) 109–​137 (Brands help firms to recoup investments in innovation). 23  JC Fromer, “The Role of Creativity in Trade Mark Law” (2011) 86 Notre Dame Law Review 1885; ID Manta, “Branded” (2016) Southern Methodist University Law Review 713. 24  Trade-​Mark Cases 100 US 82, 94 (1879) (Since trade marks relied on longstanding use for public recognition and routinely incorporated fairly unremarkable signs, such as family names or descriptive expressions, the Supreme Court concluded that the “ordinary trade mark has no necessary relation to invention or discovery”). 25  These three brands topped the Interbrand Best Global Brands Rankings (2015). See: .

522   Dev Gangjee

1.2 Formalities Registration involves the formal recognition of rights in a trade mark by a public authority, such as an Intellectual Property or Trade Mark Office.26 A familiar feature of property systems more generally, it was the prize for those advocating proprietary status for such marks.27 However, legally recognized trade marks can exist in both unregistered and registered forms. This maps on to the observable practice of using “TM” to indicate that a sign is being intentionally used as an unregistered mark, perhaps because the business operates only locally or the registration application is pending. Here a protectable legal interest is generated on the basis of sufficiently longstanding use and protected via unfair competition law, with the common law tort of passing off being a prominent example.28 Alternatively, businesses will use “®” to signal registered status. While registered marks continue to be protected under unfair competition law, they enjoy the additional procedural, evidentiary, and remedial advantages that flow from registration. One significant benefit is that registration accommodates marks at the very early stages of their commercial careers, without the need to produce evidence of consumer recognition. Registration can be granted even before trading has commenced, provided the mark is subsequently used commercially within a certain temporal window. Non-​use after five years is one reason for revoking a registration while infringement claims may be conditioned on proof of actual use.29 Taking the US as a representative example, the additional benefits of registration include: (i) nationwide rights to sue for infringement, as opposed to the footprint of actual commercial use; (ii) a (rebuttable) presumption of ownership and validity, which reduces evidentiary costs; (iii) potentially more generous statutory damages; (iv) the assistance of customs or border authorities in seizing imported goods bearing infringing marks; (v)  national registrars providing an access route to international protection; (vi) and registration acting as a defense to certain types of infringement claims brought by a third party.30 Significantly, registration formally recognizes proprietary interests in marks.31 This unlocks certain remedies—​principally injunctions—​in many jurisdictions. It additionally facilitates the transfer of rights or licensing; the aura of certainty accompanying a valid registration certificate appeals greatly to transactional lawyers. Besides these advantages for individual applicants, registration has broader informational benefits. Registrations signal proprietary status to the world and thereby act as deterrents to potential infringers.32 Of 26

  For a list of national offices, see: . 28  See Sections 2.1 and 2.2.   Bently “Communication to Thing” (n 14). 29  See, eg, UK Trade Marks Act 1994, s 46(1)(a); Community Trade Mark Regulation (EC) No 207/​ 2009 (CTMR), art 51(1)(a) (The CTMR has now been replaced by Regulation (EU) 2017/1001 of 14 June 2017 on the European Union Trade Mark). While the US has historically been a use-​based system, in the sense that rights are created through use in the marketplace as opposed to registration being dispositive, it subsequently transitioned to an intent to use-​based system. This is now recognized in 15 USC § 1051(b). However, in the US complete protection still requires evidence of use. 30  15 USC §§ 1111–1121. 31  Eg, UK Trade Marks Act 1994, s 22; CTMR, art 16; L Johnston, “Drifting towards Trade Mark Rights in Gross” (1995) 85 Trade Mark Reporter 20 (Confirming this trend in the US); K Lupton, “Trade Marks as Property” (1991) 2 Australian Intellectual Property Journal 29. 32  International Trade Mark Association (INTA), Trademark Registration Factsheet (March 2015), available at: . 27

Trade Marks and Allied Rights    523 late, business historians and other social scientists have turned to trade mark registration data as a resource to illuminate manufacturing trends or strategic choices in certain market sectors.33 Registration begins with an application, accompanied by a fee, that typically requires: (i) details about the applicant; (ii) identifying the type of mark being applied for: a standard trade mark, certification mark, or collective mark;34 (iii) a representation of the mark such as a graphical depiction of the word or logo; (iv) the appropriately classified goods or services as the substrate for the mark (eg, cars and vans in Class 12 of the Nice Classification system);35 (v) an additional written description of the mark, especially relevant for non-​conventional marks such as motion marks or holograms; (vi) relevant limitations or disclaimers; and (vii) whether the application benefits from a priority date based on an earlier application in another jurisdiction through the operation of an international convention. If the sign has not yet been used commercially, applications may also require a declaration of intent to use the mark within a specified timeframe. The application is then examined by the trade mark registry along two cumulative dimensions.36 First the prospective sign is tested for compliance with the definition of a trade mark and other so-​called absolute grounds for refusal. At this stage the focus is on identifying intrinsic deficiencies. Is the sign unsuitable subject matter for the trade mark system? For instance, the sign may be lacking in distinctiveness, previously identified as the crucial origin-​indicating ability of a mark. Or else the sign may be deceptive or applied for in bad faith. At the next stage, some registries also conduct an ex officio search to establish whether any relative grounds for refusal exist. As the label suggests, these grounds involve conflicts with specified categories of prior rights, including earlier trade marks, trade names, geographical indications (GIs), or copyright-​protected works. While an application may not be intrinsically objectionable, it could be relatively disadvantaged when encountering a prior right. In such cases an opportunity is provided to the prior rights-​holder to oppose the application. Significantly, the relative grounds rules usually mirror those for trade mark infringement. In both situations, the analysis seeks to establish whether two unrelated marks and their respective products are similar enough to lead to a recognized category of harm, such as consumer confusion, by comparing the prior registration with (i) the subsequent trade

33  P Duguid, T da Silva Lopes, and J Mercer, “Reading Registrations—​An Overview of 100 Years of Trade Mark Registrations in France, the United Kingdom, and the United States” in T da Silva Lopes and P Duguid (eds), Trade Marks, Brands and Competitiveness (Routledge 2010) 9. 34  Like medieval guild marks, certification marks indicate that goods or services meet a defined quality standard. Collective marks usually indicate the goods or services of a member of a trade association. See WIPO, “Technical and Procedural Aspects Relating to the Registration of Certification and Collective Marks” 30 Aug 2010 (WIPO/​STrad/​INF/​6). 35  Trade marks are registered in respect of goods and/​or services which fall in one or more of 45 classes and for which the international reference point is WIPO’s Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks, 1957 (as amended). See . 36  For a comparative overview, see WIPO, “Summary of Replies to the Questionnaire on Trade Mark Law and Practice (SCT/​11/​6)” 25 Jan 2010 (WIPO/​STrad/​INF/​1 Rev.1).

524   Dev Gangjee mark application (relative grounds), or (ii) the defendant’s actual use in the marketplace (infringement).37 Once past these two stages of examination, the application is published for third parties to submit any observations relating to absolute grounds or to oppose the registration usually (but not exclusively) on a relative grounds basis. If there are no successful oppositions, the mark proceeds to registration.38 For the purposes of priority conflicts as well as calculating duration, trade mark registration is effective from the date of the completed application. In the matter of duration, trade marks are an outlier. Registration is almost universally valid for a ten-​year period and can be renewed indefinitely provided the mark is used in commerce.39 As long as the mark continues to indicate commercial source, the normative basis for protection is satisfied. With the other major IP regimes having finite lifespans, potentially perpetual protection makes trade mark law an attractive alternative. Attempts are made to repackage patent, designs, or copyright protected subject matter as trade marks, raising for debate the extent to which such overlaps are desirable.40 Finally, registered marks may be (i) invalidated, on the basis that one of the absolute or relative grounds for refusal applied at the time of their registration; or (ii) revoked, on the basis that circumstances have subsequently changed. For instance, the mark may exist on paper alone, not having been commercially used within the grace period, or it may have gradually become generic over time.41 While its practical significance is manifest, registration is increasingly the object of scholarly and policy interest. Probing questions have been asked about whether a registration system can be justified on a cost-​benefit basis, given the incomplete or unreliable information it provides about the existence or scope of rights.42 The interaction between two distinct logics—​the (proprietary) approach to registration and that of consumer-​perception based infringement—​within the same overarching regime has also been explored.43 Importantly, the trade mark register cannot capture the brand image dimension of trade marks, a collectively generated psychological construct that is demarcated only during the course of infringement proceedings.44 Furthermore, with improved datasets being made publicly available, registration rates and resulting trade mark quality is a topic ripe for investigation. Are too many marks of questionable quality being registered?45 Related to the quality of registration information, the problem of clutter or deadwood—​the existence of marks on 37  There are however meaningful differences. The context of use remains relevant for infringement while relative grounds is a purely paper-​based analysis. See B&B Hardware v Hargis 135 S Ct 1293 (2015). 38  Efforts are underway to consolidate national and international records of protected marks. See the WIPO Global Brands Database, at: ​. 39  See WIPO, “Summary of Replies” (n 36) 182–​185. 40  K Köklü and S Nérisson, “How Public Is the Public Domain? The Perpetual Protection of Inventions, Designs and Works by Trade Marks” in H Ullrich et al (eds), TRIPS Plus 20 (Springer-​Verlag, 2016) 561; See also the chapter by Derclaye, this volume. 41  This occurs when it devolves into the common name for a category of products like thermos or escalator, no longer indicating a specific commercial source. 42  R Burrell, “Trade Mark Bureaucracies” in Dinwoodie and Janis (n 14) 95. 43  R Tushnet, “Registering Disagreement: Registration in Modern American Trade Mark Law” (2017) 130 Harvard Law Review 867. 44  DS Gangjee, “Property in Brands: The Commodification of Conversation” in H Howe and J Griffiths (eds), Concepts of Property in Intellectual Property Law (Cambridge University Press 2013) 29, 31. 45  B Beebe, “Is the Trade Mark Office a Rubber Stamp?” (2011–​12) 48 Houston Law Review 751.

Trade Marks and Allied Rights    525 the register that are partly or wholly unused by their owners—​has attracted the attention of policy makers.46 Since clutter increases clearance costs for subsequent applicants, proposed responses include audits to test randomly selected marks for non-​use and more stringent up-​front evidentiary requirements for bona fide use, accompanied by stricter penalties.

1.2.1 International Protection According to the principle of territoriality, the effects of an IP right are limited to the territory of the state granting it. This is the default position for trade mark rights, which are national.47 A notable exception is the EU Trade Mark (EUTM), formerly the Community Trade Mark (CTM), which has a unitary character. Such marks have “equal effect” throughout the EU, including uniform protection, transfers of ownership operating for the entire territory, and all-​or-​nothing invalidity or revocation.48 However, truly international protection has followed two well-​established paths. The first relates to harmonization of national laws. At the substantive level, the Paris Convention and the subsequent TRIPS Agreement have set out fairly undemanding standards for all signatories.49 However it is the second path of procedural harmonization that has seen greater advances. For multinational enterprises, territoriality requires that costly and time-​consuming applications must be filed in each relevant jurisdiction. One response is to increase the compatibility of national registration systems. Prominently, the World Intellectual Property Organization’s (WIPO) Nice Agreement provides a common template for classifying goods and services.50 Other agreements simplify and harmonize administrative procedures—​ such as the basic content in a registration application—​for the registration of trade marks.51 Finally, the Madrid Agreement of 1891 and Madrid Protocol of 1989—​collectively, the Madrid System—​further facilitate the acquisition of marks abroad.52 A single application via a participating national registry, in one language and with one set of fees, is submitted to WIPO in Geneva. This application is then forwarded to designated national or regional registries within this system. Where successful, the applicant obtains a bundle of national rights which can be centrally maintained via the international registration. Apart from substantive and procedural harmonization, certain especially reputed marks—​famous or well-​known marks—​enjoy the benefits of greater international protection. Where a conflict arises, international treaty obligations specify that such marks must be protected against confusing or otherwise harmful uses, (i) even in the absence of registration 46  G von Graevenitz, R Ashmead, and C Greenhalgh, Cluttering and Non-​Use of Trade Marks in Europe (UK IPO Report 2015/​48); US PTO, Post Registration Proof of Use Pilot Final Report (25 Aug 2015). 47  GB Dinwoodie, “Trade Marks and Territory: Detaching Trade Mark Law from the Nation-​State” (2004) 41 Houston Law Review 886; I Calboli and E Lee, Trade Mark Protection and Territoriality Challenges in a Global Economy (Edward Elgar 2014). 48  On unitary character, see CTMR, Recitals 2 and 3; Max Planck Institute, Study on the Overall Functioning of the European Trade Mark System (2011) at [1.13]–​[1.16]. 49  Paris Convention for the Protection of Industrial Property, 1883 (as revised), arts 6–7bis; TRIPS Agreement, arts 15–​21. 50  See (n 35). 51  Trade Mark Law Treaty 1994; Singapore Treaty on the Law of Trade Marks 2006. 52 WIPO, The Madrid System for the International Registration of Marks: Objectives, Main Features, Advantages (2016).

526   Dev Gangjee in that jurisdiction, by virtue of their trans-​border reputation; and (ii) across a wider range of goods or services than those for which they are registered.53

1.3 Subsistence To enjoy the benefits of registration, an application must successfully survive both absolute and relative grounds examination. Since relative grounds analysis overlaps with infringement, the analysis here focuses on the absolute grounds. The first of these requires compliance with the subject matter definition and in this regard, trade mark law is remarkably liberal. The US Supreme Court has observed that a mark is defined functionally and not ontologically. “It is the source-​distinguishing ability of a mark—​not its ontological status as colour, shape, fragrance, word, or sign—​that permits it to serve these basic purposes [of reducing consumer search costs and preventing unfair competition].”54 Any sign which does the work of indicating origin potentially qualifies. This inclusivity is reflected in legal definitions, some of which provide an indicative but not exhaustive list of viable subject matter: words, letters, numerals, colors, shape, or sounds, and so on.55 Trade mark law was not always so accommodating. Certain types of marks, such as colors or shapes, gave rise to practical as well as principled objections resulting in categorical exclusions under national law. The former House of Lords had ruled that since shapes related to things, monopolies over shape marks would lead to enduring legal monopolies over the things themselves. Such marks were therefore inadmissible on policy grounds.56 However, today colors, shapes, product packaging, and possibly even sounds or scents are combined within the overall brand image.57 There is ongoing procedural and doctrinal experimentation to reconcile a liberal subject matter definition with policy concerns that remain relevant. Meanwhile a more permissive approach to subject matter has reinforced the centrality of distinctiveness, as the defining feature of a trade mark.

1.3.1 Distinctiveness Distinctiveness is a term of art in trade mark law and not synonymous with the conventional usage of being merely noticeable or unusual. As opposed to something which merely stands out, a distinctive mark “must serve to identify the product in respect of which registration is applied for as originating from a particular undertaking, and thus to distinguish that product from those of other undertakings” (emphasis added).58 This criterion therefore 53  Paris Convention of 1883, art 6bis; TRIPS, art 16.3. See also FW Mostert (ed), Famous and Well-​ Known Marks: An International Analysis (2nd edn, INTA 2004). 54  Qualitex v Jacobson (n 18) 164; GB Dinwoodie, “The Death of Ontology: A Teleological Approach to Trade Mark Law” (1999) 84 Iowa Law Review 611. 55  TRIPS, art 15(1); 15 USC § 1127; Trade Marks Directive (EU) 2015/​2436, art 3. 56  Coca-​Cola Trade Marks [1986] FSR 472 (HL) (Considerable evidence to suggest the shape of the fluted Coke bottle was distinctive was overridden on policy grounds). 57  J Davis, “Between a Sign and a Brand: Mapping the Boundaries of a Registered Trade Mark in European Union Law” in Bently, Davis, and Ginsburg (eds) (n 13) 65. 58  Proctor & Gamble v OHIM (Joined Cases C-​468/​01 P to C-​472/​01 P) [2004] ECR I-​5141 at [32]. To similar effect, see 15 USC § 1127.

Trade Marks and Allied Rights    527 maps on to the essential or origin-​indicating function of a mark.59 In the pre-​registration era, rights to a mark were established on the basis of evidence of actual marketplace use as an origin indicating sign. As trade mark law transitioned from a use-​based to a registration-​ based paradigm, the distinctiveness enquiry became more abstract and predictive of necessity. Today trade mark examiners are regularly called upon to assess whether a given sign is potentially likely to function as a trade mark, in the absence of any marketplace evidence, that is, whether it is inherently distinctive. This is the case where its “intrinsic nature serves to identify a particular source.”60 Based on the application documentation, the sign is analyzed from the perspective of the notional average consumer of the goods or services being claimed. Since the assessment of distinctiveness is a factual enquiry, a spectrum of categories provides guidance while facilitating consistency in registry decision making. The approach under US law is broadly representative:61 • Inherently distinctive encompasses those marks which are (a)  invented or fanciful (Xerox or Kodak); or (b) arbitrary, in the sense that are descriptively unrelated to the underlying category of goods (Apple for computers). • Non-​distinctive marks are those which are (c) descriptive, where the ordinary meaning refers to the product’s quantity, quality, characteristics, purpose, geographical origin, and so on (24/​7 for maintenance and repair services); or (d) generic, indicating the class of underlying products (Sugar for sucrose products). These two prominent categories of non-​distinctive signs are unregistrable. However, the descriptive category is subject to a redemptive proviso allowing for marketplace evidence of acquired distinctiveness to be submitted for consideration.62 • Closer to the borderline are marks that are (e) suggestive or allusive. Often favoured by marketing professionals, these marks skirt descriptiveness but may qualify as inherently distinctive if some act of imagination is required on the part of the public (“Holier Than Thou” for a body piercing parlour). Apart from descriptive and generic signs, there are additional categories of signs assumed to convey messages other than commercial origin. For instance, a sign may be perceived as having a practical function, such as the clasp of a handbag; or viewed as a mere decorative flourish.63 The significance of this category-​based approach is worth emphasizing. Methodologically, inherent distinctiveness exists as a largely residual category. A  mark which is not fanciful or arbitrary must then traverse a series of exclusionary chasms: generic, descriptive, informational, practically useful, decorative, banal, or commonplace, 59  I Simon “How Does Essential Function Drive European Trade Mark Law?” [2005] 36 International Review of Intellectual Property and Competition Law 401. 60  Wal-​Mart Stores Inc v Samara Bros Inc, 529 US 205, 210 (2000). 61  Abercrombie & Fitch Co v Hunting World 537 F 2d 4 (2nd Cir 1976). 62  The EU in principle allows evidence of acquired distinctiveness for even generic marks, which have become customary in the trade. However, in practice the evidentiary threshold may be set very high, thereby effectively preventing them being claimed via the proviso. 63  Louis Vuitton Malletier v OHIM (C-​97/​12 P) [2014] ETMR 42 (confirming the rejection of a locking clasp for bags and related goods, since consumers would perceive it as merely functional or ornamental); X Technology Swiss GmbH v OHIM [2010] ECR II-​2409 (GC) (orange coloring on the toes of socks was likely to be perceived as decorative and not as a position mark).

528   Dev Gangjee for example. If it successfully avoids these objections, distinctiveness is then presumed, rather than established, in any positive sense. This suggests a low threshold—​a simple combination of geometric symbols may clear these hurdles, yet be little more than the sum of its parts. In the EU, this has resulted in a controversy over so called “fig-​leaf ” trade marks, where an otherwise descriptive word element like Easy Credit for financial services can bypass descriptiveness objections via embellishment, in the form of a stylized logo.64 A related question is whether such easy entry into the system should be offset by adopting more nuanced infringement analysis65 or enabling more robust defenses? Third-​party interests in the availability of signs are once again relevant when it comes to acquired distinctiveness or secondary meaning. Inherent and acquired distinctiveness may be contrasted along the lines of “nature or nurture.”66 For acquired distinctiveness, as a result of actual use, the question is whether customers have been taught to associate the primary significance of the sign with a specific commercial source.67 Supporting evidence may be direct, in the form of customer recognition established through a reliable survey. It may also consist of circumstantial evidence, including (i) market share; (ii) the length, intensity, and scale of use; (iii) advertising expenditure specific to that mark; and (iv) statements from chambers of commerce or trade bodies. Chapstick would be descriptive for a balm sold in a lipstick-​style tube and applied to dry or chapped lips. However, the mark has been registered on the basis of distinctiveness acquired via extensive use.68 This highlights both the potency of acquired distinctiveness as well as its potential for abuse. Almost any sign can be appropriated via this mechanism, including surnames which may be commonly used, or colors. Stripes are commonly featured on sporting goods in order to produce a streamlined effect, or for other decorative reasons. Having established its “three stripes” trade mark on sports goods through usage, Adidas is notorious for litigating against competitors of any stripe. Those using two, three, four, or even five stripes have been pursued.69

1.3.2 Other Absolute Grounds Apart from distinctiveness, there are additional absolute grounds with discrete policy foundations.70 When defining a trade mark, in addition to distinctiveness the EU requires that the candidate must be (i) a sign and (ii) graphically or otherwise adequately represented.71 Both these requirements call for precision and clarity. In Dyson the applicant 64 

TeamBank AG Nürnberg v EUIPO (T-​745/​14) 20 Jul 2016, ECLI:EU:T:2016:423 (Appeal pending as C-​495/​16 P). 65  Such as granting only very thin protection which does not extend to the commonplace elements: Starbucks (UK) Ltd v British Sky Broadcasting Group Plc [2012] EWHC 1842 (Ch) (Arnold J). 66  L Bently and B Sherman, Intellectual Property (4th edn, Oxford University Press 2014) 930. 67  Windsurfing Chiemsee Produktions v Walter Huber (C-​108/​97 and C-​109/​97) [1999] ETMR 585 (CJEU); Zatarain's, Inc v Oak Grove Smokehouse, Inc, 698 F 2d 786 (5th Cir 1983). 68  US Mark No. 2874779 (use dating back to 1890). 69  See, eg, Adidas America Inc v Payless Shoesource Inc, 529 F Supp 2d 1215 (D Or 2007); Shoe Branding Europe v Adidas, AG; OHIM (C-​396/​15 P) EU:C:2016:95, 17 February 2016. 70  WIPO “Grounds for Refusal of All Types of Marks” 30 Aug 2010 (WIPO/​STrad/​INF/​5). 71  Trade Marks Directive (EU) 2015/​2436, art 3.

Trade Marks and Allied Rights    529 sought to register a “transparent bin or collection chamber forming part of the external surface of a vacuum cleaner as shown in the [two illustrative photographs].”72 Since all such externally mounted transparent bins, regardless of material or shape, were being applied for, the application was not specific enough to be a sign. Granting a broad legal monopoly over an abstract, functional concept grated against the pro-​competitive foundations of trade mark law, which facilitates consumer choice. Graphical (or otherwise adequate) representation serves a similar purpose. For the register to provide meaningful information and delimit the objects of exclusive rights, the mark ought to be specified in a manner that is clear, precise, self-​contained, easily accessible, intelligible, durable, and objective.73 Therefore, the first of the absolute grounds requires that the definition of a trade mark, which encompasses both distinctiveness and a certain degree of precise specification, is satisfied. Besides this, an indicative list of absolute grounds prohibitions would include:74 • Public order (or public policy) and morality-​based prohibitions, which vary with changes in socio-​cultural attitudes across both place and time. Public order might preclude applications likely to provoke conflict or keep culturally significant signs in the public domain (for example, national monuments or public figures).75 A morality prohibition targets signs considered to be offensive from the objective standpoint of a reasonable person with average sensitivity or tolerance. This requires some deft navigation around the borderline between signs merely in poor taste and serious affronts amounting to racial or cultural slurs, or the endorsement of illegal and harmful activities. While this prohibition might be construed as a form of speech censorship, it does not restrict the commercial use of such offensive signs and merely prevents their registration.76 • Signs which are deceptive or misleadingly suggest characteristics relating to the nature, quality, or the geographical origin of the underlying products, such as using “Café Latino” for chicory-​based substitutes containing no coffee. • Signs conflicting with categories of protected national or international emblems (state insignia, flags, heraldic symbols, the Olympic symbols, the Red Cross symbol, etc.),77 or otherwise protected by bespoke legislation (GIs, plant variety names). • Signs applied for in bad faith, where the paradigmatic example involves the abuse of a commercial relationship—​for instance, where a former employee with prior knowledge applies for a mark before the employer can do so.78

72 

Dyson Ltd v Registrar of Trade Marks (C-​321/​03) [2007] ETMR 34 (CJEU) at [10]. Sieckmann v Deutsches Patent-​und Markenamt (C-​273/​00) [2003] ETMR 37 (CJEU). 74  For illustrations of the application of these grounds, see US PTO Trade Mark Manual of Examining Procedure (April 2016) at §1200; EU IPO Guidelines for Examination of European Union Trade Marks, Part B, Section 4—​Absolute Grounds for Refusal (v 1.0, March 2016). 75  M Senftleben (ed), Study on Misappropriation of Signs, WIPO Committee on Development and IP, CDIP/​9/​INF/​5 (2012) (Advocating the use of this prohibition to keep such signs in the public domain). 76  The extent to which such a rule offends free speech values is under consideration in the US. See In re Tam 808 F 3d 1321 (Fed Cir 2015) (en banc), cert granted sub nom Lee v Tam, 137 S Ct 30 (2016). 77  Paris Convention, art 6ter. 78  A Tsoutsanis, Trade Mark Registrations in Bad Faith (Oxford University Press 2010). 73 

530   Dev Gangjee

1.3.3 Functionality The final absolute ground to feature in this overview is functionality.79 It “is a term of art denoting a legal conclusion about the particular nature or degree of the product feature’s technical or competitive importance.”80 The underlying rationale is to prevent the grant of a legal monopoly in technical solutions or functional characteristics of a product that consumers are likely to seek in the products of competitors. If a technical solution can be repackaged as a trade mark, this circumvents the finite 20-​year period of protection under patent law.81 In response, this prohibition overrides even distinctiveness. Lego discovered this to its cost when seeking to register its basic 4x2 stud toy brick shape as an EU trade mark. The CJEU confirmed that since it was functional—​producing the optimal interlocking effect—​the extensive evidence of acquired distinctiveness was irrelevant.82 While the policy underpinnings are relatively clear, functionality is an inelegant umbrella term, which needs to be unpacked into: i. Technical or utilitarian functionality, which excludes those product characteristics incorporating technical solutions broadly within the province of patent law; ii. So-​called aesthetic functionality, directed at appealing visual features which add substantial value in a manner better accommodated by design law; and iii. Characteristics resulting from the “nature of the goods,” which excludes generic features found in any product of a particular type.83 What unites these exclusions is the desire to exclude features essential to a product’s use or purpose, or characteristics affecting the cost or quality of the product, which should remain open for all competitors. While many functionality cases involve three dimensional marks—​ product shape or packaging—​the scope of the prohibition extends to all types of signs (eg, the neon-​yellow color strips on high-​visibility clothing). Despite several doctrinal questions remaining unsettled, functionality emphasizes the continuing relevance of policy concerns notwithstanding an open-​ended subject matter definition. These are especially acute in the context of so called non-​conventional marks.

1.3.4 Non-​Conventional Marks Presently, the universe of signs with the capacity to bear trade mark meaning has expanded beyond words and figurative marks or logos, to encompass:84

79 

15 USC § 1052(e)(5); EU Trade Mark Regulation 2015/​2424, art 7(1)(2). B Beebe, Trade Mark Law: An Open-​Source Casebook (Version 3.0, July 2016) Ch I, Section B.1; at: . 81 See TrafFix Devices, Inc v Marketing Displays, Inc, 532 US 23 (2001); Hauck GmbH v Stokke (C-​205/​ 13) [2014] ETMR 60 [AG26]-​[AG40]. 82  Lego Juris v OHIM, Mega Brands (C-​48/​09) [2010] ETMR 63. 83  See respectively: (i) M McKenna, “(Dys)functionality” (2012) 48 Houston Law Review 823; (ii) J Hughes, “Cognitive and Aesthetic Functionality in Trade Mark Law” (2015) 36 Cardozo Law Review 1227; (iii) Hauck (n 81). 84  WIPO, “New Types of Marks” (SCT/​16/​2) 1 Sep 2006. 80 

Trade Marks and Allied Rights    531 • Three-​dimensional marks including the shape of goods, their packaging, or even the layout of a store; • Color marks, either as abstract single colors or as combinations; • Slogans and potentially hashtags; • Holograms; • Motion or multimedia marks; • Position marks, such as a red tag consistently placed on the rear pocket of jeans; • Olfactory marks, that is, scents and tastes; and • Haptic marks or textures. This is a merely illustrative list and applications are restricted only by the limits of creativity. A  personal favorite is the US registration for the concept of “goats on a roof of grass” for restaurant services.85 Admittedly such marks constitute only a minute fraction of registrations,86 but applications for colors and shapes show a steady increase. Marketers call for all the elements of brand image to be protected, while neuropsychological insights indicate that non-​conventional marks function as a primary pathway to brand recognition, since shapes or colors are relatively more quickly perceived and analyzed by the brain.87 Non-​conventional marks raise two broad categories of issues.88 First, can an expansion beyond the archetypal words and images, or visually perceptible marks in general, be accommodated within the existing rules and techniques of trade mark law; especially when the existing framework was designed with archetypal marks in mind? For instance, can a scent can be depicted on the register in a manner which avoids both subjectivity (“the scent of cinnamon”) or overcompensating by providing complex chemical formulae for the fragrance? Apart from procedural accommodation, when are non-​conventional marks truly distinctive, in an origin-​indicating sense? An abstract or non-​spatially delimited color may be functional (red to indicate danger), aesthetically appealing (red to indicate attractiveness or passion in some cultural registers), or a mere feature (red apples or cherries). Assuming we turn to acquired distinctiveness as the solution, how are we to differentiate between consumers merely associating red with a producer as opposed to identifying it unambiguously as a trade mark?89 Consumers conventionally associate Coke with the color red, but they are likely to do so for Target, Virgin, Vodafone, and Santander as well.

85  US Registration No 2007624, issued 15 Oct 1996. Al Johnson’s Swedish meatball restaurant is situated in Wisconsin and the goats have proved to be a valuable marketing gimmick. 86  See SSC009—​Statistics of European Union Trade Marks (until Oct 2016) available at: . Till date 3D marks constitute 0.58 percent and colors constitute 0.07 percent of total registrations. 87  B Soars, “Driving Sales through Shoppers’ Sense of Sound, Sight, Smell and Touch” (2009) 37(3) International Journal of Retail and Distribution Management 286; C Spence et al, “Store Atmospherics: A Multisensory Perspective” (2014) 31(7) Psychology and Marketing 472. 88  WIPO, “Relation of Established Trade Mark Principles to New Types of Marks” (SCT/​17/​3) 30 March 2007; G Lea, “Special Marks: After 20 Years, Not So Special After All?” (2015) Communications Law 40; A Scardamaglia and M Adams, “Registering Non-​Traditional Signs as Trade Marks in Australia: A Retrospective” (2016) 26(3) Australian Intellectual Property Journal 149. 89  In the context of 3D marks, see Société des Produits Nestlé SA v Cadbury UK Ltd (C-​215/​14) [2015] ETMR 50 (whether the Kit Kat chocolate bar shape had acquired distinctiveness).

532   Dev Gangjee Second, assuming non-​conventional signs can function as origin indicating trade marks, should they be nevertheless precluded on policy grounds? To what extent should competitor interests or the interests of the general public be taken into account? Courts and registries around the world are experimenting with a range of techniques to either exclude certain problematic marks from the register or to restrict the scope of the monopoly that is granted. A series of decisions relating to Louboutin’s well-​known red-​soled high-​heel shoes illustrates the tentative steps being taken.90 Registries and courts have applied procedural rules relating to inadequate representation, a demanding distinctiveness threshold, functionality prohibitions, and even reduced the scope of the mark as claimed in order to find the defendant’s product non-​infringing.

1.4 Rights and Infringement Historically, the content and contours of a trade mark proprietor’s exclusive rights have been defined by the legal provisions on infringement. Entitlements have been demarcated negatively, via rights to exclude. For that reason, Article 16.1 of TRIPS affirms that the “owner of a registered trade mark shall have the exclusive right to prevent all third parties not having the owner’s consent from using in the course of trade identical or similar signs [which infringe by creating a likelihood of confusion].” Recent attention has focused on whether an affirmative “right to use” is also recognized under Article 20 of TRIPS.91 The context is legal challenges to so-​called plain packaging legislation being introduced around the world. These regimes target the attractiveness of tobacco products by imposing strict format restrictions, including graphic health warnings, on their packaging. In an attempt to reduce tobacco consumption and associated health costs, bespoke legislation strips away trade dress, logo, and color trade marks from such packaging. If such a positive “right to use” exists, it strengthens the argument that the deprivation of proprietary interests in marks must withstand human rights scrutiny.92 While Big Tobacco’s entreaties may not invite an outpouring of public sympathy, some are concerned by the prospects of a slippery slope. Will alcohol or unhealthy foods be the next targets for plain packaging legislation?

90  Christian Louboutin (R 2272/​2010-​2) OHIM 2nd BoA, 16 Jun 2011; Christian Louboutin v YSL America 696 F3d 206 (2nd Cir 2012); Christian Louboutin v Van Haren (C/​09/​436517/​KG ZA 13-​123) District Court, The Hague, 18 April 2013; Christian Louboutin SAS v Van Haren Schoenen BV (C-​163/​16) (Pending reference before the CJEU). 91  In particular, the prohibition on encumbrances in art 20: “The use of a trade mark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trade mark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings . . .” 92  It is the subject of a live WTO dispute: Australia—​Certain Measures Concerning Trademarks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (Ukraine, WT/​DS434/​ ), (WT/​DS435, Honduras), (WT/​DS441, Dominican Republic). See S Frankel and D Gervais, “Plain Packaging and the Interpretation of the TRIPS Agreement” (2013) 46 Vanderbilt Journal of Transnational Law 1149; M Davison, “Plain Packaging and the TRIPS Agreement: A Response to Professor Gervais” [2013] Australian Intellectual Property Journal 160; J Griffiths, “ ‘On the Back of a Cigarette Packet’—​ Standardised Packaging Legislation and the Tobacco Industry’s Fundamental Right to (Intellectual) Property” [2015] Intellectual Property Quarterly 343.

Trade Marks and Allied Rights    533 Notwithstanding recent interest in the “right to use,” infringement claims have conventionally enforced the zone of proprietary exclusivity around a trade mark. It is worth reiterating that infringement actions mirror certain relative grounds for refusal of registration, with each influencing the other. Liability is generally strict, in the sense that the defendant’s subjective intent (or innocence) is of limited relevance. Unlike other forms of IP, trade mark infringement depends upon certain effects being produced in the minds of consumers.93 But which effects should count? While confusion which materially affects or distorts consumer decision making is universally impermissible, preventing mere evocation or bringing to mind may be going too far. With the scope of trade mark infringement entering an expansionary phase, there are concerns that the proprietary logic of registration systems, coupled with the desire to protect investments in brand value, has led to the “death of common sense.”94 The following analysis considers firstly the common threshold requirements, and secondly, the five principal categories of infringement claims. Finally, as a practical matter, it is worth recalling that trade mark infringement claims can run in parallel with unfair competition options, including misleading advertising claims.95

1.4.1 Threshold Criteria Threshold requirements serve an important filtering function by excluding certain kinds of uses from the scope of infringement at an early stage, thereby conserving litigation resources. Two are particularly significant. The first—​a de minimis requirement—​is that the defendant’s use must be commercial or “in the course of trade,” in order to unlock the gateway into infringement. This is satisfied when use is “in the context of commercial activity with a view to economic advantage and not as a private matter.”96 The second has proved more controversial and is described as a trade mark use or actionable use requirement, as a necessary precondition for infringement. Trade mark use has been summarized as: “[A]‌convenient shorthand expression for use of a registered trade mark for its proper purpose (that is, identifying and guaranteeing the trade origin of the goods to which it is applied) rather than for some other purpose.”97 What if I am using a trade mark without authorization to accurately identify the proprietor’s own goods in a product review (ie, referential or nominative use)? Or using a shade of color—​also registered as a mark by someone else—​for decorative purposes on my own products? In neither case is the sign being utilized as an indication of origin for my own goods—​the classic form of trade mark use—​so should these practices even enter the gateway into infringement analysis? The CJEU subscribes to the view that “trade mark use” is an unhelpful analytical frame for such a threshold enquiry.98 As opposed to the nature of the use, the court has prioritized its effects. National courts across the EU must ask whether any of the functions of a trade 93

  J Fromer and M Lemley, “The Audience in Intellectual Property Infringement” (2014) 112 Michigan Law Review 1251. 94   MA Lemley, “The Modern Lanham Act and the Death of Common Sense” (1999) 108 Yale Law Journal 1687. 95  R Tushnet, “Running the Gamut from A to B: Federal Trade Mark and False Advertising Law” (2011) 159 University of Pennsylvania Law Review 1305. 96  Arsenal v Reed (n 18) at [40]. 97  R v Johnstone [2003] UKHL 28; [2004] ETMR 2 at [76]. 98  Arsenal v Reed (n 18); see also N Dawson, “Non-​Trade Mark Use” [2012] Intellectual Property Quarterly 204.

534   Dev Gangjee mark are likely to be harmed by the defendant’s use. These include the origin, quality, communication, investment, and advertising functions. Even on the face of it, some of these functions have uncertain content and fuzzy boundaries, inviting speculation as to when harm might be envisaged in a given dispute. An amorphous threshold enquiry makes for a poor filter. It is also unclear as to the precise relationship between the threshold enquiry and the more rigorous infringement analysis which follows: Both seem to do similar work in assessing harm to functions. If harm to the origin function is found to be hypothetically possible where the use fits within a stylized fact pattern (eg, a comparative advertisement) during the threshold enquiry, to what extent does this determine the outcome under (say) the ensuing likelihood of confusion analysis which also tests whether the origin function is harmed?99 A similar debate exists in US trade mark law. Given the uncertainties associated with a threshold filter and the category-​based approach it encourages,100 some scholars prefer identifying permissible unauthorized uses either at the stage of regular infringement analysis—​having conducted the full-​fledged likelihood of confusion analysis, the defendant’s use of a color qua color is unlikely to confuse consumers—​or via specific defenses permitting certain uses.101

1.4.2 Categories of Infringement 1.4.2.1 Double Identity Trade mark infringement tests consider the degree of similarity of (i)  the plaintiff and defendant’s marks or signs; and (ii) their respective goods or services to be material considerations. Where both aspects are identical, there is no additional requirement that a likelihood of confusion need be proved. However, the basis and consequent scope of this double identity rule can vary. The TRIPS Agreement characterizes it as a rebuttable presumption of confusion: “In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed” (Article 16(1)). By contrast, the EU legislature suggested that protection “should be absolute in the case of identity between the mark and the sign and the goods or services” and the proprietor would be entitled to prevent all unauthorized third parties from using the mark in such double identity situations.102 Without an explicit restriction to situations of presumed confusion, it seemed an excessively broad 99 

See A Ohly “Keyword Advertising or Why the ECJ’s Functional Approach to Trade Mark Infringement does not Function” [2010] International Review of Intellectual Property and Competition Law 879; A Kur, “Trade Marks Function, Don’t They? CJEU Jurisprudence and Unfair Competition Practices” [2014] International Review of Intellectual Property and Competition Law 434; M Senftleben “Function Theory and International Exhaustion—​Why it is Wise to Confine the Double Identity Rule to Cases Affecting the Origin Function” [2014] European Intellectual Property Review 518. 100  Should any comparative advertising or any descriptive use be considered non-​trade mark use and therefore excluded at the threshold? Trade mark use runs the risk of being a low-​resolution analytical framework: on the specific facts before a court, a use intended to be decorative or descriptive may nevertheless create some confusion. 101  For a sense of the debates, see: GB Dinwoodie and MD Janis, “Confusion over Use: Contextualism in Trade Mark Law” (2007) 92 Iowa Law Review 1597; SL Dogan and MA Lemley, “Grounding Trade Mark Law through Trade Mark Use” (2007) 92 Iowa Law Review 1669; GB Dinwoodie and MD Janis, “Lessons from the Trade Mark Use Debate” (2007) 92 Iowa Law Review 1703. 102  See Trade Marks Directive 2008/​95/​EC, Recital 11 and art 5(1)(a).

Trade Marks and Allied Rights    535 prohibition. Consider the remote-​controlled toy car producer who incorporates a reputed car manufacturer’s logo as part of a faithfully reproduced scale model, in accordance with a long-​standing practice in the toy industry.103 Or the competitor who bids on another’s trade mark for flower delivery services, to generate a sponsored advertisement offering a competing service on the results page on a popular search engine.104 In each case, despite double identity being formally satisfied, the defendant is also prominently using their own trade mark and argues that the context of use will ward off any confusion. Each could rebut the presumption of confusion under the Art 16(1) version of the rule but is seemingly caught by the absolute prohibition, where the potential for any further analysis drops away once double identity is established. The CJEU was alive to the anticompetitive and speech-​restricting implications of the absolute prohibition and introduced an additional requirement—​over and above double identity—​in the form of harm to functions.105 However, as we have seen earlier, this has proved to be an unwieldy solution, since the functions themselves are open-​textured. To many, the Art 16(1) version of the rule is the preferred option.

1.4.2.2 Likelihood of Confusion The prevention of a likelihood of confusion is the classic trade mark infringement claim. It refers to “the risk that the public might believe that the goods or services in question come from the same undertaking or, as the case may be, from economically-​linked undertakings.”106 The test is an enduring manifestation of the regime’s historic and normative origins in misrepresentation prevention. Three aspects require further elaboration. First, the likelihood element enables claims to be made on the basis of probabilities, without necessarily requiring evidence of actual confusion and potentially in advance of the trade mark proprietor having commenced trading. Second, the analysis is structured and channeled via a multifactor test. In the US, although the test varies across judicial circuits, significant factors include: the similarity of the marks; the similarity between goods or services; evidence of actual confusion; the strength of the plaintiff 's mark (in the form of inherent distinctiveness or acquired repute); the defendant’s intent (including bad faith); and consumer sophistication.107 In the EU, the assessment proceeds in three cumulative stages:108 (i) similarity of the marks; (ii) similarity of goods or services; and (iii) does this similarity lead to a likelihood of confusion? Each stage consists of further sub-​factors to consider. For instance, marks are compared by considering their visual, aural, and conceptual similarity, which is also referred to as sight, sound, and meaning comparison. Third, the factors are interdependent—​strengths in one may offset weaknesses in another—​and the test lends itself to global appreciation. Even though no

103 

Adam Opel AG v Autec AG (C-​48/​05) [2007] ETMR 33 (ECJ). Interflora v Marks & Spencer (C-​323/​09) [2011] ECR I-​8625; [2012] ETMR 1. 105  The additional “harm to functions” analysis was used to excuse the defendant search engine in: Google France v Louis Vuitton Malletier (C-​236-​238/​08) [2010] ETMR 30. On whether harm to the broader range of functions needs to be presumed or proved, see Supreme Petfoods Ltd v Henry Bell & Co (Grantham) Ltd [2015] EWHC 256 (Ch) at [83]–[164] (Arnold J). 106  Canon Kabushiki Kaisha v Metro-​Goldwyn-​Mayer Inc (C-​39/​97) [1998] ECR I-​5507 at [29]. 107  A representative approach is: Polaroid Corp v Polarad Electronics Corp, 287 F 2d 492 (2d Cir 1961). 108  I Simon Fhima and DS Gangjee, The Confusion Test in European Trade Mark Law (OUP 2018). 104 

536   Dev Gangjee formal hierarchy exists among the factors, empirical research has considered the extent to which judges or tribunals consider some factors dispositive, whereupon the remaining factors are “stampeded” to conform with the desired outcome.109 Notwithstanding its intuitively familiarity and frequent application, there are concerns about the operation of this test. To begin with, how should we conjure up the average consumer of the relevant goods, from whose perspective confusion is assessed? Is this a hypothetical legal subject, like the reasonable person of tort law? Or one more empirically grounded? If the former approach invites judicial subjectivity, the latter is relatively more difficult and expensive. Evidence of actual confusion—​emails or phone calls from deceived customers—​is hard to come by while consumer surveys considerably raise costs and are vulnerable to design or implementation challenges.110 Next, what should be the threshold or tipping point in such situations? Do we presume an easily misled hypothetical consumer or might we err in the opposite direction, by envisioning an astute, rational choice maximizing agent? Courts also have to decide when it is likely that a sufficiently substantial proportion of consumers are being confused (is 5 percent sufficient?).111 Finally, is any confusion per se the relevant harm to be avoided? Or must it be material, influencing consumer purchasing decisions in a manner which is detrimental to the trade mark proprietor? This is pertinent since sponsorship or commercial affiliation confusion has been gathering momentum. Is mere speculation as to whether a commercial relationship exists sufficient for infringement?112 Unlike other legal domains such as consumer protection law, consumer contract law, or labeling regulations, consumer confusion in trade mark law defines the scope of exclusive proprietary rights. Where proprietors speak in the name of protecting consumers, a degree of caution is warranted. A degree of critical reflection is also warranted since the test continues to evolve. Initial interest confusion is one such controversial development. Also referred to as pre-​transaction confusion, it “allows for a finding of liability where a plaintiff can demonstrate that a consumer was confused by a defendant’s conduct at the time of interest in a product or service, even if that initial confusion is corrected by the time of purchase.”113 Originating in US decisions from the 1970s, the doctrine saw increased usage in the context of Internet 109  B Beebe, “An Empirical Study of the Multifactor Test for Trade Mark Infringement” (2006) 94 California Law Review 1581; I Simon Fhima and C Denvir, “An Empirical Analysis of the Likelihood of Confusion Factors in European Trade Mark Law” [2015] International Review of Intellectual Property and Competition Law 310. 110  J Davis, “Revisiting the Average Consumer: An Uncertain Presence in European Trade Mark Law” [2015] Intellectual Property Quarterly 15; GB Dinwoodie and DS Gangjee, “The Image of the Consumer in European Trade Mark Law” in D Leczykiewicz and S Weatherill (eds), The Image(s) of the Consumer in EU Law (Hart 2015) 339; K Weatherall “The Consumer as the Empirical Measure of Trade Mark Law” (2017) 80 Modern Law Review 57; S Diamond and D Franklyn, “Trade Mark Surveys: An Undulating Path” (2014) 92 Texas Law Review 2029. 111  B Beebe, “Search and Persuasion in Trade Mark Law” (2005) 103 Michigan Law Review 2020; M Grynberg, “Trade Mark Litigation as Consumer Conflict” (2008) 83 New York University Law Review 60; AC Yen, “The Constructive Role of Confusion in Trade Mark” (2014-​15) 93 North Carolina Law Review 77. 112  MA Lemley and M McKenna, “Irrelevant Confusion” (2010) 62 Stanford Law Review 413; W McGeveran and MP McKenna, “Confusion Isn’t Everything” (2013) 89 Notre Dame Law Review 253; R Tushnet, “What’s the Harm of Trade Mark Infringement” (2015) 49 Akron Law Review 627. 113  INTA Board Resolution, Initial Interest Confusion (18 Sep 2006).

Trade Marks and Allied Rights    537 advertising. Bait-​and-​switch advertising is the paradigmatic example, where (i) misleading advertising generates initial consumer interest and (ii) this is subsequently clarified before the purchase transaction but (iii) customers have already invested in the transaction and switching costs may be high. Such misleading conduct is clearly undesirable and inevitably proscribed by consumer protection as well as misleading advertising laws. The danger with casting the trade mark confusion net so wide is that it threatens to encompass mere diversion of consumer interest and impede desirable competitive processes. In one US dispute, the appellate court reversed its own decision.114 It initially held that a search for Multi Time Machine (MTM) watches on Amazon, which generated a results list of comparable and clearly labeled military-​style watches produced by other competitors, would be infringing in the absence of explicit disclaimers that Amazon did not stock MTM watches. This finding, based on initial interest confusion, was subsequently reversed on the ground that no reasonably prudent consumer accustomed to shopping online would likely be confused by the Amazon search results. Initial interest confusion is proving controversial in the EU as well, as it may lower the infringement standard to one where the mere possibility of confusion cannot be ruled out, while imposing onerous obligations on advertisers that could distort the operation of competitive markets.115 Post-​purchase or post-​sale confusion claims, involving exposure to a similar sign “downstream” from the point of sale, give rise to similar concerns about the over-​extension of trade mark law.116 However, such concerns are most frequently articulated when it comes to the final category of claims, relating to trade mark dilution.

1.4.2.3 Dilution Dilution refers to a set of non-​confusing yet wrongful mental associations between a plaintiff and defendant’s marks. In the US, wrongfulness stems from harm or injury to the plaintiff ’s reputed mark where there is blurring or tarnishment.117 In the EU, it additionally extends to a third type of claim: an unfair advantage or benefit obtained by the defendant where there is free riding on the reputed mark.118 Dilution is therefore a form of enhanced protection reserved for marks with a reputation, which has historically targeted unauthorized use on non-​competing goods. It seemingly favors the interests of proprietors in protecting their brand identity and image, exposing the turn to brands within trade mark law.119 However it is “probably the single most muddled concept in all of trade mark doctrine.”120 Establishing the first stage, the likelihood of a mental association or link between two marks in the minds

114 

Multi Time Machine v Amazon.com 804 F3d 930 (9th Cir 21 October 2015), superseding 792 F3d 1070 (9th Cir 6 July 2015). 115  It was recognized in Och Ziff v Och Capital [2010] EWHC 2599 (Ch) (Arnold J). See also: I Simon Fhima “Initial Interest Confusion” (2013) 8 Journal of Intellectual Property Law & Practice 311. However, its subsequent application proved controversial: Interflora & Anor v Marks and Spencer plc [2014] EWCA Civ 1403 reversing on this issue Interflora & Anor v Marks and Spencer plc [2013] EWHC 1291 (Ch). 116  J Sheff, “Veblen Brands” (2012) 96 Minnesota Law Review 769. 117  15 USC § 1125(c). 118  Trade Marks Directive 2008/​95/​EC, art 5(2). 119  D Desai, “From Trade Marks to Brands” (2012) 46 Florida Law Review 981. See generally, D Bereskin (ed), International Trade Mark Dilution (Thomson West 2016); I Simon Fhima, Trade Mark Dilution in Europe and the United States (Oxford University Press 2012). 120 Beebe Casebook (n 80) ch II, s C.

538   Dev Gangjee of consumers, is relatively straightforward. It is the second stage, the consequences flowing from that association, which poses problems. 1.4.2.3.1 Blurring.  Frank Schechter’s articulation of the nature of the harm or injury in blurring has proved enduringly influential. He identified this as “the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark or name by its use upon non-​competing goods.”121 If the uniqueness of a mark enhances its selling power, the use of an identical or closely similar mark inhibits this by definition. As he described the process: “If you allow Rolls-​Royce restaurants and Rolls-​Royce cafeterias, and Rolls-​Royce pants, and Rolls-​Royce candy, in ten years you will not have the Rolls-​Royce mark any more.”122 The legal means to preserve uniqueness clearly favors proprietors of reputed marks but is at odds with the fundamental logic of trade mark registration, which allows the same sign to be registered across different classes by unrelated parties in the absence of any confusion. Uniqueness preservation also struggles when it comes to a broader public interest justification and drifts uncomfortably close towards preserving consumer attention or interest per se.123 An alternative conception of blurring is impairment or detriment to distinctiveness. This specifically refers to harm to the origin indicating function of a trade mark; its ability to invoke a specific product category from a particular trade source, such as the ability of the Nike swoosh symbol to swiftly invoke sports shoes and the commercial entity behind them. Here the consumer or general public interest in source identification is well established. It is this conceptualization—​and not Schechter’s—​that is found in both US and EU legislation. As the CJEU confirmed:124 [D]‌etriment [by blurring] is caused when that mark’s ability to identify the goods or services for which it is registered and used as coming from the proprietor of that mark is weakened, since use of the later mark leads to dispersion of the identity and hold upon the public mind of the earlier mark. That is notably the case when the earlier mark, which used to arouse immediate association with the goods and services for which it is registered, is no longer capable of doing so (emphasis added).

Although they overlap—​unique marks are often highly distinctive in the origin indicating sense—​the two conceptions lead down diverging infringement paths.125 Harm to uniqueness is approached formally. The very existence of a junior user with an identical or closely similar mark encroaches upon the exclusivity of the senior mark’s brand identity. Once a mental association is established, harm is inevitable as a matter of logical inference. By contrast, harm to distinctiveness additionally requires that consumers experience increased internal search 121  FI Schechter, “The Rational Basis of Trade Mark Protection” (1927) 40 Harvard Law Review 813, 825. 122  FI Schechter, Hearings before the House Committee on Patents, 72d Cong, 1st Sess 15 (1932), quoted in WJ Derenberg, “The Problem of Trade Mark Dilution and the Antidilution Statutes” (1956) 44 California Law Review 439, 449. 123  SL Rierson, “The Myth and Reality of Dilution” (2012) 11 Duke Law and Technology Rev 212; I Simon Fhima, “Dilution by Blurring—​A Conceptual Roadmap” [2010] Intellectual Property Quarterly 44. 124  Intel Corp Inc v CPM United Kingdom Ltd (C-​252/​07) [2009] ETMR 13 at [29]. 125 Beebe Casebook (n 80) ch II, s C.

Trade Marks and Allied Rights    539 costs or greater recall time after exposure to the junior user’s identical or similar mark. If this mental slowdown is our target, then cognitive and behavioral psychology could provide the tools to measure such harm. However, there is one further complication. A debate over whether the test was one of (i) actual dilution (causing economic injury by lessening a mark’s selling power) or (ii) a likelihood of dilution was resolved in favor of the latter.126 If the attenuation of distinctiveness is a drawn-​out process, or “death by a thousand cuts,”127 then waiting for provable mental slowdown to set in may be too late. Yet, a likelihood of dilution test runs the risk of collapsing into a set of circumstantial or contextual factors which stop short of measuring any meaningful harm: the degree of similarity between the marks; the repute and inherent distinctiveness of the senior mark; the uniqueness or exclusive usage of the senior mark; whether one calls the other to mind, and so on. These factors may go no further than establishing a mental association between two marks in the minds of consumers. The CJEU therefore reconciles the (prospective) likelihood standard with a demonstrable harm condition by requiring “evidence of a change in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered consequent on the use of the later mark, or a serious likelihood that such a change will occur in the future.”128 Meanwhile empirical research from the US indicates that independent third parties continue to register identical marks in dissimilar classes and even use famous marks as trade names at the local level, without any apparent harm to the famous national brands.129 Marks can therefore seemingly coexist in different categories, since consumers are able to compartmentalize brand information and retain multiple sets of messages simultaneously. While consumer surveys or laboratory experiments can establish mental associations and measure ensuing “disambiguation costs,” these delays are measured in milliseconds.130 Experimental measurements also exclude the course-​correcting cues available in real world shopping contexts. There is no compelling evidence that blurring exists as a meaningful form of harm to distinctiveness. The real complaint may instead be that the junior user is free riding on the brand’s exclusivity and image.131 1.4.2.3.2 Tarnishment.  If blurring was well named—​courts struggle to bring the very concept into focus—​tarnishment appears more straightforward.132 It has the feel of a 126   The US Supreme Court favored an actual dilution standard in: Moseley v V Secret Catalogue, Inc, 537 US 418 (2003). This was reversed by statute, in the form of the Trade Mark Dilution Revision Act of 2006, Pub L No 109-​312, 120 Stat. 1730 (presently codified at 15 USC § 1125(c)). The CJEU also confirmed the likelihood of dilution standard in Intel v CPM (n 124) at [38]. 127 128  Intel v CPM (n 124) at [77].   Intel v CPM (n 124) at [18]. 129  JN Sheff “Dilution at the Patent and Trade Mark Office” (2015) 21 Michigan Telecommunications and Technology Law Review 79; R Brauneis and PJ Heald, “The Myth of Buick Aspirin: An Empirical Study of Trade Mark Dilution by Product and Trade Names” (2011) 32 Cardozo Law Review 2533. 130  Contrast J Jacoby, “Considering the Who, What, When, Where and How of Measuring Dilution” (2007) 24 Santa Clara High Technology Law Journal 601 with the powerful critique by R Tushnet, “Gone in 60 Milliseconds: Trade Mark Law and Cognitive Science” (2008) 86 Texas Law Review 507. 131  B Beebe “The Suppressed Misappropriation Origins of Trade Mark Antidilution Law” and GB Dinwoodie, “Dilution as Unfair Competition: European Echoes” in RC Dreyfuss and JC Ginsburg (eds), Intellectual Property at the Edge: The Contested Contours of IP (Cambridge University Press 2014) 59, 81. 132  But see M Handler, “What Can Harm the Reputation of a Trade Mark? A Critical Re-​Evaluation of Dilution by Tarnishment” (2016) 106 Trade Mark Reporter 639.

540   Dev Gangjee defamation claim. Tarnishment “generally arises when the plaintiff ’s trade mark is linked to products of shoddy quality, or is portrayed in an unwholesome or unsavoury context likely to evoke unflattering thoughts about the owner’s product[s]‌.”133 This creates the risk of negative associations such that the reputed mark’s power of attraction is reduced. The negative association may arise from (i) an undesirable association with the junior user’s products, attributable to their inferior quality, illegal, or immoral connotations, or dissonance arising from product incompatibility; or (ii) by using or modifying the senior mark to portray it in a negative manner, during the course of commentary or critique. An illustration of the former is where Coca-​C ola is used for low-​grade engine oils or cheap paint strippers.134 While a senior user will need to evidence the content of the qualitative image that is being threatened, they will also need to establish that negative associations are not merely speculative or hypothetical. 1.4.2.3.3  Free Riding or Unfair Advantage.  A free riding prohibition prevents unauthorized references to reputed marks that benefit the junior user. As opposed to the plaintiff ’s harm, the focus is on the defendant’s gain without any corresponding effort or investment. This is contested terrain, as evidenced by a transatlantic divide: While the EU entertains such claims, and classifies them as unfair advantage, federal US law does not.135 If the essence of the complaint is reaping without sowing or misappropriation, a blanket prohibition on gaining from the efforts of others would be overbroad. Cultural and economic life relies on interdependence; we share and reference to create or renew relationships, while copying is essential for learning, competing as well as cultural transmission.136 Among others, comparative advertisers, novelists, scriptwriters, producers of compatible products, social media users, and parodists (including those with the creative appetite to produce a Game of Scones recipe book)137 evoke reputed trade marks. Should the default setting be a prohibition on all such uses? At one end of the spectrum, the CJEU initially embraced a very broad scope of protection in L’Oréal v Bellure.138 Under EU law, the proprietor of a reputed mark can object to the defendant’s use of a similar or identical mark where the use “without due cause takes unfair advantage of . . . the distinctive character or the repute of the trade mark.”139 Did this prohibition apply to a manufacturer of low-​price smell-​alike perfumes that (i) adopted similar packaging to L’Oréal’s leading brands and (ii) provided comparison lists equating its own perfumes with L’Oréal’s? L’Oréal could not establish any confusion (due to vastly different prices and sales channels), blurring, or tarnishment—​in short, no harm—​while attempting

133

  Deere & Co v MTD Prods, Inc, 41 F3d 39, 43 (2d Cir 1994).   Intel v CPM (n 124) at [AG9] (AG Sharpston). 135   For the plausible argument that some US courts have stretched the concept of blurring to implicitly accommodate a free riding argument, See DJ Franklyn, “Debunking Dilution Doctrine: Toward a Coherent Theory of the Anti-​Free-​Rider Principle in American Trade Mark Law” (2004) 56 Hastings Law Journal 117. 136  For similar concerns in the context of misappropriation under unfair competition law, see Section 2.1. 137  Published by Orion books and authored by Jammy Lannister, it includes the aptly named recipe for Jaime and Cersei's Family Mess. 138  L’Oréal v Bellure (n 19). 139  Trade Marks Directive 2008/​95/​EC, art 5(2). 134

Trade Marks and Allied Rights    541 to replicate the actual perfumes was entirely legitimate. Focusing on the advantage taken and equating it with “parasitism” the CJEU held that it would occur “where, by reason of a transfer of the image of the mark or of the characteristics which it projects to the [defendant’s goods] there is clear exploitation on the coat-​tails of the mark with a reputation.”140 If image transference signified the advantage, the unfairness was located in the defendants’ attempt “to exploit, without paying any financial compensation and without being required to make efforts of his own in that regard, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark.”141 Since any unauthorized benefit was deemed unfair, the CJEU has subsequently retreated from this position, acknowledging that some defendants who benefit from associations with leading brands may nevertheless have “due cause” to continue with their activities.142 Much depends on one’s meta-​epistemic frame when setting up free riding: Does socio-​ economic life involve the ongoing enjoyment of benefits from positive externalities (how many of us have appreciated a fireworks display without contributing to it?) Or, more individualistically, are we only permitted to succeed by relying upon our own unaided efforts? To avoid the dangers of circular reasoning, an advantage may be considered unfair if it is (i) harmful (but this was absent in L’Oréal); (ii) removes the incentive for further creation and product differentiation (but brands thrive in the US despite no such prohibition); (iii) immoral or unethical because those who create are not compensated (but moral philosophy only justifies a narrow form of the claim where there is a legitimate expectation worth protecting); (iv) or based on the protection of a proprietary interest.143 As regards this fourth argument, if brands are to be justified as the objects of property rights based on a narrative of creation by the trade mark owner, marketing research reveals that, to a considerable extent, brand image content and value arise from consumer efforts and investment, while brand image is itself dynamic. If a brand is more analogous to a many-​sided conversation, as opposed to a stable projected image, proprietary claims are less viable.144

1.5 Defenses and Limitations While the universe of trade mark infringement claims has inexorably expanded, trade mark defenses (or exceptions) and limitations have made only incremental advances. A third party may wish to use a sign that happens to be registered as a trade mark for entirely legitimate 140

141  ibid at [49].   L’Oréal v Bellure (n 19) at [41]. Interflora v Marks & Spencer (n 104) at [91]–​[92]; Leidseplein Beheer BV v Red Bull GmbH (C-​65/​12) [2014] ETMR 24. 143  See M Lemley and MP McKenna, “Owning Mark(et)s” (2010) 109 Michigan Law Review 137; DS Gangjee and R Burrell, “Because You’re Worth It: L’Oréal and the Prohibition on Free Riding” (2010) 71 Modern Law Review 282; A Chronopoulos, “Goodwill Appropriation as a Distinct Theory of Trade Mark Liability: A Study on the Misappropriation Rationale in Trade Mark and Unfair Competition Law” (2014) 22 Texas IP L J 253; ME Kenneally, “Misappropriation and the Morality of Free-​Riding” (2014) 18 Stanford Technology Law Review 289. 144  D Gerhardt, “Consumer Investment in Trade Marks” (2009-​10) North Carolina Law Review 427; Gangjee, “Property in Brands” (n 44); L McDonagh, “From Brand Performance to Consumer Performativity: Assessing European Trade Mark Law after the Rise of Anthropological Marketing” (2015) 42 Journal of Law & Society 611. 142 

542   Dev Gangjee reasons. She may be an experienced mechanic providing Mercedes repair services, or attempting to convey a laudatory or descriptive message about her own products. To what extent does trade mark law permit this? A limitation defines the scope of a right or the outer limits of exclusivity, such that conduct within its ambit is safely beyond the purview of infringement. A defense or exception goes further, expressly excusing otherwise-​infringing conduct. Trade mark law was historically designed with a preference for limitations over exceptions,145 which has been attributed to its relatively self-​contained policy objectives (preserving the integrity of source identifying signals) and correspondingly proportionate infringement claims (directed against consumer confusion). Within a regime based on such modest and universally accepted policy foundations, there was little compulsion to justifiably excuse conduct that caused significant consumer confusion.146 However, as trade mark law expanded to recognize more speculative instances of confusion and the various flavors of dilution, the need arose for “real” exceptions or affirmative defenses, which recognize that infringing uses by a third party may nevertheless be socially beneficial. Defenses that (1) apply notwithstanding a finding of infringement have tended towards (2) a rule-​like categorical approach, where certain classes of uses are deemed legitimate, supplemented and modulated by (3) a standards-​like balancing test to determine whether the individual defendant should be excused, by drawing upon the specific factual context of the dispute.147 All three elements are evident in the US fair use defense for “a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin.”148 Those who appropriate a descriptive term as a trade mark, usually via acquired distinctiveness, should not be able to restrict others from accessing its enduring descriptive connotations. Where the defendant was using “microcolor” to describe permanent pigments injected under the skin on its cosmetics products and the trade mark proprietor asserted infringement based on the trade mark registration of Micro Colors, the US Supreme Court affirmed that the defense was available notwithstanding potential consumer confusion resulting from the defendant’s use in advertising material, provided the other two requirements of the right type of use (descriptive) and fairness or good faith were also present.149 A similar structure is evident in the EU, where specific defenses exist for: • Descriptive use, which indicates “the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics.”150

145  Examples would be non-​trade mark use by the defendant or use which did not harm a mark’s functions; non-​commercial use; use on such dissimilar goods that confusion was unlikely; or disclaiming exclusivity over certain content at the time of registration. 146  GB Dinwoodie “Developing Defences in Trade Mark Law” (2009) 13 Lewis & Clark Law Review 99. 147  See TRIPS Agreement, art 17 which permits “limited exceptions” to trade mark rights while taking into account the “legitimate interests” of both trade mark owners and third parties. 148  15 USC § 1115(b)(4). 149  KP Permanent Make-​Up, Inc v Lasting Impression, Inc, 543 US 111 (2004). 150  Trade Marks Directive (EU) 2015/​2436, art 14(1)(b).

Trade Marks and Allied Rights    543 • The use of one’s own name, which previously included both natural persons and trading names but has recently been restricted to the former.151 • A “nominative” or “referential” use, where the mark is used to identify the products as those of the trade mark owner, such as when a third party wishes to advertise its Nespresso-​compatible coffee pods or Epson-​compatible printer ink cartridges.152 By contrast, US courts approach nominative use in two different ways. It may either operate as a variant of the likelihood of confusion test, with a discrete set of factors which recognize the nature of the defendant’s referential use, or else it may operate as an affirmative defense.153 Once the use fits within one of these categories, a proviso additionally requires that it “is in accordance with honest practices in industrial or commercial matters.”154 Albeit initially obscure, the proviso is emerging as a multifactor balancing test designed to assess the legitimacy of interests on either side (for example, did the defendant independently adopt the sign and has its use been longstanding) as well as likely effects of the use on consumers (for example, notwithstanding “own name” use, will consumers mistakenly assume the parties are commercially related).155 Interestingly, when it comes to dilution, perhaps due to the inchoate nature of the infringement claim and the ensuing risk of chilling effects, the US favors legislative safe harbors which clearly define categories of use deemed socially valuable. Within the overarching umbrella of descriptive or nominative use, the trade mark statute specifically permits comparative advertising, parodies or critiques, news reporting, and non-​commercial use.156 It remains to be seen whether the “due cause” proviso in the EU, which is contained within the dilution provision as an open-​ended escape valve,157 will evolve in a similar direction. Two other prominent limitations relate to comparative advertising and the exhaustion of rights upon first sale. Both are intended to facilitate the efficient functioning of markets and the competitive process. Advertising which objectively compares product features or attributes and uses the proprietor’s mark only referentially, to truthfully identify their own goods, is unlikely to confuse. However, both double identity and dilution claims are potentially viable, resulting in legislative provisions for defenses or limitations in both the US and the EU.158 For the latter, where advertising complies with the relevant consumer protection legislation in this field, it is permitted. Exhaustion is best approached via the phenomenon of parallel imports or grey market goods. These are genuine goods legally 151 

Trade Marks Directive (EU) 2015/​2436, art 14(1)(a). Trade Marks Directive (EU) 2015/​2436, art 14(1)(c). 153  JT McCarthy (ed), McCarthy on Trade Marks and Unfair Competition, Fourth Edition (Westlaw edition, March 2016 Update) § 23:11. 154  Trade Marks Directive (EU) 2015/​2436, art 14(2). 155  Samuel Smith (Tadcaster) v Lee [2011] EWHC 1879 (Ch), [112]–[120] (Arnold J). 156  15 USC 1125(c)(3). For an argument in favor of categorical safe harbors, see W McGeveran, “The Trade Mark Fair Use Reform Act” (2014) 90 Boston University Law Review 2267. 157  Leidseplein Beheer v Red Bull (n 142). 158  See respectively: 15 USC 1125(c)(3) (nominative use in comparative advertising is a defense against dilution); Trade Marks Directive (EU) 2015/​2436, Recital 10 and art 10(3)(f), which outsource the permissibility analysis to the Misleading and Comparative Advertising Directive 2006/​114/​EC under EU consumer protection law. 152 

544   Dev Gangjee placed on the market in country A for the first time by a trade mark proprietor or with her consent, but which are subsequently imported into country B without the consent of the owner. Should the trade mark owner be able to use the suite of trade mark infringement options—​including the powerful double identity rule—​to block such imports in order to maintain control over their brands in country B? To facilitate the free movement of goods as well as the efficient functioning of downstream markets, some countries adopt a principle of regional or international exhaustion of IP rights upon the first sale of the product, whereupon the rights holder loses the ability to object to such imports in country B, except in qualified circumstances. One such example would be where shoddy re-​packaging or product modification attributable to the parallel importer could erode consumer trust in the trade mark.159 The preceding analysis alludes to the interface between trade marks and competition law. A final relationship to consider is that between expressive values or recognized speech interests and trade mark law. Digital technology and social media have made this an increasingly relevant interface. A painting, parody, song, or satirical blog post may use a mark to critique an undertaking’s environmental record or the treatment of its workers. Since trade marks function as convenient registers of social meaning, critics may also use leading brands to critique an entire sector, such as fossil fuels, the luxury goods industry, or big tobacco. There are two techniques for responding to such conflicts within trade mark law.160 The first is to apply existing rules with a sensitivity to the freedom of expression values at stake in a given dispute. The critic’s use may be non-​commercial, while a defense such as referential use or due cause may also be available. The second is to craft a specific defense which responds to speech interests.161 Each has its advantages and drawbacks.

1.5.1 Remedies Remedies in trade mark law tend to track those available under other IP regimes.162 Legal systems inevitably incorporate trade mark law within the taxonomy of broader private law categories and grant the remedies usually available to that category.163 Following on from

159 

I Calboli and E Lee (eds), Research Handbook on Intellectual Property Exhaustion and Parallel Imports (Edward Elgar 2016); LG Grigoriadis, Trade Marks and Free Trade: A Global Analysis (Springer 2014). 160  W Sakulin, Trade Mark Protection and Freedom of Expression (Kluwer 2010); R Burrell and DS Gangjee, “Trade Marks and Freedom of Expression: A Call for Caution” (2010) 41 International Review of Intellectual Property and Competition Law 544; LP Ramsey, “Reconciling Trade Mark Rights and Free Expression Locally and Globally” in D Gervais (ed), International Intellectual Property: A Handbook of Contemporary Research (Edward Elgar 2015) 341. 161  As some US courts prefer. See Rogers v Grimaldi, 875 F 2d 994 (2d Cir 1989) (which adopts a two-​ stage enquiry: expressive use of the mark will be restrained (i) only where the work has “no artistic relevance”; or (ii) if it has such relevance, where it nevertheless explicitly misleads consumers as to commercial source or content). 162  See chapter by Ross, this volume. 163  UK Trade Marks Act 1994, ss 22, 24(1) (treating trade marks as analogous to personal moveable property).

Trade Marks and Allied Rights    545 a successful infringement claim, civil law remedies include interim and final injunctions; awards of costs that are paid by the losing party; compensatory damages or alternatively an account of profits as restitution; delivery up or the destruction of infringing items; and tracing orders which reveal information allowing infringing products to be traced back along the supply chain. Criminal law enforcement is also possible, especially in cases of large scale counterfeiting.164 Since the circulation of counterfeits may pose risks to the general public, customs authorities may also be engaged to seize infringing products at borders, or more problematically, even while in transit through a jurisdiction.165 In recent years, two Internet-​specific developments have generated considerable interest as well as controversy. The first relates to intermediary or accessory liability: The extent to which online service providers or platforms—​the likes of Google, Twitter, Amazon, and eBay—​should be held responsible for the infringing activities of their users. Since primary trade mark infringement is difficult to establish (Google is not in the business of selling infringing goods) the analysis is conducted within the framework of unfair competition or tort rules on primary or secondary (accessory) liability. It broadly resolves into the question of whether the service provider was under an obligation to respond effectively, by removing results or listings, based on (i) the requisite degree of knowledge of the underlying infringing conduct as well as (ii) its own technological capabilities and resources.166 Even if liability for breaching such an obligation exists under national law, a provider may qualify for a “safe harbor” defense provided for a passive host of an online service, if it was unaware of the infringements and responds expeditiously when notified.167 However, while safe harbors insulate providers against monetary claims, they preserve the possibility for injunctive relief. A more recent development in the EU is the rise of so-​called blocking orders, which have drawn inspiration from parallel developments in copyright law. Under harmonized EU law, Member States must ensure that “rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right.”168 This remedial option is provided not on the basis that intermediaries such as Internet service providers are engaged in wrongdoing but on the basis that they have the technological capacity to expeditiously assist rightsholders, by blocking access to websites offering infringing materials from within a jurisdiction. There are concerns that this regime may drift towards the imposition of a general content monitoring obligation on intermediaries and also impose unreasonable compliance costs on them, despite the absence of a liability determination.169

164 

Trade Mark Counterfeiting Act of 1984, 18 USC § 2320; UK Trade Marks Act 1994, s 92. Eg, Customs Regulation (EU) 608/​2013. 166  L'Oréal SA & Ors v EBay International AG & Ors [2009] EWHC 1094 (Ch); Tiffany (NJ) Inc v eBay Inc 600 F 3d 93 (2d Cir 2010); Special Issue on Secondary Liability for Trade Mark Infringement (2014) 37(4) Columbia Journal of Law & Arts. 167  E-​Commerce Directive 2000/​31/​EC, art 14, as interpreted in L’Oréal SA v eBay International AG (C-​324/​09) [2011] ECR I-​6011 (CJEU Grand Chamber). 168  Enforcement Directive 2004/​48/​EC, art 11. 169  Cartier International AG & Ors v British Sky Broadcasting Ltd & Ors [2014] EWHC 3354 (Ch) (Arnold J); affirmed on appeal: [2016] EWCA Civ 658. 165 

546   Dev Gangjee

2. Allied Rights 2.1 Unfair Competition 2.1.1 What is Unfair Competition? The law of unfair competition occupies the role of the referee in a competitive marketplace. It enforces the rules of the game by providing remedies for traders affected by unfair trading methods. Stated as a general proposition, it prohibits any “act of competition contrary to honest practices in industrial or commercial matters.”170 Marketplace competition inevitably creates winners and losers, so it is not the harm suffered by the complainant per se—​losing sales or market share—​that is unfair. Instead, competitive conduct should not violate norms prohibiting (i) misrepresentation, (ii) denigration, or (iii) misappropriation.171 The focus is therefore on regulating unfair conduct, as opposed to recognizing protected categories of IP subject matter. However, if the conduct involves wrongful imitation or misrepresentation in relation to intangibles, unfair competition effectively complements IP protection. Inevitably, such flexibility comes at a price. The intuitive appeal of fairness must be offset against the inescapable vagueness that accompanies it. A longstanding challenge has therefore been to develop a methodology for delineating unfairness in specific instances; to translate general norms into detailed, context-​specific rules. “The question [of] where the line should be drawn between fair competition and unacceptable competitive behaviour has created abundant debate and literature.”172 As one judge memorably put it: “We are all against misappropriation, just as we are all in favour of mother and apple pie.”173 Misappropriation, also pejoratively referred to as free riding or parasitism, involves benefiting from something of value that another has invested in creating, without substantially departing from the original achievement or reimbursing the original creator. The literature is replete with “reaping without sowing” imagery.174 Recognizing claims against misappropriation therefore inhibits copying; yet copying is essential for learning, competing, downstream creation, and the generation of shared cultural resources as well as social existence.175 In a similar vein, does comparative advertising by a new market entrant facilitate consumer choice and enhance levels of competition? Or does it enable the newcomer to glibly or even misleadingly suggest

170 

Paris Convention of 1883, Art 10bis(2). M Spence, Intellectual Property (Oxford University Press 2007) 37. 172  M Hopperger & M Senftleben “Protection against Unfair Competition at the International Level” in RM Hilty and F Henning-​Bodewig (eds), Law Against Unfair Competition: Towards a New Paradigm in Europe? (Springer 2007) 61, 61. 173  L'Oréal SA v Bellure [2007] EWCA Civ 968 at [160] (Jacob LJ). 174  R Posner “Misappropriation: A Dirge” (2003) 40 Houston Law Review 621; A Chronopolous, “Goodwill Appropriation as a Distinct Theory of Trade Mark Liability: A Study of the Misappropriation Rationale in Trade Mark and Unfair Competition Law” (2014) 22 Texas Intellectual Property Law Journal 203. 175  See, eg, R Tushnet, “Copy This Essay: How Fair Use Doctrine Harms Free Speech and How Copying Serves It” (2004) 114 Yale Law Journal 535; A Drassinower, What’s Wrong with Copying? (Harvard University Press 2015). 171 

Trade Marks and Allied Rights    547 equivalence with the market leader, or perhaps erode the market leader’s exclusive image by suggesting the newcomer is comparable? Another thematic concern is the relationship between unfair competition and IP law.176 The former accommodates claims sounding inter alia in contract, tort, consumer protection, and even criminal law. Making allowances for jurisdictional variations, it encompasses prohibitions against: creating consumer confusion about a product’s source; misleading the public about characteristics of one’s own or another’s goods; denigrating another trader; misappropriating confidential commercial information; enticing away a competitor’s employees; inducing breach of contract; bribery; free riding upon another’s investment in a valuable intangible; intrusive and misleading advertising, as well as certain forms of comparative advertising; slavish imitation; and exploitative sales promotions.177 Since this list clearly ranges beyond IP-​specific concerns, it is helpful to identify the relationship between unfair competition law and IP in general as well as trade marks in particular.178 The following analysis outlines the difficulties associated with a legal regime premised on fairness and its partial overlap with IP, drawing upon the claim of slavish imitation to illustrate some of the delicate balances endemic to this area.

2.1.2 Contested Foundations Any legal response to unfair competition needs to be flexible. An “enumeration, however comprehensive, of existing methods of unfair competition must necessarily prove incomplete, as with new [market] conditions constantly arising novel unfair methods would be devised and developed.”179 Yet adaptability comes at a price. Two values threatened by a broad and amorphous unfair competition formulation are (1)  legal and commercial certainty; and (2) a vigorously competitive marketplace. Let us consider each in turn. From the trade perspective, predictable rules might be preferred to fluid standards. In legal systems with well-​established unfair competition regimes, a two-​tiered response has emerged to address this. An open-​ended general clause prohibiting unfair competition is often followed by enumerated instances—​effectively a blacklist—​of unfair conduct. The best known exemplar of this is the German Gesetz gegen den unlauteren Wettbewerb

176 

Other boundaries to consider are its relationship with competition or antitrust law (focusing on macro-​level structural features of markets), the law of obligations (primarily contract, tort and unjust enrichment) as well as property law (for instance, does business goodwill provide proprietary foundations for certain claims?). 177  K Misegades, “The Scope of the Law of Unfair Competition” (1932) 14 Journal of the Patent & Trademark Office Society 763, 764–​765; SP Ladas, Patents, Trade Marks and Related Rights: National and International Protection, Vol 3 (Harvard University Press 1975) 1708–​1735; WIPO, Protection against Unfair Competition: Analysis of the Present World Situation (WIPO Publication No 725(E), 1994) 48, 54–​60; WIPO, Model Provisions on Protection against Unfair Competition: Articles and Notes (WIPO Publication No 832, 1996). 178 

Given this propensity for coverage overlaps, unfair competition is indebted to yet distinct from competition or antitrust law, the law of obligations (especially contract, tort and unjust enrichment) and elements of consumer protection law. 179  FTC v Gratz, 253 US 421, 437 (1920) (Brandeis J).

548   Dev Gangjee (UWG) statute.180 The general proscription in Article 3(1) of the UWG (2015) states that “unfair commercial practices are prohibited” and Article 3(2) further refines this to acts “contrary to the requirements of professional diligence and [which] are likely to materially distort the economic behaviour of consumers.”181 This general algorithm is supplemented by specific instances of unfair competition such as conduct denigrating a competitor, making false allegations, offering replica products to the public, or illegitimately interfering with the business of a competitor (Art 4); aggressive commercial practices (Art 4a); misleading commercial practices (Arts 5 and 5a); comparative advertising which does not comply with EU standards (Art 6); and so on. The general prohibition provides flexibility while the specific instances channel claims and enhance predictability. The second technique to reconcile stability with adaptability is a common law (ie, judge-​made) process of refinement and elaboration.182 This is equally true in civil law jurisdictions, where the judiciary incrementally develops the law by resorting to familiar reasoning techniques such as drawing analogies with established cases or categories. The boundaries of honest practices are located in the precedents. Besides legal uncertainty, a general prohibition also gives rise to a second concern. Within a market paradigm premised upon liberal economic values, an overly solicitous articulation of unfair competition could inhibit conduct otherwise beneficial to consumers. The “freedom to compete implies a right to induce prospective customers to do business with the actor rather than with the actor's competitors.”183 Courts in common law jurisdictions have expressed reservations when invited to recognize open-​ended norms preventing copying per se or to move beyond established categories of harm.184 They have also sought to avoid any “judicial indulgence of idiosyncratic notions of what is fair in the market place.”185 As the US Supreme Court observed in a dispute involving the copying of identically shaped pillow-​ like breakfast cereal biscuits by a competitor: Kellogg . . . is undoubtedly sharing in the goodwill of the article known as “Shredded Wheat”; and thus is sharing in a market which was created by the skill and judgment of plaintiff ’s predecessor and has been widely extended by vast expenditures in advertising persistently made. But that is not unfair. Sharing in the goodwill of an article unprotected by patent or trade mark is the exercise of a right possessed by all—​and in the free exercise of which the consuming public is deeply interested.186

180 

Originating in 1896 but more elaborately developed in 1909, the UWG was re-​enacted in 2004 and substantially revised in 2015. See RW de Vrey, Towards a European Unfair Competition Law: A Clash between Legal Families (Martinus Nijhoff 2006) 147–​157; A Ohly and O Sosnitza, Gesetz gegen den unlauteren Wettbewerb: UWG, Seventh Edition (Beck 2016). 181  The text in German is available at:  accessed May 2016. I am indebted to Professor Ansgar Ohly for the translations. 182  S Balganesh and G Parchomovsky, “The Role of Unfair Competition in the Common Law” in S Balganesh (ed), Intellectual Property and the Common Law (Cambridge University Press 2013) 484, 484. 183  Restatement (Third) on Unfair Competition (American Law Institute, March 2016 update), § 1. 184 Prominently: Victoria Park Racing and Recreation Grounds v Taylor (1937) 58 CLR 479, 509; Hodgkinson & Corby Ltd v Wards Mobility Ltd [1994] 1 WLR 1564, 1569; L'Oréal SA v Bellure (n 173) at [139]–​[142]. 185  Moorgate Tobacco Ltd v Philip Morris Ltd (No 2) [1985] RPC 219, 239–​240. 186  Kellogg Co v National Biscuit Co, 305 US 111 (1938) at 122. For a contextually rich retrospective, see G Dinwoodie, “The Story of Kellogg Co v National Biscuit Co: Breakfast with Brandeis” in JC Ginsburg and R Dreyfuss (eds), Intellectual Property Stories (Foundation Press 2005) 220.

Trade Marks and Allied Rights    549 Critics may respond by pointing out that the common law is no stranger to open-​ended standards—​reasonableness as the benchmark for negligence and equitable claims being measured against unconscionability come to mind.187 The concern is therefore more plausibly reframed as judicial reluctance to be handed the reins for matters of economic policy, when a legislative approach potentially offers a sector-​specific focus, more transparent deliberations and better evidentiary support.188 The debate surrounding the protection of “hot news” conveniently captures this. In International News Service (INS)189 two competing US newswire services were reporting on the First World War. Since the INS was prohibited from using telegraph infrastructure to report news directly from Europe, it resorted to examining the early East Coast editions of Associated Press (AP) newspapers. The factual news content was telegraphed to INS members further westwards for publication, in direct competition with AP newspapers. The majority of the US Supreme Court recognized a quasi-​property interest—​available only against a direct competitor—​in fact-​sensitive news which would be protected against misappropriation, on the basis that the defendant was reaping without sowing. However, the strong dissent of Brandeis J. proved enduringly influential. He opposed the argument that anything which requires labor to produce and has marketable exchange value ought to be recognized as the object of property rights. Knowledge and ideas, once communicated, should be free. This freedom should only be subject to specific legislative intervention—​a copyright or patent law—​which protected defined classes of intangibles on the basis of public policy imperatives. In the US, concerns relating to a judicially-​ driven expansion of misappropriation led to the INS doctrine being subsequently restricted to “hot news,” while similar state level190 doctrines supplemented the basic test with additional criteria, further narrowing its scope.191 The “hot news” doctrine was also given a cool reception in other common law jurisdictions.192 While the past decade has witnessed the resurgence of news misappropriation allegations in a digital information ecosystem, with news-​aggregators being specifically implicated, the focus is shifting away from open-​ended misappropriation norms to more nuanced reforms of copyright legislation.193 187 

Noted by C Wadlow, The Law of Passing Off: Unfair Competition by Misrepresentation, Fourth Edition (Sweet & Maxwell 2011) 64. 188  WR Cornish “Unfair Competition and the Consumer in England” (1974) 1 International Review of Intellectual Property and Competition Law 73, 74. 189  International News Service v Associated Press 248 US 215 (1918). 190  In the US, certain unfair competition prohibitions exist at the Federal level—​prominently within the Lanham Act regulating trade marks—​but the majority are found at the state level in tort law or state-​ specific legislation. 191  D Baird, “The Story of INS v AP: Property, Natural Monopoly, and the Uneasy Legacy of a Concocted Controversy” in Ginsburg and Dreyfuss (eds) (n 186) 10; S Balganesh, “‘Hot News’: The Enduring Myth of Property in News” (2011) 111 Columbia Law Review 419; Barclays Capital Inc v Theflyonthewall.com 650 F 3d 876 (2d Cir 2011). 192  C Wadlow “Unfair Competition by Misappropriation: The Reception of International News in the Common Law World” in CW Ng, L Bently, and G D’Agostino (eds), The Common Law of Intellectual Property: Essays in Honour of Professor David Vaver (Hart 2010) 307. 193  See European Commission Communication, Towards a Modern, More European Copyright Framework COM(2015) 626 final, 10; S Ricketson and JC Ginsburg, “Intellectual Property in News? Why Not?” in S Ricketson and M Richardson (eds), Research Handbook on Intellectual Property in Media and Entertainment (Edward Elgar 2017) 10.

550   Dev Gangjee Setting to one side concerns about its scope or judicial subjectivity, the presence or absence of a flexible general clause prohibiting unfair competition—​whether contained in a statute or traceable to general tort provisions—​continues to be the principal dividing line between common law and civilian jurisdictions.194 As an illustration, the UK offers a menu consisting of individual torts or equitable wrongs (primarily passing off, injurious falsehood, defamation, and breach of confidence), the prohibition of misleading practices under consumer protection law, trade mark law, and codes of advertising regulation.195 In terms of coverage, this overlaps considerably with civilian unfair competition laws, but the general clause is missing. Besides this prominent taxonomic divide, there are others as well. • A favored mode of classification relates to the sources of law.196 Jurisdictions are divided according to whether protection is based on (i) specific or stand-​alone unfair competition legislation (eg, Austria, Germany, Japan, Switzerland); (ii) general tort law (France, Italy, the UK); and (iii) a combination of the two (the US). However, most jurisdictions are increasingly hybrid. • Unfair competition is also synonymous, at least in some common law jurisdictions, with an open-​ended tort claim directed against the misappropriation of valuable intangibles.197 Regimes lacking such an action are considered by some to stop short of full-​fledged unfair competition law. • Another criterion relates to the subjects recognized by the law. Is the regime designed to primarily protect traders? Should it also recognize independent consumer interests? And extend to the general public interest in a dynamically competitive marketplace? While France and Germany historically operated within a “classical model” prioritizing the protection of honest traders,198 at the European level the consumer protection aspect of unfair competition is gaining prominence. This is clearly evident in the EU Directives proscribing unfair trading practices and misleading advertising.199 • Identifying protected interests and groups segues into the issues of standing, remedies, and enforcement, where there is further variation.200 While consumer associations are recognized as parties with a legitimate interest to bring claims under the German UWG, the tort of passing off requires the claimant to be an affected trader. Unfair

194 

Spence (n 171) 35; De Vrey (n 180) 280–​281. R Arnold, “English Unfair Competition Law” [2013] International Review of Intellectual Property and Competition Law 63; J Davis, “Unfair Competition: The United Kingdom” in F Henning-​Bodewig (ed), International Handbook on Unfair Competition (Hart 2013) 600. 196  See WIPO, World Situation (n 177*) 19–​21; Ladas (n 177) 1693–​1696. 197  Moorgate Tobacco Ltd v Philip Morris Ltd (No 2) [1985] RPC 219, 235–​236; M Spence, “Passing Off and the Misappropriation of Valuable Intangibles” [1996] Law Quarterly Review 472. 198  C Wadlow “Unfair Competition in Community Law—​Part I: The Age of the ‘Classical Model’ ” [2006] European Intellectual Propery Review 433, 441. However contemporary German law recognizes a broader range of protected interests in art 1 of the UWG (2015) (“This act intends to protect competitors, consumers and other market participants from unfair commercial practices. At the same time it intends to protect the public interest in undistorted competition”). 199  Unfair Commercial Practices Directive 2005/​29/​EC; Misleading and Comparative Advertising Directive 2006/​114/​EC. 200  F Henning-​Bodewig Unfair Competition Law: European Union and Member States (Kluwer 2006) 10–​11. 195 

Trade Marks and Allied Rights    551 competition laws have also been given effect by a variety of mechanisms—​penal laws (fines and punishments); administrative interventions (inspections by trading standards authorities); self-​ regulation by a sector-​ specific ombudsman; or more conventional private law redress (seeking damages, injunctions, or restitutionary remedies). Having identified the foundations for national divergences, the apparent lack of ambition in international obligations becomes more comprehensible. The only general standard is contained in Article 10bis(2) of the Paris Convention, which prohibits any “act of competition contrary to honest practices in industrial or commercial matters.” Article 10bis(3) is more potent and specifies three mandatory categories: (i) acts which create confusion; (ii) false allegations which discredit a competitor; and (iii) indications likely to mislead the public as to the characteristics of the defendant’s goods. Besides these three mandatory categories, the drafting history of this provision reveals that the intention was to defer to national legal approaches as regards the form and content of unfair competition law.201 At best, Article 10bis provides methodological guidance: (i) the claimant need not be a direct competitor producing competing or substitutable products; (ii) dishonesty is assessed objectively, in terms of effects produced, rather than subjective dishonest intention; (iii) “honest practices” does not refer to abstract, universal ethical standards but should inductively reflect sector-​specific marketplace practices; and (iv) the various interests implicated (traders, consumers, the competitive marketplace) need to balanced. Beyond the Paris Convention, TRIPS incorporates the Article 10bis standards in the specific instances of geographical indications protection (Art 22.2(b)) and undisclosed or confidential information (Art 39).

2.1.3 Relationship with Intellectual Property Unfair competition is perceived as the general backdrop to the discrete categories of IP law, with the potential for filling in the interstitial spaces. Ladas captures this nicely: [The nominate branches of IP] represent pecuniary interests and business relationships, which are legally protected. The aim of the law in all these instances is to give satisfaction to interests acquired by lawful efforts, research, labour, investment or by conducting a lawful business. But the law of unfair competition aims at protecting these same interests . . . . It forms the background, and constitutes the general principle of which the laws protecting the various branches of industrial property are only special aspects or particular applications.202

In this manner, trade mark law was considered to be a specific instantiation of unfair competition, as noted by US courts in the past.203 While its “general backdrop” status is relatively well settled, identifying the general principle on which unfair competition is itself poised remains an

201 

GHC Bodenhausen, Guide to the Application of the Paris Convention for the Protection of Industrial Property (Bureau de l'Union 1968) 142–​148; Wadlow, Passing Off (n 187) 61–​64; S Ricketson, The Paris Convention for the Protection of Industrial Property: A Commentary (Oxford University Press 2015), [13.33]–​[13.59]. 202  Ladas (n 177) 1675. 203  Hanover Star Milling Co v Metcalf, 240 US 403, 412–​413 (1916) (“In fact, the common law of trade marks is but a part of the broader law of unfair competition”); Moseley v V Secret Catalogue (n 126) 428.

552   Dev Gangjee ongoing enquiry. Contenders have included (i) a proprietary foundation, where goodwill is the valuable intangible being protected; (ii) a restitutionary response to unjust enrichment; or (iii) protecting investments where the absence of protection would consequentially lead to market failure.204 The potential for unfair competition to be a practical alternative to IP claims gives rise to three consequences. First, its scope and content exerts a gravitational field upon the nominate categories of IP and shapes their coverage. As the misappropriation debate illustrates, the extent to which factual news is excluded by copyright increases the pressure to accommodate it within unfair competition law and vice versa. Similarly, a jurisdiction whose unfair competition regime recognizes misappropriation claims may not need to recognize the doctrine of initial interest confusion in trade mark law, where any initial confusion is cleared up before the actual purchase transaction, but “bait and switch” harm may have occurred by that stage. Second, through the evolution of case law unfair competition functions as an incubator for recognizing new types of subject matter within existing categories of IP, or provides the testing grounds for entirely new categories of IP being recognized.205 At a time when the registration-​based trade mark system did not recognize service marks, color per se, shape marks, or trade dress, the tort of passing off could recognize these indicia as badges of goodwill and consequently protect them against misleading uses.206 Third, although the default option is to permit concurrent claims, this may have to give way to pre-​emption in certain situations.207 If unfair competition forms the backdrop to nominate IP regimes, the freedom to compete in turn forms the broader backdrop to unfair competition. IP regimes inevitably incorporate compromises between protection and access. With the exception of trade marks and allied rights, the other IP rights have finite durations, with the expectation that pro-​competitive copying will commence upon expiry. Then there are the express subject matter exclusions, limits to the scope of protection, and defenses or exceptions. If subject matter is excluded or unprotected within a category of IP, should an unfair competition claim nevertheless be viable? In so far as any generalization is possible, the answer seems to be found within unfair competition law itself, by calibrating the regulatory valve of “fairness” to respect the policy decision within an IP regime to leave subject matter unprotected. The action against slavish imitation conveniently illustrates this.

204 

See respectively, (i) F Zoll, “A Propos de la Loi Polonaise Concernant la Repression de la Concurrence Déloyale” [1927] Propriété Industrielle 64; (ii) AK Sanders, Unfair Competition Law: The Protection of Intellectual and Industrial Creativity (Clarendon Press 1997); (iii) RM Hilty “The Law Against Unfair Competition and its Interfaces” in Hilty and Bodewig (n 172) 1. 205  A Kur, “What to Protect, and How? Unfair Competition, Intellectual Property, or Protection Sui Generis” in N Lee, G Westkamp, A Kur, and A Ohly (eds), Intellectual Property, Unfair Competition and Publicity: Convergences and Development (Edward Elgar 2014) 11. 206  See, eg, DM Kerly, The Law of Trade Marks, Trade-​Name and Merchandise Marks (Sweet & Maxwell 1894) 381. 207  Sanders (n 204) 8–​12; A Nordemann and TM Aaron, “The Relationship Between Trade Mark Rights and Unfair Competition Law” in N Wilkoff and S Basheer (eds), Overlapping Intellectual Property Rights (Oxford University Press 2012) 341.

Trade Marks and Allied Rights    553

2.1.4 Slavish Imitation: Illustrating the Delicate Balance As the name suggests, slavish imitation targets the unauthorized imitation of products. An extreme version of this claim posits that the identical or close copying of a product can be indefinitely prohibited under unfair competition law, based on a generous theory of misappropriation prevention and regardless of exclusions from IP protection.208 This has obvious risks, which influenced the US Supreme Court in Bonito Boats.209 Florida state legislation prohibited boat hulls from being identically copied by a very specific “plug moulding” method. The defendant had reverse engineered identical fibreglass boat hulls using this method. Protection for the original hulls had not been sought under federal patent or design-​equivalent protection regimes. In these circumstances, the court concluded that state law was eclipsed by federal law in the same field. The patent regime reflected the underlying commitment to the free exploitation of ideas, which was the rule. Patent or design protection was granted as an exception in carefully calibrated circumstances. Federal law therefore settled not only the question of what was protected but also, by implication, what should be left free. While proscribing confusion caused by the defendant’s copying was legitimate, a broad state-​level notion of misappropriation as an alternative channel of protection would have to give way. This suggests that slavish imitation comes in two variants: a claim based on misrepresentation (or some other form of injury) and one on misappropriation. Dutch law conveniently illustrates the former approach. An action against slavish imitation was first recognized in the Hyster Crane case concerning the imitation of a mobile hoisting-​crane.210 The Dutch Supreme Court held that drawing on another’s efforts to create a reliable and useful product, even where this potentially led to some confusion, was entirely permissible. Only where the imitator (i) could have adopted an alternative shape, without compromising on the reliability or usefulness of the product and (ii) the imitation led to confusion amongst the relevant public, would the imitation be prohibited. Avoidable confusion is at the heart of the claim. Dutch courts have subsequently developed a structured test with four requirements: (1) the claimant’s product must be distinctive; (2) the defendant’s product must be likely to confuse the public; (3) product similarity extends beyond those features which are important for the reliability and usefulness of the product (effectively excluding functional or standardized aspects of the product from the comparison); and (4) the defendant failed to take reasonable steps to prevent confusion (ie, created needless confusion by not adopting a functionally equivalent variant).211 By contrast, the German UWG prohibits not only product imitations or replicas that mislead the public (Article 4(3)(a)), but also those which take unfair advantage of or damage the reputation of the imitated goods or services (Article 4(3)(b)). The Rolex decision—​where the defendant manufactured replica watches imitating the high-​end watch brand—​confirms that exploitation or damaging a competitor’s reputation by selling almost identical, low-​ priced imitations was actionable even in the absence of confusion.212 208   AK Sanders, “Do Whiffs of Misappropriation and Standards for Slavish Imitation Weaken the Foundations of IP Law?” in E Derclaye (ed), Research Handbook on the Future of EU Copyright (Edward Elgar 2009) 567. 209  Bonito Boats Inc v Thunder Craft Boats Inc 489 US 141 (1989). The court further clarified and applied Sears, Roebuck & Co v Stiffel Co, 376 US 225 (1964) and Compco Corp v Day-​Brite Lighting, Inc, 376 US 234 (1964). 210  Hyster Kary Krane, [1954] Nederlandse Jurisprudentie 90 (Hoge Raad 26 June 1953). 211  De Vrey (n 180) 114–​126. 212  Tchibo v Rolex [1985] GRUR 876 (Bundesgerichtshof).

554   Dev Gangjee An assorted heap of Lego cases from around the world illustrates the need for careful calibration in this area.213 The makers of the globally recognized toy bricks have, in the past, obtained protection in several jurisdictions under patent law (for the interlocking mechanism), design law (for its aesthetic appearance), and copyright law (for the technical drawings).214 As protection expired under these time-​bound regimes, Lego increasingly turned to trade mark protection (claiming the three-​dimensional brick is an indicator of origin) or unfair competition laws. Granting temporally limited protection is intended to encourage subsequent copying, so to what extent should unfair competition claims extend the duration of protection? Meanwhile, competitors have a clear interest in producing identically shaped and functionally equivalent bricks to achieve interoperability. Some courts have therefore concluded that the competitor’s own distinctive branding and packaging is sufficient to ward off confusion, or judges have accepted the practice of using a disclaimer (“Not a Lego Product”) while emphasizing compatibility on the packaging. More problematically, other courts have upheld claims of post-​sale confusion by reasoning that children are less discerning than adults—​somewhat counterintuitive to any reader familiar with children—​ and will encounter the bricks without packaging. Some decisions deny direct imitations by permitting competitors to incorporate the same technical clutch-​and-​release mechanism in their designs only where their bricks look different or include noticeable variations and flourishes. Slavish imitation therefore conveniently encapsulates some of the key themes across unfair competition. While regulating marketplace conduct is the focus, where this conduct involves wrongful copying it supplements IP protection by offering an alternative menu of infringement claims. However, permissible copying is recognized as essential for the competitive process. Identifying when conduct is deemed unfair has produced different rules in different jurisdictions at different times, making this a rich field for comparatavists. While there is a broad consensus supporting the prohibition of misrepresentation and denigration, misappropriation continues to prove more divisive. These themes are further developed in Section 2.2.

2.2 Passing Off 2.2.1 What is Passing Off? It helps to begin with a confession. This section exists because of the common law origins and orientation of this book. You might plausibly argue that since passing off is a tort deployed in response to misrepresentation—​a particular strand of unfair competition—​the previous paragraphs offer sufficient coverage.215 Nevertheless, a brief review of passing off supplements the preceding analysis in two ways. First, it indicates that key divergences between common law and civilian approaches to unfair competition may originate in a more foundational tort law schism. Second, it offers a dynamic perspective on unfair competition in action; on

213 

For a convenient summary, see De Vrey (n 180) 293–​296. D Hunter and J Thomas, “Lego and the System of Intellectual Property, 1955–2015” [2016] Intellectual Property Quarterly 1. 215  The leading authority, which situates passing off within this broader field, is Wadlow (n 187). 214 

Trade Marks and Allied Rights    555 circumscribed flexibility. Despite its deep roots in misrepresentation-​prevention, common law jurisdictions have encountered persistent pressures to expand the tort into one of misappropriation. Resistance to this pressure indicates that identifying materially relevant harm has an important anchoring function in unfair competition claims, as do the inter-​related elements of the tort more generally. Passing off is a tort, or civil wrong, also described as “the law of unregistered trade marks.”216 It “can be summarised in one short general proposition—​no man may pass off his goods as those of another.”217 A successful claim requires the “classical trinity” of elements to be established: (1) goodwill that is protected against (2) a misrepresentation which (3) causes actual damage, or potentially might do so.218 The doctrinal evolution of these three inter-​ related requirements has resulted in passing off being simultaneously broader and narrower than trade mark law. It is broader in terms of protectable subject matter, since a wide range of different indicia—​extending to the “look and feel” of an advertising campaign—​can act as badges of goodwill.219 Passing off can therefore accommodate the evolving symbols of a brand’s image. However, it is narrower in terms of the scope of protection, with most jurisdictions resisting entreaties to recognize dilution or misappropriation as stand-​alone substitutes for actionable misrepresentation. There “must be customer reliance, based on the defendant's misrepresentation which harms the goodwill of the claimant.”220 As a tort, passing off is also emblematic of the common law approach to civil wrongs. The basic structure or style of tort law in this legal family indicates a preference for rules over standards; for discrete torts based on stylized facts as opposed to the more abstract delict provisions set out in Articles 1382 and 1383 of France’s Code Civil.221 This particularized approach to tort law accounts for the absence of a general unfair competition tort in common law systems. Instead, claims are pigeonholed into the torts of passing off, defamation, deceit, and so on. While a new tort of misappropriation might certainly be fashioned, passing off cannot overtly evolve into that tort without surrendering its distinct taxonomic identity founded upon misrepresentation. This has not however discouraged attempts to refashion it into such a broader tort.

2.2.2 An Evolving Tort 2.2.2.1 Goodwill Goodwill is recognized as the protected interest in passing off. Lord MacNaghten memorably described it as “the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force that brings in business . . . goodwill has no independent existence. It cannot subsist by itself. It must be attached to a business.”222 Crucially, it is 216  Davis (n 195) 600. For the history of this relationship, see Bently, “From Communication to Thing” (n 14). 217  Reckitt & Colman Products Ltd v Borden Inc [1990] 1 Wisconsin Law Review 491, 499 (Lord Oliver). 218  ibid; See also Warnink (Erven) BV v Townend and Sons Ltd [1979] AC 731 (HL) (“Advocaat”) for a more elaborate version of the test. 219  Cadbury-​Schweppes Pty Ltd v Pub Squash Co Pty Ltd [1981] 1 Wisconsin Law Review 193. 220  H Carty, An Analysis of the Economic Torts, Second Edition (Oxford University Press 2010) 266. 221  G Wagner, “Comparative Tort Law” in M Reimann and R Zimmermann, The Oxford Handbook of Comparative Law (Oxford University Press 2006) 1005. 222  Commissioner of Inland Revenue v Muller & Co's Margarine Ltd [1901] AC 217, 223 (HL).

556   Dev Gangjee recognized as a form of intangible property that is harmed by the defendant’s misrepresentation.223 It is this proprietary interest that enables the affected trader, as opposed to a deceived consumer, to bring a claim. A broad range of indicia can function as protectable symbols of this proprietary interest, including trade names, logos, trade dress, and even aspects of celebrity image.224 This permits passing off to accommodate the diverse elements of contemporary brand identity. However, it is only the intangible value of the customer connection, as opposed to the name or logo, which is the object of property rights. These indicia identify the underlying business and its goodwill in a process equivalent to acquired distinctiveness or secondary meaning in trade mark law. Three further qualifications are worth highlighting. First, while dissenting voices exist, the conventional orthodoxy is that goodwill is not the same as mere reputation and the latter will not suffice. Thus, UK courts adhere to the position that “an undertaking which seeks to establish goodwill in relation to a mark for goods cannot do so, however great may be the reputation of [its] mark in the UK, unless it has customers among the general public in the UK for those products.”225 Second, while goodwill has temporal limitations, it nevertheless might conceivably precede as well as outlast the operational life of a business. Precisely how long it may linger in a protectable form will depend on the facts.226 Third, while goodwill was also originally thought to have territorial limitations, this issue has divided common law jurisdictions. Some courts recognize a “spillover” or trans-​border reputation per se as a sufficient basis for a claim, despite no trading activity in the relevant jurisdiction while others adhere to the historic requirement for such trading activity.227 These cases have also compelled courts to reconsider what suffices as trading activity. Could the existence of customers via Internet bookings be adequate, despite no local trading establishment existing?

2.2.2.2 Misrepresentation The wrongful conduct at the heart of passing off is misrepresentation. It calls for deception to be established, as opposed to mere confusion. Here deception does not refer to the defendant’s mental intent, as it might for the tort of deceit. Instead it calls for materiality, where relevant confusion on the part of the purchasing public has effects on economic behavior giving rise to damage.228 The paradigm case is that of source confusion: As a result of trader B’s misrepresentation, the public think that her products are those of trader A. The misrepresentation can take various forms, with trader B using a similar or identical mark or logo to A’s on her goods—​along the lines of trade mark infringement—​or more subtle behaviors, such as providing B’s goods when asked for A’s or adopting a misleading marketing method to create source confusion.229 The target audience is likely customers of the product, who exhibit ordinary care and attention. The judge should be satisfied that 223

  Bone (n 14).   Fenty & Ors v Arcadia Group Brands Ltd & Anor [2013] EWHC 2310 (Ch); Affirmed, [2015] EWCA Civ 3 (Recognizing goodwill in the globally renowned music star Rihanna’s image as depicted in photographs, which were used on a t-​shirt without authorization). 225  As confirmed in Hotel Cipriani SRL v Cipriani (Grosvenor Street) [2010] EWCA Civ 110 at [106] (Lloyd, LJ). 226  Wadlow (n 187) [3-​220]–[3-​230]. 227  The diverging authorities are reviewed in Starbucks (HK) Ltd & Anor v British Sky Broadcasting Group PLC & Ors [2015] UKSC 31. 228  See Bently and Sherman (n 66) 859–​871. 229  See chs 5 and 7 of Wadlow (n 187). 224

Trade Marks and Allied Rights    557 “on a balance of probabilities  . . .  a substantial number of members of the public will be misled into buying [the defendant’s] products in the belief that they are the products of the plaintiffs.”230 Evidence relating to (i) customer sophistication (or its opposite) and (ii) the contextual setting for the purchase transaction can be taken into account. However, there has been increasing judicial resistance to admit survey evidence of consumer confusion, which tracks developments in trade mark law. In the UK, the present position calls for a cost-​ benefit analysis: Survey evidence of confusion arising from the misrepresentation should be discouraged, even if technically admissible, unless it will add real value and its usefulness will justify the costs of the survey.231 Variations in the nature of misrepresentation have given rise to sub-​categories of passing off, as the following two strands illustrate. The first is extended passing off, which describes “a line of cases stretching back nearly 50 years in which suppliers of products of a particular description have sought to restrain rival traders from using that description, or a confusingly similar term, in relation to goods which do not correspond to that description.”232 Unlike conventional passing off, the misrepresentation here relates not to a specific commercial source but to membership in a product class, which suggests that the product has certain qualities. Consequently using “Swiss Chalet” on chocolate not made in Switzerland in accordance with a Swiss recipe was found to be an actionable misrepresentation.233 Prominently deployed in disputes concerning Champagne and Scotch whisky, extended passing off is a viable strategy for protecting geographical indications in common law jurisdictions.234 The second variant is sponsorship or affiliation confusion, where some of the leading cases relate to celebrity endorsement or merchandising.235 The misrepresentation must lead customers to believe that the claimant has authorized the defendant’s conduct. A  distinction is sometimes drawn between endorsement cases—​where the customer is led to believe that the celebrity has endorsed the quality of the defendant’s goods or otherwise approved of the connection—​and merchandising, which merely facilitates the circulation of celebrity image. Here customers might buy the T-​shirt for the sake of the image, without being overly concerned about any commercial connection.236 In both these variations of passing off, any possible misrepresentation might be warded off—​a label indicating that Parmesan-​style cheese was made in the US, or disclaiming any celebrity endorsement for the T-​shirts bearing their image—​which raises for debate whether the misappropriation of a valuable image is being repackaged as misrepresentation.

230 

Neutrogena v Golden CA (t/​a Garnier) [1996] RPC 473, 493 (CA). The London Taxi Corporation Ltd v Frazer-​Nash Research Ltd [2015] EWHC 1840 (Ch). 232  Diageo v Intercontinental Brands [2010] EWHC 17 at [1]‌(Arnold J). 233  Chocosuisse Union des Fabricants Suisses de Chocolat v Cadbury Ltd [1998] RPC 117, 127 (Ch D); affirmed [1999] RPC 826 (CA). 234  On GIs, see Section 2.4; DS Gangjee, “Spanish Champagne: An Unfair Competition Approach to GI Protection” in Dreyfuss and Ginsburg (n 131) 105. 235 See Irvine v Talksport [2002] FSR 60; Fenty v Arcadia (n 224). For a comparative review, see D Tan, “Legal and Cultural Approaches to the Protection of the Contemporary Celebrity Brand in the Asia Pacific Region” in AT Kenyon, N-​L Wee Loon, and M Richardson, The Law of Reputation and Brands in the Asia Pacific (Cambridge University Press 2012) 45. 236  Spence (n 171) 236–​240. 231 

558   Dev Gangjee 2.2.2.3 Damage The integrated approach to the three limbs of passing off is perhaps most evident when we turn to damage or harm. Misrepresentation leading to mere consumer confusion is not sufficient if it is unlikely to materially affect consumer purchasing behavior. The most well-​ established head of damage is therefore loss of sales arising from the confusion. While it can be evidenced, it may also be presumed, as “the injury which is inherently likely to be suffered by any business when on frequent occasions it is confused by customers or potential customers with a business owned by another proprietor or is wrongly connected with that business.”237 Moving beyond the paradigmatic form of harm, more compelling evidence is usually required to substantiate such claims. These additional forms of damage include:238 • the devaluation of reputation (eg, where inferior goods are being passed off as those of the claimant, or the defendant’s business has an image incompatible with the claimants); • restricting the potential to expand into a new area of business, where the expansion is likely; • (more tentatively) a general “loss of control” over one’s reputation; and • dilution, also referred to as the erosion of distinctiveness. It is worth emphasizing that unlike trade mark law, where dilution is a stand-​alone cause of action, in passing off it is a recognized category of harm flowing from misrepresentation. If the use of “Spanish Champagne” would confuse some consumers, this misuse would dilute both the exclusivity of French Champagne (thereby affecting its brand image) as well potentially its origin-​indicating ability, leading to Champagne becoming generic over time for the category of sparkling wine produced via double fermentation. Where the defendant uses the sign on identical or similar goods, genericide is clearly a plausible form of harm. However judicial recognition of the dilution of exclusivity or some unspecified diminution of brand image—​or even outright misappropriation of reputation239—​begins to realign the tort, setting it upon the path to misappropriation.

2.2.2.4 A Tort in Transition? It can therefore be seen that each of three limbs might be interpreted to facilitate claims edging towards misappropriation of an exclusive or attractive brand image. Recognizing a loosely conceived form of dilution-​based harm is one such development, while badges of goodwill can accommodate the various facets of brand identity. Misrepresentation can also be attenuated. Passing off doctrine has moved beyond source confusion to recognize sponsorship or affiliation confusion—​potentially to the extent of merely requiring that consumers might wonder if there is a commercial connection between the defendant and claimant. To take another example, courts are invited to presume an actionable misrepresentation where there is an intention to copy, yet contextual information—​such as a significant

237 

Chelsea Man Menswear Ltd v Chelsea Girl Ltd [1987] RPC 189 at 202 (Slade, LJ). See ch 4 of Wadlow (n 187). 239  The high watermark is an Australian celebrity endorsement case: Paul Hogan v Koala Dundee Pty Ltd [1988] 20 FCR 314. 238 

Trade Marks and Allied Rights    559 price difference between the products—​makes material misrepresentation unlikely.240 This occurs in supermarket own-​brand or “lookalike” packaging disputes, where the supermarket designs its own brands—​cereals and shampoos are perennial favourites—​to match the “look and feel” of the market leaders.241 Depending on the degree of trade-​dress proximity, there may be allegations of misappropriation—​copying colors or shapes to signal competitive substitutability—​without meaningful misrepresentation. The borderline between misrepresentation and misappropriation is therefore porous. While courts have declined invitations to overtly adopt a new tort of misappropriation,242 there is potential flexibility within the existing parameters of passing off to achieve similar results, albeit at the cost of doctrinal coherence.243

2.3 Publicity Rights A publicity right, also referred to as an image or character right, equips individuals with the legal means to control the commercial exploitation of their image, which encompasses voice, likeness, and other aspects of personality such as mannerisms or catchphrases. The paradigmatic case is where one party uses another’s likeness in commercial advertising without permission. While the target selected is usually famous, this need not necessarily be the case. Even this synopsis implies that there are three possible reasons for objecting to such commercialization. The claimant may (i) wish to protect their privacy interests, (ii) be concerned about harm to their dignitary interests arising from the specific context of use (for example, by being associated with advertising for a product they would never support), or (iii) feeling unduly deprived of an opportunity to commercialize their image and share in the profits. Since the protected interests vary, so do the associated legal claims: “At various points . . . causes of action based on misrepresentation, misappropriation, defamation and invasion of privacy have all been employed to protect underlying interests in property, reputation and privacy.”244 It is therefore helpful to situate legal systems along a continuum of responses to the paradigmatic case described. For some jurisdictions, rights relevant to the control of image are scattered across a range of regimes including copyright law (for photographic images); trade mark law or bespoke personal name rights regimes, such as that found in the German Civil

240 Eg, Moroccanoil Israel Ltd v Aldi Stores Ltd [2014] EWHC 1686 (IPEC).

241  P Johnson, J Gibson, and J Freeman, The Impact of Lookalikes: Similar Packaging and Fast-​Moving Consumer Goods (UK Intellectual Property Office Report, 2013/​18). 242  Notably, in L'Oréal SA v Bellure (n 173). 243  This has led to calls to abandon pretences and embrace misappropriation: J Davis, “Why the United Kingdom Should Have a Law against Misappropriation” [2010] Cambridge Law Journal 561. This is countered by rejoinders highlighting the distorting effects of misappropriation logic: C Wadlow, “Passing Off at the Crossroads Again: a Review Article for Hazel Carty, An Analysis of the Economic Torts” [2011] European Intellectual Property Review 447. 244  H Beverly-​Smith, The Commercial Appropriation of Personality (Cambridge University Press 2004) 4. See also, H Beverly-​Smith, A Ohly, and A Lucas-​Schloetter, Privacy, Property and Personality: Civil Law Perspectives on Commercial Appropriation (Cambridge University Press 2005).

560   Dev Gangjee Code; unfair competition or passing off (as discussed previously); and defamation.245 Others offer a single right which directly responds to the unauthorized commercial circulation of image, but the rationale for doing so may vary. The right may have originated in response to privacy protection concerns or it may have squarely targeted commercial misappropriation, regarding image as a valuable intangible to be protected as a form of proprietary interest. Both versions of the stand-​alone publicity right are found in the US. Since there is no such right at the federal level, claims are pursued at the state level either under common law doctrines or bespoke legislation, with New  York and California proving particularly influential.246 The proprietary version is considered the strongest form of this right, since the protected interest is transferable, licensable and descendible. Haelan Laboratories247 is considered the foundational authority in this regard. The plaintiff was a bubble gum manufacturer who entered into contracts with famous baseball players for the exclusive right to use their photographs on cards included in packs of bubble gum. The defendant Topps was a rival producer who, via a third party, deliberately induced these players to breach their contracts by granting Topps permission to use their photographs. While the plaintiffs could clearly proceed against the players for breach of contract and against the intermediary who induced the breach for tortious interference, the court additionally recognized a proprietary interest in image per se, which could be licensed or assigned. Even as a licensee, the plaintiff could enforce these exclusive rights to players’ images. However, unlike the protection of dignitary or privacy interests, the normative case in support of the protection of a proprietary interest in image is relatively underdeveloped.248 For instance, if public image is created discursively, through the active attribution of qualities and modern celebrity is the product of media representation, then creation-​based arguments (“I made it, so it’s mine”) appear implausible. The incentive rationale also remains unconvincing without an explanation for why we wish to encourage the creation of a public persona.

2.4 Geographical Indications 2.4.1 What are Geographical Indications? Like trade marks, geographical indications (GIs) are signs which convey information about products to consumers and can function as valuable brands. Article 22.1 of TRIPS describes them as “indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin” (emphasis added). Prominent examples include Rioja for wine, Café de Colombia for coffee, Darjeeling for tea, and Parma for ham. GI protection is therefore concerned with preventing unauthorized uses of such

245 

J Blum and T Ohta, “Personality Disorder: Strategies for Protecting Celebrity Names and Images in The UK” (2014) 9 Journal of Intellectual Property Law & Practice 137. 246  JT McCarthy, The Rights of Publicity and Privacy (2nd edn, Westlaw 2016). 247  Haelan Laboratories Inc v Topps Chewing Gum Inc, 202 F 2d 866 (2nd Cir 1953). See S Dogan, “Haelan Laboratories v Topps Chewing Gum: Publicity as a Legal Right” in Dreyfuss and Ginsburg (eds) (n 131) 17. 248  See H Beverly-​Smith (n 244) 271–​314.

Trade Marks and Allied Rights    561 signs, which may either cause harm to their communicative functions or misappropriate their brand image. However, three features set such designations apart from trade marks. First, GIs indicate geographical origin (a place) as opposed to trade origin (commercial source). Second, all producers from within the region of origin who follow the established production methods are invested in their use. This gives rise to co-​ordination issues and a collective interest in any ensuing reputation. Third, in order to qualify as a GI, producers must demonstrate—​ in a causally verifiable manner—​that the product in question owes its qualities or reputation to the region of origin. In this regard, wine is the archetypal subject matter with terroir providing the causal explanation.249 While the origin indication function and brand dimensions of GIs overlap with trade marks, the collective interest and anchor to place set them apart. This overview will therefore foreground both their synergies and differences with trade marks.

2.4.2 International Origins and the Emergence of Sui Generis Protection Unlike most other areas of domestic IP law, GI protection in many jurisdictions was precipitated by the adoption of multilateral norms in the late nineteenth century.250 During this period rules were in place to regulate misleading origin labelling. These rules operated across a diverse array of legal domains, including customs or tariff regulations, penal laws prohibiting fraudulent marking, revenue laws, and nascent unfair competition regimes. With the advent of multilateral obligations, they were repurposed to achieve IP protection ends. This explains the presence of the broadly defined Indication of Source (IS), essentially a “Made in . . .” sign or its equivalent, as the original protected category within the Paris Convention of 1883. This pragmatic repurposing continued in the Madrid Agreement of 1891.251 By proscribing false origin marking these regimes could indirectly—​and to a limited extent—​achieve reputation-​protection goals. However, it was the Lisbon Agreement of 1958,252 largely informed by experiences with wine appellation protection in France,253 which recognized that a collectively generated reputation associated with an Appellation of Origin (AO) was a distinct category of IP.

249  A Stanziani, “Wine Reputation and Quality Controls: The Origin of the AOCs in 19th Century France” (2004) 18 European Journal of Law and Economics 149; E Barham, “ ‘Translating Terroir’ Revisited: The Global Challenge of French AOC Labeling,” in DS Gangjee (ed), Research Handbook on Intellectual Property and Geographical Indications (Edward Elgar 2016) 57. 250  For a detailed history of international GI protection, see DS Gangjee, Relocating the Law of Geographical Indications (Cambridge University Press 2012). 251  Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods, 14 April 1891, 828 UNTS 389 (1972). 252  Lisbon Agreement for the Protection of Appellations of Origin and their International Registration, 31 October 1958, 923 UNTS 205 (1974). This agreement has recently been comprehensively revised: Geneva Act of the Lisbon Agreement on Appellations of Origin and Geographical Indications, 20 May 2015 (LI/​DC/​19) (Hereafter, Lisbon Agreement 2015). 253  See Gangjee (n 250) 77–​126; N Olszak, Droit des Appellations d’Origine et Indications de Provenance (Tec & Doc 2001).

562   Dev Gangjee The residual traces of this convoluted history are visible in the alphabet soup of subject matter acronyms under different regimes (IS, AO, GI, etc.), wide variations in institutional arrangements, and varying degrees of protection.254 Multilateral instruments usually set out the required level of protection, leaving implementation choices to each contracting party. For instance, Article 22.2(a) of TRIPS makes it obligatory for Members to provide the legal means for parties to prevent the use of a GI on goods “that indicates or suggests that the good in question originates in a geographical area other than the true place of origin in a manner which misleads the public.” This obligation can be met by:255

(i) Regulating the use of false indications under the full spectrum of unfair competition law options;256 (ii) Accommodating GIs within trade mark regimes as collective marks (signaling membership in an association) or certification marks (signaling certification by the proprietor in relation to the origin, material, mode of manufacture, quality, accuracy, or other characteristics of the goods);257 or (iii) Establishing sui generis protection for products which satisfy the definition of a GI. Over time, sui generis has come to stand for registration-​based protection, as exemplified by the EU’s harmonized GI regime in Regulation 1151/​2012.258 The registration system sets out criteria for (i) identifying which groups of producers qualify as applicants; (ii) submitting a product specification; (iii) identifying inspection bodies to test for compliance with the specification; (iv) examination by public authorities; and (v) legal protection, which is usually generous and permits civil remedies while also mandating ex officio enforcement by public authorities. The scope of protection in Article 13 of this Regulation encompasses not only false or misleading indications, but also uses which exploit the reputation of the protected name or even evoke it in the minds of consumers.259 The product specification, which forms the core of the application, requires information relating to: (i) the name or designation to be protected; (ii) a product description detailing raw materials and product characteristics; (iii) a delimited geographical region; (iv) a description of the production method; and (v) details of the causal link connecting the product’s characteristics to the delimited geographical region.260

254   WIPO Secretariat, “Document SCT/​6/​3 Rev. on Geographical Indications: Historical Background, Nature of Rights, Existing Systems for Protection and Obtaining Protection in Other Countries” 2 April 2002 (SCT/​8/​4). 255   WTO Secretariat “Review under Article 24.2 of the Application of the Provisions of the Section of the TRIPS Agreement on Geographical Indications” 24 November 2003 (IP/​C/​W/​253/​Rev 1); I Kireeva and B O’Connor, “Geographical Indications and the TRIPs Agreement: What Protection is Provided to Geographical Indications in WTO Members?” (2010) 13 Journal of World Intellectual Property 275. 256  See Section 2.1. 257  See WIPO “Technical and Procedural Aspects” (n 34). 258  Regulation (EU) No 1151/​2012 on Quality Schemes for Agricultural Products and Foodstuffs. 259  Consorzio per la tutela del formaggio Gorgonzola v Käserei Champignon Hofmeister GmbH (C-​87/​ 97) [1999] ECR I-​1301. 260  DS Gangjee, “Proving Provenance: Geographical Indications Certification and its Ambiguities” (2017) 98 World Development 12.

Trade Marks and Allied Rights    563 In recent years, both registration-​ based forms of protection—​ sui generis or trade marks—​have gained ascendance. There is persistent pressure to amalgamate GIs within the established trade mark system, which raises the question of whether a distinct regime is necessary at all.261

2.4.3 Why are Geographical Indications a Distinct Category? Critics of sui generis GI protection emphasize the functional overlap between trade marks and GIs, since both categories of signs convey origin-​related information to consumers. Legal protection lowers consumer search costs, allowing them to trust these signs, while encouraging producers to invest in product quality. In essence, protection promotes informational efficiency in markets.262 However, this consequentialist justification only explains certain features of sui generis GI protection. Preserving the coherence of the message would account for only a sub-​set of rules contained within multilateral agreements. For instance, TRIPS prohibits the use of indications which mislead the public (Article 22.2(a)), or are false despite being literally true—​consider haute couture from the runways of Paris, Texas (Article 22.4); or uses amounting to unfair competition (Article 22.2(b)); and trade marks consisting of GIs may be refused or invalidated where they mislead the public (Article 22.3). While this clutch of substantive rules can be explained by information efficiency logic, protection for wines and spirits in TRIPS is significantly stronger: The use of GIs on wines and spirits that do not originate from the region in question is prohibited notwithstanding any accompanying qualifications or clarifications (“Swiss Champagne,” “Rioja-​style wine”) (Article 23.1); and trade marks which contain or consist of such GIs are impermissible where the products do not originate in those regions, apparently regardless of whether there is any confusion (Article 23.2). These enhanced provisions appear to preserve the use of the designation for producers in the region of origin, notwithstanding the absence of consumer confusion. Besides enhanced infringement provisions, some regimes contain a deeming provision which declares that once protected, registered GIs “cannot be considered to have become generic in a Contracting Party.”263 There is also significantly greater state involvement in compiling inventories of target regional products, catalyzing producer group formation, providing support with registration costs, and mediating between conflicting stakeholder interests during the specification drafting process. Once registered, government departments or agencies may “own” the GI while in some sui generis systems, public authorities help to police the GI by pursuing infringements in the marketplace.264

261

  See, eg, USPTO, “Geographical Indications Protection in the United States”; available at: . 262  C Bramley, E Biénabe, and J Kirsten, “The Economics of Geographical Indications: Towards a Conceptual Framework for Geographical Indication Research in Developing Countries.” in WIPO, The Economics of Intellectual Property (2009) 109; R Teuber, “Protecting Geographical Indications: Lessons learned from the Economic Literature” in European Association of Agricultural Economists, 2011 International Congress, August 30-​September 2, 2011, Zurich, Switzerland (Paper No 116081). 263  Lisbon Agreement (Geneva Act) 2015, art 12. 264  Gangjee (2017) (n 260).

564   Dev Gangjee These features speak to the greater regulatory thickness associated with sui generis GI regimes, in turn attributable to the additional objectives pursued by such systems. If the best-​ known trade marks symbolically represent globalization—​think Coke—​then GIs reflect the continuing significance of place and the local. They have the potential to operate as multifunctional instruments, reproducing place and sustaining local identities while simultaneously offering opportunities to participate in global markets.265 GI regimes look beyond trade mark law’s preoccupation with the sign. The sustainability of the underlying what (specified product), where (a defined region) and who (its community of producers) also have regulatory significance in sui generis systems. This anchorage to place and recognition of inter-​generational, collective investment in the product gives rise to additional normative accounts supporting the distinctive regulatory layers of GI regimes. Recognition as a GI can potentially generate a range of desirable public goods, including (i) enabling endogenous or embedded territorial development, by equitably distributing benefits across the supply chain; (ii) biodiversity preservation, by favoring locally cultivated flora or fauna; (iii) sustaining local or national cultural heritage, where GIs have symbolic cultural value or cultural practices are involved in their production; and (iv) providing market-​based mechanisms to reward the traditional knowledge which informs the preparation of processing of the product.266 There is growing interest across the social sciences in empirically evaluating whether GI regimes—​as implemented—​ can deliver on these goals. For instance, is there credible evidence that consumers are willing to pay a premium for products with a certified provenance and method of production?267 What sorts of power relations are implicated in the formulation of product specifications, where the interests of agricultural raw material producers may diverge from processors or distributors?268 To what extent is legal protection for regional products necessary or sufficient to enable success in the marketplace and what form (trade mark or sui generis) should this protection take?269

2.4.4 Contemporary Issues Signs can be semantically slippery, with meaning changing across space and time. GI proponents have responded by justifying legal intervention, which stabilizes and privileges a specific meaning, on the basis of a distinctive or potentially unique link between product and place. If no other product can legitimately claim equivalence, the geographical 265  RJ Coombe and N Aylwin, “Bordering Diversity and Desire: Using Intellectual Property to Mark Place-​Based Products” (2011) 43 Environment and Planning A 2027. 266  See generally the contributions in Gangjee (ed) (n 249); FAO and SINER-​GI, Linking People, Places and Products: A Guide for Promoting Quality Linked to Geographical Origin and Sustainable Geographical Indications, Second Edition (FAO, 2009-​2010); E Barham and B Sylvander (eds), Labels of Origin for Food: Local Development, Global Recognition (CABI 2011). 267  OC Deselnicu, M Costanigro, DM Souza-​Monteiro, and DT McFadden, “A Meta-​Analysis of Geographical Indication Food Valuation Studies: What Drives the Premium for Origin-​Based Labels?” (2013) 38(2) Journal of Agricultural & Resource Economics 204. 268  S Bowen, Divided Spirits: Tequila, Mezcal, and the Politics of Production (University of California Press 2015). 269  J Hughes, Coffee and Chocolate: Can we Help Developing Country Farmers through Geographical Indications? (International Intellectual Property Institute Report, 2009).

Trade Marks and Allied Rights    565 designation should be preserved for “the real thing.” Here authenticity relates not just to the end product but where, how, and by whom it is made. Most contemporary debates in this field can be traced to opposing positions around this foundational claim, as four prominent controversies demonstrate. (1) A  long-​standing schism relates to generic use, which confronts uniqueness by suggesting that equivalents are possible. One country’s GI may be another’s generic term for a category of products sharing common characteristics, regardless of geographical origin. While there is global consensus that cheddar denotes a type of cheese, the status of parmesan (or Parmigiano Reggiano) varies across jurisdictions. In response, Article 24.6 of TRIPS confirms there is no obligation to protect a GI where “the relevant indication is identical with the term customary in common language as the common name for such goods or services in the [relevant] territory.” This abstract test leaves TRIPS members with wide discretion as regards (i) establishing threshold conditions, (ii) identifying relevant categories of evidence, and (iii) whether generic terms can ever be “revived.”270 (2) Significant commercial stakes are also involved in conflicts between trade marks and GIs. Which rules should determine the outcome when GI producers and a trade mark proprietor lay claim to the same sign within a given jurisdiction? The never-​ ending battle over Budweiser beer epitomizes this, with the Czech appellation repeatedly squaring off against the American brewery over the use of the designation.271 Should familiar priority-​and-​exclusivity rules like “First in Time, First in Right” decide the issue? Alternatively, in light of their distinct public policy underpinnings, should GIs trump trade marks? Or, more equitably, can they coexist in qualified circumstances?272 (3) It is evident that limitations of territoriality are acutely felt by GI proponents. While initial attempts at achieving more predictable international GI protection focused on multilateral initiatives, the enduring deadlock at the TRIPS Council over an international commitment to enhance GI protection has stimulated a return to bilateral initiatives or regional trade agreements.273 Interestingly, these agreements include negotiated lists of protected terms and transitional procedures to phase out generic use, which reveal the underlying international trade imperatives in such discussions. Besides this, the redrafted Lisbon Agreement in 2015, which establishes a relatively more inclusive international register for GIs, is an intriguing new development.274

270 

DS Gangjee, “Genericide: The Death of a Geographical Indication” in Gangjee (ed), (n 249) 508. C Heath, “The Budweiser Cases: A Brewing Conflict” in C Heath and AK Sanders (eds), Landmark Intellectual Property Cases and Their Legacy (Wolters Kluwer 2011) 181. 272  B Goebel and M Groeschl, “Learning to Love My PET—​The Long Road to Resolving Conflicts between Trade Marks and Geographical Indications” in Gangjee (ed), (n 249) 361. 273  European Commission DG-​AGRI Advisory Group, Working Document on International Protection of EU Geographical Indications: Objectives, Outcome and Challenges (Ares(2012)669394); Cf C Viju, MT Yeung, and WA Kerr, “Geographical Indications, Barriers to Market Access and Preferential Trade Agreements” (CATPRN Commissioned Paper, 2012-​01). 274  For background, see M Geuze, “Geographical Indications under WIPO Administered Treaties” in Gangjee (ed) (n 249) 95, 113–​121. 271 

566   Dev Gangjee (4) If wine is the archetypal GI product, then terroir is the classic form of link between product and place. It is a cipher for the causal relationship between the region of origin and distinctive characteristics of the end product. However, the content of terroir has evolved from a focus on physical geography factors (such as soil, climate, and elevation) to accommodate distinctive skills and successful techniques particular to that region. GI subject matter has incrementally extended beyond wine, with its roots—​quite literally—​in the vineyard, to incorporate cheese, charcuterie, and now, potentially crafts and textiles as well, where the savoir faire elements are more prominent.275 To what extent are both the definitional rules and process in GI systems as well as their normative foundations equipped to handle this transition from geography to history?276 While the controversies themselves have a respectable vintage, the quality of the conversation has improved in recent years, with insights from historians, geographers, and social scientists helping to conceptually unpack as well as empirically assess some of the legal assumptions in this field.

2.5 Domain Names 2.5.1 Trade Marks as Domain Names The mainstreaming of e-​commerce and its increasing economic value mean that an Internet presence is essential for brand owners.277 That presence hinges upon a domain name, which indicates an address for web pages on the Internet. Each computer on the public Internet has a numeric identifier, such as 17.172.224.47, which is its Internet Protocol (IP) address. Since this is difficult to memorize, the Internet Corporation for Assigned Names and Numbers (ICANN) operates the Domain Name System (DNS) which operates as a mnemonic system.278 The numeric IP address in the example above corresponds to the unique alphanumeric address www.apple.com. Individuals register domain names with accredited registrars who are in turn regulated by a registry responsible for the relevant top-​level domain (TLD)—​the “.com” in our example. Even at this introductory stage, two features of the system implicate trade mark law: Domain names are unique identifiers capable of being used by only one entity at a time; and they can incorporate trade marks. The third feature of relevance is that registrations for second-​level domain names—​the “apple” to the left of the “.com”—​have historically been assigned on a first come, first served basis.

275 

D Marie-​Vivien, “The Protection of Geographical Indications for Handicrafts: How to Apply the Concepts of Natural and Human Factors to All Products” (2013) 4 WIPO Journal 191. 276  DS Gangjee, “From Geography to History: Geographical Indications and the Reputational Link” in I Calboli and WL Loy (eds), Geographical Indications at the Crossroads of Trade, Development, and Culture (CUP 2017) 36. 277  A Murray, Information Technology Law, Third Edition (Oxford University Press 2016) 451–​478; Nielsen Report, Global Connected Commerce: Is E-​Tail Therapy the New Retail Therapy? (Jan 2016). 278  ICANN, Beginner’s Guide to Domain Names (2010); at .

Trade Marks and Allied Rights    567 Conflicts arise where an unauthorized third party pre-​emptively registers a domain name containing the trade mark or a recognizable variant. Reasons for doing so could be entirely legitimate. The mark could overlap with a generic or descriptive term—​as apple does—​or be included in a family name such as Appleby. However, other motivations are less defensible. Cybersquatting involves registering a domain name corresponding with someone else’s name or mark while intending to sell it for a profit. The variant of typosquatting involves hyphenated uses or misspellings such as www.facemook.com, since even a slight dissimilarity leads to a different web location. In such situations, trade mark owners would like to either block such third-​party registrations entirely or gain control of the registration. Until recently, there were only two basic types of TLDs. A limited number of the familiar generic variety (gTLDs) such as.com, .edu, .org, and .gov, as well as country codes (ccTLDs) such as .uk, .us, .cn, and .za. From 2012 onwards, ICANN began to entertain applications for new gTLD registrars who would operate registries entirely of their own choosing. The objective was to increase choice and competition among registrars. Joining the ranks of .com and .gov are terms such as .plumbing, .pizza, .sucks, and .meme. Predictably enough, the list of new gTLDs includes well known trade marks such as .apple and .audi.279 This has greatly increased the potential for conflicting interests.

2.5.2 Protection 2.5.2.1 Existing Legal Options As the terminology suggests, a whiff of bad faith envelops cybersquatting and courts proved willing to adapt existing trade mark rules prohibiting consumer confusion or dilution to cases relating to domain names.280 In the late 1990s, US courts confirmed that the unauthorized registration of www.Panavision.com by serial cybersquatter Dennis Toeppen would dilute the PANAVISION and PANAFLEX trade marks owned by the well-​known film equipment manufacturer.281 Consumer search costs would increase, thereby lessening the capacity of Panavision’s marks to identify its products. It would also lose the ability to control the use of its marks. Around the same time, British courts were applying trade mark infringement provisions and passing off to similar fact patterns.282 An entity called One in a Million registered several domain names containing well known marks including Burger King and British Telecommunications, which it offered to sell to the trade mark owners. At trial, both trade mark infringement based on the likelihood of confusion and passing off were established for the purposes of a summary judgment. Of interest is the finding that the downstream sale of such domain names would equip third parties with instruments of fraud or deception in future. While these pragmatic judicial interventions were initially welcomed, they also gave rise to strained interpretations of infringement tests. Consumer confusion is less plausible where

279 

See (accessed April 2016). See Section 1.4. 281  Panavision International v Toeppen 141 F 3d 1316 (9th Cir 1998), affirming 945 F Supp 1296 (CD Cal 1996). 282  British Telecommunications v One in a Million [1998] 4 All ER 476 (UKCA), affirming [1997] EWHC Patents 357. 280 

568   Dev Gangjee the destination webpage context clarifies that the parties are unrelated. A  controversial workaround to this was the doctrine of initial interest confusion, which was nurtured by a steady diet of domain name and metatag disputes.283 Additionally, if the cybersquatter made no attempt to sell the domain name, the requisite commercial use element for infringement would be missing.284 In response, the US Anti-​cybersquatting Consumer Protection Act (ACPA), which inserted new provisions into the trade mark statute, represents a more targeted solution to these problems.285 This legislation recognizes a civil claim where a third party (1) registers, trafficks in, or uses a domain name (2) which is identical with, confusingly similar to, or dilutes a trade mark, and (3) has a bad faith intent to profit from that mark. It includes an open-​ended list of factors courts may consider when determining bad faith.286 Some factors emphasize the legitimate interests of the domain name registrant: the registrants own intellectual property (IP) rights associated with the domain name; use of its own trading or personal name; previously offering products under that name in good faith; or fair use of the trade mark, including for criticism. Other factors underscore the bad faith element: an intention to divert custom in a confusing manner; offers to sell the name for financial gain; a pattern of obtaining multiple infringing domain name registrations; and providing false contact information when registering the domain name.287 Besides specifically responding to cybersquatting, ACPA also innovates with jurisdictional requirements allowing an in rem claim against a domain name to be made in the place where it is registered, if in personam jurisdiction is difficult to assert against the defendant.288 Yet, even magic bullets misfire. Courts have reached inconsistent conclusions when applying these factors outside the archetypal cybersquatting context, to parody sites, or those containing critical commentary. ACPA has also been criticized for being superfluous. Instead of operating as a replacement or alternative to traditional infringement claims, it has ended up being a supplement, thereby increasing the cost of litigation.289 Furthermore, besides conventional trade mark and unfair competition claims, tort actions (including those sounding in defamation or privacy) and claims based on US state law (such as those relating to publicity rights) remain relevant, as they do in other jurisdictions as well.290

2.5.2.2 Alternative Dispute Resolution Given the inescapable problems of complexity, costs, and territorial tethering associated with a litigation-​driven solution, the demand arose for a faster, cheaper, and effective dispute resolution process. Based on WIPO recommendations, ICANN responded in 1999 with the Uniform Domain Name Dispute Resolution (UDRP) Policy.291 This establishes a form of arbitration to resolve disputes concerning the abusive registration of a domain name. The 283

  See Section 1.4.2.2.   J Lipton, Internet Domain Names, Trade Marks and Free Speech (Edward Elgar 2010) 17–​19. 285   Specifically, 15 USC § 1125(d). See also 15 USC § 8131 (federal prohibition on cybersquatting involving a personal name). 286  15 USC § 1125(d)(1)(B)(i). 287  For judicial application of these factors, see: JT McCarthy (n 153) ch 25A. 288  15 USC § 1125(d)(2)(A) & (C). 289  See Lipton (n 284) 24–​29. 290  See generally, T Bettinger and A Waddell (eds), Domain Name Law and Practice: An International Handbook, Second Edition (Oxford University Press 2015). 291  For the current version, see: . 284

Trade Marks and Allied Rights    569 UDRP is a mandatory administrative procedure incorporated into the agreements between ICANN and the TLD registries that it regulates. The registries in turn contractually ensure that accredited registrars and ultimately domain name applicants submit to this procedure, making it the primary response mechanism for any abusive registration challenges. At present, five organizations, including WIPO and the National Arbitration Forum, provide such arbitration services. As a system which has international coverage, is faster and cheaper than courts, and is adjudicated by expert panellists, the UDRP has proved popular.292 By April 2016, WIPO panellists had decided 33,885 cases.293 Its attractiveness also depends on its remedial effectiveness. Panelists may cancel an abusive registration or transfer the domain name to the complainant. An abusive registration is one where (1) the domain name is identical or confusingly similar to the complainant’s trade mark, whether registered or unregistered; (2) the registrant has no rights or legitimate interests in the trade mark; and (3) the registration has been made and is being used in bad faith.294 An extensive body of panel reports elaborates on these three requirements.295 A recently introduced, cheaper, and faster variant of the UDRP is the Uniform Rapid Suspension System (URS), “for rapid relief to trade mark holders for the most clear-​cut cases of infringement.”296 In such cases of abuse, involving a higher burden of proof, the domain name can be temporarily or permanently suspended. Instead of transferring control to the trade mark owner, this system is designed to block others from using the domain name, especially where misleading variants of the mark may be in play.

2.5.2.3 Pre-​emptive Solutions Since ex post solutions to domain name conflicts continue to be costly and time-​consuming, attention has turned towards pre-​emptive solutions.297 In response to concerns voiced during the recent, open-​ended gTLD expansion, the Trade Mark Clearinghouse was created.298 This global database consolidates and verifies information relating to extant trade mark rights, whether based upon registration, protected by treaties, or recognized by judicial decisions. This authenticated rights information is provided to registries and registrars during the domain name application process. It feeds into the Sunrise service, whereby authenticated rightsholders are offered an advance window to register their trade marks as corresponding domain names before the gTLD is opened to the general public.299 The authenticated information also subsequently feeds into the Trade Mark Claims Service, which is a notification service similar to opposition procedures in trade mark registration systems.300 A domain

292 

AF Christie, “Online Dispute Resolution—​The Phenomenon of the UDRP” in P Torremans (ed), Research Handbook on the Cross-​Border Enforcement of Intellectual Property (Edward Elgar 2015) 642. 293  See . 294 WIPO, UDRP Policy, para 4a. 295  See WIPO, Overview of WIPO Panel Views on Selected UDRP Questions, Second Edition (2011), at: ​. 296  See . 297  For an overview, see WIPO, “Update on Trade mark-​Related Aspects of the Domain Name System” 25 Feb 2016 (SCT/​35/​5). 298  See . 299  See . 300  See .

570   Dev Gangjee name applicant receives a notice where its application matches a verified trade mark. If the applicant presses ahead, then the mark owner is notified and can challenge the application. More recently, private domain name registries have created the Domains Protected Marks List (DPML), which relies on prior Clearinghouse authentication and subsequently enables brand owners to block their trade marks for five years in a single action.301 The DPML Block—​a string either consisting of or containing the trade mark—​is effective against second-​level domain name applications across all TLDs managed by the registry. The DPML is emerging as the preferred cost-​effective blocking mechanism.

2.5.3 Beyond Bad Faith Framing? The continually evolving effectiveness of search engines has reduced some of the pressure on claiming a virtual estate which precisely corresponds with a trade mark.302 Today, an educated guess on a mainstream search engine is likely to lead to the desired web page. Yet, the number of annual domain name registrations continues to rise and one industry estimate in 2015 placed the total number of registrations at 299 million across all TLDs.303 The UDRP, URS, and increasingly automated blocking mechanisms are specialized responses to the problem of trade mark–​domain name conflicts. As usage statistics indicate, they are undeniable effective in responding to the paradigmatic concern of cybersquatting, especially in cross-​border situations. Nevertheless, given that the technological substratum requires unique addresses associated with individual registrants, these dispute resolution mechanisms are blunt instruments when applied to genuine conflicts of interest.304 It is legitimate to query whether a system designed to protect proprietary interests against bad faith actors can accommodate conflicts which are less clear-​cut and raise issues relating to free speech, privacy, image rights, and rights in geographical or cultural indicators.305 Such a specialized dispute resolution system has intrinsic limitations and may not be equipped to extend beyond the paradigmatic case of abusive registration.306 The DNS also lacks the limiting or balancing mechanisms within trade mark law which allow for coexistence. For instance, the territorial nature of trade mark rights and their specificity or limitation to specified goods and services facilitate coexistence in the material world. Some critics also suggest that the UDRP creates a parallel universe of trade mark law in the domain name context, which applies a simplified infringement model and downplays the fair use analysis that would otherwise enable a more finely tuned balancing of interests.307 This 301 

See . E Goldman, “Deregulating Relevancy in Internet Trade Mark Law” (2005) 54 Emory Law Journal 507. 303 Verisign, The Domain Name Industry Brief, Vol 12(4) (Dec 2015). 304  As recognized in the WIPO, Report of the Second WIPO Internet Domain Name Process (2001). Problematic categories included personal names, International Nonproprietary Names (INNs) for pharmaceutical substances, names of international intergovernmental organizations, country names, geographical indications, and trade names. 305  See Lipton (n 284). 306  T Willoughby, “Domain Name Disputes: The UDRP 10 Years On” (2009) 4 Journal of Intellectual Property Law & Practice 714. 307  K Komaitis, “Trade Mark Law’s Increment through the Uniform Domain Name Dispute Resolution Policy” (2011) 6 Journal of Intellectual Property Law & Practice 553. 302 

Trade Marks and Allied Rights    571 parallel system simultaneously operates at a more abstract, global level while its disputants and panelists are situated in specific jurisdictional contexts. Taking fair use justifications as an example, an intriguing empirical study concluded that national legal traditions continue to play an influential albeit uneven role with implications for free speech. Respondents from the US are noticeably more likely to succeed with a fair use justification and US panellists are more receptive to fair use arguments.308 Therefore, any doctrinal feedback loops from trade mark law to the domain name system or vice versa should be carefully monitored.

2.6 Conclusion Of the major categories of IP, trade mark law enjoyed a form of benign neglect for many decades. Its basic features were unobjectionable, since origin-​indicating signs performed useful functions in markets. Both consumers and honest producers benefited from a regime which prevented any unauthorized and confusing uses of such signs. However, a combination of an expanding universe of subject matter, registration on the basis of anticipated (as opposed to actual) use, an extended suite of infringement claims attuned towards brand image protection, and initiatives for greater international recognition have incrementally re-​oriented the system. From a regime empirically anchored by the actual use of a mark, trade mark law has become increasingly abstract—​some would even say formalistic—​over the years. Its consumer construct is sometimes deployed in implausible ways to define the scope of proprietary interests, which could have a detrimental impact on speech values as well as inhibit competitive marketplaces. It may be time to initiate the transition from the general back to the particular once again, by enabling doctrinal mechanisms to assess where the equities lie in individual cases.

308  DA Simon, “An Empirical Analysis of Fair Use Decisions under the Uniform Domain-​Name Dispute Resolution Policy” (2012) Boston College Law Review 65.

Chapter 20

Design Prot e c t i on Barton Beebe * 1. Introduction The protection of industrial design, understood as the protection of the appearance of articles of manufacture, is emerging as an increasingly important area of intellectual property (IP) protection. The European Union Intellectual Property Office (EUIPO)1 and the US Patent and Trademark Office (PTO) have both seen considerable growth in recent years in applications for registration of industrial designs. More and more, courts around the world are adjudicating important, high-​stakes disputes over design infringement, most notably the multi-​jurisdictional dispute between Apple and Samsung over the designs of certain of their respective mobile phones. These trends are not surprising. Product design has emerged in recent decades as a significant source of value-​added and means of product differentiation. Particularly in Europe, design-​intensive industries are now seen to provide substantial competitive-​advantage over less design-​oriented industries and trading partners. Industrial design protection is also becoming an increasingly complex area of IP law. This is largely due to the hybrid nature of industrial design, which implicates both aesthetic and functional concerns, and which can be protected under a number of different areas of IP law, including sui generis design protection law, patent law, copyright law, and trademark law, among others. Thus, design law consists of all the many ways in which exclusive rights may be obtained in the visual appearance of an article of manufacture across these various areas of IP law. This chapter first discusses the general boundaries of design law and surveys the international instruments that form the foundation of the law. It then focuses on design law in the two leading jurisdictions for design protection, the United States (US) and the European Union (EU).

* 

Barton Beebe has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  The EUIPO was formerly called the Office for Harmonization of the Internal Market and used the acronym OHIM.

Design Protection   573

2.  Defining “Design” “Design” is a notoriously broad concept and “design law” certainly does not cover all the possible subject matter that might fall within the more comprehensive notion of design. Instead, design law is concerned primarily, if not exclusively, with the external appearance of articles of manufacture. The EU Design Directive makes this emphasis clear. It defines design as “the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colors, shapes, texture and/​or materials of the product itself and/​or its ornamentation.”2 The Directive defines “product” in turn as “any industrially produced or handcrafted item, including, among other things, parts intended to be assembled into a complex product, as well as packaging, get-​up, graphic symbols and typefaces, but excluding computer programs.”3 Included in the Directive’s definition of design are both three-​dimensional and two-​dimensional designs. US law similarly emphasizes appearance. US PTO regulations establish that “[t]‌he design for an article consists of the visual characteristics embodied in or applied to an article.”4 As in European law, so in the US, these visual characteristics may take the form of the three-​dimensional configuration of an article, the two-​dimensional surface ornamentation applied to an article, or any combination of configuration and surface ornamentation.5 Present-​day design law will typically protect the appearance of an article regardless of whether that appearance is aesthetically appealing or was even intended to be.6 Previous requirements that the design at issue have “eye appeal” have largely been abandoned. Design law thus seeks to move beyond any kind of dichotomy between the aesthetic and functional characteristics of products. It was likely influenced to do so by the rise of what has been termed “functionalism” in design, in which good design consists of a close union of form and function.7 Though design law may protect the visual characteristics of functional products, it typically refuses to protect the functional characteristics of such products. To the extent that visual characteristics cannot be protected without also resulting in the protection of functional characteristics, design law will typically refuse protection. It does so in order to ensure that designers cannot use the different schemes of design protection in copyright, trademark, patent, and sui generis design protection law, which often impose relatively low requirements for protectability and offer lengthy, if not unlimited, terms of protection, as an indirect means of establishing exclusive rights in functional product features. Traditionally the protection of functional product features is the domain of utility patent law with its significantly higher requirements for protectability and shorter terms of protection. As discussed later, the many different modes of design protection across IP law employ many differing tests 2 

Directive 98/​7 1/​EC of the European Parliament and of the Council of 13 October 1998 on the Legal Protection of Designs [1998] OJ L 298/​28 (hereafter Design Directive) art 1. 3  Design Directive. 4  US Patent and Trademark Office Manual of Patent Examining Procedure (hereafter MPEP) § 1502 (9th edn 2013, revised November 2015). 5 MPEP. 6  See GB Dinwoodie, “Federalized Functionalism: The Future of Design Protection in the European Union” (1996) 24 AIPLA Quarterly Journal 611, 646–​665. 7  See Dinwoodie (n 6).

574   Barton Beebe for the functionality bar to protection. Some deny protection if the visual appearance of a product was constrained in any way by functional concerns. Others are far more lenient, and grant design protection in the appearance of highly functional products and highly minimal designs if that appearance involves in any way aesthetic concerns. Though design law is careful not to trench upon areas better reserved to utility patent law, it otherwise typically embraces the “cumulation” of rights in the appearance of products under the various other areas of IP protection that can be used to protect the visual appearance of articles of manufacture.8 Thus, the visual appearance of, for example, the front grill of an automobile may simultaneously be protected by design patent law in the US (or sui generis design protection law in the EU), trademark law, copyright law, and certain veins of unfair competition law. Once the term of protection under design patent has expired, the owner of the design may continue to assert exclusive rights under copyright, and once the copyright term has expired, the owner may still assert such rights under trademark law, and do so in perpetuity. As discussed later, however, each mode of protection of the design at issue protects only against certain conduct. For example, US design patent and EU-​registered design protection will protect against independent creation by another designer of the same design; the later designer is liable for infringement even if she did not copy from the protected design and had no knowledge of it. Copyright law, by contrast, insists on copying if liability is to be found. The general purpose of design law is to incentivize innovation in design by enabling designers to recoup the costs of their investment in new and original designs. Design law has also been justified as protecting the designer’s investment of her personality in her designs. In this sense, the unauthorized reproduction of a design may represent not simply a financial loss to the designer, but also an affront to his moral right to control his own creation at least for some period of time. Recent commentary has questioned the degree to which design protection actually encourages progress in design when in certain industries—​particularly apparel fashion—​the widespread copying of a design may actually incentivize designers to move on to new designs.9 In essence, copying quickens the fashion process and in doing so prompts designers more rapidly to create new designs. Nevertheless, the prevailing view remains that, at least in most industries, design protection is necessary most efficiently to promote the progress of industrial design.

3.  International Sources of Design Protection Various international agreements form the foundation of design law at the national and, in Europe, the community level.10 The most important of these agreements is the Agreement

8 

See the discussion by Estelle Derclaye in Chapter 22. K Raustiala and C Sprigman, The Knockoff Economy: How Imitation Sparks Innovation (OUP 2012). But see C Scott Hemphill and J Suk, “The Law, Culture, and Economics of Fashion” (2009) 61 Stanford L Rev 1147. 10  On these agreements see further the discussion by Sam Ricketson in Chapter 8. 9 

Design Protection   575 on Trade-​Related Aspects of Intellectual Property Rights (TRIPS), which was concluded in 1994 as part of the formation of the World Trade Organization. Other agreements discussed below also play an important role in ensuring that the large majority of nations around the world offer minimum levels of protection to design, be it under patent or trademark law, copyright law, or sui generis design law. The Paris Convention for the Protection of Industrial Property, concluded in 1883 and since amended several times, most recently in 1979, covers the protection of patents, trademarks, and what it calls “industrial designs.”11 With 176 contracting nations, the convention requires that all signatories follow the principle of “national treatment,” by which each nation agrees to provide to foreign nationals of Paris Union countries industrial property rights no less favorable than those rights it provides to its own nationals. The convention does not provide any definition of “industrial design,” nor does it specify the scope of rights that members must afford to such designs. The convention does, however, establish a six-​month “right of priority” for applicants for the registration of an industrial design in a Paris Union country.12 By this mechanism, from the date of the applicant’s first application to register a particular industrial design in any Paris Union country, the applicant enjoys a six-​ month period during which it may file to register its design in any other Paris Union country and avail itself of the priority date established by its first application.13 The Berne Convention for the Protection of Literary and Artistic Works,14 concluded in 1886 and since amended as recently as 1979, is an international copyright treaty. Like the Paris Convention, the Berne Convention provides for national treatment. It further requires that the 171 current contracting parties of the Berne Union provide some form of protection for “works of applied art,”15 though the convention leaves it largely to the discretion of the members to define the category of “works of applied art” and the nature and extent of that protection.16 If a Berne Union member’s laws fail to specify a particular form of protection for works of applied art, then the convention stipulates that such works must be treated as “artistic works” under the member’s national copyright law.17 Such works must receive a minimum of 25 years of protection from the date of their creation.18 Importantly, Berne insists that copyright rights, including those in works of applied art, “shall not be subject to any formality.”19 This means, among other things, that registration is not necessary to claim copyright rights in designs. The TRIPS Agreement covers nearly all areas of IP protection. The 162 members of the WTO are, by virtue of their membership, subject to the provisions of TRIPS. TRIPS incorporates by reference most of the articles of the Paris and Berne Conventions, including those that apply to “industrial designs” and “works of applied arts” respectively.20 Like 11  Paris Convention for the Protection of Industrial Property (opened for signature 20 March 1883, revised 14 July 1967) 828 UNTS 305 (hereafter Paris Convention) arts 1(2) and 5quinquies. 12  Paris Convention, art 4(C)(1). 13  See (n 12). 14   Berne Convention for the Protection of Literary and Artistic Works (adopted 9 September 1886, revised 24 July 1971) 828 UNTS 221 (hereafter Berne Convention). 15  Berne Convention, art 2(1). 16  Berne Convention, arts 2(7) and 7(4). 17  Berne Convention, art 2(7). 18  Berne Convention, art 7(4). 19  Berne Convention, art 5(2). 20  See Agreement on Trade-​Related Aspects of Intellectual Property Rights (opened for signature 15 December 1993, entered into force 1 January 1995) 1869 UNTS 299 (hereafter TRIPS); Paris Convention, art 2(1); Berne Convention, art 9(1).

576   Barton Beebe Paris and Berne, TRIPS also sets out the principle of national treatment. It further calls for “most-​favored-​nation treatment,” by which any TRIPS-​related advantage granted by a WTO member to nationals of any other WTO member will be accorded immediately to all nationals of all WTO members.21 Articles 25 and 26 of TRIPS directly address the protection of, in TRIPS’ term, “industrial designs,” though TRIPS nowhere offers a definition of the term. Article 25 requires that WTO members protect “independently created industrial designs that are new or original” and allows, but does not require, members to find that designs are not “new or original” if they do not “significantly differ” from known designs.22 TRIPS’ reference to “new or original” designs reflects its acceptance of both patent-​like approaches to the protection of “new,” that is, novel, designs and copyright-​like approaches to the protection of “original” designs, which may simply require that designs be original to their author, that is, not copied from another author, but not necessarily novel as compared to all existing designs. The article further allows members to deny protection to designs that are “dictated essentially by technical or functional considerations.”23 Finally, the article specifies that members may provide for the protection of “textile designs” either through industrial design law or copyright law.24 Article 26 of TRIPS sets forth the minimum rights that WTO members must provide to owners of protected industrial designs. Specifically, owners must be able to prevent the “making, selling or importing” of a design for commercial purposes that is “a copy, or substantially a copy” of a protected design.25 The article further sets forth a three-​step test for limitations and exceptions to these minimum rights. Such limitations must be limited in nature, must not “unreasonably conflict with the normal exploitation” of the design right, and must not “unreasonably prejudice the legitimate interests” of the right owner in light of the “legitimate interests of the third parties.”26 Finally, the article specifies that members must provide industrial design protection for a term of at least ten years.27 The Hague Agreement Concerning the International Deposit of Industrial Designs is the basis of an international application system for the registration of design rights. First established in 1925, the Hague system is governed by a number of somewhat inconsistent sets of procedural rules established, for example, in the London Act of 1934, the Hague Act of 1960, and the Geneva Act of 1999. The Hague system remains a work in progress. The US and Japan joined as recently as 2015. Like the Madrid Protocol for trademarks and the Patent Cooperation Treaty for patents, the Hague system provides a procedural mechanism by which an applicant can file a single application in a member nation or at the International Bureau at the World Intellectual Property Organization and extend that application to one or more members of the Hague system. Each member to which the application has been extended reviews the application under its own laws and any rights granted are limited to that member. Notably, members must notify the International Bureau of a refusal to register within six months (or for members, such as the US, that engage in substantive examination, within 12 months)28 of receipt of the application.

21 TRIPS, art 4.

22  TRIPS, art 25(1). 23  TRIPS, art 25(1). 24  TRIPS, art 25(2). 26  TRIPS, art 26(2). 27  TRIPS, art 26(3). TRIPS, art 26(1). 28  Common Regulations Under the 1999 Act and the 1960 Act of the Hague Agreement, rule 18. 25 

Design Protection   577

4.  Design Protection in the United States The US offers a variety of means to protect the visual appearance of articles of manufacture, many of which may overlap with each other. The relative merits and demerits of each of these means of protection is discussed later in the chapter. In general, design patent protection offers the strongest form of protection because it protects even against independent creation. However, design patent protection is also the most difficult form of protection to obtain and the shortest in term. Copyright protection is probably easier to obtain, particularly because it does not require registration, but it does not protect against independent creation. Trademark protection also has no registration requirement and offers an unlimited term of protection, but proving trademark infringement of a design is arguably more difficult than proving design patent or copyright infringement of a design.

4.1 Design Patent Protection In order to qualify for design patent protection in the US, a design must be (i) new, (ii) original, (iii) ornamental, (iv) non-​obvious, and (v) applied to an article of manufacture.29 The design must be “new” in the sense that it must meet the same standards for novelty under Section 102 of the US Patent Act30 that utility patents must meet. The most important of these is that the design must not have been patented, described in a printed publication, or otherwise available to the public before the filing date of the design patent application.31 However, if the inventor of the design is him/​herself responsible for a disclosure of the design no more than one year before the filing of the application, then this disclosure will not destroy the novelty of the design.32 Prior art that is not identical to the claimed design may nevertheless “anticipate” and thus defeat the design’s novelty if “in the eye of an ordinary observer, giving such attention as a purchaser usually gives,” the prior art is “substantially the same” as the claimed design.33 The design must be “original” in that it must not have been copied from another designer not named in the patent.34 The requirement that the design be “ornamental” sharply distinguishes American design patent protection, which “protects the way an article looks,” from American utility patent protection, which “protects the way an article is used and works.”35 To meet the ornamentality requirement, a design must be visible in its normal use, though American courts have arguably applied this requirement loosely.36 Past courts have occasionally found the aesthetic merit of a design to be insufficient to justify protection,37 but the usual approach 29 

30 31 35 USC §§ 171, 102 and 103.   35 USC § 102.   35 USC § 102(a)(1).   35 USC § 102(b)(1). 33  International Seaway Trading Corp v Walgreens Corp 589 F3d 1233, 1239 (Federal Circuit 2009) (quoting Gorham Manufacturing Co v White 81 US 511 (1871) 528). 34  Hoop v Hoop 279 F3d 1004, 1007 (Federal Circuit 2002). 35  MPEP § 1502.01. 36  See, eg, In re Webb 916 F2d 1553 (Federal Circuit 1990) (finding design of hip stem prostheses to be ornamental). 37  See, eg, Blisscraft of Hollywood v United Plastics Co 294 F2d 694 (2nd Circuit 1961). 32

578   Barton Beebe is not to judge a design’s aesthetic appeal. Instead, the main problem faced by some designs under the ornamentality requirement is that they are not ornamental but rather functional, and thus protectable, if at all, under utility patent law rather than design patent law. To determine functionality, courts ask, in essence, whether the claimed design was dictated by functional or mechanical requirements.38 To aid in the analysis of this question, courts will consider the availability of alternative designs for the article of manufacture.39 Courts may also consider a variety of other factors, such as whether the claimed design constitutes the best design, whether alternative designs would adversely affect the utility of the article of manufacture, whether there are any related utility patents, and whether advertising touts the utilitarian advantages of any elements of the claimed design.40 Even if the claimed design is new or novel as compared to the prior art, it must also consist of a non-​obvious innovation over the prior art. More precisely, courts assess whether “a designer of ordinary capability who designs articles of the type involved”41 would have “combined teachings of the prior art to create the same overall visual appearance as the claimed design.”42 To make this assessment, courts engage in a two-​step process. First, courts must identify a single, primary reference in the prior art that is “basically the same”43 as the claimed design. Second, courts may use other references in the prior art to modify the primary reference to create a design that has the “same overall visual appearance”44 of the claimed design, but courts may do so only when the secondary references are sufficiently related to the primary reference to suggest the application of the secondary references’ features to the primary reference.45 Courts arguably assess similarity in this context narrowly.46 As to the final requirement, that the design be applied to an article of manufacture, US law construes this requirement liberally. In a well-​known case, it was found to be satisfied by the three-​dimensional configuration of water produced by a water fountain.47 In contrast to the registration process in Europe under the Community Design Regulation, the USPTO engages in substantive examination of the design patent application to ensure that it meets all of the above substantive requirements. As a result, the design patent application process can be relatively lengthy, typically taking 12 to 18 months. This represents a significant disadvantage of design patent protection for industries in fast-​moving, trend-​ dependent sectors because design patent protection begins only from the date of the grant of the patent. By the time the applicant can claim patent protection, the value of its design may have declined significantly. The design patent application process can also be relatively expensive, with overall costs including legal fees typically ranging from $2,000 to $5,000.48 The term of protection for design patents filed on or after 13 May 2015 is 15 years from the date of the patent grant. For applications filed before that date, the term of protection is 14 years. 38 

39 See, eg, Best Lock v Ilco Unican 94 F3d 1563, 1566 (Federal Circuit 1996).  See (n 38).  See PGH Technologies, LLC v St John Companies, Inc 469 F3d 1361, 1366 (Federal Circuit 2006). 41   Durling v Spectrum Furniture Co 101 F3d 100 (Federal Circuit 1996) (hereafter Durling) 103. 42  Titan Tire Corp v Case New Holland, Inc 566 F3d 1372 (Federal Circuit 2009) 1381. 43  Durling 103. 44  Durling. 45  Durling. 46  See, eg, Apple, Inc v Samsung Electronics Co, Ltd 678 F3d 1314 (Federal Circuit 2012) (finding that primary reference from the prior art did not create the same visual impression as the claimed design). 47  In re Hruby 373 F2d 997 (Court of Customs and Patent Appeals 1967). 48  See generally S Burstein, “Costly Designs” (2016) 77 Ohio State LJ (forthcoming). 40

Design Protection   579 Infringement of a design patent is assessed from the perspective of an ordinary observer familiar with the prior art.49 For the three-​decade period from the 1984 case of Litton Systems, Inc v Whirlpool Corp.50 to the 2008 case of Egyptian Goddess, Inc v Swisa, Inc, courts additionally considered whether the accused design appropriated the particular “points of novelty” over the prior art contained in the patented design. In its first en banc hearing of a design patent case, the Federal Circuit in Egyptian Goddess eliminated the points of novelty test.51 Now courts will find infringement if, “in the eye of an ordinary observer, giving such attention as a purchaser usually gives,”52 and in light of the prior art,53 “two designs are substantially the same,”54 that is, “the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other.”55 In assessing infringement, courts are instructed to consider similarities in the overall appearances of the accused and claimed designs; minor differences in particular ornamental features will not prevent a finding of infringement.56 US patent law provides a variety of remedies for the infringement of patents, be they utility or design patents, including injunctive relief57 and the plaintiff ’s damages in the form of lost profits or a reasonable royalty rate.58 US law also contains a special damages provision applying only to the infringement of design patents.59 This provision specifies that the infringer will be liable to the design patent owner “to the extent of [the infringer’s] total profit”60 in the sale of the infringing articles. In Apple, Inc v Samsung Electronics Co, the Federal Circuit applied this provision to hold that the defendant was liable for all profits from the sale of mobile phones containing the infringing designs, even if these designs were responsible for only a fraction of the value of the phones.61 The US Supreme Court is currently reviewing this controversial holding.62

4.2 Trademark Protection US trademark law provides exclusive rights in a wide variety of trademarks, including “trade dress” in the form of product packaging (for example, the particular packaging for an iPhone) and product configuration (the shape of the iPhone itself). Federal trademark law offers essentially the same level of protection to registered and unregistered trade dress—​ though registered trade dress enjoys nationwide priority as of the date of application63 and owners of registered trade dress do not bear the burden of showing the non-​functionality of their trade dress. Because it does not require registration, trademark protection of industrial design can be a highly expedient form of industrial design protection. A further advantage is that trademark protection is unlimited in time provided that the trademark continues 49 See Egyptian Goddess, Inc v Swisa, Inc 543 F3d 665 (Federal Circuit 2008) (hereafter Egyptian

Goddess). See also Gorham Co v White 81 US 511 (1871) (hereafter Gorham). 50  728 F2d 1423 (Federal Circuit 1984). 51  Egyptian Goddess, 678. 52  Gorham, 528. 53  Egyptian Goddess, 678. 54  Gorham, 528. 55   Gorham, 528. 56 See Crocs, Inc v International Trade Commission 598 F3d 1294 (Federal Circuit 2010) 1303–​1304. 57  35 USC § 283. 58  35 USC § 284. 59  See 35 USC § 289. 60 See (n 59). 61  Apple, Inc v Samsung Electronics Co, Ltd 786 F3d 983 (Federal Circuit 2015) 1001–​1002. 62  Apple, Inc v Samsung Electronics Co, Ltd 2016 WL 1078934 (Mem) (21 March 2016) (granting certiorari). 63  See 15 USC § 1057(c).

580   Barton Beebe to be used in commerce. Trademark protection does, however, impose certain additional requirements not found, for example, in design patent law. To gain trademark protection of an industrial design, the owner must show that the trade dress is distinctive, and to prove infringement, the owner must show a likelihood of consumer confusion or trademark dilution. To qualify for US trademark protection, industrial design must be (i) perceived by consumers as distinctive of source, (ii) used in commerce, and (iii) not barred from protection by various statutory bars, the most significant of which in this context is the functionality bar. Trademarks may be inherently distinctive of source in that they are immediately perceived by consumers as source-​designations. An example of an inherently distinctive trademark is the profile of a bitten apple that appears on Apple products—​consumers do not see this as mere decoration, but know immediately, without being told, that it is a designation of source. Trademarks can also possess acquired distinctiveness of source, which a trademark may build up over time through use in the marketplace and advertising. US law holds that product configuration trade dress cannot be inherently distinctive.64 The Supreme Court reasoned that in the case of product design, consumers are not predisposed to equate a product feature with the source of the product; instead, consumers perceive “even the most unusual of product designs” to be intended to render the product itself “more useful or more appealing,” not to identify source.65 Thus, producers of product designs must show that the designs have acquired distinctiveness of source over time. US courts consider a number of factors in assessing acquired distinctiveness (also known as “secondary meaning”), such as the extent of the use of the product design, how the design has been advertised, and survey evidence showing that consumers perceive the design not simply as a feature of the product, but as an indication that the product comes from one particular source.66 US trademark law requires that a trademark (including a source-​distinctive product design) be “used in commerce” in order to receive protection. This use requirement distinguishes US trademark law from most other trademark systems around the world, which allow registration and protection without use, at least for a certain period of time. The American “use in commerce” requirement is not burdensome. It simply requires that the mark be used in interstate commerce or in commerce between the US and foreign nations. A significant barrier to the protection of product designs under US trademark law is the requirement that the design not be functional.67 In TrafFix Devices, Inc. v Marketing Displays, Inc., the Supreme Court held that a design is functional in a utilitarian sense if it “affects the cost or quality of the article” or if it is “essential to the use or purpose of the article.”68 This language has proven to be open to a variety of interpretations by lower courts. Most courts apply the language aggressively to deny protection to product designs that perform any significant function in enabling the product to do what it is intended to do,69

64  By contrast, product packaging trade dress may be found to be inherently distinctive of source. Different courts in the United States apply different tests to assess the inherent distinctiveness of product packaging. See Amazing Spaces, Inc v Metro Mini Storage 608 F3d 225 (5th Circuit 2010). 65  Wal-​Mart Stores, Inc v Samara Brothers, Inc 529 US 205 (2000) 213. 66  See, eg, Art Attacks Ink, LLC v MGA Entertainment, Inc 581 F3d 1138 (9th Circuit 2009) 1145. 67  15 USC § 1052(e)(5). 68  TrafFix Devices, Inc v Marketing Displays, Inc 532 US 23 (2001) (hereafter TrafFix Devices) 32. 69  See, eg, Eppendorf-​Netheler-​Hinz GMBH v Ritter GMBH 289 F3d 351 (5th Circuit 2002).

Design Protection   581 or even that serve any purpose other than source designation.70 These courts follow the Supreme Court’s prescription in TrafFix that they need not consider whether competitive alternatives to the design exist. Other courts, such as the Federal Circuit, apply the TrafFix language less restrictively. In fact, notwithstanding TrafFix’s apparent rejection of the Federal Circuit’s four-​factor test for utilitarian functionality, the Circuit continues to use this test, which considers whether the design feature at issue has been patented, whether its utilitarian advantages have been touted in advertising, whether there are competitive alternatives to the design, and whether the design affords significant manufacturing advantages.71 The design must also not be “aesthetically functional.” For example, even if the shape of a heart-​shaped box of Valentine’s Day chocolates serves no utilitarian purpose, the shape may nevertheless be aesthetically functional in the sense that the granting of exclusive rights in it would put competitors at a “significant non-​reputation related disadvantage”72—​because the heart-​shaped box is an important traditional box shape for such chocolates. Even if the producer of the box could show that it had developed secondary meaning as a designation of source, it would still be denied protection on functionality grounds. In contrast to the test for utilitarian functionality, with respect to aesthetic functionality courts consider whether there are competitive alternatives to the claimed design.73 To prove infringement, the owner of a product design that merits protection as a trademark must show either a likelihood of consumer confusion as to source or, if the design is sufficiently famous, a likelihood that the defendant’s design will dilute the distinctiveness of the plaintiff ’s design. With respect to consumer confusion in particular, the owner must show that the allegedly infringing design is sufficiently similar to the protected design that consumers will likely believe the former originates from the producer of the latter. Courts apply a multifactor test to assess the likelihood of consumer confusion.74 The most important factors are the similarity of the parties’ designs, the relatedness of their goods, any evidence of actual confusion by consumers including survey evidence, and the sophistication of the relevant consumer population. To prove infringement under federal antidilution law, the owner of a product design must first show that the design is “widely recognized by the general consuming public of the United States.”75 Courts apply a demanding fame standard and routinely deny antidilution protection to marks that fail to meet it.76 If the product configuration at issue is sufficiently famous, courts then consider whether the defendant’s design gives rise to an association between the defendant’s and plaintiff ’s design that “impairs the distinctiveness”77 of the latter or “harms the reputation”78 of the latter.

70

  Jay Franco & Sons, Inc v Franek 615 F3d 855 (7th Circuit 2010) 857 (“[A]‌design that produces a benefit other than source identification is functional”). 71   See, eg, Valu Engineering, Inc v Rexnord Corp 278 F3d 1268 (Federal Circuit 2002). 72  TrafFix Devices, 33. 73  TrafFix Devices, 33. 74  See, eg, Virgin Enterprises Ltd v Nawab 335 F3d 141 (2nd Circuit 2003). 75  15 USC § 1125(c)(2)(A). 76  See, eg, Maker’s Mark Distillery, Inc v Diageo North America, Inc 703 F Supp 2d 671 (District Court (Western District of Kentucky) 2010) 77  15 USC § 1125(c)(2)(B). 78 See (n 77).

582   Barton Beebe

4.3 Copyright Protection Among the many ways that the US has tried to establish a sui generis regime of protection for industrial designs, Title II of the draft Copyright Act of 1976 contained extensive design protection provisions.79 This title was deleted in the final stages of congressional consideration of the bill.80 Current copyright law will nevertheless protect industrial designs as sculptural, graphic, or pictorial works under Section 102(a)(5) of the Copyright Act. The design need only be fixed in a tangible medium of expression and original, that is, independently created by its author rather than copied from another author and containing some “minimal degree of creativity.”81 The creativity standard is extremely low, so that nearly any design beyond the most simple or banal will qualify. Like US trademark law, US copyright law does not require registration for exclusive rights to attach to the design, though registration confers various benefits on the registrant.82 A significant advantage of copyright protection of industrial designs over design patent protection is that the term of copyright protection is substantially longer than the 15 year term of design patent protection—​not so long as the unlimited term of trademark protection, but at 95 years from first publication for corporate works (ie, “works made for hire”) still of considerable length. A disadvantage of copyright protection as against design patent protection is that independent creation is an absolute defense against liability for copyright infringement. In other words, if the defendant can show that it did not copy from the plaintiff ’s design, even an identical design by the defendant will not be found infringing. Design patent protection, by contrast, prohibits even independent creation. Meanwhile, a significant advantage in the US of copyright protection for industrial designs over trademark protection is that to gain copyright protection, the owner need not show that the design has secondary meaning as a designation of source, and to show copyright infringement, it need not show that consumers are confused as to source by the defendant’s design or that the defendant’s design causes trademark dilution. The primary impediment to copyright protection for industrial designs in the US is the “useful articles doctrine.” The Copyright Act defines a useful article as “an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information.”83 Most industrial designs easily qualify as useful articles. The Copyright Act further provides that “the design of a useful article . . . shall be considered a pictorial, graphic or sculptural work only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.”84 This statutory language is the basis for the separability requirement in US copyright law, which requires that design features of useful articles be either physically or conceptually separable from the utilitarian aspects of the article to receive copyright protection.

79

  See Design Protection Act of 1975, S Rep No 473, 94th Cong, 1st Sess 1 (1975) 47. See JH Reichman, “Design Protection in Domestic and Foreign Copyright Law: From the Berne Revision of 1948 to the Copyright Act of 1976” (1983) Duke LJ 1143; JH Reichman, “Design Protection and the New Technologies: the United States Experience in a Transnational Perspective” (1989) 29 Baltimore L Rev 6. 81  Feist Publications, Inc v Rural Telephone Service Co 499 US 340 (1991) 345. 82  See 17 USC §§ 410, 411, 412 and 504(c). 83  17 USC § 101. 84 See (n 83). 80 

Design Protection   583 The concept of physical separability is relatively straightforward. Courts assess whether the design feature at issue can be physically removed from the article while leaving the utilitarian function of the article intact. But for many modern industrial designs, which are characterized by the close integration of form and function, the physical separability test is not easily satisfied. Indeed, courts now rarely assess separability in terms of physical separability. As for the conceptual separability test, American courts have developed a wide variety of approaches to determining if a design feature is theoretically separable from the underlying utilitarian purpose of the article.85 Arguably, the leading test is that set forth by the Second Circuit Court of Appeals in Brandir International, Inc v Cascade Pacific Lumber Co.86 The design at issue was a bicycle rack consisting simply of a single, continuous heavy-​gauge tube of galvanized steel bent in successive, equally-​proportioned u-​like shapes and rooted into the ground at each end. The court stated that conceptual separability will be found “where design elements can be identified as reflecting the designer’s artistic judgment exercised independently of functional influences.”87 The bicycle rack failed this test because the record showed that the designer took into consideration the height and width of bicycles in proportioning the undulations of his rack. The Brandir test is highly demanding but it is not impassable. In another leading case that applied the Brandir test, Pivot Point International, Inc v Charlene Products, Inc,88 involving the design of a mannequin head used in teaching hair-​styling, the court found the design to be copyrightable on the basis that the designer’s artistic choices were “unfettered by functional concerns.”89 US copyright law considers clothing to be a “useful article” because it functions to cover the body. (Patterns on textiles, by contrast, are not useful articles because they function, in the language of the Copyright Act, “merely to portray th[eir own] appearance”). Clothing designs must thus pass the separability test, which is thought to be exceedingly difficult for most such designs to do. For this reason, copyright litigation in the fashion sector for the copying of clothing designs is relatively rare in the US. Nevertheless, the US Supreme Court has accepted certiorari review of the Sixth Circuit Court of Appeals decision in Varsity Brands, Inc v Star Athletica, LLC,90 in which the Sixth Circuit found that the graphic elements of cheerleading uniforms were protectable under copyright law. It is possible that the Supreme Court’s opinion in the case will reconfigure separability doctrine in American copyright law.

4.4 Other US Design Protection Schemes US law provides for sui generis protection of boat hulls for a term of ten years if registration is made within two years of the design being made public.91 It has done so since 1998, with the Vessel Hull Design Protection Act (VHDPA),92 which added Chapter 13 to the Copyright 85 See Pivot Point v Charlene Products, Inc 372 F3d 913 (7th Circuit 2004) 923 (reviewing various approaches). 86  834 F2d 1142 (2nd Circuit 1987). 87  834 F2d 1145 (2nd Circuit 1987). 88  372 F3d 913 (7th Circuit 2004). 89  372 F3d 932 (7th Circuit 2004). 90  799 F3d 468 (6th Circuit 2015). 91  17 USC § 1302(5). 92  Pub L No 105-​304, 112 Stat 2860 (1998).

584   Barton Beebe Act in the form of Sections 1301 through 1332.93 The Copyright Act is undoubtedly a strange place to put provisions protecting the design of vessel hulls. Some understanding of the larger significance of the VHDPA may be gained by considering the terms of its first provision, Section 1301(a)(1), which establishes that “[t]‌he designer or other owner of an original design of a useful article which makes the article attractive or distinctive in appearance to the purchasing or using public may secure the protection provided by this chapter.”94 This provision has every appearance of offering general design protection of the type Congress originally considered adding to the Copyright Act when the Act was first being drafted in the 1970s. However, Section 1301(b)(2) then defines a “useful article” for purposes of Chapter 13 of the Copyright Act as a “vessel hull or deck.”95 This provision quite severely limits the subject matter of the chapter. Recent efforts to establish a general scheme of design protection under US copyright law or a more limited scheme of protection for apparel fashion designs have sought, in essence, to amend Section 1301(b)(2) to remove the limitation to vessel hulls or at least to include apparel fashion designs (and a term of protection of three years). These repeated efforts have so far failed, mainly owing to opposition from the insurance industry, the spare-​parts industry, and some elements of the fashion design industry. US law also provides for special protection of semiconductor chip topographies in Chapter 9 of the Copyright Act.96

5.  Design Protection in the European Union Like the US, the EU offers multiple means of protection of design, many of them overlapping. The twin bases of design protection in the EU are the EU Design Directive, which governs the substantive provisions of the national registered design law of the Member States, and the Community Design Regulation, which establishes a community-​wide design protection regime.97

5.1 EU Design Protection The Design Regulation provides EU-​ wide protection for registered and unregistered designs and applies essentially the same requirements for eligibility to both. A fundamental difference between the two regimes of protection, however, is that registered designs enjoy a strict liability form of protection, while unregistered designs are only protected against copying.98 In other words, an owner of a registered design need not show that an alleged infringer copied from the design; even independent creation triggers liability.99 By contrast, an owner of an unregistered design must show that the alleged infringer did not independently 93 

94  17 USC § 1301(a)(1). 95  17 USC § 1301(b)(2). 17 USC §§ 1301–​32. See 17 USC §§ 901–​14. 97  European Council Regulation No 6/​2002 of 12 December 2011 on Community Designs [2002] OJ L 3/​5 (hereafter Design Regulation). 98  Design Regulation, art 19. 99  Design Regulation, art 19(1). 96 

Design Protection   585 create, but rather copied from the claimed design.100 In assessing evidence of copying, courts will consider the degree of similarity between the claimed and accused designs in light of industry practice, so that a court will likely find copying even in the absence of direct evidence of copying if an accused design is identical or nearly-​identical to the claimed design and that degree of similarity would not be plausible except as the result of copying.101 Another significant difference between the regimes of protection applied to registered and unregistered designs is the terms of protection these regimes provide. Registered designs are protected for a term of five years from the date of the application for registration, and this term is renewable for additional five year terms up to a total of 25 years.102 Unregistered designs are protected for a non-​renewable term of three years from the date when the design is first made available to the public within the EU.103 For registered designs, the registration process at the European Union Intellectual Property Office (EUIPO) is relatively fast. The EUIPO examines the application only to determine if it complies with various administrative formalities and if the design constitutes a protectable design under the Regulation and is not against public morality.104 In 2014, nearly one in three applications were examined on a fast-​track basis within two working days.105 To qualify for protection as a registered or unregistered design under the Regulation, a design must meet a set of basic requirements: (i) it must be new (ie, novel); (ii) it must have individual character; and (iii) it must not be functional. Certain designs must also be visible when in normal use. A design will qualify as new if no design that is “identical”106 (or different only in “immaterial details”)107 has been made available to the public, in the case of unregistered designs, before the designer’s first public use of the design, or in the case of registered designs, before the filing date of the application for registration (or before the priority date if the designer is claiming a priority date based on an application filed in another Paris Convention or WTO country).108 Importantly, the Design Regulation establishes that, for registered designs, the designer’s own use of its design during the 12-​month period preceding its date of application (or its priority date) will not destroy the novelty of the design.109 The applicant for registration thus has a 12-​month grace period (during which it will enjoy unregistered design protection). Furthermore, at least in principle, not all disclosures to the public will destroy novelty. Specifically, the Design Regulation establishes that novelty will not be extinguished by uses that “could not reasonably have become known in the normal course of business to the circles specialized in the sector concerned, within the Community.”110 Thus, geographically or historically remote uses within the EU will not affect novelty. However, recent case law has persuasively challenged the logic of this provision at least with respect to uses in 100

  Design Regulation, art 19(2).   See U Suthersanen, “Design Law: European Union and United States of America” (2nd edn, Sweet & Maxwell 2010) § 7.3.3. 102 103   Design Regulation, art 12.   Design Regulation, art 11. 104   See Design Regulation, arts 3 and 9. 105  Office for Harmonization in the Internal Market, Annual Report 2014 (OHIM 2015) 17. 106  Design Regulation, art 5(2). 107  Design Regulation, art 5(2). See D Stone, European Union Design Law: A Practitioner’s Guide (2nd edn, OUP 2016) para 11.07. 108  Design Regulation, arts 5 and 41. 109  Design Regulation, art 7(2). 110  Design Regulation, art 7(1). 101

586   Barton Beebe other sectors. In Green Lane Products v PMS International Group, which involved the design of small plastic spiky balls, the Court of Appeal of England and Wales reasoned that because exclusive rights in a community design extend to all goods, even those outside of the sector in which the design is used or in connection with which it is registered, “prior art available for attacking novelty should also extend to all kinds of goods.”111 Meanwhile, courts have held that disclosures occurring outside of the EU may destroy novelty if they would be known in the normal course of business to the relevant specialized firms in the sector within the EU.112 A design will qualify as having “individual character” if the “overall impression it produces on the informed user” differs from the overall impression produced on that user by any other design made available to the public before the same dates used to assess the novelty of the design, that is, in the case of unregistered designs, before the designer’s first public use of the design, or in the case of unregistered designs, before the filing date of the application for registration or before the priority date.113 The “informed user” (not designer) is less sophisticated than the “designer of ordinary capability” in US design patent law, but more sophisticated than an occasional consumer of the products of the type to which the designs at issue are applied.114 The informed user is cognizant of the existing corpus of designs in the relevant sector or sectors and “shows a relatively high degree of attention when he uses them.”115 The Design Regulation further provides that in assessing individual character, courts must take into consideration the “degree of freedom of the designer”116 in light of such constraints as the functional requirements of the product or a crowded prior art. The informed user is understood to recognize that where such constraints significantly limit the designer’s freedom, minor differences between the design and the prior art may enhance the difference of the overall impression of the design as against the prior art.117 As to the non-​functionality requirement, the Regulation establishes that community design rights will not subsist in “features of appearance of a product which are solely dictated by its technical function.”118 Courts have tended to interpret this provision in one of two ways.119 The current leading approach was established in 2009 by the EUIPO’s Third Board of Appeal 111   Green Lane Products v PMS International Group [2008] EWCA Civ 358 [79]. See also Stone (n 106) para 10.47. 112  See Holey Soles Holdings Ltd [2008] 8 ECDR 100 (OHIM Invalidity Decision); Kirschenhofer GmbH v WS Teleshop International Handels GmbH (OHIM Third Board of Appeal, 11 July 2007). See also Stone (n 106) para 10.11. 113   Design Regulation, art 6(1). 114  See PepsiCo Inc v Grupo Promer Mon Graphic SA [2012] FSR 5 (ECJ) (hereafter PepsiCo); Proctor & Gamble Co v Reckitt Benckiser (UK) Ltd [2007] EWCA Civ 936 (hereafter Proctor & Gamble). 115 116  Design Regulation, art 6(2).   PepsiCo. 117 See Proctor & Gamble [31]; PepsiCo and OHIM v Grupo Promer Mon Graphic SA [2011] ECDR 12, para 29 (ECJ Advocate General). 118  Design Regulation, art 8(1). The Design Regulation also contains a “must-​fit” provision denying protection to “features of appearance of a product which must necessarily be reproduced in their exact form and dimensions in order to permit the product in which the design is incorporated or to which it is applied to be mechanically connected to or placed in, around or against another product so that either product may perform its function” (art 8(2)). This provision does not apply, however, to modular systems consisting of “mutually interchangeable products” such as Lego bricks or stacking chairs (art 8(3)). 119  See generally J Du Mont and M Janis, “Functionality in Design Protection Systems” (2012) 19 Journal of Intellectual Property Law 261.

Design Protection   587 in Lindner Recyclingtech GmbH v Franssons Verkstäder AB,120 which involved the design of a rotating shredding element in a shredding machine used in the recycling industry. The Lindner approach assesses, from the standpoint of the reasonable observer (rather than from the subjective standpoint of the particular designer responsible for the design), whether only purely functional considerations could have been relevant when the design was chosen and aesthetic considerations were “completely irrelevant,”121 in which case the design was “solely dictated by its technical function.” If, by contrast, aesthetic considerations would also have been taken into account, then the design will not be excluded from protection on functionality grounds.122 The alternative approach is the so-​called “multiplicity of forms” approach, which asks whether the particular design is the only design by which the product at issue can perform its function. If there are alternative designs that will also allow the product to fulfill its function, the claimed design is not functional.123 Lindner rejected this approach on the ground that it will find functionality only in “highly exceptional circumstances” and, in any case, one firm could itself individually register each alternative design and thereby establish an indirect monopoly over the technical function at issue.124 The Lindner approach to the functionality question is strikingly different from the leading approach to conceptual separability in US copyright law in Brandir. For Lindner, even in a design process that might have focused largely on functional considerations, if any aesthetic considerations were taken into account, then the design is not functional. For Brandir, if the design process was largely concerned with aesthetics, but was constrained in any way by functional considerations, then the design is functional. The Design Regulation imposes a visibility requirement only on designs that constitute “a component part of a complex product,”125 with a “complex product” being “a product which is composed of multiple components which can be replaced permitting disassembly and re-​ assembly.”126 To qualify for protection, such designs must remain visible during the normal use of the product and their visible features must themselves be novel and possess individual character.127 The design need not be visible at every moment the product is used, but it must be seen “some of the time in such a way that all its essential features can be comprehended.”128 The test for infringement of both registered and unregistered designs mirrors the individual character test, and the case law developed under either test is largely applicable to the other. The Design Regulation provides that the protected design will be infringed by “any design which does not produce on the informed user a different overall impression.”129 As with the individual character analysis, courts must take into consideration the designer’s degree of freedom to determine the scope of protection.130 But in direct contrast to the role of the designer’s degree of freedom in the individual character analysis, if the claimed design is significantly constrained by technical considerations or a crowded field of similar designs, minor variations in the accused design may be sufficient to produce a different overall impression on the informed user.131 While a limited degree of freedom may thus help the ­designer to gain 120 

[2010] ECDR 1 (OHIM 3rd Board of Appeal 2009). 122  [2010] ECDR 1, para 36. [2010] ECDR 1, para 35. 123  See Stone (n 106) para 6.11. 124  Lindner (n 120) para 30. 125  Design Regulation, art 4(2). 126  Design Regulation, art 3(c). 127  Design Regulation, art 4(2). 128  Lindner (n 120) para 21. 129  Design Regulation, art 10(1). 130  Design Regulation, art 10(2). 131  See Du Mont and Janis (n 118) 296. 121 

588   Barton Beebe rights, it may also restrict the scope of those rights. Meanwhile, the scope of protection of a protected design is not limited to the particular category of products with which the protected design is used.132 Thus, for example, a design registered for an automobile may be infringed by the use of that design in connection with “a brooch or a cake or a toy.”133 Unlike US design patent law, the Regulation contains explicit exclusions from liability for “acts done privately and for non-​commercial purposes,” “acts done for experimental purposes,” and reproductions for purposes of teaching and citation.134 It is not clear, though doubtful, if a company’s unauthorized use of another’s design could ever qualify as “private” and “non-​commercial.”135 Nor is it clear if a company’s unauthorized use of another’s design in consumer surveys (perhaps to determine what aspects of the design are most appealing) would be excused as undertaken in pursuit of “experimental purposes.” In its so-​called “must-​fit” provision, the Regulation further excludes from protection design features that “must necessarily be reproduced in their exact form and dimensions” in order to allow interoperability among products or parts.136 Similarly, in its “must-​match” provision, the Regulation excludes from protection “a design which constitutes a component part of a complex product used . . . for the purpose of the repair of that complex product so as to restore its original appearance.”137 This latter provision is explicitly stated to be transitional in nature, although there has been no significant movement on amending its terms since the Regulation was first adopted in 2001.

5.2 National Design Protection The EU Design Directive requires all Member States of the EU to provide registered ­design protection at the national level and to align the substantive provisions of their relevant ­national laws that govern the subject matter and scope of registered design protection with the terms of the Design Directive. The Design Regulation and Design Directive have very similar, often identical, substantive provisions, so the basic requirements for ­national registered design protection and the basic tests for infringement within each of the EU Member States closely match the requirements and tests discussed previously for community registered design protection. However, while the Design Directive follows the Regulation provisions in excluding from protection “must-​fit” designs,138 the Directive does not follow the Regulation’s provisions with respect to “must-​match” designs. Instead, because agreement could not be reached on the matter, the Directive merely requires Member States to maintain their current national law’s provisions on “must-​match” parts, and to modify these provisions only “if the purpose is to liberalise the market for such parts.”139 132

  See Design Regulation, art 36(6).   Green Lane Products v PMS International Group [2008] EWCA Civ 358 [27]. 134   Design Regulation, art 20(1). 135   See D Ohlgart, “Ohlgart Commentary” in European Design Protection: Commentary to Directive and Regulation Proposals (Wolters Kluwer 1996) 143. 136  Design Regulation, art 8(2). 137  Design Regulation, art 111(1). In a recent decision, the English High Court interpreted this provision not to allow the unauthorized reproduction of registered designs consisting of alloy wheels for automobiles. See Bayerische Motoren Werke AG v Round & Metal Ltd [2012] EWHC 2099 (Pat). 138  Design Directive, art 7(2). 139  Design Directive, art 14. 133

Design Protection   589 The Design Directive does not attempt to harmonize the procedural rules of the Member States covering application, examination, opposition, and invalidity procedures. Nor does the Design Directive make any effort to harmonize how (or even if) EU Member States protect unregistered designs. Registered national design protection, rather than community registered design protection, may make sense for companies that plan to operate only within a particular member nation. The United Kingdom is the one European jurisdiction that offers unregistered design protection at the national level.140 In the UK, unregistered design protection attaches automatically to a three-​dimensional design from the moment the design is recorded in the form of either the article for which the design is made or a design document, provided that (i) the design was not copied from another design, (ii) the design is not “commonplace in the design field in question,”141 and (iii) the development of the design involved more than a trivial degree of skill, labor, and judgment. Explicitly excluded from protection are “must-​fit” and “must-​match” design features necessary to make a design (particularly for a spare part) mechanically or aesthetically compatible with a preexisting design.142 Like the community unregistered design, the UK unregistered design is only protected against copying; independent creation by another designer will defeat liability. The term of protection offered to unregistered designs in the UK is complex. It extends 15 years from the end of the calendar year in which the design was first recorded in a design document, or in which an article was made according to the design, whichever comes first.143 However, if articles embodying the design are publicly sold within the first five years of the 15 year period just described, then the term will extend only ten years from the end of the calendar year in which the sale first occurred.144 In the last five years of the term of protection, anyone is entitled “as of right” to a license to make any use of the design, the terms of which license, in the absence of agreement, will be set by the Comptroller General of the UK Intellectual Property Office.145 As with the Community Registered Design, explicitly excluded from liability are private uses for non-​commercial purposes and uses for experimental, teaching, and citation purposes.146

5.3 Trademark Protection An industrial design may be registered as a trademark under European trademark law. At the community level, a design may be registered as an EU Trade Mark (EUTM) under the terms of the Trade Mark Regulation,147 and at the national level, as a national trademark under the respective national laws of the Member States. The substantive provisions of these

140

  See E Derclaye, “A Decade of Registered and Unregistered Design Rights Decisions in the UK: What Conclusions Can We Draw for the Future of Both Types of Rights?” (2014) 3 Intellectual Property Theory 144. 141   Copyright, Designs and Patents Act 1988 (UK) (hereafter CDPA) s 213(4). 142  CDPA, s 213(3)(b). 143  CDPA, s 216(1)(a). 144  CDPA, s 216(1)(a). 145 CDPA, s 237. 146  CDPA, s 244A. See also s 244B (excluding from liability conduct relating to the use and repair of equipment for overseas ships and aircraft). 147  Council Regulation 207/​2009 of 26 February 2009 on the Community Trade Mark [2009] OJ L 78/​ 1 (hereafter Trade Mark Directive).

590   Barton Beebe national laws must align with the terms of the Trade Mark Directive, whose substantive provisions themselves run parallel to those of the Trade Mark Regulation. As with US trademark protection, the great advantage of registered trademark protection of industrial design in Europe is that the ten-​year term of protection may be renewed indefinitely. Furthermore, the design owner need not show novelty and individual character. However, as in the US, European trademark law imposes certain requirements not imposed by European sui generis design law, specifically, that the design be distinctive and that a likelihood of confusion or dilution be proven for infringement to be found. EUIPO not only examines an EUTM application to ensure that it complies with various formalities, but also to ensure that it does not trigger various so-​called “absolute grounds” for refusal, including that the mark lacks distinctiveness or is functional. EUIPO does not engage in review of “relative grounds” for refusal, such as that the mark is confusingly similar to an already-​registered mark. In the case of product design, the EUTM regime does not hold, as US law does, that product design is per se incapable of inherent distinctiveness.148 However, like the US Supreme Court, the EU Court of Justice has recognized that average consumers are less prone to identify product shapes as designations of source, and thus it may be more difficult to establish that a three-​dimensional shape is perceived by consumers as distinctive of source.149 If the design lacks inherent distinctiveness, it may still be registered if it is shown to possess acquired distinctiveness. The factors supporting a finding of acquired distinctiveness are closely similar to those used in US law, discussed earlier.150 As with US trademark law, a design must not be functional to qualify for trademark protection. The Trade Mark Regulation and Trade Mark Directive contain parallel language denying protection to “signs which consist exclusively of: (i) the shape, or another characteristic, which results from the nature of the goods themselves; (ii) the shape, or another characteristic, of good which is necessary to obtain a technical result, (iii) the shape, or another characteristic, which gives substantial value to the goods.”151 Each of these grounds for refusal is independent, so violation of any one will trigger a denial of protection. The Court of Justice recently considered the meaning of the first exclusion in Hauck GmbH & Co KG v Stokke A/​S,152 which involved the celebrated design of a children’s chair that could adjust to the child’s height. The court ruled that to qualify as a shape which “results from the nature of the goods themselves,” the shape need not be “indispensable” to the function of the goods, but need merely be a shape whose “essential characteristics . . . are inherent to the generic function or functions of such goods.”153 As to the second exclusion, in a case involving Lego plastic bricks, the Court of Justice ruled that a design could be found “necessary to obtain a technical result” even if alternative designs exist that are capable of achieving the same result.154 The court reasoned that competition could be significantly impaired if multiple alternative designs were simultaneously registered, perhaps even by the same company.155

148   Case C-​238/​06 P Develey Holding GMbH & Co Beteiligungs KG v OHIM [2007] ECR I-​09375, para 80. 149 See (n 148). 150  See Case C-​25/​05 August Storck KG v OHIM [2006] ECR I-​05719. 151  Trade Mark Directive, art 4(1)(e); Trade Mark Regulation, art 7(1)(e). 152  Case C-​205/​13 Hauck GmbH & Co KG/​Stokke A/​S EU:C:2014:2233. 153  Hauck GmbH, [23] and [27]. 154  Case C-48/​09 P Lego Juris v OHIM [2010] ECR I-​08403, para 53. 155  Lego Juris, paras 55–57.

Design Protection   591 Going farther, recent case law arguably urges the refusal of trademark rights to any product feature that is merely “aimed at obtaining a technical result.”156 The third ground for exclusion mainly targets shapes that possess substantial aesthetic appeal. In Bang & Olufsen v OHIM,157 the General Court affirmed the refusal to register the minimalist shape of an electronic speaker. The court took notice of Bang & Olufsen’s advertising that emphasized the aesthetic merit of the speaker design “as a kind of pure, slender, timeless sculpture for music reproduction.”158 Unlike US trademark law, which in the context of aesthetic functionality would consider the availability to competitors of alternative designs, the General Court instead simply pointed to the importance to consumers of the aesthetic appeal of the design.159 The court emphasized that this was enough to give substantial value to the good at issue and thus trigger a refusal of trademark protection even if other, technical features also gave substantial value to the good. Overall, European case law has expansively interpreted the functionality bar to protection in European trademark law, which has resulted in greater difficultly in gaining trademark protection for a three-​dimensional design in Europe than in the American system. Trademark protection is also available at the national level in Europe, and a company doing business only within the borders of a single European Member State may find national registration more practical than community-​level registration. This is particularly the case if the three-​dimensional design it seeks to register as a trademark is being used as a trademark in a limited area elsewhere in Europe, which may defeat registration of the design as an EU trademark. Because they must comply with the Trade Mark Directive, the substantive provisions of European national trademark law are very closely similar, and often identical, to those of the Trade Mark Regulation. Thus, much of the earlier discussion of the requirements for trademark registration also applies at the European national level. Three-​ dimensional designs may also be protected as unregistered marks at the national level in Europe, but the many different regimes of unregistered trademark protection established by the various Member States are highly diverse.

5.4 Copyright Protection Despite a large number of Directives on the issue, harmonization of copyright law in the EU significantly lags behind harmonization of other areas of IP protection. Harmonization of the specific issue of how copyright law bears on design is even more inchoate. The result is a kaleidoscope of differing national approaches in Europe to basic questions of whether and how national copyright law protects designs, particularly if a design has not been registered for protection under community or national sui generis design law, and what the term of copyright protection for design might be. UK copyright law provides a good example of the complexity of the copyright-​design interface.160 The UK Copyright Designs and Patents Act (CDPA) makes copyright protection 156 

Case T-​331/​10 Yoshida Metal Industry Co Ltd v OHIM EU:T:2012:220 [61]. Case T-508/​08 Bang & Olufsen A/​S v OHIM [2011] ECR II-​06975, paras 69–​77. 158  Bang & Olufsen, para 75. 159  Bang & Olufsen, para 73. 160  See L Bently, “The Return of Industrial Copyright?” (2012) 10 European Intellectual Property Review 654. 157 

592   Barton Beebe available to “artistic works,” and an industrial design may so qualify perhaps as “a work of artistic craftsmanship”161 or perhaps as “sculpture”162 under the terms of the CDPA. However, two important sections of the CDPA severely limit, if not eliminate altogether, this protection. Section 51 establishes that “[i]‌t is not an infringement of copyright in any design document or model recording or embodying a design for anything other than an artistic work or a typeface to make an article to that design or to copy an article made to the design.”163 As Lionel Bently has noted, “[a]lthough section 51 is not without its niceties, on the whole it has operated to exclude the operation of copyright from the field of functional industrial designs.”164 Meanwhile, Section 52 limits the term of protection available to artistic works made “by an industrial process,” and that are commercially marketed, to 25  years. With some exceptions, artistic works qualify as made by an industrial process if they have been manufactured in a quantity greater than 50 copies.165 In Europe, only Estonia and Romania establish similar limits on the term of copyright protection for industrially made works of artistic craftsmanship. Further complicating matters in the UK, a recent Court of Justice ruling has apparently made it necessary to repeal Section 52. In Flos SpA v Semararo Casa e Famiglia SpA,166 the Court of Justice interpreted Article 17 of the Design Directive to require that Member States recognize the eligibility for copyright protection of any design registered for design protection in or in respect of a Member State. The court further held that the Copyright Term Directive requires that such protection be provided for the full extent of the standard copyright term. Flos has thus been understood in the UK to require, at the very least, the repeal of Section 52, which, after various delays, has now been scheduled to become effective in 2020.167 German protection of design under copyright law has also recently been undergoing significant transition. In the so-​called “Birthday Train” (or “Geburtstagszug”) decision,168 the German Bundesgerichtshof (Federal Supreme Court) established that in light of reforms to German registered design protection law under the Design Directive, works of applied art need no longer meet a higher standard of creativity (specifically, that they “clearly surpass the average design”) than that required of non-​utilitarian works of fine art or literature. For all such works, it is now “sufficient that they achieve a level of creativity that allows a public that is open to art and relatively familiar with views on art justifiably to speak of ‘artistic’ creativity.”169 Importantly, the court also noted that copyright law will only protect those aspects of a design that are based on artistic creativity rather than functionality, and where the design shows only a minimal degree of artistic creativity, perhaps because of functional constraints, the scope of copyright protection for that design will be correspondingly narrow.170

161 

But see George Hensher Ltd v Resawhile Upholstery (Lancs) Ltd [1976] AC 64 (HL). See also Lambretta Clothing Co Ltd v Teddy Smith (UK) Ltd [2005] RPC 88 (CA). 162 163   But see Lucasfilm Ltd v Ainsworth [2011] UKSC 39.   CDPA, s 51(1). 164  Bently (n 159) 657. 165  The Copyright (Industrial Processes and Excluded Articles) (No 2) Order 1989. 166  Case C-168/​09 Flos SpA v Semeraro Casa e Famiglia SpA [2011] ECR I-​00181. 167  See UK Intellectual Property Office, Transitional provisions for the repeal of section 52 of the Copyright, Designs and Patents Act of 1988 (2015) 3. 168  Case I ZR 143/​12 (13 November 2013 BGH). 169 See (n 168). 170 See (n 168).

Design Protection   593

5.5 Other Design Protection Schemes Several European countries offer protection against the copying of product designs under various theories of unfair competition, including “slavish imitation” and “parasitism.” In Italy, for example, the Intellectual Property Court of Milan recently found that a defendant had engaged in parasitic unfair competition in violation of Article 2598(1)(1) and (3) of the Italian Civil Code when it slavishly imitated the interior design of the plaintiff ’s cosmetics stores.171 (The court also found copyright infringement.)172 However, in Mega Bloks Inc v Lego System A/​S, the Italian Supreme Court declined to find any unfair competition in the defendant’s production of plastic interlocking blocks that were compatible with the plaintiff ’s, particularly since patent protection for the plaintiff ’s block designs had long since expired.173 Lego has similarly failed under unfair competition law in the Netherlands.174 French law in particular has a well-​developed body of law prohibiting “concurrence parasitaire” (parasitic competition) under the very broadly worded terms of Article 1382 of the French Civil Code.

6. Conclusion With the advent of 3D printing and increasingly flexible and faster modes of production, represented by the spread of “fast fashion” techniques to other sectors of the economy, design law will no doubt gain even greater importance in the future. Though the EU Design Directive and Regulation represent great advances in the rationalization of design law at least within Europe, significant work still remains to be done to clarify and harmonize how the various areas of design law, which consist of parts of patent, copyright, trademark, and sui generis design law, interact within particular jurisdictions and across jurisdictions.

171  Sentence No 11416/​15 (IP Court of Milan (Business Chamber “A”) 13 October 2015). See also Ghidini Cipriano SpA [2006] 28 EIPR N173-​174 (Court of Milan). 172 See (n 171). 173  Mega Bloks Inc v Lego System A/​S [2008] ETMR 73 (Supreme Court of Italy). 174 See Lego Nederland BV v Mega Brands Inc (Case LJN BJ6999) (20 November 2009 Supreme Court of The Netherlands).

Chapter 21

Rights in Data a nd Informat i on Huw Beverley-​S mith * 1. Introduction Data and information are somewhat amorphous categories in legal terms. Although information, in various forms, may give rise to intellectual property (IP) rights, in Europe as elsewhere the law has been reluctant to treat information itself as property.1 Protection may be achieved through literary copyright, the sui generis database right, database copyright, and the law of confidence. The law also affords a period of exclusivity in specific circumstances to clinical trial data where, for practical reasons, the data cannot be kept confidential.2 Much of what goes on in the modern world requires the ability to collect, analyze, and transfer data across borders, and the traditionally territorial nature of IP rights can pose obstacles. The laws relating to databases in the European Union (EU) have been the subject of an ambitious program of harmonization. This was intended to stimulate investment in the database industry, allow the development of markets in data and information, and improve the global competitiveness of the European database industry.3 More recently the protections afforded to individuals’ personal data in the EU have grown significantly as the courts and legislatures have sought to harmonize upwards and outwards through further substantive rules on the collection, storage, and processing of personal data, and through restrictions on transfers of such data outside the European Economic Area.4

* 

Huw Beverley-​Smith has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1 See Your Response Ltd v Datateam Business Media Ltd [2014] EWCA Civ 281 [42] (information in a database cannot be physically possessed and regarded as tangible property which could be subject to the tort of conversion or the exercise of a possessory lien). Cf Thyroff v Nationwide Mutual Ins Co NY 3d 283 (2007) (copying of electronic records and data could constitute conversion); and see T Hoeren, “Big data and the ownership in data: recent developments in Europe” (2014) European Intellectual Property Review 751. 2  See text accompanying ns 170 to 180. 3  See text accompanying ns 16 to 33. 4  See text accompanying ns 156 to 166.

Rights in Data and Information    595 Apart from IP rights in collections of data, the economic value of data relies on property rights in a number of related areas. They include the software that allows the intelligent processing of the data,5 the physical infrastructures that allow increasingly vast quantities of data to be stored, and the communication networks that provide inter-​connectedness. These are often as critically important as the data itself, particularly where the speed of collation, analysis, and onward transmission is a key economic driver. The economic value of data and databases has traditionally derived from a combination of factors such as accuracy, comprehensiveness, and currency. However, their economic worth increasingly derives from the insights that can be gleaned from analysis of data, frequently through combining multiple sources of data—​both public and private. In particular, the analysis of personal data (and its combination with other data) can account for much of their economic or social value, for example, for marketing, medical diagnostics, or crime prevention. Data relates to all aspects of an individual’s life, including health, finances, buying habits, and geolocation, through to consumption patterns relating to essential goods, services, and entertainment. Through combination with, or analysis against, other data sets (for example, general demographic patterns), an almost endless range of analytical inferences may be drawn. Such data may be volunteered by individuals when contracting for goods or services, through providing personal details such as name and address or bank account. Alternatively, the data may be observed by capturing an individual’s online search behavior, consumption patterns, geolocation, or driving habits, subject to varying degrees of awareness, prior notice, or consent. Personal attributes, such as browsing habits and medical conditions, do not attract property rights—​none are required to bring them into existence.6 They are purely personal and have very few of the classical incidents of proprietary subject matter, with safeguards against their harmful use being essentially granted by law. Their commercial value, which underpins many information society services that are provided at minimal or no cost to the end user, frequently comes from marketing potential and aggregation. The uses made of collections of data, which may include personal data, go way beyond IP law and privacy. The impacts on property rights, the free flow of scientific research and creative endeavors, market competition by new market entrants, personal privacy, and security are obvious. Somewhat less apparent are the impacts on areas such as criminology, employment, and social discrimination, where the datasets themselves, or the analytical techniques employed, introduce bias7. Any legal system must balance the potentially conflicting interests of a number of participants. Creators, curators, and aggregators of data must be given appropriate incentives to invest in the collection and storage of data without conferring excessive market power on those who are effectively the only source of such data. Users, including commercial competitors, academic researchers, and journalists, must have free access to the data. Governments have particular responsibilities (not least given their roles as 5 

Council Directive (EC) 96/​9 on the Legal Protection of Databases [1996] OJ L77/​20 (hereafter Database Directive) art 1(3) explicitly states that it does not apply to the computer programs used in making or operating databases. 6  See P Samuelson “Privacy as Intellectual Property” (1999) 52 Stanford L Rev 1125, 1138. 7  See Federal Trade Commission: “Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues” (2016); J Chan and L Bennett Moses “Is Big Data Challenging Criminology?” (2016) 20 Theoretical Criminology 21.

596   Huw Beverley-Smith primary generators of some of the largest data collections) in balancing requirements of freedom of information and stimulating innovation through free access while securing national interests in security. Intermediaries such as search engine providers and social media platforms are becoming subject to further obligations imposed by regulators, and this is partly driven by the increasing scrutiny of a growing body of privacy activists. While these issues are universal, the EU, which is the primary focus of this chapter, has seen the greatest interfusion of legal concepts which have been driven by underlying economic and political imperatives.

2.  Rights in Databases in the European Union 2.1 Context and Introduction While individual items of information do not attract property rights, most legal systems protect compilations of data.8 This has proved to be a controversial and difficult balance to achieve on a number of levels. For example, there has traditionally been a reluctance to protect fundamental building blocks of knowledge, and difficulties in identifying the nature and scope of incentives required for the investment required in collections of data. At a more theoretical level, collections of factual data have never sat easily within author-​centric concepts of European copyright law, or even within the more pragmatic conceptions of authorship in the common-​law systems:9 “copyright law has always dealt more comfortably with the novelist, painter or composer, than with the historian, reporter or compiler.”10 Frequently, the value of a database derives not from the novelty or originality of the information, but simply from the fact that it is a complete and comprehensive collection of facts, free from any superfluous materials. Similarly, the creative structuring of the data may add very little value and may, in fact, impede rather than improve accessibility of the data. Many databases, therefore, involve no (or at least only minimal) intellectual or creative effort. Obvious examples featuring in the case law are telephone directories and dictionaries. Moreover, databases often consist of information generated by the database makers themselves, as in the case of telephone directories created by telecoms companies, trading data from financial markets, and sporting fixtures. These are often a by-​product of a principal business activity, such as organizing sporting events. Such “single source” databases 8 

The Berne Convention for the Protection of Literary and Artistic Works (opened for signature 9 September 1886, entered into force 5 December 1887) 1161 UNTS 30 (“Berne Convention”) has, since 1948, required member countries to protect “[c]‌ollections of literary or artistic works such as encyclopaedias and anthologies which, by reason of the selection and arrangement of their contents, constitute intellectual creations” (art 2(5)), and the World Trade Organization Agreement on Trade-​ Related Aspects of Intellectual Property (opened for signature 15 April 1994, entered into force 1 January 1995) 33 ILM 81 (hereafter TRIPS) requires protection for compilations of data or other material “which, by reason of the selection or arrangement of their contents constitute intellectual creations” (art 10(2)). 9  JH Reichman and P Samuelson, “Intellectual Property Rights in Data?” (1997) 50 Vanderbilt L Rev 51, 76. 10  R Denicola, “Copyright in Collections of Facts: A Theory for the Protection of Nonfiction Literary Works” (1981) 81 Columbia L Rev 516. See also the discussion of copyright by Jane Ginsburg in C ­ hapter 18.

Rights in Data and Information    597 represent a potentially more dangerous monopoly.11 It is frequently not possible to obtain the data independently, and such collections of data, by their nature, do not require the incentives offered by IP rights. In many cases, the data in question would have been created regardless of any such incentives. IP systems typically address such dangers through compulsory licensing provisions or by specific exclusions or, where this is too politically controversial for a legislature, through restrictive judicial interpretation. Competition law or antitrust laws, particularly the abuse of dominant position, have played a relatively limited role.12 Most legal systems require some intellectual effort or originality for IP rights and do not protect investment or labor as such. For example, US law notably requires that, in order to attract copyright, a compilation of information such as a telephone directory must be its author’s original independent creation. This must involve “a modicum of creativity”13 in the selection or arrangement, although the standard of creativity is extremely low. Some relatively crude, humble, or obvious creative spark will suffice in making non-​obvious choices from a range of options. Mere “sweat of the brow” or industrious collection, however, will not be sufficient.14 Purely factual compilations involving no creativity in the selection, arrangement, or organization of data are, therefore, not entitled to copyright protection.15 In the early 1990s the EU attempted to harmonize the laws that protected the effort that went into creating databases. Differences in the standard of originality required for copyright to subsist in a database were seen as impediments to free movement and a distortion of trade in database products across the European Community.16 The level of protection for databases varied considerably between EU Member States. Different standards for subsistence of copyright applied that required varying levels of economic investment in the creation of the database. For example, in the United Kingdom (UK), compilations of data were traditionally protected as literary works. A relatively low level of skill, labor, and judgment in compiling data was sufficient, having regard to the whole process, including the work required to bring the data into existence in the first place.17 Some European countries provided further protection through general concepts of unfair competition,18 and advocated maintaining this approach. Such laws would only apply after the fact and would not provide a positive economic right that could be freely transferred—​factors that weighed against this approach. Moreover, there were significant difficulties in harmonizing such

11 

See E Derclaye, “An Economic Analysis of the Contractual Protection of Databases” [2005] Journal of Law, Technology and Policy 101, 111. 12  See MJ Davison, The Legal Protection of Databases (CUP 2003) 43–​46. 13  Feist Publications, Inc v Rural Telephone Services Co 499 US 340 (1991) (hereafter Feist) 341. 14  See, eg, Feist, 345–​348; and see JC Ginsburg, “No ‘Sweat’? Copyright and other Protection of Works of Information After Feist v Rural Telephone” (1992) Columbia L Rev 338; Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCAFC 44 (where the Federal Court of Australia held that there to be insufficient intellectual effort in producing original expression or arrangement of information in directories compiled by computer programs). 15  Feist, 349. 16  Commission of the European Communities, “DG Internal Market and Services Working Paper First evaluation of Directive 96/9/EC on the legal protection of databases” (2005) 3. 17  Football League Ltd v Littlewoods Pools Ltd [1959] 1 Ch 637 (Ch); Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 All ER 465 (House of Lords). 18  Davison (n 12) 103–​160.

598   Huw Beverley-Smith laws and in accommodating such a general cause of action within national systems such as the UK.19 The Database Directive attempted to provide a harmonized uniform legal regime to encourage investment in all EU Member States in advanced information processing systems. This was intended to redress a perceived imbalance with the level of investment in the database sector in other countries, particularly the US,20 and to recognize the increasing importance of data as a tradeable commodity. This was in spite of the fact that the US had, at the time, moved away from protecting “non-​original” compilations.21 Similar legislation has been proposed in the US on a number of occasions, but has not been implemented.22 Protection for the contents of a database is primarily secured through a combination of contractual terms restricting the manner and use of a database,23 technological measures, and restructuring the contents of a database to meet the higher requirement of creativity to qualify for copyright protection, the inclusion of additional quasi-​factual materials such as notes and commentary, misappropriation, and unfair competition laws. Notably, the misappropriation branch of unfair competition law has generally played a limited role in the US, restricted largely by the constitutional doctrine that federal statutory IP rights such as copyright and patents are supreme and, in any conflict, pre-​empt the application of state laws.24 It may, however, provide an alternative to copyright claims and prevent the misappropriation of information by free-​riding competitors in respect of time-​sensitive information, such as sports results, which have been generated at a cost where the incentives to invest in producing or maintaining the quality and accuracy of such data might otherwise be reduced.25 The European initiatives were partly driven by a perceived correlation between the strength of national database industries and the high level of protection afforded by copyright in those countries.26 Empirical evidence shows that there has been considerable growth in database production in the US without such protection. In the EU, the introduction of 19 

See eg, Hodgkinson & Corby Ltd v Wards Mobility Ltd [1994] 1 WLR 1564 (Ch) 1569. Database Directive, recitals 7–​12. 21  See (n 14) and Commission of the European Communities (n 16) 10. 22  See JC Ginsburg, “Copyright, Common Law and Sui Generis Protection of Databases in the United States and Abroad” (1997) 66 University of Cincinnati L Rev 151, 171; J Lipton, “Balancing Private Rights and Public Policies: Reconceptualizing Property in Databases” (2003) 16 Berkeley Technology LJ 773, 804; E Derclaye, “An Economic Analysis of the Contractual Protection of Databases” [2005] Journal of Law, Technology and Policy 101, 104. 23  See US Copyright Office “Report on Legal Protection for Databases” (1997) 57; E Derclaye, “An Economic Analysis of the Contractual Protection of Databases” [2005] Journal of Law, Technology and Policy 101, 104. 24  See, eg, Sears, Roebuck & Co v Stiffel Co 376 US 225 (1964); Compco Corp v Day-​Brite Lighting Inc 376 US 234 (1964); Bonito Boats Inc v Thunder Craft Boats Inc 489 US 141 (1989); and see generally Restatement, Third, Unfair Competition (1995) §38; DG Baird “Common Law Intellectual Property and the Legacy of International News Service v Associated Press” (1983) University of Chicago L Rev 411. 25  See, eg, National Basketball Association v Motorola, Inc 105 F 3d 841 (2nd Circuit 1997); N Khadder, “National Basketball Association v Motorola, Inc” (1998) 13 Berkeley Technology LJ 3. 26  Davison (n 12) 61. See also PK Yu, “The Political Economy of Data Protection” (2011) 84 Chicago-​ Kent L Rev 777, 782 (suggesting that the lack of specific US legislation in this area resulted from the relatively weak lobbying efforts on the part of the US database industry partly due to fears that a strong database right might not necessarily strike an appropriate balance between their dual roles as producers and users of data). 20 

Rights in Data and Information    599 further layers of IP protection seems to have had the opposite effect to what was intended.27 Economic imperatives were, therefore, given primacy over the underlying jurisprudential or philosophical foundations in national laws, which resulted in significant conceptual confusion. As originally proposed, the Database Directive was intended to provide relatively limited protection solely for electronic databases, and for contents that were not protected by copyright. Protection was to be based on the unfair competition principles of a number of EU countries (whose existence was regarded by some countries as making the Database Directive unnecessary), with broad exceptions and provisions for compulsory licensing of sole source information.28 In its final form, the Database Directive was the product of a political compromise and significant industry lobbying, based on English copyright law’s relatively low originality requirement, protecting data in any form, regardless of any copyright in its contents, coupled with continental European systems’ much more limited exceptions to copyright protection (designed for copyright regimes with high standards of originality).29 The seemingly basic question of whether such rights are justified does not seem to have been posed, let alone answered.30 The Database Directive introduced a two-​tier system. Copyright protection was retained for the structure of databases (to the extent that copyright subsists under national laws), but not their contents. Pre-​existing rights in such contents (often held by multiple owners) were not affected.31 A new sui generis “database right” was introduced to protect and encourage the investment of the creator of the database in creating the structure that allows the data to be organized and retrieved, although protection does not extend to the data or information itself.32 However, there is no clear dichotomy between the protection of structure and contents: There is a considerable overlap inherent in the tests for ownership, subject matter, and exceptions.33

2.2 Copyright Protection for Databases Copyright protection for the structure of databases (lasting for a period of 70 years from the end of the calendar year in which the author of the database dies) was maintained. However, as a key part of the harmonization measures, the Directive introduced a different, and higher, standard. As a result, copyright in a database subsists only in respect of the selection or arrangement of the contents of a database. Any skill and labor in creating the 27 

Commission of the European Communities (n 16) 24. Cf Database Directive, art 16(3), which ultimately included a review mechanism for the possible introduction of compulsory licensing provisions; Radio Telefis Eireann v Commission of the European Communities [1995] ECR I-​743. 29  Davison (n 12) 51–​52; Reichman and Samuelson (n 9) 73–​76. 30  R Jacob, “Is Intellectual Property the Grit in the Wheels of Industry?” (2012) UCL Journal of Law & Jurisprudence 1, 14. 31  Database Directive, art 3(2). 32  Case C-​203/​02 British Horseracing Board Ltd v William Hill Organisation Ltd [2005] ECR I-​10415 (hereafter British Horseracing Board) para 31; Directmedia Publishing GmbH v Albert-​Ludwigs-​Universität Freiburg [2008] ECR I-​7565 (hereafter Directmedia) para 46. 33  Davison (n 12) 81. On overlapping protection for databases, see also Estelle Derclaye’s perspective in ­Chapter 22. 28 

600   Huw Beverley-Smith contents themselves, or the addition of contextual significance to a pre-​existing item of data (for e­ xample, selecting the dates of football fixtures and allocating specific matches to those dates) are irrelevant.34 Moreover, to qualify for copyright protection, the database must be original and “constitute the author’s own intellectual creation.”35 This is the sole test (borrowed directly from the EU Software Directive)36 without any aesthetic or qualitative criteria.37 This concept was derived from international conventions38 and was common in many civil law jurisdictions, such as the French notion of the author’s imprint of personality or the German test of personal intellectual creation. However, it introduced a higher threshold and a fundamentally different substantive test in some counties, eg, the UK. This raised significant difficulties in interpretation requiring references to the Court of Justice of the European Union (CJEU). The threshold is satisfied where the selection or arrangement of the data is the result of creative choices bearing the stamp of the author’s personal touch.39 Databases whose structures are dictated by technical rules, constraints, or considerations will not qualify for copyright protection.40 Such an approach, in theory, reduces the potential anti-​competitive effects of granting copyright in common database structures.

2.3 Database Right The Database Directive also requires Member States to provide protection in the form of a sui generis database right. The database right is a property right that may be transferred, assigned, or granted under contractual license.41 This second tier provides protection against extraction or reutilization of the contents of a database that would otherwise fail to meet the originality requirement under copyright law42. It was partly influenced by the existence of catalogue laws in some EU countries, eg, Sweden, which provided a short term of protection against unauthorized reproduction for non-​original factual compilations. The database right is entirely separate from any copyright in a database. It applies, regardless of whether the database or the contents of the database qualify for protection by copyright or any other rights.43 Protection for the underlying computer programs used in making the database is excluded, since such programs are protectable as literary works.44 The database right has 34

  Case C-​640/​10 Football Dataco Ltd v Yahoo! UK Limited EU:C:2012:115 (hereafter Football Dataco) [19], [24] and [46]. 35   Database Directive, art 3 and recital 15; The Copyright and Rights in Databases Regulations 1997 (UK) (hereafter Database Regulations) regs 6 and 16; Football Dataco, para 37; and see Infopaq International A/​S v Danske Dagblades Forening [2009] ECR I-​6569, paras 35, 37 and 38; Painer v Standard Verlags GmbH [2012] ECDR 6 (hereafter Painer) para 87. 36   Council Directive 91/​250/​EEC of 14 May 1991 on the Legal Protection of Computer Programs [1991] OJ L 122/​42, art 1(3). 37   Case C-​444/​02 Fixtures Marketing Ltd v Organismos Prognostikon Agonon Podosfairou [2005] CMLR 16 (hereafter Fixtures Marketing Ltd v Organismos) para 26. 38   Berne Convention, art 2(5); TRIPS, art 10(2). 39 40  Football Dataco, paras 38 and 39.   Football Dataco, para 33; Painer, para 92. 41  Case C-​338/​02 Fixtures Marketing Ltd v Svenska Spel AB [2004] ECR I-​10497 (hereafter Fixtures Marketing v Svenska) para 3. 42  Database Directive, art 7. 43  Fixtures Marketing v Svenska, para 4; Case C-​545/​07 Apis-​Hristovich EOOD v Lakorda AD [2009] ECR I-​1627 (hereafter Apis-​Hristovich) para 4. 44  Database Directive, recital 23.

Rights in Data and Information    601 been frequently cited as “one of the least balanced and most potentially anti-​competitive intellectual property rights ever created.”45 However, its practical effects in restricting competition and free access to data have been more limited following a series of decisions of the CJEU ruling on the key elements of the database right in the context of the licensing of data relating to sporting fixtures.46

2.3.1 Key Elements A “database” is defined as “a collection of independent works, data, or other materials that are arranged in a systematic or methodical way, and are individually accessible by electronic or other means.”47 The database right can subsist whether or not the database or its contents is a copyright work. Compilations of data that do not amount to a “database” as defined under the Database Directive continue to be protected as literary works. This has relatively limited application, given the wide definition of a database, which does not need to be in an electronic form. This can include an index, table of contents, or a plan or method of classification.48 The right is therefore potentially extremely wide in scope, and applies to databases “in any form,” a factor that led to considerable unease from commentators when it was introduced.49 Databases potentially within its scope include literary, artistic, musical, or other collections of works, or collections of other material such as texts, sound, images, numbers, facts, and data. It is not limited by specific technical or minimum volume requirements.50 Thus, national laws have protected as databases, for example, listings of telephone subscribers; compilations of case law and legislation; websites containing lists of classified advertisements; catalogs of various information; and lists of headings of newspaper articles.51 The data may be drawn from the database creator’s own materials, independent sources, or a combination of both.52

2.3.2 Nature of the Data A database must be a collection of independent materials, which are separable from each other, without affecting their informative, literary, artistic, musical, or other value. Further, the data must be accessible individually. This excludes, for example, combined audio-​visual works such as a DVD, since access to such works requires the combination of sound and image.53 The informative value of the independent materials is assessed in the light of its utility to the person extracting the material (for example, for the purposes of combination 45 

Reichman and Samuelson (n 9) 81. British Horseracing Board; Case C-​46/​02 Fixtures Marketing v Oy Veikkaus Ab [2004] ECR I-​10365 (hereafter Fixtures Marketing v Oy Veikkaus); Fixtures Marketing v Svenska; Fixtures Marketing Ltd v Organismos. 47  Database Directive, art 1(2). 48  Database Regulations, reg 1(2); Fixtures Marketing Ltd v Organismos, para 30. 49  Reichman and Samuelson (n 9) 85. 50  Fixtures Marketing Ltd v Organismos, paras 20–​25; Case C-​30/​14 Ryanair Ltd v PR Aviation BV EU:C:2015:10 [33]. 51  Commission of the European Communities (n 16) 11–​12. 52  Fixtures Marketing Ltd v Organismos, para 25. 53  Fixtures Marketing v Organismos, para 39. 46 

602   Huw Beverley-Smith with other materials) and not necessarily a typical user. Therefore, it will not necessarily matter if the value of the independent extracted materials is reduced when they are taken out of the context of a database as a whole (for example, individual geographical features or co-​ordinates of data extracted from maps, which would be of limited value when used in isolation).54

2.3.3 Requirements for Subsistence Unlike traditional continental European copyright models or the classical US constitutional copyright property model, which seek to promote the progress of science and useful arts, the database right does not require creative or technical achievement.55 The database right protects the financial and professional investment in the creation of data storage and processing systems, which allow verification and presentation of the contents of a database, a point that resonates in the case law.56 Therefore, the key qualifying test is whether there has been a substantial investment, qualitatively or quantitatively, in obtaining, verifying, or presenting the contents of the database.57 These activities can involve relatively mundane “sweat of the brow” processes, intellectual creativity, or a combination of both.58 The nature and extent of the investment have proved to be two key tests in limiting the wide scope, and potentially anti-​competitive effects, of the database right. In particular, the investment in creating the raw data that can subsequently be stored in the database, such as football fixture lists,59 or horse racing events,60 is not protected by the database right on the basis that it needs no specific encouragement.61 Similarly, investment in verifying the data must relate to the (frequently resource-​intensive) process of ensuring the accuracy of the data when the database is created and subsequently maintained. The investment required in verifying the data when it is initially created (or collated) is not protected.62 Therefore, databases that are by-​products of a principal activity will not be protected as such. This reflects the approach that had been taken in some EU jurisdictions (for example, the Netherlands), although through interpretation of the provisions of the Database Directive itself rather than through the adoption of the Dutch theory that databases that are mere “spin-​ offs” of other activities are not protected.63 A great many human activities produce some form of information as a by-​product. The utilitarian basis of the Database Directive, with its focus on promoting investment in databases, does not justify protecting information that 54

  Case C-​490/​14 Freistaat Bayern v Verlag Esterbauer GmbH [2016] ECDR 6, paras 19–​28.   Reichman and Samuelson (n 9) 54. 56   British Horseracing Board, para 30; Fixtures Marketing v Svenska, para 27. 57 58  Davison (n 12) 85.   Database Directive, art 7(1); Fixtures Marketing v Svenska, para 22. 59  Fixtures Marketing v Organismos, para 49; Fixtures Marketing v Oy Veikkaus, para 29; Fixtures Marketing v Svenska, para 33. 60  British Horseracing Board, para 80. 61  Fixtures Marketing v Organismos, para 39; Fixtures Marketing v Oy Veikkaus, para 46; Fixtures Marketing v Svenska, para 24; British Horseracing Board, para 31. Cf British Sky Broadcasting Group plc v Digital Satellite Warranty Cover Ltd [2011] EWHC 2662 (Ch). 62  British Horseracing Board, paras 34–​36; Fixtures Marketing v Svenska, para 34; Fixtures Marketing v Organismos, para 43. 63  See PB Hugenholtz, “Abuse of Database Right—​Sole Source Information Banks Under the EU Database Directive” in F Lévêque and H Shelanski (eds), Antitrust, Patents and Copyright: EU and US Perspectives (Edward Elgar 2005) 203. 55

Rights in Data and Information    603 would, in any case, derive automatically from those activities.64 The fact that creating a database is linked to a principal activity (for example, creating sporting fixtures, travel timetables, or TV program schedules) in which data will be generated does not, in itself, preclude protection under the database right. However, it must be shown that there has been substantial investment in quantitative or qualitative terms, which is independent of the resources used to create the raw data,65 for example, in verifying or presenting (but not necessarily changing) the contents. As the European Commission has noted in a reasonably frank appraisal, such an approach is at odds with the original intention of protecting “non-​original” databases in a wide sense. However, it highlights the serious difficulties raised by attempting to harmonize national laws by recourse to untested and ambiguous legal concepts, which do not have precedent in any international convention.66

2.3.4 Term of Protection The basic term of protection is much shorter than copyright: 15 years from the end of the calendar in which the database was completed.67 This is longer than initial proposals for a ten-​ year term modeled on the laws of Sweden, Denmark, and Finland,68 but significantly shorter than the 25-​year term proposed in initial drafts. It inevitably reflects the basic compromise that most IP rights must achieve between providing adequate incentives and a fair return on investment, and potentially limiting effects on free access and competition. This will obviously vary, depending on a number of factors, such as the nature of the data and its market audience, time sensitivity, and volatility.69 However, it provides a greater degree of certainty than a cause of action based on misappropriation, where protection only endures as long as the data remains new and timely. Where a database is made available to the public before the end of such period, rights in the database expire 15 years from the start of the year following the date when the database was first made available to the public. Making a database available to the public within the original 15-​year term will therefore result in the clock re-​setting with the start of a new 15-​year term. A database may qualify for a new period of protection where there is a substantial change (evaluated qualitatively or quantitatively) to the contents of the database.70 This will include any substantial change resulting from cumulative additions, deletions, or modifications. The key test is whether the changes constitute a substantial new investment in the database itself (which can potentially include substantial verification of the contents of the database).71 If this can be established, over and above mere addition of further data, then a rolling period of protection can exist. As a consequence, those parts of the database that have not been updated will continue to be subject to the same period of exclusivity. This can be justified on the basis that the database right protects the investment in the database itself, rather than the 64

  See E Derclaye, “Databases ‘Sui Generis’ right: should we adopt a spin-​off theory” [2004] European Intellectual Property Review 402, 406. 65   British Horseracing Board, para 35; Football Dataco, para 46. 66  Commission of the European Communities (n 16) 24. 67  Database Directive, art 10; Database Regulations, reg 17. 68  See Davison (n 12) 59. 69  J Lipton, “Balancing Private Rights and Public Policies: Reconceptualizing Property in Databases” (2003) 16 Berkeley Technology LJ 773, 780. 70  Database Directive, art 10(3) and recitals 54 and 55; Database Regulations, reg 17(3). 71  Database Directive, recital 55.

604   Huw Beverley-Smith information contained within it. Fundamental building blocks of information may continue to be used by competitors, but not at the expense of those who have invested in collating and verifying such elements.

2.3.5 First Ownership The “maker” of a database is the first owner of the database right.72 This definition contrasts with the notion of authorship in copyright law, and raises issues both on a conceptual and practical level. The maker of the database is the person who takes the initiative and bears the risk of investing in the obtaining, verification, or presentation of the contents of a database, which reflects the primary aim of protecting and encouraging investment.73 Where the making involves mere sweat of the brow, there will be a maker, but no author.74 Where a database is commissioned, the commissioner will usually be the “maker” and first owner of the database right. Some anomalies exist. Where a business commissions a database, it is likely to be the owner of the database right since it takes the initiative and bears the investment risk, although copyright in the database may remain with the contractor as the author of the work unless it is assigned. Arrangements regarding databases created by employees are left to the discretion of EU Member States. Where a database is made by an employee in the UK in the course of employment, unless otherwise stipulated the employer is regarded as the maker of the database.75 Crucially, the maker must be based in the European Economic Area, either as nationals or residents or, in the case of companies and firms with their central administration or principal place of business. Protection is not provided to databases from other countries outside of the European Economic Area in the absence of reciprocal protection,76 which was somewhat controversially to the detriment of US database producers at the time. To maintain the competitive advantage of US database producers, the US Congress considered many legislative proposals in the mid-​to-​late 1990s, some of which were closely modeled on the Database Directive77 to strengthen database protection, although none were adopted.78

2.3.6 Infringement In the absence of general fair use defenses or a reasonably broad range of exceptions, the scope of infringement has become critical in mitigating the potential anti-​competitive effects of the database right. The right is infringed by the unauthorized (rather than unfair) “extraction or reutilization of the whole or a substantial part of the contents of the database.”79 This may be assessed quantitatively by reference to the volume of the data that is extracted and/​or reutilized in relation to the database as a whole. Alternatively, it may be assessed qualitatively, by reference to the nature and scale of the financial investment in obtaining, verifying, and 72

  Database Regulations, reg 15. 74  Davison (n 12) 83. Database Directive, recital 41; Database Regulations, reg 14. 75  Database Regulations, reg 14(2). 76  Davison (n 12) 63. 77  Bill 3531, introduced in 1996 (104th Congress). 78  See (n 22). Similarly, proposals for a WIPO treaty have not come to fruition: see Davison (n 12) 226–​234. 79  Database Directive, art 7(1); British Horseracing Board, para 69. 73 

Rights in Data and Information    605 presenting the contents of the database. A quantitatively negligible part of the contents of a database may represent significant human, technical, or financial investment in obtaining, verifying, or presenting the data.80 Crucially, the intrinsic value of the materials themselves is irrelevant, since the database right does not protect the raw data itself or provide a cause of action for misappropriation of data. What must be assessed is the overall contribution of the data to the database owner’s investment in the database as a whole, rather than the effect on the database owner’s business. Thus, for example, although the rider names, dates, and times of horseraces may have been vital to the database owner’s business, it was irrelevant to the question of whether there had been extraction or reutilization of a substantial part of the total volume of the contents of the database.81 The database right is also infringed by repeated and systematic (construed cumulatively) extraction and/​or reutilization of insubstantial parts of the contents of the database in a way that conflicts with the normal exploitation of the database or that unreasonably prejudices the legitimate interests of the maker of the database. The fact that the contents were made available to the public by the database owner does not exhaust the owner’s rights to prevent extraction or reutilization of the whole or a substantial part of the database.82 “Extraction” is defined as the permanent or temporary transfer of those contents to another medium by any means or in any form.83 The concept of “reutilization” covers the process of making all or a substantial part of the contents available to the public.84 Both concepts are interpreted broadly in the light of the objective of the database right—​to protect the database owner’s investment85 and cover any unauthorized act of appropriation of the whole or a part of the contents of a database without the owner’s consent, which would deprive the owner of the revenue from the investment in creating the database.86 The purpose of the extraction or reutilization, including, for example, whether it will be used for creating another (competing) database, or whether it is used for non-​commercial rather than commercial purposes, is irrelevant, provided that there is significant detriment to the maker’s investment.87 The means and form of the processes of extraction and reutilization are immaterial.88 It is also immaterial that the transfer of the contents of a protected database to another medium results in an arrangement or an organization of the material concerned that is different from that in the original database.89 Direct access to the database is not a prerequisite and indirect extraction or reutilization may infringe.90 Infringement is not limited to an electronic or mechanical transfer. The concept of extraction covers the transfer of the elements of one database to another following consultation, and can apply in the case of manual recopying and where there has been some modification of the contents during the process of recopying.91 Factors such as lack of competition between the original and infringing databases, differences in size, and use for 80

  British Horseracing Board, paras 70–​7 1; Apis-​Hristovich.   British Horseracing Board, para 82. 82   Database Directive, art 7(5); British Horseracing Board, paras 25 and 67. 83   Database Directive, art 7(2)(a); Apis-​Hristovich. 84  Database Directive, art 7(2)(b). Cf Database Regulations, reg 16(2). 85  Directmedia, paras 33 and 34. 86  British Horseracing Board, para 51. 87  Directmedia, paras 46–​47; British Horseracing Board, para 48. 88  British Horseracing Board, paras 51 and 67; Case C-​545/​07 Apis-​Hristovich, para 40. 89  Apis-​Hristovich, para 47. 90  British Horseracing Board, para 53. 91  British Horseracing Board, paras 37–​39. 81

606   Huw Beverley-Smith non-​commercial purposes will not be decisive.92 However, the database right does not provide a right of ownership of information as such, and cannot be used to prevent mere consultation of the contents of a database once access has been authorized by its owner.93

2.3.7 Exceptions A relatively small number of exceptions to the sui generis database right are permitted, which are left to the discretion of EU Member States to implement. Concerns were expressed in academic and scientific communities about the narrow scope of the exceptions and the fact that traditional copyright exceptions, such as fair dealing, were not included. There has been relatively limited harmonization, with some countries choosing not to adopt the Directive’s limited exceptions.94 Lawful users of a database made available to the public without restriction may extract and/​or reutilize insubstantial parts of its contents where this does not conflict with the normal exploitation of the database or unreasonably prejudice the legitimate interests of the database maker or the holder of a copyright or related right contained in the database. Extraction or reutilization of a substantial part of a database’s contents is permitted: (i) for private purposes in respect of non-​electronic databases; (ii) for illustration for teaching or scientific research (provided that the source is indicated and to the extent justified by the non-​commercial purposes to be achieved); and (iii) where extraction and/​or reutilization is undertaken for the purposes of public security or administrative or judicial procedures.95

3.  Confidentiality and Privacy 3.1 Introduction The breach of confidence action has long protected a diverse collection of interests, ranging from primarily economic interests in trade secrets, artistic, literary and journalistic confidences, government secrets, and personal information concerning an individual’s dignity and autonomy. This reflects a number of different underlying bases—​from the basic ethical principle that confidences should be maintained, upholding an implicit social agreement, promoting the national interest, and preventing unjust enrichment through to more utilitarian bases in incentivizing parties to enter into collaborative or mutually beneficial relationships, or to invest in the production of information and knowledge-​based goods and services.96 More recently, the breach of confidence action has played an increasing role in protecting human autonomy and dignity through the development of a separate stream of

92 

93  Directmedia, paras 50–​53. Directmedia, para 47; Apis-​Hristovich, para 60. 95  Database Directive, art 9. Davison (n 12) 156. 96  See T Aplin, L Bently, P Johnson, and S Malynicz, Gurry on Breach of Confidence (2nd edn, Oxford 2012) ch 3; MA Lemley, “The Surprising Virtues of Treating Trade Secrets as IP Rights” in RC Dreyfuss and KJ Strandburg (eds), The Law and Theory of Trade Secrecy (Edward Elgar 2011); RG Bone, “A New Look at Trade Secret Law: Doctrine in Search of Justification” (1998) 86 California L Rev 241. 94 

Rights in Data and Information    607 authorities concerned with the misuse of private information. This has provided a separate common law remedy in addition to the statutory scheme for the protection of personal data. Copyright and the database right protect information in a particular form. Competitors are free to collect the same data and structure it in the same way, provided that this is done independently. The law of confidence can, in appropriate circumstances, protect the substance of the information. Protection is not necessarily limited to information in a particular (written) form of expression, or by notions of the author’s intellectual creation. Confidentiality does not discriminate in respect of term between creative and non-​creative work. Industrious collection with no element of originality or creativity is therefore potentially protectable. Infringement is not limited by copyright law’s test of substantiality.97 Similarly, the law of confidence supplements the laws of patents and designs in a number of ways. It allows competitive advantage to be maintained by restricting disclosure of information prior to registration. It provides an alternative where it is not commercially feasible to bear the costs of registration or to make the public disclosures required to obtain such rights, or where the information (for example, client lists) would be rendered worthless by disclosure.98 It also provides auxiliary protection for the technical know-​how required to exploit a patented invention or a design. Protection under the law of confidence is not limited to complex, novel, or original information. Similarly, commercial value is not a prerequisite. While the fact that data or information is a licensable commodity will help establish that it is not generally available, and will be a major factor in determining an award of damages or the availability of an injunction,99 the decisive factor will be the nature of the information, not its market value.100 Information that is subject to an obligation of confidence may be in any written, graphic, or oral form that constitutes a specific body of material or source of information101 provided that it is not intermixed with other information, thereby making it difficult to identify for the purposes of an injunction, or inherently vague.102 This final limitation helps draw the boundaries between protectable confidential information and general ideas or concepts, which must remain free in a competitive market.

3.2 Jurisdictional Basis and Key Elements Obligations of confidence have been derived from a number of competing jurisdictional bases, including express or implied contract,103 equity,104 and a right of property in

97 

Aplin et al (n 96) 669. M Landes and RA Posner, The Economic Structure of Intellectual Property Law (Harvard UP 2003) 356. 99  Nichrotherm Electrical Co Ltd v Percy [1956] RPC 272 (Ch) 273. 100  OBG v Allan [2008] 1 AC 1 (HL) (hereafter OBG v Allan) para 299 (Lord Walker), cf para 117 (Lord Hoffmann). 101  Terrapin Ltd v Builders Supply Co (Hayes) Ltd [1967] RPC 375 (Ch) 391. 102  De Maudsley v Palumbo [1996] FSR 447 (Ch). 103  Lamb v Evans [1893] 1 Ch 218 (CA) 229. 104  Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 (CA) (hereafter Saltman). 98 

608   Huw Beverley-Smith information.105 There has historically been limited support or authority for a tortious cause of action for breach of confidence, although a tort of misuse of private information has developed and has finally been acknowledged as a separate cause of action.106 Unsurprisingly, given the range of doctrinal bases, the law of confidence has, until recently, seen relatively limited harmonization. Aspects of the law of confidence are standardized at an international level by the TRIPS Agreement. In the EU, the Trade Secrets Directive107 has introduced a minimum level of harmonization of the disparate laws of trade secrets in Member States, which are based on a number of different criminal and civil law actions. While the focus has been primarily on the procedural rules and remedies, the Directive has introduced a common definition of a “trade secret,” covering know-​how, business information, and technological information where there is both a legitimate interest in keeping such information confidential and a legitimate expectation that such confidentiality will be preserved, and a requirement that reasonable steps be taken to keep the information secret.108 While this is an established concept in some European jurisdictions and originates from the TRIPS Agreement, it will need to be assimilated in the laws of other Member States. In English law, the concept of a “trade secret” has generally been of relatively little significance, except in defining the scope of the implied duty of confidentiality of employees. According to the classic twentieth-​century English law formulation, three key elements are required to establish a breach of confidence action. The information concerned must have: (i) the necessary quality of confidence about it; (ii) been imparted in circumstances importing an obligation of confidence; and (iii) been used without authorization, possibly to the detriment of the party communicating it.109 The first two elements have seen the greatest degree of judicial activity and academic criticism, both in respect of the scope of commercial confidences and the protection of informational privacy. For information to have the necessary quality of confidence110 and to be regarded as confidential, its accessibility must be restricted. Widely known or disseminated material in the public domain will not have the necessary quality of confidence—​which is a question of fact and degree.111 Crucially, once an information product is placed on the market, it will not have the necessary quality of confidence. Competitors with the necessary skills are free to obtain whatever information they can independently by reverse engineering, which is one of the most important ways in which confidentiality expires.112 Use of technological measures, such as encryption, will also not generally be sufficient to import or maintain an obligation of confidence.113 This distinguishes confidentiality from other forms of IP protection in that

105

  Seager v Copydex (No 2) [1969] 1 WLR 809 (CA).   See T Aplin, “The Future of Breach of Confidence and the Protection of Privacy” (2007) 7 Oxford University Commonwealth LJ 137. 107   Directive (EU) 2016/​943 on the Protection of Undisclosed Know-​How and Business Information (Trade Secrets) Against Their Unlawful Acquisition, Use and Disclosure [2016] OJ L 157/​1. 108  ibid art 2(1)(c). 109  Coco v AN Clark Engineers Ltd [1969] RPC 41 (Ch) (hereafter Coco) 47. 110  Saltman, 215. 111  Franchi v Franchi [1967] RPC 149 (Ch); and see Aplin et al (n 96) 153. 112  See RC Dreyfuss “Trade Secrets: How Well Should We Be Allowed to Hide Them? The Economic Espionage Act of 1996” (1998) 9 Fordham Intellectual Property Media and Entertainment LJ 1, 16. 113  Mars UK Ltd v Teknowledge Ltd [2000] FSR 138 (Ch) para 29. 106

Rights in Data and Information    609 confidentiality only provides a limited market lead time for originators of information to recoup their investment.114 Information products differ from manufactured goods in a number of ways. They frequently have high front-​end costs of development with relatively minimal costs of reproduction, can flow across national borders much more readily than tangible products, and in practice may have a shorter lead time.115 Moreover, they often bear a higher proportion of the know-​how “on their face” in the distributed products themselves when compared to manufactured goods, where much of the know-​how remains within the production process.116 Therefore, the challenge for any legal system is to “protect information-​ rich products against market-​destructive cloning, while providing enough breathing room for reverse engineering to enable new entrants to compete and innovate in a healthy way.”117 While reverse engineering may be a slower and more expensive means for information to be disseminated than publication through the patent system, it is arguably an effective source of information. It inevitably requires some degree of borrowing, although this merely reflects the fact that all innovators benefit both from breakthrough innovations and incremental development. All innovators therefore stand on the shoulder of both giants and midgets,118 reflecting the basic reciprocity in the inventive process—​every producer of information is also a consumer.119 Information may still be protected despite some accessibility or some public knowledge, and therefore the structure of aggregated materials that are publicly available may be protected.120 While general availability on the Internet denies information its confidential character, more limited or partial dissemination may not necessarily result in a loss of confidentiality.121 Inaccessibility is generally assessed by reference to the expenditure of intellectual skill and labor that would be necessary to reproduce it: “what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process.”122 This test is applied only to the body of information itself, rather than its constituent parts. Therefore, a database assembled from materials in the public domain may have the necessary quality of confidence if something new and confidential has been created through the application of the skill and ingenuity of the human brain.123 This must go beyond mere expenditure of labor and resources in compiling a non-​selective list of publicly available information.124 This reflects

114  Reichman and Samuelson (n 9) 60; and see JH Reichman, “How Trade Secrecy Law Generates a Natural Semicommons of Innovative Know-​How” in Dreyfuss and Strandburg (n 96) 287. 115  RC Dreyfuss “Information Products: A Challenge to Intellectual Property Theory” (1987–​1988) 20 New York University Journal of International Law and Policy 897, 898–​901. 116  JH Reichman “Legal Hybrids Between the Patent and Copyright Paradigms” (1994) 94 Columbia L Rev 2432, 2438, cited in P Samuel and S Scotchmer “The Law and Economics of Reverse Engineering” (2002) 111 Yale L Rev 1575, 1579. 117 118 119  Reichman, 1580.  Reichman, 1662.   Landes and Posner (n 98) 364. 120  International Scientific Communications Inc v Pattison [1979] FSR 429 (Ch) 433 (customer lists embodied sufficient “labour of composition, experience of the trade, and practical utility” to be confidential trade information). 121  Barclays Bank plc v Guardian News and Media Ltd [2009] EWHC 591 [22]; Aplin et al (n 96) 154. 122  Saltman, 215. 123  Coco, 47. 124  Ocular Sciences v Aspect Vision Care Ltd [1997] RPC 289 (Pat) 375.

610   Huw Beverley-Smith the more general concern that information should not be too readily protected solely on the basis of some form of investment, which clearly disrupts the structure of other IP regimes.125 It remains debatable whether originality or novelty are independent requirements in respect of the information or whether they are factors in considering whether the information is inaccessible and therefore has the necessary quality of confidence. As the authors of the leading text note, the English authorities have shifted between the two concepts with an imprecision that is not evident in the law of copyright or patents. A novelty or non-​obviousness requirement would duplicate the requirements of patent law, which would be difficult to justify given that the confidentiality does not offer the same degree of monopoly protection. Similarly, although confidentiality does not necessarily presuppose originality, the courts have applied a test of originality that is somewhat higher than that applied in copyright law in assessing the confidentiality of relatively general ideas or information that are in the public domain.126 The inherent limitation in using confidentiality to protect data and information has been the (somewhat pliable notion) of an obligation of confidence. Apart from relationships created by contract, the law of confidence has preserved a number of intrinsically confidential relationships, such as doctor and patient, lawyer and client, and fiduciary relationships.127 The courts have focused on the unconscionability of imparting information received in confidence, and acknowledged the artificiality of relying on the violation of a confidential relationship:128 a requirement that would otherwise severely limit the scope of the cause of action. A broader general principle developed, whereby an equitable duty of confidence arises when “confidential information comes to the knowledge of a person . . . in circumstances where he has notice, or is held to have agreed, that the information is confidential, with the effect that it would be just in all the circumstances that he should be precluded from disclosing the information to others.”129 A  duty of confidence will arise whenever a person receives information that he knows, or ought to know (on an objective basis), is fairly and reasonably to be regarded as confidential.130 This somewhat radically developed131 principle can cover information obtained surreptitiously132 or adventitiously, but without authorization,133 key factors being the nature of the information, the understanding of the parties involved, the steps taken to preserve its confidentiality, the manner in which it was obtained or disclosed, and any limitations on the purpose of disclosure.134 The 125

  See H Carty, “An Analysis of the Modern Action of Breach of Confidence: When is Protection Merited?” [2008] Intellectual Property Quarterly 416, 433, citing T Aplin, “Commercial Confidences After the Human Rights Act” [2007] European Intellectual Property Review 411, 415. 126   Aplin et al (n 96) 162; and see Fraser v Thames Television Ltd [1984] 1 QB 44 (QBD); De Maudsley v Palumbo [1996] FSR 447 (Ch); Wade v British Sky Broadcasting Limited [2014] EWHC 634 (Ch). 127   See generally Aplin et al (n 96) ch 9. 128  See Stephens v Avery [1988] Ch 449 (Ch); and see Campbell v MGN Limited [2004] UKHL 22 (hereafter Campbell) [46] (Lord Hoffmann). 129   Attorney-​General v Guardian Newspapers (No. 2) [1990] 1 AC 109 (HL) 281 (Lord Goff). 130   Campbell [14]; Vestergaard Frandsen A/​S v Bestnet Europe Limited [2013] UKSC 31 (hereafter Vestergaard) [25] and [38]; and see R Arnold “Accessory Liability for Breach of Confidence” [2014] European Intellectual Property Review 554. 131  C Hunt, “Rethinking Surreptitious Takings in the Law of Confidence” [2011] Intellectual Property Quarterly 66, 70. 132  OBG v Allen; Shelley Films Ltd v Rex Features Ltd [1994] EMLR 134 (Ch) 144–​150; Creation Films Ltd v News Group Newspapers Ltd [1997] EMLR 444 (Ch) 451–​455. 133  Imerman v Tchenquiz [2010] EWCA Civ 908 [68]. 134  Aplin et al (n 96) 250–​260.

Rights in Data and Information    611 grounding in authority and doctrinal coherence of enjoining surreptitious takings of information on the basis of the equitable notion of unconscionability has been questioned, and the wrong said to be more appropriately characterized as the misappropriation of commercial value, or invasion of personal privacy interests.135

3.3 Informational Privacy and Data Protection 3.3.1 Introduction In the UK, informational privacy has been protected by two parallel strands. First, the statutory scheme protecting personal data deriving from the EU Data Protection Directive, which is, in theory, premised both on the economic aim of facilitating free trade in data and protecting fundamental rights in response to the emergence of a data processing industry in the 1970s.136 Second, the development of the breach of confidence action followed the introduction of the Human Rights Act 1998 in cases of invasion of privacy by disclosure of private facts. The early English authorities on breach of confidence formed the principal basis of a right to privacy in the US.137 The English courts were much more cautious, extending protection incrementally to sensitive personal information relating to private domestic relationships,138 while gradually becoming more explicit in acknowledging the role that the breach of confidence action plays.139

3.3.2 Misuse of Private Information More recently, through a process of accelerated judicial development following the Human Rights Act 1998, the action for breach of confidence has developed to a point where a duty of confidence will arise whenever there is an unjustifiable intrusion into an individual’s informational autonomy in circumstances where a claimant has a reasonable expectation of privacy: an objective test developed from commonwealth case law.140 The second limb of

135 

Hunt (n 131) 85. See generally O Lynskey, The Foundations of EU Data Protection Law (OUP 2015) ch 1; Google Inc v Vidal-​Hall [2015] EWCA Civ 311 [55]–​[58]. 137  Prince Albert v Strange (1848) 2 DeG and Sm 652, 64 ER 293; (1849) 1 Mac and G 25, 41 ER 1171; and see NM Richards and DJ Solove, “Privacy’s Other Path: Recovering the Law of Confidentiality” (2007) 96 Georgetown LJ 123. 138  See, eg, Argyll v Argyll [1967] Ch 302 (Ch); Stephens v Avery [1988] Ch 449 (Ch); Barrymore v News Group Newspapers Ltd [1997] FSR 600 (Ch); Blair v Associated Newspapers Plc (QBD, 13 November 2000); A v B [2000] EMLR 1007 (Ch). 139  See, eg, Hellewell v Chief Constable of Derbyshire [1995] 1 WLR 804 (Ch) 807 (Laws J); R v Department of Health ex parte; Source Informatics Ltd [2001] QB 424 (CA) 440 (Simon Brown LJ); W Wilson, “Privacy, Confidence and Press Freedom: A Study in Judicial Activism” (1990) 53 Modern Law Review 43. 140  Campbell [21], [85] and [134]. Cf E Barendt, “A Reasonable Expectation of Privacy: a coherent or redundant concept?” in AT Kenyon (ed), Comparative Defamation and Privacy Law (CUP 2016) 114, 107–​110; K Hughes, “A Behavioural Understanding of Privacy and its Implications for Privacy Law” (2012) 75 Modern Law Review 806. 136 

612   Huw Beverley-Smith the classic formulation (that the information is disclosed in circumstances importing an obligation of confidence) has been subsumed by the first limb (that the information has the necessary quality of confidence).141 While this branch of breach of confidence concerned with misuse of private information was largely indistinguishable from a pure privacy tort,142 explicit recognition with the appropriate label has been more recent. Actions for breach of confidence and actions under what is now explicitly recognized as a tort of misuse of private information are generally acknowledged to rest on separate legal foundations and protect different interests: Secret or confidential information on the one hand, and privacy on the other.143 This allows the principles of Articles 8 and 10 of the European Convention on Human Rights (ECHR) to be absorbed within English law (through indirect horizontal effect)144 while maintaining the conceptual coherence of the breach of confidence action.

3.3.3 Exceptions It is particularly important to maintain the distinction when considering exceptions to confidentiality or privacy. The action for breach of confidence is subject to a reasonably broad defense of public interest, which may, in appropriate circumstances, outweigh the countervailing public interest in preserving confidences. While originally confined to the disclosure of iniquity,145 which would justify the disclosure of information where the obligation of confidence might still subsist, the broader formulation of a just cause or excuse in the disclosure of “crimes, frauds and misdeeds” has been interpreted flexibly to cover a range of civil wrongs or regulatory matters.146 It permits disclosure where there is a more general countervailing public interest.147 Where the duty of confidence is based on an express contractual duty, however, the public interest in preserving confidences may be given particular weight when balanced against the public interest in disclosure.148 However, in respect of misuse of private information, the balance is not between two competing public interests (the interest in preserving confidences and the countervailing public interest which may favor disclosure). Rather, the balance is between privacy on its own merits as a fundamental right, balanced against any other competing interest and, where applicable, other fundamental rights to freedom of expression.149 While particular regard must be given to freedom of expression when granting relief,150 it does not have presumptive 141  See Douglas v Hello! Ltd [2005] EWCA Civ 595 [83]; Campbell [21]; G Phillipson, “Transforming Breach of Confidence? Towards a Common Law Right of Privacy Under the Human Rights Act” (2003) 66 Modern Law Review 726. 142   See Phillipson (n 141); and see Campbell [21] (Lord Nicholls). 143   Google Inc v Vidal-​Hall [2015] EWCA Civ 311 [17], [25] and [51]; PJS v News Group Newspaper Ltd [2016] UKSC 26 [58]. 144   Campbell [17] and [132]; A v B Plc [2002] EWCA Civ 337 [4]‌; and see AL Young, “Remedial and Substantive Horizontality: the Common Law and Douglas v Hello! Ltd” (2003) Public Law 232; J Morgan, “Privacy, Confidence and Horizontal Effect: ‘Hello’ Trouble” (2003) 62 Cambridge Law Journal 444; Phillipson (n 141) 729–​732. 145  Gartside v Outram (1857) 26 LJ Ch (NS) 113. 146  Initial Services Ltd v Putterill [1968] 1 QB 396 (CA). 147  Attorney-​General v Guardian Newspapers (No 2) [1990] 1 AC 109 (HL); London Regional Transport v Mayor of London [2001] EWCA Civ 1491. 148  Associated Newspapers v HRH Prince of Wales [2006] EWCA Civ 1776. 149  Aplin et al (n 96) 699. 150  Human Rights Act 1998 (UK) s 12(4).

Rights in Data and Information    613 priority,151 unlike the First Amendment jurisprudence in the United States.152 In granting any relief which might affect freedom of expression,153 the courts must strike what is often a difficult balance between conflicting rights on their merits, and give each right particular weight and regard.154 Moreover, different considerations apply in determining whether information is in the public domain and therefore is no longer confidential or private. While a quantitative approach (measuring what is disclosed against what is undisclosed) may be appropriate in respect of alleged breaches of confidence, this is not appropriate in a privacy claim, as it overlooks the invasiveness and distress involved in the (repeated) disclosure of private information.155

3.3.4 Data Privacy Any data that consist of, or include, personal data (which relate to a living individual who can be identified from that data, whether alone or combined with other information)156 comes with additional obligations. Such obligations are placed on the data controller: the person who decides for what purpose the data is used. Control of the data does not presuppose ownership or any form of IP right. In contrast with the protection conferred by the law of confidentiality, it is irrelevant whether the information has previously been published,157 or is subject to a reasonable expectation of privacy. The “identifiability” of an individual is construed broadly. It can result from the association of the information with other information having regard to “all the means likely reasonably to be used either by the controller or by any other person to identify” the data subject.158 Therefore, the obligations are potentially extensive: applying to data that has been modified by pseudonymizing or anonymizing techniques to make direct identification more difficult.159 The last decade has seen significantly increased technical opportunities for analysis of data, which results in precisely targeted marketing. This has given rise to increased regulatory scrutiny and heightened efforts on the part of privacy activists. Data subjects have a number of qualified rights in respect of the processing of their personal data. Such rights allow the data subject access to their data and information about the nature and purposes

151 

Attorney-​General v Guardian Newspapers (No 2) [1990] 1 AC 109, 283 (Lord Goff); Imutran Ltd v Uncaged Campaigns Ltd [2001] 2 All ER 385 (Ch) 389–90 (Morritt VC). 152  Campbell [55] and [106]; PJS v News Group Newspaper Ltd [2016] UKSC 26 [20] and [33]. 153  Human Rights Act 1998 (UK) s 12(1). 154  Campbell [111]; and see generally, G Phillipson, “Press Freedom, the Public Interest and Privacy” in Kenyon (n 140) 136, 137 (arguing that the balance increasingly lies in favor of press freedom even where the public interest in disclosure is limited). 155  PJS v News Group Newspaper Ltd [2016] UKSC 26 [25] and [26]. 156 Cf Durant v Financial Services Authority [2003] EWCA Civ 1746. 157  Aplin et al (n 96) 580. 158  Directive 95/​46/​EC of the European Parliament and of the Council of 24 October 1985 on the protection of individuals with regard to the processing of personal data and on the free movement of such data [1995] OJ L 281/​31 (hereafter Data Protection Directive) recital 26. 159  See generally Data Protection Working Party “Opinion 05/​2014 on Anonymisation Techniques,” art 29.

614   Huw Beverley-Smith of processing activities, to enable them to verify the accuracy of the data, the lawfulness of the processing, and the logic involved in automated decision making, provided that this does not adversely affect trade secrets (a notion that is not defined in the Data Protection Directive) or IP rights, in particular the copyright in the relevant software.160 In addition, data subjects have the right to object to certain types of processing, for example, direct marketing purposes or automated decision making that have significant consequences such as creditworthiness or performance at work.161 Data subjects may also object to processing of data that is likely to cause, or is causing, damage or distress,162 and to receive compensation from a data controller where damage has been suffered as a result of unlawful processing of personal data.163 The notion of “damage” includes both material and non-​material harm, and the distressing invasion of privacy (termed “moral damage” in many European systems, including France and Germany) is taken to be the primary form of damage, rather than pecuniary damage.164 Thus, the use of software to collect private information relating to web browsing habits, which allows targeted advertising on users’ web browsers, thereby creating the prospect that personal information might be revealed, has been held to be capable of resulting in such distress. It was not possible to reach this conclusion through a literal interpretation of the relevant UK legislation, which therefore had to be dis-​applied165 on the basis that it conflicted with fundamental rights to privacy and family life.166 The right of rectification, erasure, or blocking of the data processing has similarly been interpreted expansively, and has received explicit recognition as a “right to be forgotten,” although it has fallen some way short of a right of anonymity.167 The scope of the right of rectification includes the processing of personal data undertaken by search engines as a data controller,168 independently of any obligations on the publisher of a website, which reflects their role in providing a structured means of increasing access to personal data. A balance must be struck between the data subject’s fundamental rights to respect for privacy and family life and to the protection of personal data and other competing interests. This balance will vary, depending on the nature of the information in question, its sensitivity for the data subject’s private life, and the public interest in receiving the information, particularly with regard to the role played by the data subject in public life. The rights of the data subject will, as a general rule, prevail over the economic interests of search engine operators (SEO);169 as a result, SEOs are no longer regarded as independent intermediaries, and carry significant responsibilities in achieving such a balance. 160

  Data Protection Directive, art 15(1) and recital 41.   Data Protection Directive, arts 14 and 15. 162 163  Data Protection Directive, art 23(1).   Data Protection Directive, art 14(a). 164  Google Inc v Vidal-​Hall [2015] EWCA Civ 311 [77]. Cf Johnson v Medical Defence Union Ltd [2007] EWCA Civ 262 (requiring some form of pecuniary loss to establish damage). 165  Under the principle in Case C-106/​89 Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR I-​4135. 166  Charter of Fundamental Rights of the European Union [2010] OJ C 83/​389, arts 7 and 8. 167  Regulation (EU) 2016/​679 on the Protection of Natural Persons with Regard to the Processing of Personal Data and the Free Movement of Such Data, art 17. Cf Melvin v Read 297 P 91 (1931). 168  Case C-​131/​12 Google Spain SL and Google Inc v Agencia Española de Protección de Datos (AEPD) EU:C:2014:317 [23]. 169  ibid para 81. 161

Rights in Data and Information    615

4.  Data Exclusivity As discussed, while data, at least in collected form, attract IP rights, a number of other IP rights, particularly patents, often rely on ancillary data both during the development process and for their subsequent exploitation. In particular, regulatory approvals processes in the medical sector require the submission and analysis of vast quantities of clinical trial data. The TRIPS Agreement requires protection against unfair commercial use of data that are required to be submitted as a condition to approve the marketing of pharmaceutical products.170 While protection in the EU and the US was relatively well-​developed,171 many countries offered limited protection and had differing requirements for the submission of data in support of their regulatory approvals processes.172 All medicinal products in the EU are subject to a strict system of testing and assessment of their quality, efficacy, and safety before being authorized and marketed for public use.173 This applies regardless of whether patent protection is sought for such products. Significant amounts of data are required as part of this costly and time consuming process. Since a patent is often filed at the beginning of the development process, much of the patent term can be lost in the pre-​market development phase, which requires a system of extensions to the patent term. Additional protection is therefore arguably required, although critics claim that this may result in double recovery of costs that may already be recovered through patent protection with no real incentive to promote incremental research.174 Prior to the introduction of the data exclusivity right, pharmaceutical test data was protected through confidentiality laws that varied significantly from country to country. Following significant lobbying from the pharmaceutical industry in the EU, which sought protection at a level provided in the US and a harmonized level of protection to compensate for differences in national patent laws that existed at the time, a new period of exclusivity was introduced.175 Innovators have a limited period of exclusivity for pre-​clinical tests and clinical trial data (intended to discover or verify the effects of one or more investigational medicines) submitted in support of applications for marketing authorization.176 During the

170  Art 39(3). This requirement is touched on also in Rebecca Eisenberg’s discussion of IP and public health in C ­ hapter 33. 171  In the United States since the Drug Price Competition and Patent Term Restoration Act 1984 (the Hatch–​Waxman Act), and in the EU since Council Directive 87/​21/​EEC of 22 December 1986 amending Directive 65/​65/​EEC on the Approximation of Provisions Laid Down by Law, Regulation, or Administrative Action Relating to Proprietary Medicinal Products [1987] OJ L 15/​36. 172  See GL Skillington and EM Solovy, “The Protection of Test and Other Data Required by Article 39.3 of the TRIPS Agreement” (2003–​2004) 24 Northwestern Journal of International Law and Business 1; and see P Andanda, “Managing Intellectual Property Rights Over Clinical Trial Data to Promote Access and Benefit Sharing in Public Health” (2013) IIC, 140; S Matilal, “Do Developing Countries Need a Pharmaceutical Data-​Exclusivity Regime?” (2010) European Intellectual Property Review 268. 173  For an overview of the US system see D Acquah, “Extending the Limits of Protection of Pharmaceutical Patents and Data Outside the EU—​Is There a Need to Rebalance?” (2014) 45 IIC 25, 260. 174  See C Ho, Access to Medicine in the Global Economy: International Agreements on Patents and Related Rights (OUP 2011) 264. 175  See Ho, 261. 176  Directive 2001/​83/​EC on the Community code relating to medicinal products for human use [2001] OJ L 311/​67 (hereafter Medicinal Products Directive).

616   Huw Beverley-Smith exclusivity period, trial data may not be referenced in regulatory filings submitted by the innovator. This is intended to provide protection against free-​riding competitors. However, a period of exclusivity is only one option, and innovators could arguably be compensated through an entitlement to a license fee.177 Moreover, the standard period of protection does not necessarily correlate directly with the timeframe during which the innovator’s costs may be recovered.178 After the exclusivity period has lapsed, generic manufacturers may rely on the innovator’s data in their submissions. This saves the time and expense to gather the pharmacological, toxicological, and clinical data required to manufacture and market the generic version. In addition to promoting economic efficiency by allowing competition by generic manufacturers and avoiding unnecessary duplication of data, it also serves an important public policy interest by avoiding unnecessary repetition of tests on humans or animals.179 The period of data exclusivity in the EU lasts for eight years from the date of first authorization. This is followed by an additional two years of market protection, during which competitors may not market an equivalent generic version of the product, although they may make use of the data in regulatory applications. The innovator may then qualify for an additional further year of market protection if, for example, they are granted marketing authorization for a significant new indication for the relevant medicinal product. Data exclusivity is granted independently of any patent rights in the underlying invention. It does not preclude competitors from generating their own test data. However, the time and resources required to generate the necessary data represent a naturally high market barrier to entry for generic manufacturers who do not have the benefit of patent protection, and who therefore face stronger market competition than a patentee.180 Similarly, there is no requirement that the data be confidential, although where the data is confidential it will not form part of the state of the art for patent validity purposes. Even if part of the data is in the public domain, a competitor may not refer to the innovator’s public data while the period of regulatory data protection subsists. Proponents of marketing exclusivity point to evidence that the incentives provided by such a right go beyond its role as a supplement to patent protection and point to its effects in stimulating the quality of clinical trials to the benefit of the innovation process as a whole. Critics question both whether conferring marketing exclusivity offers appropriate additional incentives and whether the same rules should apply in both developing and developed countries.181 A somewhat more fundamental question is whether the conduct and results of clinical trials are the proper subject matter of any form of IP rights, or whether they are better viewed as a public good whose costs should be collectively borne by governments and the results shared openly; this is an issue that is beyond the scope of this chapter, if not this volume.182 177

  Ho (n 174) 261.   See V Junod, “Drug Marketing Exclusivity Under the United States and European Law” (2004) 59 Food and Drug LJ 479, 515. 179  See Medicinal Products Directive, recital 10; Case C-​368/​96 The Queen v The Licensing Authority established by the Medicines Act 1968 (acting by The Medicines Control Agency), ex parte Generics (UK) Ltd, The Wellcome Foundation Ltd and Glaxo Operations UK Ltd [1998] ECR I-​07967. 180  See Acquah (n 173) 256, 259. 181   See Ho (n 174) 265. 182  See JH Reichman, “Rethinking the Role of Clinical Trial Data in International Intellectual Property Law: The Case for a Public Goods Approach” (2009) 13 Marquette Intellectual Property L Rev 1, 48–​68. 178

Rights in Data and Information    617 The challenges of accommodating the many conflicting interests of participants in information-​driven economies will remain acute. Legal rights in data and information reflect a somewhat imperfect balance between commercial interests and competing rights to free access to information and free competition. Anglo-​American lawyers may, in years to come, see the database laws of the EU as a high-​water mark in harmonization based on somewhat vague and aspirational political and economic policy objectives. The impact of European standards of data privacy on the US and the rest of the world may be somewhat more enduring as global standards for the protection for personal privacy move upwards. Achieving the balance, both in the corporate and governmental spheres, between personal privacy and competing interests such as freedom of expression and security will be the enduring challenge.

Chapter 22

Overl apping  Ri g h ts Estelle Derclaye * 1.  Definition and Origin Intellectual property (IP) overlaps, also known as overlapping intellectual property rights (IPRs) or the (ac)cumulation of rights is the situation where two or more IPRs subsist in respect of the same subject matter.1 Overlaps can arise as a result of two or more different types of endeavor (eg, an artwork created at the outset to be registered a trademark) or as a result of two or more IPR protecting a single type of endeavor (eg, patent and copyright protecting the same computer program). At first blush, IPRs appeared to be water tight. Trademarks mainly protected names of products and services; copyright, literary, and artistic works; and patents, new products, and processes. Works of applied art (eg, vases, jewelry, clothing, furniture) were clearly an exception, for they cut across intellectual and industrial domains, and could arguably be protected by copyright for their form and patents for their function. Double protection was optional (countries did not have to protect works of applied art by a separate design right). For quite some time, it was the only overlap regulated at the international level.2 Otherwise, IPRs were conceived as different rights for different subject matter. Copyright, patents, and plant variety rights were justified by utilitarian purposes or seen as flowing from natural law (giving a property right to incentivize innovation or to respect the creator’s personality), while the *  Estelle Derclaye has asserted her moral right to be identified as the author of this contribution. My thanks to I Calboli, S Dusollier, P Ganea, J Gaster, G Ghidini, P Kamina, P-​E Moyse, A Musso, J Park, M Ricolfi, G Spedicato, and A Tischner for references to materials. Thanks also go to R Dreyfuss, J Pila, and L Chave, for their comments on previous versions of this chapter. All potential errors remain my own. All websites were last accessed in February 2018, unless otherwise specified. 1  For more details on overlaps, see E Derclaye and M Leistner, Intellectual Property Overlaps: A European Perspective (Hart 2011); N Wilkof and S Basheer (eds), Overlapping Intellectual Property Rights (OUP 2012); R Tomkovicz, Intellectual Property Overlaps, Theory, Strategies and Solutions (Routledge 2012); and in French, J-​M Bruguière (ed), L’Articulation des Droits de Propriété Intellectuelle (Dalloz 2011) and S Dusollier and A Cruquenaire (eds), Le Cumul des Droits Intellectuels (Larcier 2009). 2  See Berne Convention for the Protection of Literary and Artistic Works (opened for signature 9 September 1886, entered into force 5 December 1887) 1161 UNTS 30, arts 2(7) and 7(4) and discussion below.

Overlapping Rights   619 trademark right’s function was to indicate origin and prevent consumer confusion.3 All IPRs were also designed with a carefully crafted internal balance between the interests of the right holders and those of the users. The phenomenon of IP overlaps has grown in recent years for several reasons. First, some IPRs have been extended to cover new areas. For example, copyright and patents both cover computer programs; trademarks now cover music and shapes, which were traditionally and respectively protected by copyright or design law.4 Another example is European Union (EU) design protection, which can now cover functional products. Second, lawyers have increasingly exploited gaps in the law in an attempt to maximize the protection of the endeavors of their clients. In addition, in the EU, new rights were created: The database sui generis right codified and harmonized unfair competition in relation to collections of information and the Community plant variety right, the Community design, and the Community trademark (now renamed the EU trademark) were added to the corresponding national rights.5 Another development that generated more overlaps was the extension of the justifications of some IPRs, most prominently trademark law, which now protects not only the traditional indication of origin function, but also protects the quality, investment, communication, and advertising functions.6 This means that the scope of protection of trademarks has grown and, to a large extent, it now overlaps with that of copyright and designs. In addition to the overlap between two or more IPRs, in many countries, unfair competition can be added as yet one more layer of protection. While the cumulation of one or more IPRs and unfair competition is not as such an overlap as defined above, in some cases, it can be because the unfair competition action seeks the same redress as the IP action. A typical example is the action against slavish imitation or parasitism, which seeks to punish simple copying and therefore,

3  Design rights’ function was not much discussed, but since the right is a hybrid between copyright and patent, it is fair to say that the same justifications implicitly applied. 4  G Dinwoodie, “Copyright, Trade Marks and Trade Dress: The Overlap (and Conflict?) in Intellectual Property Regimes Concerning Designs and Visual Images, General Report” in J Ginsburg and J Besek (eds), Adjuncts and Alternatives to Copyright, Proceedings of the ALAI Congress, June 13-​17, 2001, New York USA (Columbia University School of Law, 2002) 497, 499; V Moffatt, “Mutant Copyrights and Backdoor Patents: The Problem of Overlapping Intellectual Property Protection” (2004) 19 Berkeley Technology LJ 1473, 1496; A Quaedvlieg, “Concurrence and Convergence in Industrial Design: Three-​ Dimensional Shapes Excluded by Trade Mark Law” in W Grosheide and J Brinkhof (eds), Intellectual Property Law, Articles on Crossing Borders between Traditional and Actual (Intersentia 2004) 23, 25; L Heymann, “Overlapping Intellectual Property Doctrines: Election of Rights Versus Selection of Remedies” [2013] 17 Stanford Technology L Rev 239, 244–​245; A Beckerman-​Rodau, “The Problem with Intellectual Property Rights: Subject Matter Expansion” [2010] 13 Yale Journal of Law & Technology 35. 5  Apart from the recently re-​named EU trade mark (Regulation (EU) 2015/​2424 of the European Parliament and of the Council of 16 December 2015 amending Council Regulation (EC) No 207/​2009 on the Community trade mark and Commission Regulation (EC) No 2868/​95 implementing Council Regulation (EC) No 40/​94 on the Community trade mark, and repealing Commission Regulation (EC) No 2869/​95 on the fees payable to the Office for Harmonization in the Internal Market (Trade Marks and Designs) [2015] OJ L 341/​21), the rights are still called Community rights even though the European Community has been replaced by the European Union in 2009. As opposed to a national right, a Community right is a right that applies and has the same effect in the same way across all the Member States. 6  At least this is the case in the EU: see Case C-​487/​07 L’Oréal SA v Bellure NV [2009] ECR I-​5185, para 58.

620   Estelle Derclaye functions exactly like a copyright. In most countries, other rights giving similar remedies than IPRs can also be cumulative. These include contract law, digital rights management (DRM) protection, and trespass to chattels. The result is that in many cases, the balance inherent in all IP regimes can be upset by the overlaps.

2.  Types of Overlap There are currently three types of overlap: in relation to the content, the occurrence in time, and the geographical level. The so-​called “content overlap” or “horizontal overlap” refers to the situation in which different IPRs pile up or apply to the subject matter in question. For instance, a logo can be protected by copyright and trademark law if all the conditions of the two IPRs are fulfilled. Similarly, a computer program can be protected by copyright and patent law. There are nine content overlaps: –​ Copyright/​designs –​ Copyright/​neighboring rights (including performers’ rights, database sui generis right, rights of sound recording and film producers and of broadcasters) –​ Copyright/​trademarks –​ Copyright/​patents –​ Trademark/​patent –​ Patent/​design –​ Patent/​plant variety right –​ Trademarks/​geographical indications7 –​ Design/​sui generis right on topographies of semi-​conductor products8 There can of course also be triple or quadruple content overlaps, such as copyright/​design/​ trademark, and copyright/​design/​trademark/​patent, as in the famous Philishave and Lego brick examples.9 In addition, as stated, one can also cumulate unfair competition or other bodies of law which give similar remedies to IPRs. One such example is the overlap that can exist between patents and trade secrets.10 While “objective overlap” refers to the same subject matter (object of protection) being protected by two or more different IPRs, “subjective overlap” means that the two or more IPRs protect one subject matter, but the rights belong

7 

The relationship between trademarks and geographical indications involves conflicts more than overlaps and is considered separately by Dev Gangjee in C ­ hapter 19. See also D Gangjee, “Overlaps between Trade Marks and Geographical Indications” in Wilkoff and Basheer (n 1) 277. 8  This overlap does not deserve any treatment in this chapter because of its negligible relevance in practice. See G Karnell, “Protection of Layout Designs (Topographies) of Integrated Circuits: RIP?” [2001] IIC 648. 9  Case C-​299/​99 Koninklijke Philips Electronics v Remington Consumer Products [2002] ECR I-​05475; Case T-​270/​06 Lego Juris A/​S v OHIM [2008] ECR II-​3117. 10  On this overlap, see L Bently, “Patents and Trade Secrets” in Wilkoff and Basheer (n 1) 57.

Overlapping Rights   621 to different persons (different “subjects”).11 Without an objective overlap there cannot be a subjective overlap. Overlaps can also occur at different moments in time. A  concurrent or simultaneous overlap occurs when two or more IPRs apply at the same time to the same subject matter. For instance, if the same person drew a logo and simultaneously registered it as a trademark, the person will be protected for several years by copyright as a graphic work and as a means to distinguish the registrant’s products or services. A “subsequent,” “sequential” or “a posteriori” overlap occurs when subject matter protected by one IPR falls into the public domain and is then protected by another IPR. In the example of the drawn logo, an undertaking (either the creator or another) might register the logo as its trademark after the copyright in the logo has expired. Finally, there can be, for want of a better word, a “negative overlap,” that is, one IPR can subsist even though the work fails to qualify for protection under another regime. For instance, even if it is not possible to obtain a patent under the European Patent Convention (EPC) on a computer program because it has no technical effect, the program is nonetheless copyrightable because it is original. Similarly, single words can be trademarked but not copyrighted. This chapter does not cover negative overlaps as, with rare exceptions, few pose problems. Rather, they simply reflect the natural, initial division between IPRs. However, it is worth noting that the negative overlap concerning computer programs is strikingly problematic. Finally, overlaps can occur at different levels. This is the case if a regional IPR (such as a EU trademark) is added to a local IPR (such as a national trademark). “Content” and “level” overlaps can also occur simultaneously. For instance, the same subject matter can be protected by a national trademark and a Community design. “Level” or “vertical” overlaps exist in the EU by virtue of the creation of Community rights, which apply to the entire territory of the EU. These rights so far exist only in relation to trademarks (EU trademark regulation), designs (Community design regulation) and plant variety rights (Community plant variety regulation). There is a big difference between on the one hand the Community trademark and design rights and on the other hand, the Community plant variety right (CPVR). It is that national plant variety rights subsist (Article 3 CPVR) but, by contrast with trademark and designs, cannot be cumulated with the Community plant variety right (Article 92 CPVR). In other words, the level overlap is prohibited between patents and plant variety rights. Therefore, the breeder has to opt between a national or Community right, whereas a trademark or design right holder can register his or her right at both levels, and therefore have the advantage that if the national right is invalidated or refused, the Community right may still subsist, and vice versa. Nevertheless, if a prior national plant variety right or patent for the variety is granted, the later Community right will prevail and the national right(s) will be ineffective. In other words, the CPVR prevails. This is so for as long as the Community right is effective.12 Therefore, if the Community right is invalidated or expires, the national right(s) can be revived.

11  D Feer Verkade, “The Cumulative Effect of Copyright Law and Trademark Law: Which Takes Precedence?” in J Kabel and G Mom, Intellectual Property and Information Law: Essays in Honour of Herman Cohen Jeroham (Kluwer 1998) 69, 70. 12  G Tritton, R Davis, M Edenborough, J Graham, S Malinicz, and A Roughton, Intellectual Property in Europe (Sweet & Maxwell 2008) 629.

622   Estelle Derclaye Combining two levels of protection can thus be very useful not only for a single IPR (eg, national design and Community design) as one can subsist while the other ceases to exist, but also for two IPRs (eg, national design, national trademark, Community design, and EU trademark). The combined level and content overlap gives a potentially stronger protection to the rights holder. It is not consistent that the vertical overlaps are allowed in relation to trademarks and designs but not in relation to plant varieties. In fact, the Commission had initially taken the view that the level overlap should not be allowed between national registered and Community registered design rights.13 Arguably, level overlaps can lead to regime clashes and overprotection as court decisions can vary even if the regimes are identical and damages can be cumulated for infringing intrinsically the same subject matter. Another major difference between the design and trademark level overlaps and the plant variety right overlap is that while the substantial law relating to designs and trademarks is the same at national and Community level, it is not entirely the same for plant varieties at these two levels.14 Some national laws, like that of the UK, are closely aligned with the CPVR, some less (on this, see section 4).

3.  Problems Posed by Overlaps and General Principles The vast majority of commentators agree that most overlaps cause problems and that such problems need either legislative or judicial remedy.15 Overlaps can cause two kinds of problems: regime clashes or conflicts, and overprotection. A regime clash happens when there is a simultaneous overlap and the rules applying to the several IPRs provide different, irreconcilable, outcomes. For instance, the subjective overlap can lead to hold-​ups. Another example is when an exception may apply in copyright law, but not in patent law, yet both regimes apply to a computer program. This regime clash leads to overprotection, as the strictest regime overrides the more generous one. Overlaps can also lead to clashes in relation to procedural aspects including other remedies such as injunctions, limitation periods to bring an action, and jurisdictional issues (eg, forum shopping). Overprotection means reduction of the public domain, reduction of freedom of movement, and/​or overcompensation by allowing the right holders to extract double16, 13  Green Paper on the Legal Protection of Industrial Design, European Commission, June 1991, Working Doc 111/​F/​5131/​91—​EN, 138–​139 (“[A]‌s far as Registered Community Designs are concerned, cumulation should not be admitted. The legal force in the State concerned of a registered national design and a Registered Community Design would be the same. There is therefore no reason for multiplying the number of identical protections in the hands of the same right holder in the same territory”). 14  For more details see Derclaye and Leistner (n 1) 97 ff; M Llewelyn and M Adcock, European Plant Intellectual Property (Hart 2006) 381–​383 (regarding the exhaustion principle). 15  Tomkowicz does not think that legislative action is necessary at all (n 1) 177. 16  For a recent example, see decision of the commercial chamber of the court of Cassation, 16 September 2014, no 13-​20.589, which accepts the cumulation of damages when there is copyright and design infringement. Contrast that decision with a decision of the tribunal of first instance of Paris, 30 December 2014 which held on the contrary that “the multiplication of bases does not justify the multiplication of damages.”

Overlapping Rights   623 triple, or quadruple damages for a single act of infringement. For example, the sequential overlap delays entry of the work into the public domain. The concurrent overlap reduces freedom of movement (eg, one right is exhausted, but not the other). When overlaps cause overprotection, whether as a result of regime clashes or not, they are harmful as they disturb the balance carefully crafted in each IPR. They can also breach other rights, such as freedom of expression, and severely limit or even cancel other legal rules or principles (eg, the EU’s free movement of goods and services and the WTO’s commitment to free trade). On the other hand, even if there is overprotection, it is arguably justified in some cases. For instance, if a sign distinguishes products or services, it should receive trademark protection, while if it is beautiful, the author should be awarded separately for making that aesthetic contribution. In addition to the two main problems of overprotection and regime clashes, overlaps impose unnecessary costs, including administrative and enforcement costs, on competitors, users, and more generally, the public. To these costs are added complexity and legal uncertainty.17 That said, overlaps do not always cause problems. Typically, they do not cause problems when there is convergence. This means that two IPRs converge to provide the same rules. There are different types of convergence. Asymmetric convergence occurs when part of the rights (eg, subject matter, protection requirements, rights) converge, if not totally in their intention at least in their result, but other parts do not (eg, the two or more rights have different exceptions). Conversely, symmetric convergence means that the IPRs in question tend not only to have the same subject matter, protection requirements, and rights, but also have comparable rules on exceptions.18 On the other hand, negative convergence means that different IP regimes exclude a certain subject matter from their respective protection (eg, ideas, which can be protected neither by copyright nor by registered or unregistered design right).19 As a result of such convergence, there is less literature in relation to some overlaps than others. For instance, the patent and plant variety right overlap has been carefully thought through from the beginning, and the systems converge considerably so that clashes and overprotection are rare in the EU. Thus, most commentators do not see this overlap as creating problems like hampering competition or the free movement of goods, unlike in other overlaps.20 The literature instead points out the usefulness of plant variety rights for those plant varieties that are not novel or inventive in the patent sense21, and the advantages the plant variety right 17  Moffatt (n 4) 1512; D Vaver, “Taking stock” [1999] EIPR 339; S Dusollier, “Introduction” in Dusollier and Cruquenaire (n 1) 5, 19; in relation to designs, W Cornish, “Informal Rights in Industrial Designs: Why Impose Community Constraints?” in J Kabel and G Mom, Intellectual Property and Information Law: Essays in Honour of Herman Cohen Jeroham (Kluwer 1998) 253, 259; U Suthersanen, Design Law in Europe (Sweet & Maxwell 2000) 80. 18  A Kur, “Cumulation of IP Rights Pertaining to Product Shapes—​an ‘Illegitimate Offspring’ of IP Law?” in G Ghidini and M Genovesi (eds), Intellectual Property and Market Power—​ATRIP Papers 2006-​ 2007 (Eudeba 2008) 613, 615–​616. Quaedvlieg ((n 4) 23, 26) has called this type of convergence positive convergence. 19  Quaedvlieg (n 4) 23, 26. 20  R Crespi, “Patents and Plant Variety Rights: Is there an Interface Problem?” [1992] IIC 173, 183; N Brahy, “Cumul et Chevauchement du Brevet et du Certificat d’Obtention Végétale: Beaucoup de Droit . . . mais peu de Faits” in Dusollier & Cruquenaire (n 1) 107, 123 (“the examination of the empirical data available reveals few overlap situations which are problematic”). 21  M Kock, S Porzig, and E Willnegger, “The Legal Protection of Plant-​Biotechnological Inventions and Plant Varieties in Light of the EC Biopatent Directive” [2006] IIC 135, 148.

624   Estelle Derclaye system has over the patent system: A plant variety right is generally “easier to administer, cheaper, better examined, more certain, easier to enforce and less prone to litigation than patent protection.”22 For that reason, some commentators do not advocate the abolition of plant variety rights. Instead, they “advocate [ . . . ] the coexistence of both protection systems, with the choice of which system to use left to the individual plant breeder.”23 When the plant variety fulfils the conditions of patent law, the breeder can choose patent law if s/​he wishes but when it does not, s/​he can use the plant variety right.24 However, for reasons we shall explore later, the same cannot be said of the US in this respect. Finally, there are genuine overlaps (eg, patent and copyright for computer programs) and false overlaps (eg, asymmetric convergence in the copyright/​trademarks overlap).25 In the latter case, the problem is internal (there is an inner imbalance in one of the IPRs) and ideally, it should be remedied internally (eg, adopt a more flexible, or fair, use) instead of the rigid system of exceptions. In the former case, where restrictions of competition occur because of the combination of the several intrinsically balanced rights, the application of external rules to limit the exercise of one of the rights may often be more appropriate. A consequence of the piecemeal developments described previously is that there are very few rules regulating the overlaps, regardless if they are at the international, regional, or national level. As overlaps are not forbidden, implicitly, they are therefore generally allowed. Nevertheless, some countries and regional or international agreements have adopted general principles on these issues. A look at the international instruments in the field of IP shows that most are silent on the issue of overlaps. This is not surprising since most of these instruments date from the nineteenth century, when IPRs were considered water tight. However, the broad language used implies that overlaps are allowed, and it is rare that they are clearly allowed. The international instruments regulate to some extent only two overlaps: namely, part of the copyright/​designs overlap that relates to works of applied art in the Berne Convention (Article 2(7) and 7(4)) and patents and plant variety rights in the TRIPS Agreement (Article 27(3)(b)). Only the overlap between plant variety right denomination and trademark is expressly prohibited at international level, and therefore also at the European and national levels.26 Additionally, there is an implicit rule of “exclusionary convergence,” which means that if all potentially overlapping IP regimes converge to exclude something from protection, that material must then always stay in the public domain.27 Examples of subject matter covered by exclusionary convergence are non-​confidential information, laws of nature, and abstract subject matter such as mathematical concepts and scientific discoveries. Even if TRIPS does not specifically state that these are also excluded from patent law, these advances are not considered to be “inventions.” That said, even for those overlaps that are expressly allowed, none of the international instruments enunciates rules to regulate them or at the twin problems of regime clashes and overprotection.

22 

J Funder, “Rethinking Patents for Plant Innovation” [1999] EIPR 501, 511, 513. G Van Overwalle, “Patent Protection for Plants: A Comparison of American and European Approaches” (1999) 39(2) IDEA 143, 192. 24  Van Overwalle (n 23)193. 25  Along the same lines, see Dinwoodie (n 4) 497, 510. 26  See Section 4.8. 27  Quaedvlieg (n 4) 27. 23 

Overlapping Rights   625 At the EU level, overlaps are allowed, as per the (generally) final articles of directives and regulations.28 There are, however, a few clearly stated rules that regulate the interface between several IPRs. One prominent example is the European and national rules that ensure a maximum of convergence between patents and plant variety rights to avoid regime clashes.29 The next most prominent example is Article 4(1)(e) of the Trademark Directive (TMD) and corresponding Article 7(1) in the EU Trademark Regulation (EUTMR)30, both of which organize the overlap between trademarks, patents, designs, and copyright, along with the growing Court of Justice of the European Union (CJEU) case law on these articles. Article 4(1)(e) of the TMD ensures that there is no monopoly, via a trademark right, on shapes or other characteristics that exclusively: (i) result from the nature of the goods themselves; (ii) are necessary to obtain a technical result; or (iii) give substantial value to the good. These are respectively (i) not protectable; (ii) protected or protectable by patents; and (iii) protected or protectable by designs, patent, or copyright. Article 7(1) of the Design Directive similarly addresses the interface between designs and patents, and excludes from design protection those features solely dictated by technical function. Another important rule is that an IPR cannot be used to prevent the free circulation of goods and services within the EU. As the CJEU held in Dior v Evora, if a good is protected by a trademark and a copyright, the exhaustion of the first cannot be barred by the assertion of the other.31 In the United States (US), courts abandoned the so-​called election theory32 and instead embraced the allowance of overlaps in a number of decisions: Mazer v Stein33 (copyright and design patents), In re application of Mogen David Wine Corp.34 (design patent and trademark), and Kewanee Oil Co v Bicron 35 (trade secrets and patents). Many of the same principles adopted in the EU apply as well. Thus, works that fall into the public domain under copyright cannot be protected through a trademark right to prevent false association.36 Nor can works so functional that they were entitled to utility patents receive extended protection

28  See, eg, Directive 2009/​24/​EC of 23 April 2009 on the legal protection of computer programs (codified version) [2009] OJ L 111/​16, art 9; Directive 2001/​29/​EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society [2001] OJ L 16/​107, art 9; Directive 96/​9/​EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases [1996] OJ L 77/​20, art 13. 29   See Section 4.8. 30   Directive (EU) 2015/​2436 of the European Parliament and of the Council of 16 December 2015 to approximate the laws of the Member States relating to trade marks (Recast) [2015] OJ L 336/​1; Regulation (EU) 2015/​2424 of the European Parliament and of the Council of 16 December 2015 amending Council Regulation (EC) No 207/​2009 on the Community trade mark and Commission Regulation (EC) No 2868/​95 implementing Council Regulation (EC) No 40/​94 on the Community trade mark, and repealing Commission Regulation (EC) No 2869/​95 on the fees payable to the Office for Harmonization in the Internal Market (Trade Marks and Designs) [2015] OJ L 341/​21. Previously art 4(1)(e) TMD was art 3(1) (e). The new numbering is used throughout the chapter. 31   Case C-​337/​95 Parfums Christian Dior v Evora [1997] ECR I-​6013. 32  Such theory imposes that the IPR holder makes a choice between the several IPRs that can apply to its endeavor. 33  347 US 201, 219 (1954). See also In Re Yardley 493 F2d 1389 (US Court of Customs and Patent Appeals 1974). 34  328 F2d 925, 926 (US Court of Customs and Patent Appeals 1964). 35  416 US 470 (1974). 36  Dastar Corp v Twentieth Century Fox Film Corp 539 US 23 (2003).

626   Estelle Derclaye via trademark law.37 All these rules will be examined in more detail later. But it is clear that in both legal systems the overarching principle or rationale behind these rules is that of the importance of maintaining free or undistorted competition. In the EU, it is a constitutional principle. However, it is not affirmed at international level, as Article 6 TRIPS leaves the principle of international exhaustion untouched. Last, but not least, the human right to free speech or freedom of expression exists at the international, European, and national level, and has been used as an external limit to curb IPR excesses in many countries, including France, the United Kingdom (UK), Germany,38 and the US.39 It can therefore be used to regulate overlaps. It is well illustrated in the so-​ called “Darfurnica case,” which was tried in the Netherlands.40 This case involved the use of a Louis Vuitton design in a painting to express the prominence of fashion in the media and oppose it to the media’s neglect of the humanitarian crisis in Darfur (more precisely, the artist drew a famished black boy holding a Louis Vuitton bag). The court held that famous brands must accept criticism and thus the artist was held not to have infringed the design; her artistic freedom of expression overrode Louis Vuitton’s design right. It is interesting that Louis Vuitton certainly had a trademark and a copyright in the same design, but most probably chose not to act on the basis of these two IPRs, as both laws include exceptions that could have permitted use of the design in the painting (parody, criticism). Even though Louis Vuitton lost, the case demonstrates that having several IPRs allows the claimant to act on the one that suits its interests best. Canada contrasts with the striking convergence between the EU and the US on the two major rules regulating the overlaps. There, the situation is a bit more muddled owing to the courts’ reliance on whether there are specific legislative provisions regulating overlaps.41 WCC Containers Sales v Haul-​All Equipment asked whether trademark and design protection were mutually exclusive,42 and concerned a design right on a can and the right holder tried to register a trademark on it after the design right expired. Noting that Parliament did not prohibit this overlap (whereas it did prohibit overlaps for copyright and design), the court held that the legislature must have meant that the trademark/​design overlap was allowed. Significantly, the court did not compare the purposes of industrial design and trademark protection or ask whether the overlap was justified in the context of the entire IP system; it simply held the rights could be cumulated.43 By contrast, in Rucker Co. v Gavel’s

37   TrafFix Devices, Inc v Marketing Displays, Inc 532 US 23 (2001). On Dastar and TrafFix, see generally also G Dinwoodie, “Concurrence and Convergence of Rights: The Concerns of the U.S. Supreme Court” in F Grosheide and J Brinkhof (eds), Intellectual Property Law: Crossing Borders between Traditional and Actual (Intersentia 2004) 14. 38   See art 5(3) of the constitution (fundamental right to freedom of the arts). 39   US Constitution, Amendment I. 40   Nadia Plesner Joense v Louis Vuitton Malletier SA, District Court of The Hague, 4 May 2011, IER 2011/​39, comment W Sakulin. The unofficial translation of the decision of the Court of Appeal was made by Kennedy Van der Laan, attorneys in Amsterdam, representing defendant Nadia Plesner, available at: . The artwork can be seen at . For a comment, see L Guibault, “The Netherlands: Darfurnica, Miffy and the right to parody!” [2011] 3 JIPITEC 236. 41  Tomkowicz (n 1) 7–​8. 42  Federal Court of Canada [2003] FC 962 (FCTD) para 64. 43  Tomkowicz (n 1) 109.

Overlapping Rights   627 Vulcanising Ltd, the court decided the contrary: Although Parliament did not specify anything about the copyright in patent application drawings, the court said such protection was prohibited.44

4.  Similarities and Differences Between Countries Regarding the Rules Regulating Each Overlap Owing to language and space constraints, the main jurisdictions examined here are the US, Canada, the EU, France, the UK, and Germany. Rules from other jurisdictions are mentioned when possible. Each content overlap is discussed by its occurrence in time (concurrent and subsequent), and similarities and divergences in their treatment by the different countries are highlighted.

4.1 Copyright and Designs The copyright/​design overlap is both the oldest and most regulated overlap; it is also a genuine overlap. The overlap exists because many products, be they in two dimensions (graphic design such as designs to be applied on clothes, wallpaper, etc.) or three (furniture, clothing, fashion accessories, cutlery, vases, etc.), can combine function and beauty. Furthermore, products exist on a continuum, so where there is the work of pure art, there is also the industrial/​functional object, and the many shades between the two. Whether products that combine aesthetic character and functionality should be protected depends on a country’s view. Ricketson and Suthersanen ask “should the fact that the art is applied in the production of objects which also serve a utilitarian purpose deprive the maker of the status of author, and consequently of the legal protection that is otherwise accorded to authors?”45 If we take this to mean solely copyright, it therefore leaves only design law to protect the designer’s product. The Berne Convention covers two-​and three-​dimensional works of art in Article 2, which makes possible the overlap with any design law protecting the same work. As stated previously, the overlap was envisaged early on in the evolution of the Berne Convention. However, it was acknowledged only to a minimal extent at first—​namely the Berlin revision of 1908 added works of applied art to the list of protectable works. Further, at the Brussels revision in 1948, a more detailed provision organizing the overlap was inserted and the current provision (Article 2(7), Paris revision 1971) now reads: Subject to the provisions of article 7(4) of this convention, it shall be a matter for legislation in the countries of the Union to determine the extent of the application of their laws to works 44 

[1985] 7 CPR (3d) 294 (FCTD). S Ricketson and U Suthersanen, “The design/​copyright overlap: Is there a resolution?” in N Wilkof and S Basheer (n 1) 159, 162. 45 

628   Estelle Derclaye of applied art and industrial designs and models, as well as the conditions under which such works, designs and models shall be protected. Works protected in the country of origin solely as designs and models shall be entitled in another country of the Union only to such special protection as is granted in that country to designs and models; however, if no such special protection is granted in that country, such works shall be protected as artistic works.46

This rule means that countries are allowed to choose how copyright and design law protect works of applied art: copyright law only, design law only, or both.47 However, cumulative protection is generally the norm throughout the world and this is not likely to change.48 The Paris Convention simply states that industrial designs must be protected (Article 5 quinquies), but it does not prescribe a specific type of protection. The TRIPS Agreement (Articles 25 and 26) does not add much more: It does not mandate a specific design right, be it registered or unregistered, but merely requires that designs that are new or original are protected for at least ten years from infringement if they are copied exactly or substantially for commercial purposes. The objective overlap is therefore clearly allowed at the international level, but no rules exist to avoid regime clashes or overprotection. That is left to regional or national law. In the EU, the copyright/​design overlap is further complicated by the fact that there are several types of design rights. In the 28 Member States, there are not only national and Community rights, but also registered and unregistered design rights. Each country has thus three different design rights: the national registered design right, the Community registered design right, and the Community unregistered design right.49 In addition, the UK also has a national unregistered design right (s. 213 ff. of the UK Copyright, Patents and Design Act (CDPA)). Thankfully, the national registered design right and the Community registered design right have identical rules except in relation to procedural matters and ownership. Moreover, the Community unregistered design right also has identical rules to the registered design rules, with the exception, among others, of duration (three years instead of up to 25) and infringement (as opposed to the registered design rights, copying must be proven). Countries around the world therefore fall in three categories:  those allowing partial overlap, those allowing the total overlap,50 and those prohibiting overlap (ie, either allowing only design law or only copyright law to protect works of applied art). Most countries fall in

46  On the history of the protection of works of applied art in the Berne convention, see S Ricketson and J Ginsburg, International Copyright and Neighbouring Rights: The Berne Convention and Beyond (Volume I and II) (2nd edn, OUP 2006) paras 8.59–​8.69. 47  S Von Lewinski, International Copyright Law and Policy (OUP 2008) 114, paras 5.46–​5.47. 48  S Ricketson and J Ginsburg (n 45) 469. 49  Directive 98/​7 1/​EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs, OJ L 289/​28; Council Regulation (EC) No 6/​2002 of 12 December 2001 on Community designs, OJ L 3/​1. 50  France fell within this category before EU harmonization on this issue. Total cumulation meant that if a design was original, it was automatically novel. Now the cumulation is partial in the sense that the protection requirements in copyright and design law are no longer considered to amount to the same thing, thus a design can be protected by copyright and not design right and vice versa. This is so by virtue of the implementation of art 17 of the design directive. See P Kamina in M Vivant (ed), Les Grands Arrêts de Propriété Intellectuelle (2nd ed, Dalloz 2015) 419–​429, commenting on three decisions confirming this, namely, Cass Crim 13 December 2011 [2012] PIBD 957, III, 180; Cass Crim 26 November 2013 [2014] PIBD, 999, III, 122; Cass Civ 1st ch [2012] PIBD, 966, III, 523.

Overlapping Rights   629 the partial cumulation system; this includes all EU countries,51 the US,52 Canada,53 Australia, and Japan. The EU has now imposed cumulation. On the other hand, design law is heavily harmonized in the EU, with no options left to Member States except on procedural matters and on ownership and dealings (transfers), which are left unharmonized in the directive. Thus, apart from these two issues, when an overlap exists between copyright and design right, whether registered (national or Community design right) or unregistered (Community design right), there will be no differences in the way the design aspects are treated. However, there is no rule at the EU level that deals with any of the three content overlaps. All that can be said is that EU law allows, and, in fact, mandates, the overlap between copyright and design rights (Article 17 of the design directive and Article 96(2) of the Community design regulation), but leaves the choice of the conditions of protection for works of applied art by copyright to the Member States. The Regulation has a clear ownership rule: Article 14 provides that the designer is the owner, unless the designer is an employee, and the design was conceived in the execution of duties or following the instructions given by the employer.54 Therefore, there are very few similarities between countries in respect of the copyright/​design overlap. Similarities will exist between countries that opted for the same regime, that is, either total cumulation, partial cumulation, or demarcation. But even within those groups, differences remain. Famously, the level of creativity is judged according to different criteria in the partial cumulation group. For instance, the UK has a requirement of artistic merit for some three-​dimensional copyright works55 (works of artistic craftsmanship) and for others (sculptures, engravings, and similar works) of artistic intention (the result does not have to be artistic). At one time, Germany had a higher requirement of originality for works of applied art, but its Federal Court of Justice lowered it to be the same as for works of fine art.56 On the other hand, the US uses the criteria of useful article and separability.57 Only useful articles, the design of which is separable, physically or conceptually, from the article, can be protected by copyright.58 Thus, objective cumulation varies quite strongly between partial cumulation countries. Once there is objective cumulation, differences also exist between countries as to subjective cumulation. Some countries have rules to avoid the possibility that the various rights will be held by different right holders, while others do not. In France, for example, the theory of the unity of art mandates that the copyright cannot be transferred without the design right.59 This rule helps to avoid conflicts in case of overlap by keeping the rights in the hands 51

  Formerly, Member States allowing total cumulation included France, the Benelux, and Poland. On Polish law, see A Tischner, “Focus on the Polish Regulation of Copyright and Design Overlap after the Judgment of the Court of Justice in Case C-​168/​09 (Flos v Semeraro)” [2012] IIC 202, 204, 206. 52   The overlap was first allowed in Mazer v Stein (n 23); see also In re Yardley (n 32). 53   See section 64 of the Canadian Copyright Act, which is similar to the old section 52 of the UK Copyright Act. 54   Art 14 was recently further clarified by the Court of Justice in Case C-​32/​08 Fundación Española para la Innovación de la Artesanía (FEIA) v Cul de Sac Espacio Creativo, SL and Acierta Product & Position, SA [2009] ECR I-​5611 (the term “employment” does not include “commission”). 55  See s 4 of the UK copyright act; George Hensher v Restawile Upholstery (Lancs) [1976] AC 64 (HL); Lucasfilm v Ainsworth [2008] EWHC 1878 (Ch), aff ’d by [2011] UKSC 39. 56  BGH, Birthday train decision, 13 November 2013. 57  1976 act 17 USC §§ 101 and 102(5). 58  See, eg, Ricketson and Suthersanen (n 44) 180–​181. 59  AE Kahn, “Un an de droit de la mode” [2008] Communication Commerce Electronique, September issue.

630   Estelle Derclaye of only one entity. Sections 2 of the Registered Design Act (RDA) and 215 of the CDPA provide that the commissionee, that is, the designer, is the owner of the design right, which aligns the CDPA (s. 11) with the Community design regulation (Article 14). All the rules are thus perfectly aligned in respect to ownership in the UK. The designer is the owner in all cases (including commissions), except if the design is created in the course of the duties of employment. In Germany, owing to the lowering in 2013 of the originality requirement for works of applied art, unless contracts regulate the issue in particular cases,60 there will potentially be more clashes as the ownership rule for designs is the reverse of the rule for copyright (employed designers do not own their designs, as opposed to employed authors).61 Another rule found in the Netherlands is the presumption of ownership of copyright in favor of the (legal or natural) person that exploits the work, which helps prove ownership in infringement actions, especially against third parties. However, it is a rebuttable presumption and it is also not useful in situations of conflict between different IPR owners.62 In the US, the designer is the owner of the design right, even if he has made the design in the course of employment, whereas in copyright law, the author is not the owner of the copyright if the work is made for hire.63 Finally, in both partial and total cumulation countries, the rights, the test for infringement, and the exceptions to the rights vary greatly, which causes regime clashes and overprotection. Most notably, because there are fewer exceptions in the design right regimes, design law will override the public-​regarding aspects of copyright law. For instance, while in the US the rights of a design patent and copyright holder are similar, the copyright fair use doctrine does not exist in patent law and the patent act has far fewer exceptions.64 In the EU, design law only has four exceptions, while national copyright laws have far more.65 An illustration of the clash is found in a French decision, in which the court refused to apply the copyright parody exception to the parody of a design.66 Finally, compared to other countries, the UK’s rules on the copyright/​design overlap are very special and detailed. Owing to a long history of legislative changes, there are no fewer than six rules organizing the overlap between copyright and the registered design right (RDR) and the unregistered design right (UDR). These either prevent an overlap altogether or avoid a regime clash. First, the UDR does not protect surface decoration; therefore, most two-​dimensional products and three-​dimensional decoration can only be protected by copyright and RDR (s. 213(3)(c) CDPA). This prevents the objective cumulation between copyright and UDR, but not between copyright and RDR. Second, sections 224 of the CDPA and 19(3B) of the RDA provide for the automatic transfer of both RDR and UDR rights when both rights are owned by the same person and the latter only transfers one of them. Third, 60  Because often employment contracts ensure that the economic rights of the designer are transferred to the employer. 61  See art 7 Copyright Act and art 7 Design Act. 62  N de Araujo Sousa e Silva, The Ownership Problems of Overlaps in European IP Law (Nomos 2014) 55–​56. 63  17 USC § 201(b); A Bridges, “Navigating the Interface between Utility Patents and Copyrights,” in N Wilkof and S Basheer (eds) (n 1) 1, 11. 64  Wilkof and Basheer (n 1) 13. 65  In the EU there are only four: namely private use, use for teaching and citation purposes, experimental use, and use to facilitate international travel (art 13 of Directive and art 20 of Regulation). 66  TGI Paris, 18 March 2005 [2005] Propriétés Intellectuelles 339, comment A Lucas.

Overlapping Rights   631 Section 51 of the CDPA provides that it is not an infringement of the copyright in a two-​ dimensional depiction of a three-​dimensional object, which is not also an artistic work, to manufacture the three-​dimensional object. This prevents an overlap between a copyright and a UDR. In the same vein, if an article is protected both by copyright and UDR, copyright prevails at the stage of infringement and the UDR is therefore not infringed (s. 236 CDPA). Section 53 similarly regulates the interface between copyright and RDR. Acts authorized by licenses and assignments of registered design rights are not regarded as infringing the copyright in the design. Finally, the exceptions of the UDR and the Community design rights are now identical (ss. 244A and 244B CDPA). However, there are more copyright exceptions, which leads to the same problem of regime clashes and overprotection as described previously. But what about the subsequent overlap? Since most countries that allow partial or total cumulation between copyright and registered design right protect the design for the life of the author and 50 or more years under copyright law (owing to the requirement in the Berne Convention), and from ten to 25 years under registered design law, it is always the case that copyright will protect the design for a longer period than the design right. The unregistered design right also lasts for a very short time: three years for the Community unregistered design right and between ten and just under 16 years for the UK unregistered design right. The CJEU Flos decision67 has arguably confirmed that copyright’s term is not shortened for works of applied art. Thus, the subsequent overlap is alive and well. Prior to this ruling, in some countries, such as Italy, Poland, and the UK, if a work of applied art was mass produced, its copyright term was reduced to the term of the registered design right, which thereby precludes the sequential overlap.68

4.2 Copyright and Neighboring Rights There is only one overlap that can occur between copyright and neighboring rights and it is of little importance because it is rare in practice.69 It is that concerning databases. In the EU, databases can be protected both by copyright and a sui generis right.70 Copyright protects the original structure of the database—​the arrangement and/​or the selection of its elements. The sui generis right protects the substantial, quantitative, or qualitative investment that went into the collection, verification, and/​or presentation of the elements. In other words, copyright protects the structure of a database, whereas the sui generis right protects in the vast majority of cases the contents within that structure; therefore, the two rights appear to protect two different subject matters, precluding the occurrence of an overlap. However, arguably, there can be a substantial qualitative investment in presenting the elements that corresponds to the original arrangement or selection, thus leading to an overlap, that is, a copyright and a sui generis right on the structure of the database. There is no rule in the directive to avoid double protection in this respect. Whereas the rights (reproduction and communication to the 67 

Case C-​168/​09, Flos SpA v Semeraro Casa e Famiglia SpA [2011] ECDR 8. See Tischner (n 50), s 52 CDPA and art 44 of the Italian Industrial Property Code. 69  To my knowledge, there is no decision on this issue. 70  Database directive (n 15). Note that a sui generis right for databases is not envisaged by any international convention. 68 

632   Estelle Derclaye public in the case of copyright; extraction and reutilization for the sui generis right), the infringement test (taking a portion that represents the originality and substantial investment will amount to the same thing in this case), and the exhaustion principle are the same, the owner of the copyright (the database author) may not be the same as the database maker (the person who takes initiative and assumes the risk of the investment) (see above). By the same token, the exceptions can be different, depending on which of the optional provisions of the directives the country has chosen to implement.71 Depending on the country, therefore, the overlap may or may not cause regime clashes and thus overprotection. This overlap could potentially arise in Liechtenstein,72 Norway,73 Iceland,74 South Korea,75 Russia,76 and Mexico,77 all of which have adopted a similar sui generis right protecting the investment in making databases.78

4.3 Copyright and Trademarks Both the copyright/​trademark and the design/​trademark overlaps are false overlaps, due mainly to an expansion of trademark subject matter. These are two of the most problematic overlaps, along with the copyright/​patent overlap. The copyright/​trademark overlap has grown with the extension of trademark subject matter, triggered not only by the TRIPS Agreement (Article 15(1)), but also by prior national and regional initiatives (eg, Article 2 of the 1988 Trademark Directive, which protects sounds and shapes). The objective overlap thus covers slogans and titles; two-​dimensional artistic works (figurative marks such as color combinations, logos, graphical user interfaces, or computer visual displays); musical works (sound marks); and three-​dimensional artistic works (shape marks). Recently, the CJEU accepted that the layout of a shop could be a trademark.79 So long as the requirements of originality and distinctiveness are met, an objective overlap will exist. While the international agreements are silent on the copyright/​trademark overlap, which thereby allows it implicitly, many countries have rules regulating this overlap. They are largely very similar.

71 

Arts 6 and 9 of the database directive. Act of 19 May 1999 on copyright and related rights (Urheberrechtsgesetz, URG), LGBL 1999 Nr 160. 73  Act of 16 April 1999 amending the copyright act of 12 May 1961 Nr 2. 74  Act Nr 60 of 19 May 2000 amending the copyright act Nr 73 of 29 May 1972. 75  Arts 91–​98 of the South Korean copyright act. Act No12137, 30 December 2013. 76  Arts 1333–​1336 of the Russian civil code as amended, available at . 77  Art 108 of the copyright act as amended, available at . 78  Other countries which have concluded free trade agreements with the EU and which include the requirement of protection of databases by a special right may also face this overlap. For more information, see J Gaster, in Hoeren/​Sieber/​Holznagel, Handbuch Multimediarecht (42nd edn, Beck 2015). 79  Case C-​421/​13 Apple v Deutsches Patent-​und Markenamt [2014] available at . 72 

Overlapping Rights   633 First of all, many legal systems, including that of the US80 and the EU,81 do not allow copyright on single words. Accordingly, this material lies only in the realm of trademark law. By contrast, while in the US short phrases, including slogans and titles are not copyrightable,82 the CJEU Infopaq decision clearly now allows it,83 which makes the overlap possible.84 Prior to Infopaq, French courts, for instance, already allowed the overlap for titles.85 On the other hand, most countries allow the overlap between marks and graphic and musical works. This is the case in the EU,86 US,87 France,88 the UK,89 and Germany.90 Canada even has a specific rule allowing the overlap (s. 64(3)(b) of the copyright act). However, in Mattel, the Supreme Court of Canada noted that allowing trademark rights to be extended beyond the origin function was “overshooting the purpose of trademark law.”91 80 

C Mende and B Isaac, “When Copyright and Trademark Rights Overlap,” in N Wilkof and S Basheer (eds) (n 1), 151. 81  Case C-​5/​08 Infopaq International A/​S v Dankse Dagblades Forening [2009] ECR I-​6569, para 45 (a single word can never attract copyright even if it is original). 82  Mende and Isaac (n 79). 83  See (n 76). 84  Slogans are protectable by trademark law if they have acquired distinctiveness, see case C-​398/​08P Audi AG v OHIM [2010] ETMR 18. 85  In 2006, the Court of Cassation affirmed this overlap for a very short title (two words): Cass com, 4 July 2006, no 03-​13.728, comment by JP Doat, “La Marque, Création Objet de Droit d’Auteur: Portée et Limites de l’Application” [2007] 23 Revue Lamy Droit de l’Immatériel 6; [2006] 31–​35, JCP G IV, no 2715 (the words in question were “High Score”). For prior decisions, see CA Paris, 30 April 1963 [1963] JCP II, 13243, cited by J Passa, “Titres et Slogans: Entre Marque et Droit d’Auteur” [2005] 14 Propriétés Intellectuelles 31, 39; CA Versailles, 12th ch, 11 January 2001 [2001] JCP E 496; [2001] Communication Commerce Electronique, Comm 97, 2e esp, comment C Caron; more generally on the copyright protection of titles, see A Lucas, A Lucas-​Schloetter, and HJ Lucas, Traité de la Propriété Littéraire et Artistique (4th edn, Litec 2012), para 114, 122ff. 86  Except for signs which consist exclusively of two-​dimensional works which give substantial value to the goods. 87  I Calboli, “Trademarking Creative Works: Trends and Negative Effects on the Copyright Equilibrium,” in S Frankel and D Gervais (eds), Evolution And Equilibrium: Copyright This Century (CUP 2014), 68 (“in the majority of cases, courts have supported concurrent overlaps, particularly with respect to pictorial representations because of their ‘special value in distinguishing goods’ ”), citing Walt Disney Co v Powell, 897 F2d 565 (DCCir, 1990); Lyons Partnership, LP v Morris Costumes, Inc, 243 F3d 789, 794 (4th Circuit 2001). Tomkowicz, (n 1), 106–​107 citing among other cases, Midway Mfg Co v Dirkschneider, 543 f supp 466 (D Neb 1981, trademark right can protect a computer’s GUI). So long as the functional characteristics of the screen display are non-​essential, a trademark right can subsist. 88  A famous example is Michelin’s Bibendum. See CA Riom 15 September 1994 [1995] Dalloz, Juris, 429, comment B Edelman. For a logo, see Cass Com, 4 July 2006, Jurisdata no 2006-​034458, cited by C Caron, Droit d’Auteur et Droits Voisins (Litec 2006), 19, n 23. 89  Unilever plc v Griffin [2010] EWHC 899 (Ch) (Marmite trademark likely not infringed as BNP political party did not use it in commerce but copyright in logo likely infringed as use in political campaign likely not caught by any exception); Griggs Group Ltd v Evans [2003] EWHC 2914 (Ch) (Dr Martens shoe logo). See also A Firth, “National Report, Reply to the Questionnaire for the United Kingdom, ALAI 2001 Sessions IIA and IIB: The Relationship of Copyright and Trademarks,” in Ginsburg and Besek (n 4) 4. 90  See, eg, Federal Court of Justice (2008) Gewerblicher Rechtsschutz und Urheberrecht 1093—​ Marlene-​Dietrich-​Bildnis. See also R Jacobs, “Die Himmelsscheibe von Nebra” in A Ohly, T Bodewig, and T Dreier (eds), Festschrift für Gerhard Schricker zum 70. Geburtstag, 2005, 801 ff. 91  Mattel Inc v 3894207 Canada Inc 2006 SCC 22, para 22. Cited by Tomkowicz (n 1) 95.

634   Estelle Derclaye The EU and US have similar rules preventing the overlap for some shape marks. Article 4(1)(e)(iii) of the TMD and the corresponding Article 7(1)(e)(iii) of the EU Trademark Regulation prohibit the trademark protection of signs that consist exclusively of the shape, or another characteristic,92 which gives substantial value to the goods. The exclusion, which applies even if the shape or other characteristic has acquired distinctiveness, regulates the copyright/​trademark overlap as well as the trademark/​design and trademark/​patent overlap. As the EU courts held in Bang & Olufsen93 and Hauck,94 the substantial value of a good can be its beauty, but also other aspects. In this way, the CJEU case law prevents both the concurrent and subsequent overlap.95 In the US, the parallel doctrine is solely judicial, and is called “aesthetic functionality.”96 It was summarized by the Supreme Court in Qualitex thus: [t]‌he functionality doctrine . . . forbids the use of a product’s feature as a trademark where doing so will put a competitor at significant disadvantage because the feature is “essential to the use or purpose of the article” or “affects [its] cost or quality of the article.”97

Despite the Supreme Court decision in Qualitex, the doctrine of aesthetic functionality is not always followed. A notable difference between the US doctrine of aesthetic functionality and Article 3(1)(e)(iii) (now 4(1)(e)(iii)) of the TMD was that the latter did not apply to two-​dimensional signs. Nevertheless, the EU and US rules are difficult to apply in practice, because it is hard to determine what is “too pretty” to refuse protection by trademark law.98 As stated earlier, EU law prevents the holder of a copyright and trademark on a product to use copyright to block the resale of the product, the trademark right of which has been exhausted by the trademark holder’s putting on the market of the product. This is also the case in Canada,99 and, albeit in a much less clear-​cut way, in the US.100 In Dior v

92 

The words ‘or another characteristic’ have been added when the directive was amended in 2015 thus there is no case law yet. Such other characteristics can include two-​dimensional aspects. 93  Case T-​508/​08 Bang & Olufsen v OHIM [2011] ETMR 10, para 77. 94  Case C-​205/​13 Hauck v Stokke [2014] ETMR 60, paras 31–​32, 35–​36. 95  Bang & Olufsen (n 92), paras 64–​66 both in relation to art 3 (1) (ii) and (iii) TMD. 96  On this doctrine, see I Calboli, “Betty Boop and the Return of Aesthetic Functionality: A Bitter Medicine Against ‘Mutant Copyrights’?” [2014] European Intellectual Property Review 80 and Calboli (n 75). 97  Qualitex Co. v. Jacobson Products Co., 514 US 159, 169 (1995); see (n 125), 169. 98  A Kur, “Too Pretty to Protect? Trade Mark Law and The Enigma of Aesthetic Functionality,” in J Drexl et al (eds), Technology and Competition: Contribution in Honour of Hanns Ullrich (Larcier 2009) 139; Calboli (n 84) 81. 99 In Euro-​Excellence, Inc v Kraft Canada, Inc [2007] 3 SCR 20 (Can), the Canadian Supreme Court had to decide a case similar to Dior. The result was the same but the justices were split on the reasons—​ for some it was a technical interpretation of the distribution right which prevented Kraft from using its copyright to circumvent the exhaustion principle; for others, it was because it was not the role of copyright law/​the interests of the copyright holder were not harmed. See Tomkovicz (n 1) 150–​151; on this case see P-​E Moyse, “Kraft Canada c Euro-​Excellence: L’Insoutenable Légèreté Du Droit (Kraft Canada v Euro-​Excellence: the Unbearable Lightness of the Law)” [2008] 53(4) McGill Law Journal 741 and references cited. 100 In Quality King Dist Inc v L’anza Research Int Inc, 523 US 135 (1998), the US Supreme Court also disapproved the use of copyright law to prevent the resale of genuinely trademarked products. The argument was that copyright is there to promote creativity rather than “ordinary commercial products

Overlapping Rights   635 Evora,101 the CJEU held that when copyright forbids the reproduction of a work “attached” to a trademarked good or service (ie, commercialized as such by the trademark owner) but there is no trademark infringement, copyright law cannot override the free movement of goods or services which would have prevailed would trademark law have been exclusively applicable. Accordingly, the freedom of movement of goods and services not only includes the freedom to resell goods, but also to bring to the public’s attention the further commercialization of those goods (eg, via advertisement) unless such use of the trademark (or goods) for this purpose seriously damages the reputation of the trademark (or goods).102 The Dior decision set out a rule that in this situation, copyright law must yield before the EU principle of freedom of movement of goods and services. The case involved genuine Dior perfumes bought for resale by a discount store. The trademark right was exhausted and Dior tried to use its copyright in the shape of the perfume bottles and their packaging to prevent the trader from reselling the perfumes. Indeed, in order to advertise the perfumes, the discount store had to reproduce the packaging and bottles on its ads. Another similarity between countries in relation to the copyright/​trademark overlap is that despite the overlap being generally allowed, most countries have no rules regulating the overlap in relation to ownership, dealings, rights, infringement, and exceptions. Sometimes there is convergence, and sometimes not. But in most cases, there is no convergence and therefore the stricter regime prevails over the other. For instance, in most countries, because the basic requirements for infringement are the same owing to international conventions and basic principles in the two rights, copyright will override the limitations of trademark law (principle of specialty, use in the course of trade and requirement of confusion in some cases) and trademark law will override the limitations of copyright law (requirement of copying). Likewise, trademark law allows private use of trademarks whereas copyright law does not always (the UK does not have a private copying exception unlike Germany, France, Belgium, and many other civil law countries). Thus, using a trademark that is also a copyright work privately may infringe the copyright whereas it does not infringe the trademark right. The owner of the rights therefore gets the best of both worlds. Denmark is special in that respect. Some commentators have suggested that if a subject matter is protected as a trademark, only the trademark infringement action can be used, even though the sign could also be considered as being original and thereby protected by copyright law. If, however, the sign consists of a pre-​existing copyright protected work, full copyright protection based on that work could be claimed.103

that use copyright material as a marketing aid” (at 151). However, the reverse situation, namely using a trademark right to circumvent the exhaustion principle (or first sale doctrine as it is called in the US) applicable to copyrighted material, seems possible under an interpretation of US law, although it has not yet been tested judicially. See M LaFrance, “A Material World: Using Trademark Law to Override Copyright’s First Sale Rule for Imported Copies” [2014] 21 Michigan Telecommunications & Technology Law Review 43. For a more recent case with facts similar to those of Dior, but decided by a lower court, see Omega SA v Costco Wholesale Corp, No CV 04-​05443 TJH, 2011 US Dist LEXIS 155893 (ED Cal 2011) on remand from the 9th Circuit. 101 

102  Paras 48 and 59 of the decision. Case C-​337/​95 [1997] ECR I-​6013. This principle was developed by Mogens Kotvedgaard and Jens Schovsbo Lærebog I Immaterialret (7th edn, Jurist-​og Økonomforbundets Forlag 2005) 67 and 80ff, and Jens Schovsbo, Morten Rosenmeier, Clement Salung Petersen, Immaterialret (4th edn, Djøf Forlag 2015) 121. 103 

636   Estelle Derclaye However, this position has not been explicitly recognized (or rejected) by Danish courts. In a recent ­decision, the Maritime and Commercial Court remarked, however, that a figurative mark which was made for and used as a trademark and as such enjoyed trademark protection was not also protected by copyright.104 The court did not make it clear whether this decision was based on the principle described above or just on the fact that the mark was not considered original. However, since the court did not refer to the originality criterion, it would seem that the court did in fact base its decision on the principle described above. Similarly, in the EU and its Member States, there are no exceptions in trademark law ­except under Article 5(2) TMD (use with due cause of an identical or similar trademark with reputation on dissimilar goods and by extension on identical or similar goods).105 Therefore, if a copyright exception applies, but the use is of an identical mark without reputation on identical goods, the trademark regime will override the copyright regime. This has happened in France in relation to some parodies. The character Titi Fricoteur was not held to infringe the copyright in Bibi Fricotin, but held to infringe the trademark right in the same.106 In a case parodying the ESSO trademark with the symbol “E$$O,” the use of the trademark was held not to infringe copyright (the parody exception was applicable), but use was not permitted under trademark law as it could damage the trademark’s reputation.107 However, other decisions involving parodies have allowed the two rights to converge.108 Similarly in the UK, courts have tolerated parodies less in trademark cases than in copyright cases.109 Thus, while a parody may be allowed under copyright (s. 30A CDPA), the parody argument will only work in trademark law when the parody “is a vehicle for ‘non-​commercial speech’ for the primary purpose of political or satirical comment.”110 In Germany, whereas there is no case law, the fundamental rights to freedom of the arts (Article 5(3) of the constitution) and freedom of speech (Article 5(1) of the constitution) are the two bases for the development of similar results in both trademark and copyright law. Then how do countries’ laws fare in relation to the subsequent overlap? In virtually every country the trademark right will be renewable ad infinitum provided it remains used, which creates a subsequent overlap when the copyright eventually expires on the work. But conversely, if a trademark right expires (ie, if it is not renewed every ten years in the EU (Article 48 TMD or if it has not been used for a period of five continuous years, Article 16 TMD)) or is no longer distinctive, copyright still subsists until it expires; it is the first scenario that is the

104 

Ugeskrift for Retsvæsen, 2013, 18. Case C-​292/​00 Davidoff & Cie SA & Zino Davidoff SA v Gofkid Ltd [2003] ECR I-​389. 106  CA Paris, 12 July 1993, cited by VL Benabou, “Les Rapports entre Droit d’Auteur et Droit des Marques et de la Concurrence Déloyale, Rapport National, France,” in Ginsburg and Besek (n 4) 12. 107  CA Paris, Esso SA Francaise v S Ossetian Greenpeace France and Société Internet.fr [2003] ETMR 867. 108  See, eg, Société des Participations du Commissariat à l’Energie Atomique v Greenpeace France et al, 2 August 2002 unreported (TGI) affirmed by CA Paris [2003] ETMR 870. 109  A Firth, “National Report, Reply to the questionnaire for the United Kingdom, ALAI 2001 Sessions IIA and IIB: The Relationship of Copyright and Trademarks,” in Ginsburg and Besek (n 4) 6 citing E Gredley and S Maniatis, “Parody: A Fatal Attraction” [1997] European Intellectual Property Review 339; 412. 110  Gredley and Maniatis (n 108) 418 noting however at 420 that “There is no freedom of expression defence in UK trade mark law.” 105 

Overlapping Rights   637 more common. While the sequential overlap is alive and well, the manner in which it is dealt with by countries varies considerably. In the EU, neither statutory law nor case law envisages this issue except for shapes, and since 2016 other characteristics such as two-​dimensional ones too. The same is true in the UK. France has a rule that avoids the subsequent overlap in relation to titles of copyright works. Article L 122-​4 IPC provides that, even if the copyright in the title of a work has expired, if the use by another person of the title for a work of the same kind creates confusion with the once-​copyright protected work to which it relates, it will infringe. This rule prevents the overlap by a person other than the copyright holder, but allows the overlap by the copyright holder. There is also case law on the subsequent overlap in general, but courts are divided on the issue: Some allow registration of a copyright work as a trademark when the copyright has expired,111 and some do not.112 In countries that have perpetual moral rights (many civil law countries), the moral right of integrity could be used to the same effect, but for all kinds of works, even if there is no similarity as to the kind of work for which the title is used. The right could be invoked to prevent the trademark registration of any work by persons other than its author if the trademark or its use is prejudicial to the author’s reputation (eg, musical works may have to be registered in their entirety and not extracts, unless using short extracts does not breach the right of integrity). There is no statutory solution in Germany, and the courts are divided. In the Mona Lisa case, the Federal patents court did not allow the overlap when a copyright work is famous because the more famous it is, the less likely it would be distinctive,113 whereas in the Marlene Dietrich case, the Federal Court of Justice held that distinctiveness can sometimes subsist even if the person, in this case, is famous. In conclusion, the situation in relation to the sequential overlap is rather fragmented and the solutions are on a spectrum: Where some countries laws are silent (UK), others restrict the overlap considerably (France), while some take a position in between (Germany). 111  See Cass, 13 January 1904 [1904] Ann Prop Ind 26 cited by PY Gautier, Propriété Littéraire et Artistique, (6th edn, Presses Universitaires de France 2007), 467—​a drawing or photograph can in general, even if they have fallen in the public domain as artistic works, constitute a trademark, albeit an old obiter dictum; TGI Paris, 20 March 1975 [1976] Ann Prop Ind 55; CA Paris, 6 July 1989 [1990] PIBD, III, 112, cited by VL Benabou, “Les Rapports entre Droit d’Auteur et Droit des Marques et de la Concurrence Déloyale, Rapport National, France,” in Ginsburg and Besek (n 4) 13. 112  See C Caron, “L’Empilement des Propriétés Intellectuelles: Le Droit d’Auteur ne Chasse pas la Marque” [2006] 6 Communication Commerce Electronique, June, comm 88 noting that some courts including the Court of Cassation have showed some hostility to the reappropriation by trademark law of the public domain of copyright, and citing CA Besancon, 5 June 1970 [1972] Ann Prop Ind 20, comment Dusolier, also cited by Gautier (n 110), no 409 (refusing the protection of an architectural work as a trademark on the basis that one should not be able to appropriate for an unlimited time a shape which belongs to the public domain or has a vocation to fall into it); Cass Com, 19 October 1999, SARL J Pironin v SA Thiers Virole [2000] Communication Commerce Electronique, Comm 3; CA Paris, 4th ch, 25 June 1997 [1998] Gazette du Palais, 1, somm 63 (“one cannot, because it diverts trademark rights from their aim, protect as a trademark the arrangement and interior decoration of a shop, which cannot be protected by copyright”) cited by A Bertrand, Droit des Marques: Signes Distinctifs, Noms de Domaine (2nd edn, Dalloz 2005) 20, no 1.141. However, contrast this decision with the recent Apple decision, (n 67), which now clashes with this earlier French decision. 113  See Federal Patents Court (1998) Gewerblicher Rechtsschutz und Urheberrecht 1021—​Mona Lisa. On this issue, see R Jacobs, (n 78), 809; cf also A Ohly, “Areas of Overlap Between Trade Mark Rights, Copyright and Design Rights in German Law” [2007] GRUR Int 704, 709.

638   Estelle Derclaye

4.4 Trademarks and Designs The objective overlap between trademarks and designs is as evident as that between trademarks and copyright because designs are concerned with the appearance of a product, be it two or three dimensional, and there can be figurative and shape marks. And a two-​or three-​dimensional design can be distinctive as well as being original and novel, allowing the objective overlap to subsist. It is allowed both by EU and US law.114 In the EU, specific rules regulate this overlap. Indents (ii) and (iii) of Article 4(1)(e) TMD (and corresponding Article 7(1)(e)(ii) and (iii) CTMR) prohibit the protection by trademark law of signs which consist exclusively of the shapes, or other characteristics, of goods which are necessary to obtain a technical result or give substantial value to the goods. We have seen the latter exclusion in the previous section. There has been extensive litigation on indent (ii) of Article 4(1)(e). In summary, like indent (iii), indent (ii) “reflects the legitimate aim of not allowing individuals to use registration of a mark in order to acquire or perpetuate exclusive rights relating to technical solutions” (emphasis added).115 The CJEU thus deals with both the concurrent and the subsequent overlap. The shape of the Philishave three-​headed electric shaver has been held unregistrable as a trademark in the EU and UK.116 The same fate ensued for the shape of the Lego brick not only in the EU, but in Germany,117 the UK,118 and Switzerland.119 On the other hand, the shape of the Lego manikin is not excluded.120 Even if the feet and hands can be connected to other elements and thus can be said to serve a technical function, they are not the essential parts of the mark, which consists of the shape of the entire manikin.121 The Rubik’s cube also fell outside of the exclusion because the mark registered was not for the moving blocks (ie, their rotating capability) but solely for their appearance (a cubic grid structure of 3x3 for a three-​dimensional puzzle) which does not convey any technical function.122 In addition to Article 4(1)(e)’s rule, the CJEU has treated shape marks, including packaging, less favorably in terms of distinctiveness because consumers do not generally perceive them as an indication of origin and, therefore, the overlap is also curtailed this way.123 The result is 114 

A Nemes and A Carboni, “Overlapping Rights in Designs, Trademarks and Trade Dress,” in Wilkof and Basheer (n 1) 252 ff; T Jackson, “Functional Signs and Decanters of Wine: How Trade Dress Protection Unconstitutionally Extends Expired Design Patents” [2014] 18 Marquette Intellectual Property Law Review 431. 115  Case C-​299/​99 Koninklijke Philips Electronics v Remington Consumer Products (n 9) para 82 (shape of the three-​headed Philishave electric razor). See also Case T-​270/​06 LegoJuris A/​S v OHIM (n 9) (shape of the Lego brick). 116  [1998] RPC 283. 117  Federal Court of Justice, Decision of 16 July 2009—​I ZB 53/​07 and 55/​07 [2010] Markenrecht 131. 118  [1998] RPC 69. 119  3 July 2012 (Decision 4A_​20/​2012), Federal Supreme Court. 120  Case T-​395/​14 Best-​Lock (Europe) v OHIM [2015] nyr, available at . 121  Best-​Lock (Europe) v OHIM para 33. 122  Case T-​450/​09 Simba Toys v OHIM [2014], nyr, available at , paras 54–​60. However, on appeal, the Advocate General ruled out the cube could obtain such a trademark. The CJEU confirmed the Advocate General’s view, see Case C 30/​15 P—​Simba Toys GmbH & Co KG v European Union Intellectual Property Office (EUIPO), available at . 123  See Joined cases C-​53/​01 –​55/​01 Linde AG, Winward Industries and Rado Watch v DPMA [2003] RPC 45 and further case law cited by A Kur, “Too Common, Too Splendid, or ‘Just Right’? Trade Mark

Overlapping Rights   639 that the overlap is reasonably curtailed, and that some shapes are registrable, but not many. There is, as discussed in the previous section, too, no rule regulating the overlap between figurative marks and copyright works, and two-​dimensional designs. However, in the UK, courts have gone further than the Court of Justice. Thus, in the Philips case, the Court of Appeal held that: To enable monopolies granted in respect of patents, registered designs and the like to be extended by trademark registrations would be contrary to the public interest unless justifiable on grounds of the public good.124

This statement therefore excludes the subsequent overlap for all sorts of subject matter and not only shapes. At around the same time, the Trademarks Registry and on appeal, Neuberger J. expressed similar views in Interlego’s Application (concerning the trademark registration of the Lego brick).125 Similarly, in the US, neither a trademark nor a design patent can subsist in functional product features. The Supreme Court has held that trade dress in a product feature is functional when it is “essential to the use or purpose of the device or when it affects the cost or quality of the device,” that is, if the exclusive use of the feature would put competitors at a “significant non-​reputation related disadvantage.”126 The exclusion is broader than in the EU as it embraces two-​dimensional designs, too. Indeed, in the US, colors have been found to be functional.127 Neither the UK, France, Germany, nor the US have additional rules organizing the trademarks/​designs overlap. Thus, similarly to the trademark/​copyright overlap, regime clashes occur at the level of ownership, rights, infringement, and exceptions as there is not much convergence between the two IPRs. For instance, in the EU, there is convergence as both trademark and design laws allow private use/​use for non-​commercial purposes. But the three other exceptions allowed under design law (acts done for experimental purposes, acts of reproduction for the purposes of making citations or of teaching, and transit of aircrafts’ and ships’ equipment embodying design infringements, including importation of equipment for repairs and execution of such repairs on the equipment of such aircrafts and ships in transit) will be trumped by the trademark regime, at least in double or single identity cases. Also, a trademark will generally be more easily infringed than a design; this is because the design law test of informed user is stricter than the trademark law test of average consumer. In the US, though, the infringement tests for design patents and for trade dress are more closely aligned than in the EU.128 Finally, in the US, there is also a separate Vessel Hull

Protection for Product Shapes in the Light of CJEU Case Law,” Max Planck Institute for Innovation and Competition Research Paper No. 14‐17, 6; Case C-​218/​01 Henkel KGaA [2004] ECR I-​1725, para 49. 124 

[1999] ETMR 816, 824. [1998] RPC 69, at 114 cited by A Firth, E Gredley, and S Maniatis, “Shapes as Trade Marks: Public Policy, Functional Considerations and Consumer Perception” [2001] European Intellectual Property Review 86, 90. 126  Qualitex Co v Jacobson Products Co, Inc, 514 US 159, 165 (1995). 127  See, eg, Brunswick Corp v British Seagull Ltd, 35 f 3d 1527, 1533 (Fed Cir 1994). 128  In design patent law, the infringement test is that of the ordinary observer and deception Gorham Co v White, 81 US 511 (1871), most recently restated in Egyptian Goddess, Inc v Swisa Inc (543 f 3rd 665 (Fed Cir 2008). See also Jackson (n 112) 436. 125 

640   Estelle Derclaye Design Protection Act, which expressly forbids cumulation with design patents, but not with trademarks and unfair competition.129 Similar to the overlap between trademark and copyright, trademarks can prolong the normal life of a registered or unregistered design. As seen, the CJEU case law prevents this in the case of certain shapes. Otherwise, the overlap is implicitly allowed. However, a design can never be registered and thus prolong an expired trademark right as the design will no longer be novel or original. This is the case in every country by the sheer application of the protection requirement. The literature is sometimes in agreement and sometimes divided on the copyright/​trademark and design/​trademark overlaps. There is general agreement that slogans and titles are the realm of trademark and not copyright law.130 Copyright law should not extend to them as they are, in the main, not original, and also such copyright protection threatens freedom of expression.131 For those copyright works that are not minimalist like titles, such as artworks and music, commentators agree that convergence at the level of exceptions is badly needed.132 In fact, some advocate such convergence between patent, copyright, and trademarks, and it is allowed by international instruments, including TRIPs and WTO case law.133 Accordingly, a fair use exception (understood broadly, ie, not in the sense of the American fair use doctrine and thus meaning that remuneration could be owed in some cases)134 would help eliminate regime clashes in case of overlaps.135 In the EU, as in the US, most commentators were also in favor of extending the exclusion in Article 3(1)(e) TMD (now 4(1)(e)) to all signs instead of just shapes.136 This was done in 2015 when the directive and regulation were amended. However, some commentators would repeal137

129 

See 17 USC §§ 1329-​30 (1998). See also Dinwoodie (n 4) 6. See, eg, J Passa (n 84) 34 and 40; Lucas, Lucas-​Schloetter, and Lucas (n 84), no 114; F Pollaud-​ Dulian, Le Droit d’Auteur (Dalloz 2005) no 197, 147. 131  J Davis and A Durant, “To Protect or Not to Protect? The Eligibility of Commercially Used Short Verbal Texts for Copyright and Trade Mark Protection” [2011] Intellectual Property Quarterly 345, 370. 132  A Kur, “Harmonization of the Trademark Laws in Europe—​An Overview” (1997) 28 International Review of Intellectual Property and Competition Law 1, V 17; Calboli (n 95). 133  M Senftleben, “Overprotection and Protection Overlaps in Intellectual Property Law—​The Need for Horizontal Fair Use Defences” in A Kur and V Mizaras (eds), The Structure of Intellectual Property Law: Can One Size Fit All? (Elgar 2011), 136. 134  Senftleben (n 132) 138–​139. 135  Senftleben (n 132) 138–​139. See also S Dusollier, “Pruning the European Intellectual Property Tree: In Search of Common Principles and Roots” in C Geiger (ed), Constructing European Intellectual Property—​Achievements and New Perspectives (Elgar 2012) 57, who also thinks that a common catalogue of exceptions and limitations would be good. 136  Firth, Gredley, and Maniatis (n 124), 86; U Suthersanen, “The European Court of Justice in Philips v Remington—​Trade Marks and Market Freedom” [2003] Intellectual Property Quarterly 257, 281–​282; Study prepared by the Max Planck Institute on the “Overall Functioning of the European Trade Mark System,” available at . 137  U Koschtial, “Die Freihaltebedürftigkeit wegen Besonderer Form im Europäischen und Deutschen Markenrecht” [2004] GRUR International 106, 110, and further references cited by A Quaedvlieg, “Overlap/​Relationships between Copyright and Other Intellectual Property Rights,” in E Derclaye (ed), 130 

Overlapping Rights   641 or at least disregard138 the third indent. This is because as a result of the importance given to product design, many goods have shapes that give them substantial value, so that the exclusion will apply to most goods.139 This contradicts the intention of the EU legislature to open up the registration of shapes in the TMD and CTMR. Some also mention that there should be convergence between the design law’s must-​fit and must-​match exclusions and Article 4(1)(e) TMD.140 Much of the CJEU case law on Article 4(1)(e) arguably enables this, but legislative clarity would be preferable. However, for some, designs solely dictated by function should be protectable by design right because denying protection to technically innovative design is “as likely to hamper innovation as granting it would have done.”141 On the other hand, the literature is divided on the sequential overlap. Some advocate the abolition or at least a severe restriction of the possibility to register copyright works fallen in the public domain as trademarks.142 Others do not think that the overlap reduces the public domain as the copyright works used will lack distinctiveness.143 Nevertheless, the case law shows such works can have, or acquire, distinctiveness.144 Others adopt a position in the middle: The expiry of copyright protection is not per se a public interest, as copyright law could override trademark law, but only in special circumstances.145 As to the trademark/​design sequential overlap, again some think there is not much case for concern and courts can apply an “effects on competition” criterion to regulate this overlap.146 Others suggest that it should not be possible for the right holder to pick one suitable aspect from one regime in order to bypass the restrictions that were deliberately included in the other regime,147 and note that extending a design right by a trademark right distorts the balance of rights and interests established between the trademark owner, users/​the public and other competitors/​competition.148

Research Handbook on the Future of EU Copyright (2009) 479, 509; Study prepared by the Max Planck Institute on the “Overall Functioning of the European Trade Mark System,” Part III, para 2.37. 138   See A Kur, “Harmonization of the Trademark Laws in Europe—​An Overview” [1997] 28 IIC 1, V 17 note 106 and ibid (n 122) 11 and 24; Maniatis and Gredley (n 108) 420. 139   Quaedvlieg (n 136) 479, 509; P Torremans, Holyoak & Torremans Intellectual Property Law (5th edn, OUP 2008) 388. 140  Quaedvlieg (n 4) 61; Kur (n 18) 613, 627. 141  D Musker, Community Design Law, Principles and Practice (Sweet & Maxwell 2002) 41. 142  Calboli (n 95) 88; Calboli (n 86) 57 and 76; H Cohen Jeroham cited, seemingly with approval, by Feer Verkade (n 11) 69 and 72. 143  A Kur, “Exceptions to Protection Where Copyright and Trade Mark Overlap: Parody, News Reporting and Other ‘Speech’ Use of Trade Marks, General report,” in Ginsburg and Besek (n 4) 593, 600. 144  Moffat (n 4) 1473. See also A Quaedvlieg, “Protection of Three-​Dimensional Models as a Trade Mark, in Adjuncts and Alternatives to Copyright,” in Ginsburg and Besek (n 4) 576, 583. P Reeskamp, “Dr No in Trade Mark Country: A Dutch Point of View” [2010] Journal of Intellectual Property Law and Practice 29, 36. 145  A Quaedvlieg (n 136) 53. See also Schovsbo (n 102). 146  A Kur, “Cumulation of Rights with Regard to Three-​Dimensional Shapes—​Two Exemplary Case Studies,” in Dusollier and Cruquenaire (n 1) 155, 166; ibid (n 18) 613, 621. 147  P Torremans, “Three-​Dimensional Trade Marks and Designs for Packaging,” in Ghidini and Genovesi (n 18) 745, 765–​766. 148  Tomkowicz (n 1) 113.

642   Estelle Derclaye

4.5 Trademarks and Patents The overlap between patents and designs is regulated in the EU by Article 4(1)(e)(ii) TMD and what was said in the previous section therefore applies here, too. In the recent case of Pi Design v OHIM,149 the claimant was barred from protecting by trademark law indentations in its knives as they were purely functional (non-​skid function). The claimant also had a patent on them. The CJEU has recently added that only the way the good functions is relevant; the manufacturing method is not.150 Therefore, all signs consisting of shapes attributable solely to the technical result are unregistrable as trademarks.151 Because of the EU courts case law, the overlap will occur rarely as it expressly excludes trademark registration of concepts, shapes and other characteristics that are exclusively functional,152 and these correspond to potentially patentable processes and products. Because this overlap is heavily harmonized at EU level, the rules are the same at national level. For instance, France, the UK, and Germany do not have additional specific rules organizing this overlap. In Germany and in the UK, there was also parallel litigation on the Philishave and Lego brick.153 In the US, the law is similar; according to the functionality doctrine, a trademark right cannot prolong a patent right after it has expired.154 As in previously reviewed overlaps, ownership, the infringement tests, rights, and exceptions in patent and trademark law differ in the main, which causes conflicts and overprotection. For instance, in all countries, neither patent nor trademark provisions require copying, so from this aspect, there is convergence but, with the exception of famous marks, the patent regime will prevail over that of trademark as the patentee’s rights are not restricted to use in trade for identical or similar goods or services. In most European countries, patent law’s exceptions are similar and include uses in trade (eg, acts done for experimental purposes, extemporaneous preparation for individual cases in a pharmacy of a medicine in accordance with a medical prescription, exception to facilitate transport based on Article 5ter Paris convention).155 Therefore, trademark law will override these exceptions in case of an overlap, at least in single and double identity cases. Nevertheless, on the whole, this overlap will be quite rare owing to the similar stance taken by courts both in the EU and the US.156 This is so even though the Supreme Court has not really endorsed a principle against cumulation,157 which the EU legislation has in Article 4(1)(e)(ii) TMD, to a large extent in respect of this overlap. 149   Case C-​337/​12P to 340/​12P Pi-​Design AG and Others v Yoshida Metal Industry Co Ltd [2014] nyr, available at . 150   Case C-​215/​14 Nestlé v Cadbury [2015], nyr, available at , para 57. 151   Nestlé v Cadbury, para 56. 152   Koninklijke Philips Electronics v Remington Consumer Products, Lego Juris v Mega Brands (n 9) and Case C-​321/​03 Dyson v Registrar of Trademarks [2007] ECR I-​687. 153   See Federal Court of Justice, (2006) Gewerblicher Rechtsschutz und Urheberrecht 588 and 589—​ Scherkopf and Rasierer mit drei Scherköpfen implementing the Court of Justice’s decision in Philips/​ Remington and Federal Patents Court (2007) Gewerblicher Rechtsschutz und Urheberrecht 786—​Lego-​ Baustein. For the UK, see (n 115) and (n 117). 154 See TrafFix (n 36). 155  This is the case in the UK (art 60(5) Patent Act), Germany (art 11 Patent Act), and France (art L 613-​5 IPC). 156  See Dinwoodie (n 4) 8. 157  See Dinwoodie (n 4) 11.

Overlapping Rights   643

4.6 Patent and Copyright The patent/​copyright overlap mainly concerns computer programs.158 Computer programs are copyrightable and patentable subject matter virtually worldwide due to the TRIPs agreement (Articles 10(1) and 27(1)). The patent/​copyright overlap for computer programs is a genuine overlap, and it is problematic. Indeed, the vast majority of the literature criticizes the overlap. For most, the overlap is overprotective and thus economically undesirable.159 Some recommend keeping patent and abolishing160 or at least (severely) curtailing copyright, keeping it (only) to fight piracy.161 Some commentators are not against cumulation, per se, if it is well organized to avoid overprotection; for instance, the overlap should not prevent the application of the exceptions in the two regimes.162 In the EU, Article 9 of the Software Directive allows the overlap,163 and paragraphs 2(b) and 3 of Article 52 of the EPC do not entirely rule out patents on software—​they can be patented if they are not claimed as such. According to the European Patent Office and national case law in countries bound by the convention, computer-​implemented inventions can be patented as long as they achieve a technical effect, which is not difficult.164 Like in the case of computer programs, the EPC and by ricochet, national law of the European countries bound by the convention,165 also allow the patentability of presentations of information and aesthetic creations, as long as they are not claimed as such, but overlaps on these are rare. As to ownership, there is a high degree of convergence at EU level because of the software directive; Article 3(3) requires that the economic rights are exercised by the employer if the author is employed and created the software in the course of his employment. Thus, 158 

This chapter uses the terms “software” and “computer program” interchangeably even if software does not technically encompass all computer programs (mainly firmware). 159  C Le Stanc, “Logiciels entre Droit d’Auteur et Brevet: Implications Juridiques et Economiques,” in Ghidini and Genovesi (n 19) 295, 309; F Macrez, “Les Cumuls de Droits Intellectuels sur les Créations Informatiques,” in Dusollier and Cruquenaire (n 1) 87, 106. Contra: R Hart, P Holmes, and J Reid, The Economic Impact of Patentability of Computer Programs, Report to the European Commission, 19 October 2000, 3 Conclusions 1, available at , finding no evidence that software patents have affected European independent software developers, cited by G Casucci, “Software and Computer Related Inventions: Protection by Patent and Copyright,” in C Heath and A Kamperman Sanders (eds), New Frontiers of Intellectual Property Law, IP and Cultural Heritage, Geographical Indications, Enforcement and Overprotection (Hart 2005) 161, 178. 160   C Le Stanc (n 159) 295; G Ghidini and E Arezzo, “One, None or A Hundred Thousand: How Many Layers of Protection for Software Innovations?” in J Drexl (ed), Research Handbook on Intellectual Property and Competition Law (Elgar 2008) 359, 372. 161   G Ghidini and E Arezzo, “Dynamic competition in software development: How copyrights and patents, and their overlapping, impact on derivative innovation” [2013] 3(4) Queen Mary Journal of Intellectual Property 278, 292–​293; B Caillaud, La Propriété Intellectuelle sur les Logiciels, in J Tirole, C Henry, M Trommetter, L Tubiana, and B Caillaud (eds), Propriété Intellectuelle (Conseil d’analyse economique, La Documentation Française 2003) 154, 164; F Macrez, (n 197) 102. 162 163 N 28.   Tomkowicz (n 1) 56. 164  See cases T 1173/​97 IBM/​Computer Program Product I & II [1999] OJ EPO 609 and T 0935/​97 [1999] RPC 861. This case law has been codified in the EPO guidelines for examination, part C, Chapter IV, 2.3.6, April 2009, available at . Nevertheless, in the UK, there are conflicting precedents on the issue. For developments, see Derclaye and Leistner (n 1) 210–​211. 165  See, eg, art 1(2) UK Patents Act 1977 as amended.

644   Estelle Derclaye a non-​employed author/​inventor will own both the copyright and the patent, and the ­employer will not. But in France, for instance, convergence stops there as there are different rules in copyright and patent law for joint ownership. Each co-​owner of a patent can alone decide to exploit the invention so long as the others are indemnified equitably. But the converse is true in copyright law: The co-​authors must exercise their rights together unless a court grants permission to bypass the resistance of one or more of them.166 In the UK and Germany, a special regime exists for employee inventions. Under certain conditions, the inventor-​employee must receive additional compensation from the employer. But in copyright law, there is no such right.167 Neither UK nor German law has a rule regulating this conflict. Therefore, the patent rule “breaches” the copyright rule that the author has already been adequately compensated via his employment contract. As to rights, in all countries, patent law does not require copying, whereas copyright does. Therefore, if there is copying, both patent and copyright will be infringed provided a substantial (ie, original) part of the work has been taken and the claimed invention or an equivalent has been used. If there is no copying, the patent may still be infringed. In Europe, there are fewer and different exceptions in patent law than in copyright law, which allows patent law to override the copyright exceptions (namely normal access and error correction, back-​ up copy, and decompilation).168 In the US, the overlap also exists by virtue of the statutory and case law and also mainly concerns software.169 The result of the overlap is very similar to that in Europe. As Moffat writes, “A programmer—​ or her employer—​ may now enjoy the benefits of both protection regimes: twenty years of strong patent rights; at least seventy years of medium-​strength copyright rights; the patent right to preclude fair use, reverse engineering, and independent creation; and the copyright benefit of preventing the creation of substantially similar works.”170

Indeed, in the US, as discussed, the economic rights are similar in patent and copyright law and there is no fair use in patent law. Virtually worldwide, the sequential overlap applies with full force, as the patent duration is 20 years from filing by virtue of TRIPs, and copyright lasts 50 or more years after the author’s death by virtue of the Berne convention. Copyright will thus last for many years after the patent right’s expiration.

166  C Le Stanc, “Interferences entre Droit d’Auteur et Droit des Brevets quant à la Protection du Logiciel: Approche Française,” in S Verma and R Mittal (eds), IP Rights, A Global Vision, ATRIP Papers 2002-​03 (Indian Law Institute 2004) 162, 166–​167. 167  Section 41 of the UK Patents Act and arts. 9 and 20 of the German Employees’ Inventions Act 2002. See for detailed treatment of art 20, Federal Court of Justice, (2001) Gewerblicher Rechtsschutz und Urheberrecht 155—​Wetterführungspläne I; Federal Court of Justice, (2002) Gewerblicher Rechtsschutz und Urheberrecht 149—​Wetterführungspläne II. 168  Arts 5 and 6 of the software directive. Art 5(3)’s observe-​study-​test exception arguably covers the same acts as experimental use, which is allowed under patent law in European countries. 169  Moffat (n 4) 1500. Computer programs can be protected as literary works, see art 101 Copyright act. As to patents, see State Street Bank and Trust Company v Signature Financial Group, Inc, 149 F3d 1368 (Fed Cir 1998). 170  Moffat (n 4) 1503–​1504.

Overlapping Rights   645 Therefore, the combination of the two rights on a computer program is a very powerful one. It is further reinforced by the application of trade secret protection as the publication of the source code is not mandatory in the patent application in the US or in Europe and typically never revealed.

4.7 Patents and Designs In the EU, the overlap between designs and patents is allowed (Article 16 Design Directive and Article 96(1) of the Design Regulation) and relates to functional articles. However, this is rather rare because Article 7 Design Directive excludes designs dictated by their technical function and designs of interconnections. Nevertheless, the first exclusion only applies when the design is totally dictated by its function and as the requirements of patent and design law are close (on the one hand novelty, inventiveness, and industrial application, and on the other hand novelty and individual character),171 objective overlaps can occur. The law on rights, infringement, and exceptions is heavily harmonized here as well, via the EPC and the design directive and regulation. Thus, as usual, differences between EU Member States occur at the level of ownership. In France, for instance, the rules concerning ownership in design and patent laws to some extent converge. Both the design and patent rights go to the “creator” and there is a rebuttable presumption that the person applying to register the design or patent is considered the beneficiary of the protection. However, in design law, there are no rules on joint ownership or on the employer-​employee relationship, whereas there are very detailed rules in this respect in patent law (Article L 613-​29 and 611-​7 IPC). Therefore, the patent regime will prevail over the flexibility of the design regime.172 Also there may be a clash if the employer has not obtained the design rights as a contract is needed by contrast with patent law where the transfer is automatic. As we saw above, there are special rules to compensate the employee inventor in UK and German patent law, but not in design law. In the EU, the patent and design rights are very similar: The making, offering, putting on the market, importation, and use are prohibited without the consent of the right holder. In France, the UK, and Germany, patent law also prohibits, under certain conditions, offering the means to make the invention, a provision that does not exist in designs law. The patent regime therefore takes precedence over the design regime on this point. The scope of patent protection is determined by the claims which must be interpreted by the description and drawings. The doctrine of equivalents applies in accordance with the Protocol on the interpretation of Article 69 EPC. The test in design law is different, as it involves visual impression—​the scope of protection extends to all designs that do not produce on the informed observer a different overall impression. This means that even if the patent would not be infringed, the design right could be, and vice versa; additionally, often the patent will be infringed, but not the design right. This is because courts have interpreted the design 171  Novelty is absolute in patent law and relative in design law. Design law also requires the design to be visible for parts of complex products (ie, parts that can be disassembled). Arts 4, 6, and 3(3) of the design directive. 172  Note however that the ownership rule in relation to endeavours made by employees is the same for Community designs and for French patents (the employer is the owner unless there is a contract to the contrary).

646   Estelle Derclaye right’s infringement test rather strictly and a few differences will make a competing design escape infringement.173 Most of the exceptions in design law (Article 13(1)(a) and (b) and 13(2) Design Directive) are derived from national patent laws. Thus, there is some convergence on this aspect. However, one exception comes from copyright law (reproduction for the purposes of making citations or teaching) and does not exist in national patent laws, so that in case of an overlap, the patent regime will override it.174 In the US, double patenting between utility and design patent is generally not permitted,175 although “in practice, the objection can be overcome by a ‘terminal disclaimer’ renouncing any term extension of the longer-​lasting right over the shorter one.”176 However, the o ­ bjective overlap cannot occur anyway as a design patent can only be acquired for ornamental features. And works of art as such are not patentable.177 This is a major difference from the EU. What can happen, though (and it is the same in the EU too for non-​functional designs), is that the two different rights co​exist on the same product, albeit not on the same features of that product. Since the product is generally meant to be sold with the two aspects, the overlap exists in practice even if there is no objective overlap in theory. Unlike EU law, US law does not have a rule requiring visibility for designs of complex products but it is a, rebuttable, rule of thumb for refusal.178 By contrast to the EU, rights, infringement, and defenses are more closely aligned in both US utility patent and design patent law, which enables convergence. Both in the US and Europe, the sequential overlap is less problematic than in other cumulation scenarios. This is because the maximum length of a registered design right is 15 or 25 years (in the US179 and the EU respectively) and that of a patent is 20. Nevertheless, five years of protection can still be used to extend either patent (in the EU) or design (in the US) protection.

4.8 Patents and Plant Variety Rights With the copyright/​design overlap, the patent/​plants variety right overlap is the most heavily regulated at EU level. First, a distinction needs to be made between plants and plant varieties. Plant varieties are not patentable in the EU as opposed to genetically modified plants (Article 53(b) EPC and 4(2) Biotech directive). Plant varieties benefit from a special sui generis right: the Community plant variety right (CPVR). Therefore, the overlap between patent and CPVR should not occur. However, things are less neat than they appear. There 173   Procter & Gamble Company v Reckitt Benckiser (UK) Ltd [2007] EWCA Civ 936 (CA); Dyson v Vax [2010] FSR 39, aff ’d [2012] FSR 4 (CA); Samsung Electronics v Apple [2012] EWHC 1882 (Pat); aff ’d [2012] EWCA Civ 1339 (CA); Magmatic v PMS International [2013] EWHC 1925, rev’d [2014] EWCA Civ 181 and aff ’d [2016] UKSC 12. 174   In some countries’ patent laws, like the UK, there are also compulsory licenses in addition to the exceptions. See ss 48–50 UK Patents Act. In this case, the design law regime will trump them. 175  See US Manual of patenting examining practice (MPEP) 1504.06 and D Musker, “The Overlap Between Patent and Design Protection” in Wilkoff and Basheer (n 1) 29. 176  Musker (n 175) 29. 177  See MPEP 2106. Patent subject matter eligibility. 178  See Musker (n 175) 54 and MPEP 1504.01(c). Lack of ornamentality. 179  Since 13 May 2015. Prior to this the term was 14 years.

Overlapping Rights   647 are four ways an overlap can occur. First, the EPC only bans the patenting of plant varieties produced via non-​microbiological processes. Thus, a plant variety which has been produced by a “microbiological process” is patentable. Second, if a patent application directly claims a plant variety, it will be rejected, but if a patent application claims a plant, it is patentable even if it encompasses a plant variety.180 Third, even if it is not possible to claim a plant variety (as a product), it is possible to indirectly protect the plant variety by applying for a process patent (so long as it is not essentially biological). The plant variety, being the resulting product of the patented process, will be protected as it falls within the scope of protection of the patent.181 Fourth, if a patent claims DNA sequences such as genes or vectors, patent protection “extends to any material into which the patented DNA sequence has been introduced and in which it functions. Such material may well be a plant variety.”182 Thus, if the protection requirements of the patent law (novelty, inventiveness, and industrial application) and CPVR (distinctness, uniformity, stability, and novelty) are fulfilled (and they often are, as they are quite similar), the objective overlap occurs. As we saw above, even if patent law is not harmonized at EU level, convergence exists to a great extent by virtue of the EPC, and because European countries have also adopted similar patent law rules. Thus, excluded subject matter is the same under the two regimes, that is, inventions offending immorality and ordre public are excluded. On the other hand, ownership remains a national issue. For instance, in France, the IP Code establishes a perfect convergence between national patents and plant variety rights in relation to co-​ownership and dealings, but the rules relating to simple ownership are slightly different (Article L 623-​ 24 IPC). By contrast, in the UK, there is not always convergence in relation to ownership of the two rights; as breeding, discovering, and developing are not the same as inventing, there is not always correspondence between the inventor and the breeder. However, the employment rules are identical in the UK patent and plant variety right laws: The employer obtains the right unless otherwise agreed (s. 39 Patents Act and 4(4) Plant Variety Act). As to rights and infringement, French law has aligned the two rights closely. There is only ambiguity as to whether the extension of the protection to essentially derived varieties has the same effect as the principle of equivalents in patent law. As there is no case law, it is yet unclear whether the protection at the level of infringement converges. In Germany, the rights and infringement are also quite well aligned (Article 10 Plant Variety Act and Article 9, 9a and 9b Patent Act). In UK law, on the other hand, there is convergence in this regard. In France and Germany, there is far less convergence at the level of exceptions. In France, some exceptions converge (similar or identical compulsory licenses on the grounds of public health and national defense,183 compulsory cross-​license,184 an exception similar to the breeder’s privilege),185 some do not (far fewer exceptions in the plant variety right, that is, no exception for acts done privately, for non-​commercial purposes and acts done for experimental

180   L Bently and B Sherman, Intellectual Property Law (3rd edn, OUP 2009) 446–​447. See also Funder (n 22) 511, 513. 181  R Moufang, “The Interface between Patents and Plant Variety Rights in Europe,” in WIPO/​UPOV Symposium on Intellectual Property Rights in Plant Biotechnology, Geneva, 24 October 2003, Document WIPO-​UPOV/​SYM/​03/​6, 3-​4; Funder (n 22) 509; A Christie, “Patents for Plant Innovation” [1989] European Intellectual Property Review 394, 404; Llewelyn and Adcock (n 14) 320. 182  See, eg, Moufang (n 180) 4; Christie (n 180) 396. 183  Art L 623-​17–623-​22 IPC. 184  Art L 613-​15-​1, L 623-​22-​1, and 623-​22-​2 IPC. 185  Art L 613-​5-​3 and L 623-​25 IPC.

648   Estelle Derclaye purposes, no farmer’s privilege, no compulsory license if the breeder fails to work its variety, and no compulsory license to meet the national economy’s requirements). In Germany, there is a farmer’s privilege in both regimes, but German patent law does not have a breeder’s exemption. To compensate for this, there is a new exception to patent protection in favor of the use of biological material for breeding, discovering, or developing new plant varieties (Article 11 No 2a Patent Act), but it does not perfectly correspond to the breeder’s exemption in the plant variety right. On the other hand, in the UK, there is more convergence at the level of exceptions. Acts for private and non-​commercial purposes, acts for ­experimental purposes, and a farmer’s privilege are provided in both regimes (s. 60(5)(g) and Schedule A1 Patents Act and s. 8 and 9 Plant Variety Act). However, the compulsory licenses are not perfectly aligned in the two regimes. In the UK, the sequential overlap is possible for a further five years as the plant variety right lasts 25 years, and no special regulation has yet been adopted to increase the length of protection to 30 or 35 years for some varieties. By contrast, in France and Germany, the sequential overlap can last longer as Article L 623-​13 IPC and 13 of the German Plant Variety Protection Act both grant a 30-​year term to some varieties. In a very similar way as with the overlap between plant variety right and patent at purely national level, the sequential overlap can occur at EU level as the CPVR lasts for 25 years (30 for vines and trees), and the term is calculated from grant, contrary to patents, whose term is calculated from filing. That said, the overlap will be rare as the commercial life of a variety is often less than 25 or 30 years.186 In addition, it often takes a long time to obtain a marketable plant variety (on average 15 years following the initial invention). Therefore, once a plant variety is actually marketed, there is only around five years of patent protection left.187 Thus, for an overlap that is quite regulated at EU level, there are still a great number of differences between Member States. In the US, plant varieties can also be protected by a special plant variety right and by patent law.188 There is far less convergence between plant variety protection and protection of plant varieties under patent law. If the plant breeder has obtained both patent and plant variety protection for a plant variety, because the patent regime is stricter, it will override the plant variety protection. The US adopted a special plant variety right, which is provided for under the Plant Variety Protection Act (PVPA).189 Like in the EU, it offers protection to plant varieties that are new, distinct, uniform, and stable. For most varieties, the duration of the right is 20 years from the date of the issuance of the certificate. The scope of protection only superficially resembles that of patents. It is closer to that of copyright law, in the sense that there are far more exceptions and limitations than in patent law, for example, acts done privately and for non-​commercial purposes, and the use and reproduction of a plant variety for breeding or other bona fide research. There is also a saved seed exemption and a compulsory licensing provision. Neither the patent act nor the PVPA regulates the overlap between patent and plant variety right expressly. The PVPA “avoids any subject matter exclusions or election requirements although the fact that protection is accorded only for statutorily defined varieties does regulate the potential subject matter overlap with utility patents.”190 In the many cases involving 186 

187  Kock, Porzig, and Willnegger (n 21) 148. Brahy (n 20) 107, 121. 35 USC §§ 161–​164 (protecting asexually reproduced plants). 189  7 USC §§ 2321–​2582 (protecting sexually produced plants). 190  M Janis, “Interfaces in Plant Intellectual Property,” in Wilkof and Basheer (n 1) 91. 188 

Overlapping Rights   649 Monsanto, the US courts have not limited patent subject matter for plants nor harmonized the exceptions between the two bodies of law.191 By way of example, the CPVR seed saving exemption is far more restrictive than that of the PVPA, for example, the CPVR exemption “does not apply to any ‘hybrid or synthetic variety’, can only be invoked in connection with specified varieties listed in the Regulation and may require the farmer to pay ‘equitable remuneration’ to the plant variety protection owner.”192 Thus, the EU approach is totally opposed to the US approach, as it sees the cumulation as problematic and has adopted specific rules to avoid these problems. In Japan, there is a separate Seeds and Seedlings Law and it is not easy for a plant variety to obtain patent protection.193 The government sees the two bodies of law as well demarcated,194 and any overlap is therefore rare. Thus, there is yet a different treatment of overlaps compared to the EU and the US. Finally, there cannot be an overlap between the denomination of a plant variety and a trademark. There is a clear prohibition both in the International Convention for the Protection of New Varieties of Plants (UPOV Convention) and the CPVR, and it applies even after the plant variety right has expired (Article 20(1) of the 1991 Act of the UPOV Convention, and Articles 17 and 18(1) CPVR).195 There is simply coexistence between the two. The variety denomination is used as the generic name for the product, it is in the public domain, and it cannot be appropriated.196 A trademark is appended in addition. As this overlap is simply prohibited and relates to plant varieties only, it has been addressed here, and not separately.

5.  Current Outlook and Future Directions This chapter has shown that there is very little regulation of rights overlaps at international level, and that there are both differences and similarities in the way overlaps are treated at national level. Most of the case law concerns the attempt to prolong an expired IPR by using a trademark right or using copyright to block parallel imports of genuine trademarked products. Overall, it emerges that both in the EU and the US, the courts are mindful of not allowing shapes and other characteristics to be marks (simultaneously with another IPR or after another IPR expires) when there is a threat to competition, and of not allowing copyright to take precedence over the free circulation of trademarked goods. That said, US courts have been keener to deny trademark claims restricting freedom of speech than some national courts in Europe. On the other hand, the US and some European countries allow the sequential overlap by way of trademarks when the copyright in a work has expired. US legislation

191 

192  Wilkof and Basheer (n 1) 97. Wilkof and Basheer (n 1) 88, 95–​96. R Namikawa, “Overlapping of intellectual property systems for plant variety as a result of advances in biotechnology” [2011] Sogo Seisaku Ronshu (Comprehensive Policy Journal) 30. 194  See Namikawa (n 193). 195  See the corresponding articles in France and the UK: art L 623-​15 IPC, and s 19(3) Plant Varieties Act. 196  MC Piatti and M Jouffray, “Plant Variety Names in National and International Law, Part 1” [1984] European Intellectual Property Review 283, 284. 193 

650   Estelle Derclaye does not see the patent/​plant variety right as problematic, and allows patent law to override the plant variety right regime; however, the EU legislation prevents this in most cases by crafting as much convergence as possible between the two regimes. A fairly patchy picture thus emerges as the above summary does not account for the lack of rules in relation to the other regime clashes and overprotection scenarios, such as ownership, rights, infringement, and defenses.

5.1 Solutions The literature proposes many different solutions to regime clashes and overprotection, and most scholars agree that there is no single criterion to solve these problems; often, different criteria may have to be combined, depending on the circumstances.197 Most criteria can work in most cases, but others do not. The list of criteria or principles can be summarized as follows.198 The aims of the several IPRs must be respected, as distorting them can create problematic overlaps. In the same vein, one law should not cut across another’s object or the result it intends to produce. There should not be a rule prohibiting all overlaps, nor one allowing them all, because the overlaps and the problems they cause are different. Free competition, freedom of speech and other human rights, and the freedom of movement of goods and services are important principles to use to regulate overlaps, and can be used as external mechanisms to solve problems caused by genuine overlaps. However, freedom of movement of goods and services does not work at international level as it is not enshrined in TRIPS. Other external mechanisms include the theory of abuse of right (civil law countries), the misuse doctrine (US), and the doctrine of public interest (UK).199 When the overlap is false, it is best to trim the right that has been expanded.200 Legislative convergence is also a good mechanism for false overlaps. Another rule that can work for both genuine and false overlaps is to identify the claimant’s harm and only repair that harm; thus, this avoids double, triple, etc., remedies. In relation to problems resulting from split ownership, additional proposed solutions include waiving one IPR and implied licenses. On the other hand, some principles do not work for some overlaps, for example, software. This is the case of the election principle (the IPR holder has benefited from the incentive of the chosen law, and so does not need the protection of another one) and the principle of hierarchy. In the case of software, the law grants both patent and copyright equally if the conditions of both laws are fulfilled. Likewise, the method that consists in examining the function, characteristic, or mode of exploitation of the subject matter and determining the most significant

197  However, one commentator (Tomkowicz (n 1) 174 ff) thinks that an answer to overlaps must necessarily be found in one single doctrine that applies to all IPR. 198  For a detailed overview of these solutions, see Derclaye and Leistner (n 1) 318ff. 199  Based on s 171 UK copyright act and the corresponding case law. 200  However, some do not think limiting the overlaps by way of exclusions works because it is difficult to fix the boundaries. See T Cook, “How IPRs, Like Nature, Abhor a Vacuum and What Can Happen When They Fill It—​Lacunae and Overlaps in Intellectual Property” [2012] Journal of Intellectual Property Rights 296, 301–​302.

Overlapping Rights   651 relationship or the prevalence or priority of the closest regime does not work for subject matter that is created with two or more functions at the outset. In conclusion, apart from the copyright/​design overlap, the problems caused by overlaps are relatively new, owing mainly to the recent expansion of most IPRs or creation of new IP-​ protected subject matter. The case law in many jurisdictions is thus only starting to emerge and its direction seems to converge overall on the important aspects, such as not allowing trademarks to protect products as such to preserve competition. Free circulation of goods and services and free competition are certainly driving the CJEU as they are fundamental aspects of EU law. Otherwise, the debate is slowly but surely evolving in the literature; most authors agree that the majority of overlaps are problematic, but disagree on which solution(s) are most adequate. What seems certain is that more case law will emerge and along with it, more literature. A testament to the progress of the issue is that, in recent years, case law has grown, the number of journal articles is increasing, and no fewer than five books have been devoted to the issue.201 This expansion will no doubt promote the progress and maturity on the issue of IP overlaps, and thus favor the elaboration of sophisticated answers. In short, overlapping rights is an IP topic to watch closely.

201 See (n 1).

Chapter 23

Intellectua l Prope rt y Licensi ng Michael Kasdan * 1. Introduction This chapter provides a window into the world of intellectual property (IP) licensing, using patents and United States (US) law as a case study. While there exist many other types of IP licensing—​including trademark, copyright, software, mass media, and character licensing—​ the rules for which differ in important respects, a discussion of patent licensing in the US gives a flavor of the nature of IP licensing in general, including its importance for business and the economy, and for ensuring access to the products and other subject matter that IP protects. Patent owners have the right to exclude others from practicing their claimed inventions. However, many times, retaining and exercising these exclusionary rights may not maximize the value of the IP. Often, patent owners can obtain greater benefit from their IP by licensing some or all of their patent rights to third parties. Such third parties often want to obtain access to a particular technology in order to conduct their business and compete in a particular field or industry. For this purpose, they must obtain licenses to patents owned by others. While a number of different patent monetization methods have cropped up in recent years to extract value from patents, most of these methods have their foundations in patent licensing. Indeed, traditional patent licensing is the most frequently used technique for “monetizing” (ie, extracting value from) one’s patents.

2.  What Is Patent Licensing? The holder of a US patent has the right to exclude others from making, using, selling, offering to sell, or importing the claimed inventions into the US, or practicing claimed methods in the US. As such, this right to exclude is a negative right, that is, a right to restrict. * 

Michael Kasdan has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified.

Intellectual Property Licensing    653 As with other forms of IP, patents confer rights that are divisible. The holder of a patent may grant permission to exercise some, or all, of those rights to another party. Put simply, patent licensing is the granting of permission by the party that holds rights in the patent to another to exercise some, or all, of those rights that would otherwise be excluded. At its heart, a patent license is a promise not to sue the licensee for infringement of the patent when the licensee exercises its rights. Unlike the right to use tangible property (eg, a lease of real property), which typically is only transferred sequentially and utilized by one entity at a time, IP may generally be licensed and used by multiple parties at the same time.

3.  Why License Patents? Licensing Out, Licensing In, and Cross-​L icensing From a licensor’s perspective, there are many circumstances under which licensing out a patent can maximize the value of the patent, as compared to just practicing the patent in the licensor’s own products and using the patent to stop others from competing. First, it may be quite costly to invest resources in manufacturing a product and to enter and compete in the market or particular field of use. It may well be that greater financial reward can be received by licensing the patent to one or more other companies who have already invested those resources or are more capable of doing so. Second, even if the licensor does make and sell a product that practices its patent, it still may make sense to license to others, depending on market conditions and the terms of the license. For example, a licensor/​manufacturer may not have the capacity to meet the market demand for the product. Under such circumstance, the additional licensing revenue received from licensing to others, even if offset by some competition from the licensees, may very well maximize income. From the licensee’s perspective, “licensing in” a patented technology is a way to gain access to a particular technology and to leverage the resources of others so that the licensee can enter into a potentially lucrative market. Some licenses—​especially those coupled with an agreement by the licensor to provide know-​how through a consulting arrangement—may truly provide access to technology in a way that greatly assists with the development of a new product. In other situations, such as the grant of a “bare” patent license or where a patent license is part of an arrangement to settle patent litigation, a license is a necessary price to pay for the use of the patented technology, even if had been independently developed. One of the most important uses of patents is as trading chips. Through cross-​licensing, an arrangement where two parties each license out their own patents and license in the other party’s patents, patents can be used as currency to purchase peace and access by each side to IP needed to promote their respective business objectives. The defensive value of patents used in this fashion cannot be overstated. Companies that make and sell products want to keep their focus on making and selling those products, rather than getting into protracted, costly, and risky disputes about patents. For this reason, cross-​ license arrangements are common among large companies and are often done according to technology area. For example, two large competing consumer electronics companies may enter into a five-​or seven-​year broad cross-​license arrangement to cover the manufacture

654   Michael Kasdan and sale of digital televisions or optical drive products or digital cameras. Depending on the strength of each company’s patents and their potential exposure, the cross-​license may be fashioned as a straight exchange of patent licenses with no payment (a “zero cross-​license”) or there may be a balancing payment made to the company that is perceived to have the “stronger” patent portfolio.

4.  License Agreement Essentials While patent rights are created by specialized law (in the US, federal law), patent license agreements themselves are generally governed by and are subject to the general requirements of contract law (in the US, this would be state law). License agreements thus not only have to take into account the patent law itself (eg, what rights may be licensed, doctrines such as patent exhaustion, and patent misuse), but also have to consider other substantive laws and regulations, including not only contract law, but also antitrust regulations, bankruptcy regulations, corporate law concerning mergers and acquisitions, etc., and oftentimes, industry-​specific issues. Because patent licenses need to deal with all of these intricacies, parties to a complex licensing arrangement have to be proactive in recognizing what issues are important and in memorializing clear terms to deal with those issues in their license agreements. At its most basic level, a patent license is an agreement by the licensor that during the term of the agreement the licensee will be authorized to use the patented technology free from infringement claims that would otherwise arise in the absence of the license. In exchange for this authorization, the licensee will agree to compensate the licensor. This compensation may take the form of one or more lump sum payments, a running royalty (in which the licensee pays a percentage royalty rate or a stated sum for each licensed product that it sells), or—​in the case of a cross-​license agreement—​compensation may include the value of a license flowing in the other direction to some other patented technology. Exclusive license agreements generally include some running royalty component to the compensation terms. In most cases, the license is a long-​term agreement that contemplates that the licensor-​ licensee relationship will continue for some period of years, either an agreed-​upon term of years (after which a new license may be negotiated) or for the remaining life of the licensed patents. Much of the complexity of negotiating and drafting license agreements owes to this fact. During the term of the agreement new products may be developed and introduced, new technologies may evolve, markets may shrink, expand, or change dramatically, and the parties’ businesses may change drastically (eg, sales of business units, mergers and acquisitions, bankruptcy, etc.). License terms should be written to reflect the parties’ potential changing performance and business relationship over the term of the license agreement.

4.1 Exclusive versus Non-​exclusive Agreements Patent licenses may be exclusive or non-​exclusive. An exclusive license refers to a situation in which the licensee is the sole licensee, or at least the sole licensee within a specified field of use.

Intellectual Property Licensing    655 Non-​exclusive refers to a situation in which multiple licensees may be granted rights under the same patents. Most license agreements are of the non-​ exclusive variety. Generally speaking, settlement agreements and patent license agreements between competitors or between licensing companies and operating companies are non-​exclusive. For example, a licensing company that holds patents that cover a particular type of television technology or a standardized communications technology may seek to license those patents to multiple companies in those technology spaces. Exclusive license agreements are more often used in circumstances where a licensee seeks access to a particular technology in order to invest significant resources to commercialize it. For example, where a company approaches a university technology transfer office to gain access to a particular early-​stage technology so that it can develop and build that technology, and where the licensor seeks buy-​in from the licensee in order to ensure it puts the resources into developing and commercializing the inventions, the parties more commonly employ exclusive license agreements. Exclusive license agreements contemplate a more involved, going-​forward business relationship between the parties. The licensor relies on the licensee to actually develop and commercialize the technology and foregoes the opportunity to make money from any other licensees. The terms of exclusive agreements are therefore generally more complicated. For example, exclusive license agreements may include “best efforts” clauses or performance obligations, under which the exclusive licensee may be obligated to use its “best efforts” or some other performance standard, such as “reasonable efforts” to implement or commercialize the patented technology. The rationale behind such provisions is that the licensor/​patent-​owner wants to rely on the exclusive licensee to actually commercialize the technology. In the absence of such a provision, a licensee generally is not under any implied obligation to implement a technology covered by a licensed patent. Some exclusive license agreements may also contain provisions that expressly require that the licensee meet certain performance benchmarks. For example, a license agreement relating to a technology developed at a research university often will include benchmarks requiring certain timing and success milestones in connection with product development and product launch. A licensor may also protect against the risk that a licensee will not aggressively exploit the licensed patents by including minimum periodic royalties in the license terms. Companies may also exclusively license their patents to another company in order to give the exclusive licensee the rights to enforce and monetize the patents by seeking to license others. Another key right that is granted to exclusive licensees (but not, in most countries, to non-​exclusive licensees) is the right to bring a lawsuit against third parties for infringement of the licensed patents. In the US, for example, only a patent owner or an exclusive licensee has the required standing to bring an infringement suit.1 Moreover, an exclusive licensee

1  Rite-​Hite Corp v Kelley Co 56 F3d 1538 (Federal Circuit 1995) (en banc) (“If the party has not received an express or implied promise of exclusivity under the patent, ie, the right to exclude others from making, using, or selling the patented invention,” the party has only a “bare license” and “a bare license to sell an invention in a specified territory, even if it is the only license granted by the patentee, does not provide standing without the grant of a right to exclude others.”).

656   Michael Kasdan who receives all substantial rights in the licensed patents has standing to bring an infringement action without joining the patent owner as a party to the lawsuit .2

4.2 Overview of Key Patent License Agreement Provisions 4.2.1 Scope of License The core of the patent license is the “grant” clause. This is the provision that defines the bundle of rights that are being licensed. The grant clause (i) sets forth whether the license is exclusive or non-​exclusive; (ii) defines the scope of allowable use; (iii) defines the specific geographic territory covered by the license; (iv) sets forth a specified field-​of-​use, if any; (v) may address whether the license is transferable or assignable; and (vi) whether sublicensing of the patents is permissible. As to the scope of allowable use, the grant clause may provide the licensee with a broad grant of rights to practice the licensed patents, including the right to perform any act that would otherwise be one of the enumerated infringing acts under the relevant patent law, usually the right to make, to use, to offer for sale, to sell, and to import any products covered by the patents, or use any covered processes. Alternatively, the grant may limit the licensee to some, but not all, of the acts that would otherwise constitute infringement of the licensed patents. For example, the license may permit the licensee to “sell” and “offer for sale,” but not include the right to “make” or “import” articles covered by the licensed patents. In addition to obtaining the right “to make” an article covered by the licensed patent, a license may also grant the right to arrange for the manufacture of a patented article by a third-​ party manufacturer, that is, the right “to have [the licensed product] made.” Even if this right is not expressly stated in the grant clause, US courts have held that where a license agreement does not show intent to the contrary, the right to have made is implied from the granting of the right to make.3 Where the licensor wants to limit the “have made” rights, he must include express language to achieve this. The licensor may also divide authorization among particular fields-​of-​use or limit the authorization that the licensee has to practice the patents to cover only one field-​of-​use. For example, a license to a technology that could be used in various industries may be limited to the medical device market. When the license is limited to a particular field-​of-​use, this is generally done in the grant clause.

4.2.2 Licensed Patents Different approaches may be used to define the licensed patents that are the subject of the license. For example, the license may specifically enumerate specific patents or patent applications, including whether the licensed patents include foreign counterparts to patents issued by the licensor’s own country, patents that might issue in the future covering inventions that are described in pending patent applications, and patents resulting from

2  3 

Sicom Sys Ltd v Agilent Techs, Inc 427 F3d 971 (Federal Circuit 2005). CoreBrace LLC v Star Seismic LLC 566 F3d 1069 (Federal Circuit 2009).

Intellectual Property Licensing    657 related patent applications, including continuation applications, divisionals, and continuation in part applications. Alternatively, the license may define licensed patents as all patents and patent applications owned or controlled by the licensor that claim the benefit of one or more specific effective filing dates. Another approach is to define the licensed patents by technical subject matter, rather than by enumerating specific patents. To implement this approach, the license would identify a particular technology, such as a product, process, technical standard, or product embodying certain features; and the licensed patents would be described as including all patents and applications owned or controlled by the licensor that are related to that process, technical standard, or product.

4.2.3 Licensed Products Patent license agreements may allow the licensee to practice the licensed patents in connection with any process or product. More commonly, the licensed products are specifically identified. Several approaches are commonly used. One approach is to define the licensed products by technology area. For example, licensed products may include “television products,” “semiconductor products,” or “wireless communications products.” Another approach, more commonly used with running-​royalty based agreements, is to define licensed products with reference to the scope of the licensed patents. In other words, “licensed products” for which the licensee has an obligation to pay royalties are products that, but for the authorization granted in the license, would infringe one or more of the licensed patents.

4.2.4 Compensation and Royalty Provisions As mentioned above, most license agreements provide for some sort of monetary payment by the licensee to the licensor as consideration for the license grant. The parties are free to define payment provisions that best fit their business and accounting practices. These provisions can allocate risk between the parties in an almost-​endless variety of payment structures. Nonetheless, the two most frequently used payment structures are: (i) lump sum; and (ii) running royalty. In a lump sum compensation scheme, the licensee pays the licensor a one-​time fixed amount as consideration for the license. A  variant of this provides for multiple fixed payments over some period of time. The main advantage of this type of compensation structure is that it is predictable and simple to administer. However, lump sum payment structures also pose potential risks to both the licensee and licensor. Both must accurately forecast the expected use of the licensed technology and the likely profitability that will be derived. If the projections are inaccurate, the licensor bears the risk that it will not be able to timely recover for an unexpected increase in the licensee’s sales. Conversely, the licensee bears the risk of a drop in future sales or of exiting the business altogether, while still having the obligation to continue to make fixed royalty payments. These risks are eliminated in a running royalty compensation scheme, where the licensee pays a periodic amount based on its use of the licensed technology. A running royalty provision typically sets forth the royalty rate, the royalty base (which products/​sales the royalty is being paid on), along with other particulars such as how often payments are to be

658   Michael Kasdan made, reporting obligations from the licensee to the licensor, and whether and how often the licensor may audit the licensee to confirm that the reported sales figures are accurate. Running royalty provisions may also include minimum royalty payments or combine a running royalty with an up-​front payment, in order to reduce risk for the licensor. They may also include royalty caps or conditional reductions in the royalty rate, in order to reduce risk for the licensee. The big advantage of this commonly used scheme is that the amount paid for the right to practice the licensed patents is based on the volume of commercial activity in sales of the licensed products. Tying the payment to the licensee’s actual sales allows for the licensor to be compensated for unexpected increases in sales, while allowing the licensee to pay less if there is a decline in sales. Another advantage is that payment is made over time and is in sync with the licensee’s revenue stream in sales of licensed products. On the downside, running royalty schemes are more costly and complicated to administer than a lump sum arrangement, since the licensee must track and report its sales to the licensor.

4.2.5 Assignability One significant aspect of patent licensing is the need to plan for likely or potential future business transactions that could affect the parties’ rights. Since patent license agreements generally have long terms (five years, ten years, or for the life of the patents), it is important to include provisions to deal with what happens if there is a future business transaction in which the licensee wants to assign its patent licenses. These can include events such as a sale of the company or business unit, a merger with a third-​party company, a change in control, or bankruptcy. It is one thing to license patent rights to a small non-​competitor. It is quite another situation entirely if that small non-​competitor is later acquired by the licensor’s biggest direct competitor, and that with that acquisition, the large competitor receives the right to practice the licensor’s patents! This highlights one of the risk factors of patent licensing for licensors: loss of control of the IP rights. In the US, the default rule is that a licensee may not transfer the license rights it receives without the express permission of the licensor.4 However, depending on the future transactions, obtaining such consent for the licensee may be difficult. This is a risky proposition for licensees. If they have paid for, licensed, and used the patented technology and become reliant on it, they do not want to be put in the situation of going back to the licensor for permission to assign those licenses in the case of every corporate transaction. At that point in time, the licensor holds all the leverage and could extract additional compensation from the licensee or even prevent viable business moves by withholding consent. For this reason, many parties choose to include a provision in the patent license agreement that specifies when and under what conditions (and with what limitations) a licensee may assign its rights to a new entity.

4  The default rule under federal common law is that non-​exclusive licenses are non-​transferable without the express permission of the licensor, because they are “personal rights.” See, eg, Everex Sys v Cadtrak Corp (In re CFLC, Inc) 89 F3d 673 (9th Circuit 1996) (“Allowing free assignability would undermine the reward that encourages invention. . . .. In essence, every licensee would become a potential competitor with the licensor-​patent holder in the market for licenses under the patents.”)

Intellectual Property Licensing    659

4.3 Naked Patent Licenses vs. Licenses with Know-​how or Joint Development When the parties’ agreement is limited to a patent license and nothing else, it is referred to as a “naked” patent license. All that is provided is authorization to use the patented technology; essentially, it is a promise not to sue the licensee for patent infringement. Many settlement agreements and other types of non-​exclusive license agreements are of this type. Sometimes, however, a patent license is part of a larger set of agreements between the parties to commercialize a particular technology. A patent license can be included as one piece of a larger set of agreements to jointly develop a technology or for one party to supply another with a particular technology. In these types of arrangements, the licensor may also provide trade secret information, know-​how, other IPRs, including use of logos and trademarks, and/​or act as a consultant or partner with the licensee.

5.  A Brief History Lesson: the Evolution of Monetization A patent license is but one example of a mechanism for monetizing and gaining access to IP. We are at the leading edge of a fundamental shift in the role of IP as a corporate asset. This comes as part and parcel of how our economy has changed to one which values intangible IP assets more highly than ever before: In 1975, 83.2 percent of the value of the S&P 500 companies resided in tangible assets and 16.8 percent resided in intangible assets. By 2009, tangible assets comprised a mere 19 percent of the S&P’s value while intangible assets comprised 81 percent of the S&P’s value. Most of the intangible asset component of corporate value is comprised of intellectual property.5

Correspondingly, more so than ever, IP strategy—​what to protect and to how to use it to increase revenues and support a company’s business—​plays an essential role in business strategy. IP is now viewed as a strategic asset with the potential to generate revenues, as well as an entry-​point into new markets and opportunities, as opposed to merely providing legal protection against competitors. Spurred by the opportunity to unlock untapped value from IP, patent “monetization” has become an important goal for business

5  T Wills and A Fanucci, “The Long March to New IP Licensing Paradigms—​Part I” LAW360 (New York, 29 June 2011) ; see also Intellectual Property and the US Economy: 2016. US Patent and Trademark Office (“IP-​intensive industries accounted for $6.6 trillion in value added in 2014, up more than $1.5 trillion (30 percent) from $5.06 trillion in 2010. Accordingly, the share of total US GDP attributable to IP-​intensive industries increased from 34.8 percent in 2010 to 38.2 percent in 2014.”).

660   Michael Kasdan people, investors, and lawyers alike. This recognition has led to new IP business methods, new techniques for extracting values from patents, and a host of new players.6 In order to understand where we are, it is instructive to understand where we came from, as well as how these techniques arose and evolved. Many years ago, patents were assets that sat on corporate shelves and were sometimes used in licensing and cross-​licensing transactions.7 In the late 1970s and early 1980s, two companies, IBM and Texas Instruments, started highly successful licensing campaigns. The success of these campaigns established a pattern for how companies engage in licensing and cross-​licensing discussions today: aggregation of large patent portfolios in a technology area, initiations of license discussions that move from technical to business to legal discussions, and which ultimately are consummated in multi-​year term license agreements that can then be revisited during the next cycle. These licensing campaigns required dedicated internal technical and legal staff to perform the patent infringement analysis and to conduct the negotiations. While IBM and Texas Instruments demonstrated that licensing campaigns conducted in this fashion can be extremely successful, they also demonstrated that there are massive transaction costs and inefficiencies associated with using a traditional bilateral patent licensing technique to monetize a firm’s patents. One patent monetization technique that arose to address the inefficiencies and transaction costs of traditional patent licensing is the use of “patent pools.” Patent pools allow for “one-​stop shopping” for potential licensees to purchase license rights to patents that are owned by all of the pool members. By aggregating patents in this way, the transaction costs of traditional licensing are reduced. Pools are generally organized by technology and have proven to be a quite popular way to monetize and to acquire license rights to a large set of patents that are essential to practice a particular technical standard. Each of the pool members promises to let the pool license out patents they own that cover the pool’s technology area. They also pay license fees to license-​in the pooled patents. By joining the pool, a company entering into a particular field can acquire license rights to all patents owned by the other pool members within that technology, rather than seeking to enter into bilateral licenses with each company, which would be highly inefficient. Patent pools have been a successful way to license patents related to technical standards (eg, MPEG-​2, MPEG-​4, AAC, W-​CDMA, etc.), particularly when all or most of the key industry players participate in the pool. Some examples of patent pools are those run by MPEG LA, Via Licensing, the OneBlue Patent Pool for BluRay technology, and the DVD6C Pool for DVD technology. As mentioned above, patent pools are often used in connection with licensing patents involving technical standards, in which licenses to a potentially large set of patents owned 6  S Lohr, “Patent Auctions Offer Protections to Investors” New York Times (New York, 20 September 2009)  (“A flurry of new companies and investment groups has sprung up to buy, sell, broker, license and auction patents. And venture capital and private equity is starting to pour into the field.”) 7  S Lohr, “With Smartphone Deals, Patents Become a New Asset Class” New York Times (New York, 24 September 2012)  (“Traditionally, patents sat on corporate shelves and were occasionally used as bargaining chips in cross-​licensing deals with competitors . . . Today, companies routinely buy and sell patents, mostly in deals that draw little attention, for millions of dollars instead of billions. The question, experts say, is how big the market will become.”).

Intellectual Property Licensing    661 by different industry players must be licensed in order to have authorization to practice a particular technical standard. This situation arises because of the manner in which standard setting organizations (SSOs) operate. Generally, the main industry players will be involved in the standard setting process and participate in developing the technical standard. One of the goals of SSOs is to ensure that the standard is attractive to industry players, not only on the basis of technology, but on the basis of being relatively unencumbered by patents that could block companies from making products that comply with the standard by refusing to license. Standard setting organizations generally seek to solve this structural problem of lock-​in and the potential for “hold-​up” by requiring that participating patent holders disclose patents that may relate to the standard during the standard setting process and agree to license those patents on “fair, reasonable and non-​discriminatory terms” (FRAND, or RAND). For this reason, patents that are licensed through patent pools often must be licensed on FRAND terms. Another monetization concept that has grown exponentially as a business model from the late 1990s to the present day is the non-​practicing entity or patent assertion entity (sometimes derogatorily referred to as “patent trolls”). These licensing firms make no products. They are in the business of patent licensing and litigation against operating companies. Some examples are companies like Acacia, Wi-​LAN, Mosaid, Collier Capital, LSI, Rambus, Interdigital, and Tessera. Today more than 50 percent of patent infringement lawsuits in the US are brought by non-​practicing entities. The key to the success of the non-​practicing entity (or pure licensing company) as a corporate form is that it has no exposure because it sells no products. Because of this feature, unlike operating companies, non-​practicing entities are effectively immune to one of the principal downside risks of licensing (or litigation):  counterclaims. There is no need to trade patent assets or to otherwise pay for peace, which is often a principal motivation for operating companies to resolve licensing negotiations or litigation. Whether these firms are viewed as “patent trolls” who exact an unfair tax on operating companies, or simply as more efficient licensing vehicles that are better positioned to extract fair value from patent assets, tends to depend on the perspective of the viewer. The combination of the trends of aggregation with the non-​practicing entity business model has yielded super large-​scale patent aggregators of all kinds. For example, Intellectual Ventures stands as the proverbial 800-​pound gorilla of the patent licensing world, and has accumulated upwards of 70,000 patents and patent applications in various technology spaces.8 Interestingly, this trend has led not only to firms that aggregate patents for use offensively, in licensing assertions and in litigation, but also to firms that aggregate patents for defensive use. One of the leading so-​called defensive patent aggregators is a firm called RPX. RPX purchases patents or the right to license patents from non-​practicing entities so that these non-​practicing entities cannot use them to assert against operating companies. Operating companies who pay RPX a yearly fee to join as a member, in exchange become licensed to these patents, thereby inoculating themselves from patent assertions or patent infringement litigation from the non-​practicing entities. Effectively, RPX sits in between non-​practicing entities and operating companies as a type of patent rights clearinghouse. To

8  Intellectual Ventures, “Our Patent Portfolio” .

662   Michael Kasdan the operating companies, they sell a type of patent assertion insurance, or an opportunity to acquire license rights in bulk, and to non-​practicing entities they sell the opportunity to get paid faster and without the transaction costs and risk of having to monetize by conducting bilateral license negotiations or patent infringement litigation with multiple parties. Another response to the rise of non-​practicing entities has been for operating companies to mimic their business model in order to more efficiently monetize their patents. This “if you can’t beat ‘em, join ‘em” arrangement is known as “patent privateering.” In a patent privateering arrangement, an IP-​centric corporate form is created for the purpose of licensing the patents that it holds. This firm can be set up as a trust or simply as a third-​party company. The new firm acquires either ownership or exclusive licenses to a certain group of patents from an operating company and proceeds to seek to license those patents to others. The operating company does not own or control the privateer. However, the operating company is paid a certain percentage of the privateer’s licensing profits. In this way, the operating company remains out of the business of licensing and patent litigation and is not subject to the risk of a counterclaim. Theoretically, this allows the privateer to more efficiently license the patents, and with less downside risk. Other benefits for an operating company to sell or transfer patents to a privateering entity is that patents that are no longer owned by the operating company may no longer be subject to that company’s cross-​licenses or non-​ assertion arrangements. Examples of well-​known privateering arrangements include Micron Technology’s assignment of its semiconductor patent portfolio to Round Rock Research and Lucent’s assignment of certain of its patent portfolio to the Multimedia Patent Trust.

6.  Beyond Licensing: Other Monetization Techniques To be sure, traditional licensing and cross-​licensing remain the most oft-​used techniques to monetize patents. Licensing proves to be a highly effective technique for deriving value from patent assets, particularly in circumstances where there is a known well-​defined set of infringers or companies interested in utilizing the assets to be licensed. When done effectively, licensing is widely considered to fairly value patent assets and provide a good return on investment. In addition, licensing gives the patent owner control over risk, targets who are offered a license, and contract terms. However, there are certain downsides to licensing, which have real-​world costs. First, licensing requires a great deal of internal resources, including engineers, business people, and key legal personnel. Prior to commencing any licensing negotiation, the patent owner must carefully evaluate the patent infringement and validity issues, consider who should be the licensing targets, and evaluate information about their business and sales exposure. In addition, there are significant transaction costs associated with providing evidence of infringement to the licensee, possibly conducting reverse engineering, meeting with the licensee, and conducting the other internal tasks necessary to develop the assertion, define strategy, and establish goals.

Intellectual Property Licensing    663 Second, as in a patent litigation, if the patent owner who makes a licensing assertion is an operating company, there is also a strong risk that a target could assert counter patents (either their own or purchased from others) to seek to level the playing field. Third, licensing is generally a slow process unless the licensee has approached the licensor for technology needed in its business. In most other circumstances, the licensor must convince the licensee of the necessity and the value of the license. This process can take many meetings and ultimately may result in litigation if the parties cannot come to an agreement on technical and valuation issues. In recent years, firms have evolved from a model that relied on traditional licensing and cross-​licensing to include a diverse array of monetization techniques that can be used to extract value from patents. Many of the techniques developed to monetize patents were motivated from frustrations with one or more aspects of traditional licensing. For example, in certain circumstances, companies may be willing to trade off the careful deliberations and control that they could exercise over a licensing program for a quicker return or other advantages that may come by outsourcing this task to others with particular expertise. As already briefly discussed, such monetization techniques include, by way of example, (i) the delegation of licensing to licensing agents or exclusive licensees; (ii) direct patent sales to operating companies, non-​practicing licensing companies that aggregate and license patents, or to defensive aggregators of patents who sell bulk licenses to patents that they have an interest in to their members; (iii) patent sales through sales brokers, at patent auctions, through membership syndicates, or on patent exchanges; (iv) so-​called “privateering” arrangements in which operating companies sell or exclusively license patents to an independent third party entity or trust that is a licensing company, which then seeks to license the patents and pays some percentage of the return back to the operating company; (v) participating in patent pools; or (vi) enforcement through patent infringement litigation, often a last resort. Each of these monetization techniques has certain advantages and disadvantages, and determining which may be appropriate for a particular circumstance or transaction requires a detailed evaluation of business considerations, legal considerations, and other considerations that cut across the legal and business realms.9

9 

J Casino and M Kasdan, “Monetization of a Firm’s Patent Rights: A Lawyer’s Perspective,” Bloomberg BNA, BNA’s Patent, Trademark & Copyright Journal, 85 PTCJ 22 (November 2012).

Chapter 24

Rem edi e s Terence P. Ross 1. Introduction Remedies for the infringement of intellectual property (IP) rights can be broadly divided into two categories.* First, there are monetary remedies, which typically take the form of the payment of money damages by the infringer to the owner of the IP rights that have been infringed. Second, there are non-​monetary remedies, which usually take the form of a court order either prohibiting any further infringement or, in some rare cases, mandating an affirmative action by the infringer, such as an order to destroy goods bearing a counterfeit trademark. Each of these two types of remedies is surveyed below, with a focus on their availability under United States (US) law.

2.  Monetary Damages for Infringement of Intellectual Property Rights A form of judicial remedy that can be awarded to a claimant in compensation for an injury or loss wrongfully inflicted1 is most commonly referred to “monetary damages,” or simply as “damages.” The essence of damages is the payment of money as a release from civil liability. Because damages in American jurisprudence are awarded by a jury of lay persons under the supervision of a judge, it is necessary to have certain guiding principles by which the judge can direct the jury. The rules that were developed to guide juries in their damages deliberations are essentially the law of damages. Damages for the violation of IP rights are a product of this general law of damages. Each of the four principal fields of IP law—​copyright law, patent law, trademark law, and trade secret law—​has developed unique principles governing the award of damages for infringement or misappropriation. These principles emerged out of a legal tradition that dates back several * 

Terence P Ross has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  DB Dobbs, Law of Remedies (2nd edn, West Publishing 1993), 3.

Remedies   665 millennia of compensating civil wrongs with money. In this regard, it should be recognized that there are two general approaches to the award of money damages in Western legal tradition. The first approach—​often referred to as “prefixed damages”—​assumes that all civil wrongs can be anticipated in advance and that a schedule of predetermined damages can be developed to address each and every type of wrong. Under this approach, an individual who has been injured in his person or property may know in advance the exact compensation for that injury merely by consulting the tariff of damages. Of course, such a rigid schedule of prefixed damages allows no flexibility in fashioning relief for the injured party. During the twentieth century, this approach shifted from a fixed damage amount to a damage range within which the amount can be set. This is typically referred to as “statutory damages” and is a common feature of IP laws.2 The second approach—​often referred to as “discretionary damages”—​acknowledges that the individual nature of most civil wrongs makes it difficult to prescribe in advance an exact monetary assessment for a particular injury to person or property. Under this approach, a decision-​maker is accorded the discretion to award monetary damages based upon the facts of a particular claim. Although there is greater uncertainty as to the amount of compensation to be received by an individual that has suffered a civil wrong, this approach offers much greater flexibility in compensating the injured party. The history of Western damages jurisprudence is marked by a progression from the award of prefixed damages to the award of discretionary damages. As the discretionary theory of damages became ascendant, however, it became clear that justice and fundamental fairness required that this discretion not be wholly unlimited. Certain general principles that served to limit discretionary damage awards were introduced. These general principles became the law of damages. The award of damages for the infringement of IP merely reflects special application of the general law of damages. Thus, to understand damages in IP law, it is useful to have a basic familiarity with certain principles that are central to the general law of damages.

2.1 Historical Development of Monetary Damages The concept of awarding money to a property owner as compensation for a trespass upon his property is not new. The Code of Hammurabi, compiled by the King of Babylonia circa 1780 BCE, contains the following provision: If a man has cut a tree in a man’s plantation without (the knowledge of) the owner of the plantation, he shall pay 1/​2 a maneh of silver.3

Indeed, one of the most common incidents of civilization is the development of judicial redress in the form of monetary payment for wrongs inflicted. In civilization after civilization, history reveals the gradual substitution of a system of monetary compensation in place of

2  For example, in the United States statutory damages (ie, prefixed damages) can be awarded for copyright infringement. 17 USC § 504(a). Statutory damages can also be awarded for trademark counterfeiting and cybersquatting. 15 USC § 1117(c) and (d). 3  “Code of Hammurabi” in RW Nice (ed), Treasury of Law (NY Philosophical Library 1964), 32–​33.

666   Terence P. Ross clan vengeance for wrongs inflicted.4 Moreover, to ensure that a monetary settlement would be reached between disputants (and civil peace thereby preserved), it was common for the state to publish a schedule of payments for various injuries. In effect, the state fixed in advance the cost of civil wrongdoing.5 This same tradition is found in the earliest Anglo-​Saxon legal system. For example, the laws of Aethelbert, dating to approximately 600 CE, include a lengthy listing of prescribed payments to be made in the event of certain specific wrongs being committed.6 This system of prefixed damages in civil cases continued in England until the Norman Conquest. In the period after the Norman Conquest (1066 CE), however, English courts began to use petit juries composed of 12 yeomen from the area in which a civil dispute had occurred to make findings of fact relating to the dispute. By the late-​twelfth century, these petit juries were also being called upon to determine the monetary damages awarded in the dispute. During this earliest period, the jurors were left free to fix damages based upon their own experience and knowledge as to what constituted fair recompense for a particular injury to person or property.7 By the beginning of the fourteenth century, however, a movement to rein in the unbridled discretion of jurors in fixing damages developed. A proceeding known as an “attaint,” by which a grand jury of 24 knights reviewed a verdict, was adapted to allow a reduction in the amount of damages, if found to be excessive.8 But the attaint was fraught with procedural burdens that limited its usefulness. Thus, by the fifteenth century, usage of the attaint began to decline, and it was obsolete by the end of the sixteenth century.9 As its used declined, the law judges in England became frustrated by the lack of a procedural device for constraining damage awards by jurors. In the mid-​seventeenth century, the law courts settled upon a procedure for constraining jury awards that was superior to the attaint and did not require a judge to set the actual award, and “The real successor of the attaint was the device of setting aside the first verdict and granting a new trial of the case before a second petty jury.”10 Utilization of this procedure (which was borrowed from the Chancery courts) was slow in developing, but by the end of the eighteenth century, “it was clear that in England the courts would grant a new trial if the award violated some rule of damages—​such rules were still few and chiefly confined to contracts—​or if even in tort cases the court, in its discretion, considered the amount unreasonable.”11 During this same period, English jurisprudence developed certain general principles that govern an award of damages to this day. At first, judges endeavored to guide juries by suggesting to them in advance certain rules that would allow damages to be awarded in a consistent and fair manner. As time passed, this developing “law of damages” began to find its way into law treatises and these suggestions to the jury began to take the form of instructions. 4

  JH Folowicz, “The Assessment of Penalties in Primitive Law” in PH Winfield and AD McNair (eds), Cambridge Legal Essays (1926) 202–​222 (discussing various ancient legal systems, including the Babylonian, Hittite, and early Roman codes). 5   In fact, much of the Code of Hammurabi is nothing more than a tariff listing the price to be paid for various civil wrongs. 6  “Decrees of Aethelbert,” in FL Attenborough (ed), The Laws of the Earliest English Kings (University of Michigan Library 1922) 5–​17. 7  CT McCormick, Handbook on the Law of Damages (West Publishing 1935), 24–​25. 8  ibid 25–​26. 9  JM Zane, “The Attaint” (1916) 15 Michigan Law Review 1, 126. 10  McCormick (n 7) 26. 11 ibid 27.

Remedies   667 By the nineteenth century, judges were required to instruct juries on the law of damages, and any misinstruction by the trial judge or improper application of the instructions by the jury was grounds for a new trial. These rules governing the law of damages were passed down to the English colonies in America and have been fulsomely developed and expanded by state and federal courts in the US since that time.

2.2 General Principles of Monetary Damages It is not the goal of this chapter to explicate the entire range of legal principles relating to monetary damages that have developed since English judges began to instruct juries on damages. It is useful, however, to provide an overview of those damages principles that play a significant role in the award of monetary damages in IP law. At the broadest level, damages principles can be divided into two categories of rules: (1) rules that determine what types of injury may be compensated by being included in a damages award, and (2) rules that determine how a damages award is calculated.

2.2.1 Determining Compensation by Damages There are two general principles of damages that determine whether a particular injury may be compensated by a damages award which are significant in IP law. These are the doctrine of proximate cause and the standard of certainty. Both are rules of exclusion. In other words, they are used by the law to exclude particular items of loss from the damages calculation.

2.2.1.1 Proximate Cause The doctrine of proximate cause is most commonly associated with determinations of whether tort liability exists for a particular action that eventually resulted in injury. Proximate cause, however, can also be used to exclude a particular item of loss from the damages calculation.12 The doctrine is frequently used in this latter manner in IP lawsuits. In order to be the proximate or legal cause of harm, a person’s actions must be a “substantial factor” in bringing about the harm.13 An action is not a “substantial factor” in bringing about a harm if the harm would have been sustained notwithstanding.14 It is frequently said that, in order to be a “substantial factor” and constitute the proximate cause of an injury, it must appear that the harm would not have befallen the plaintiff “but for” the defendant’s wrongdoing.15 In other words, the doctrine of proximate cause seeks to limit liability or damages to those acts for which the defendant truly should be held responsible because of its role in bringing about an injury or loss. Proximate cause becomes an important consideration for damages when an injury is attributable to more than one act. Thus, when cattle owned by two different ranchers trespass on a third party’s land and trample crops, the damages must be apportioned between the two owners of the cattle. In a lawsuit brought by the land owner against only one of the cattle 12 ibid 260.

13  American Law Institute, Restatement (Second) of Torts (American Law Institute Publishers 1965) § 431. 14 ibid § 432. 15  McCormick (n 7) 262.

668   Terence P. Ross ranchers, the cattle rancher could properly invoke the doctrine of proximate cause to exclude some portion of the crop loss suffered by the land owner as not being attributable to that rancher’s cattle. Proximate cause, however, imposes more than merely a traceability requirement from an act to an injury. It also requires that the injury be reasonably foreseeable. Courts frequently summarize this element of proximate cause as excluding recovery for the “remote consequences” of wrongful conduct. For example, when an automobile dealership breaches its contract with a pregnant woman to deliver a new car on a particular day and this breach so upsets the woman as to cause her to miscarry, that loss would be considered too remote and unforeseeable by the automobile dealership to be recoverable by the woman. The doctrine of proximate cause is similarly used in IP lawsuits as a means to exclude certain types of losses from a damages award. This is particularly true in patent infringement litigation.16 The US Court of Appeals for the Federal Circuit, which hears all appeals from patent lawsuits filed in the US, requires that a patent owner prove for each type of injury claimed that the injury was a “but for” consequence of the infringement, and that it was a reasonably foreseeable consequence at the time of infringement. Specifically: [J]‌udicial relief cannot redress every conceivable harm that can be traced to an alleged wrongdoing .... For example, remote consequences, such as a heart attack of the inventor or loss in value of shares of common stock of a patentee corporation caused indirectly by infringement are not compensable. Thus, along with establishing that a particular injury suffered by a patentee is a “but for” consequence of infringement, there may also be a background question whether the asserted injury is of the type for which the patentee may be compensated. Judicial limitations on damages, either for certain classes of plaintiffs or for certain types of injuries have been imposed in terms of “proximate cause” or “foreseeability.”17

Thus, proximate cause plays an important part in IP damages by imposing limits on what an IP owner can claim as compensable injury. Although there are a variety of ways to measure such damages—​loss of market value, lost profits, reasonable royalty, unjust enrichment—​not all losses traceable to a particular act of infringement are recoverable. No matter what measure of damages is used, only if the particular loss was foreseeable by a reasonable person at the time of infringement may an IP owner include it in a damages claim.

2.2.1.2 The Standard of Certainty The standard of certainty represents another rule by which particular types of loss are excluded from damages. In its broadest statement, the standard of certainty requires a plaintiff seeking monetary damages to prove to a reasonable certainty the amount of loss

16 

It is also utilized in copyright infringement lawsuits, eg, Data General Corp v Grumman Systems Support Corp, 36 F3d 1147, 1171 (1st Cir 1994) (copyright owner must prove that “the infringement was a proximate cause of its loss by demonstrating that the existence and amount of the loss was a natural and probable consequence of the infringement.”). 17  Rite-​Hite Corp v Kelly Co, Inc, 56 F3d 1538, 1546 (Fed Cir) (en banc), cert denied, 316 US 867 (1995). The Federal Circuit does allow evidence as to what a defendant in a patent lawsuit would have done had it been aware that it might be engaged in patent infringement, ie, whether the defendant would have simply implemented a “design around” to avoid infringement.

Remedies   669 suffered.18 The certainty requirement is usually interpreted to mean that damages cannot be allowed if they are “contingent,” “conjectural,” or “remote.” Reasonable certainty, however, does not require mathematical precision.19 While damages may not be awarded based on sheer speculation or guesswork, approximation based upon reasonable inferences is permitted.20 Moreover, difficulty in ascertaining the value of services or goods that make up the claimed loss does not render the damages so speculative and uncertain as to preclude recovery.21 This is particularly true in IP lawsuits when the difficulty in calculating damages is attributable to the infringer’s efforts to conceal its misuse of another’s IP. The standard of certainty presents a serious issue in IP lawsuits. Given the nature of IP infringement, proof of damages is often difficult. For example, it is hard to know (and harder to prove) how much damage (in terms of dollar value) is done to a company’s trademark when it is infringed by a company selling a product of substantially lesser quality. Moreover, proof of damages is frequently within the exclusive control of an infringer. When that infringer is deliberately pirating the IP, it cannot be trusted to cooperate in the effort to establish damages. Therefore, courts in IP lawsuits generally resolve any doubts or uncertainties about damages against the infringer.22 For example, the infringer’s failure to keep or produce records from which an IP owner could ascertain damages will be held against the infringer. Courts will allow an IP owner to infer that the infringer made certain sales or derived certain profits from the infringement. In the case of certain types of IP thefts, legislation has provided an alternative damages approach for the IP owner when proof of damages to a reasonable certainty is difficult. For example, the US copyright law provides a copyright owner with the right to obtain a statutory damages award from an infringer, despite the fact that the owner is unable to prove with reasonably certainty actual damages caused by an infringement.23 This alternative remedy is provided in order to induce copyright owners to invest in and enforce their copyrights, even when the owner is unable to prove actual damages with reasonable certainty. As should be evident from the foregoing discussion, the standard of certainty is applied in a far less onerous manner in IP lawsuits. It remains, however, as a limit on damages, and IP owners must be careful not to proffer in litigation elements of damage that are so speculative as to run afoul of the standard of certainty.

18 

Dobbs (n 1) 319.

19 Eg, Story Parchment Co v Paterson Parchment Paper Co, 282 US 555, 563 (1931).

20 Eg, Bigelow v RKO Radio Pictures, 327 US 251, 264 (1946) (“jury may not render a verdict based on speculation or guesswork,” but “the jury may make a just and reasonable estimate of the damage based on relevant data”); Story Parchment Co v Paterson Co, 282 US 555, 563 (1931) (“while the damages may not be determined by mere speculation or guess, it will be enough if the evidence shows the extent of the damages as a matter of just and reasonable interference, although the result be only approximate”). 21  McCormick (n 7) 103. 22  This is not always true, however, in patent infringement cases when the plaintiff is a patent-​ assertion entity. See Section 3.3.3 for a discussion of patent-​assertion entities. 23  17 USC § 504(a).

670   Terence P. Ross

2.2.2 Calculating the Damages Award Monetary damages for infringement of IP rights include four principal components. These are compensatory damages, unjust enrichment, augmented damages, and interest.24 This section discusses each of these separately.

2.2.2.1 Compensatory Damages In IP law, the fundamental purpose of the damages remedy is to make the IP owner whole for the injuries or loss caused by the infringer. Thus, compensatory damages—​monetary relief intended to compensate for the plaintiff ’s loss—​is the component that is most true to this purpose. In IP lawsuits, there are two principal measures for calculating the loss to be redressed by compensatory damages—​the market value measure and the lost opportunity measure. The market value measure is what most courts refer to when they use the term “general damages.” This approach to measuring damages is probably the most broadly used approach in Anglo-​American jurisprudence. The market value measure determines the market value of an asset prior to a defendant’s wrongful act and the market value of that same asset after the wrongful act. The difference between the two values is the damage that the defendant’s wrongful act inflicted upon the owner of the asset. Such an asset can be tangible or intangible. A simple example serves to elucidate the market value measure of damages. The owner of an automobile parks it in a driveway. A truck is driven negligently down the street in such a manner as to crash into the automobile. Under the market value measure, the market value of the automobile prior to the accident is determined. The value of the automobile as damaged by the accident is then determined. The difference between the two values is the measure of the automobile owner’s compensatory damages resulting from the truck driver’s negligence under the market value measure. The market value measure plays a very important role in calculating compensatory damages for IP infringement. When the market value measure of damages is used, a court determines the value of the IP prior to infringement (usually by determining what a willing buyer would have paid a willing seller for the IP) and the value after infringement. The difference is the loss to the IP owner resulting from the infringement and constitutes the owner’s compensatory damages. An alternative to the market value measure of damages is the lost opportunity measure of damages. While the market value measure compensates a plaintiff for the diminished value of an asset due to a civil wrong, the lost opportunity measure compensates a plaintiff for the loss of income generated by that asset. In some instances, damage to an asset will not only diminish the market value of the asset, but also deprive the owner of the opportunity to derive some gain from use of the asset. One common type of such damages is lost profits. Is it possible that application of these two different measures of damages to a real case might yield different damages calculations? Yes, it is, and it frequently occurs. In those cases in which a plaintiff must choose between these two measures of damages, careful

24  Under some IP statutes, it may also be possible for an IP owner to recover its attorneys’ fees and costs incurred in prosecuting the lawsuit against the infringer. 17 USC § 505 (copyright); 35 USC § 285 (patent); 15 USC § 1117(a) (trademark).

Remedies   671 consideration must be given to which measure of damages will yield the greater award.25 Thus, if a plaintiff ’s business had a market value of one million USD before it was injured by a defendant’s action, but it has a value of only $500,000 after injury, then the plaintiff ’s damages under the market value test would be $500,000. If the profits lost because of the defendant’s action were one million USD over five years, then the plaintiff ’s damages under the lost opportunity test would be one million USD. The plaintiff, however, may not always be able to claim both the diminishment in value and the lost profits. For example, in valuing the business, the future profits would have been factored into the analysis. In such a circumstance, recovery of a market value measure of damages and a lost opportunity measure of damages would constitute an improper double recovery. Copyright law, patent law, trademark law, and trade secret law all allow for the recovery of an IP owner’s lost profits due to infringement under the lost opportunity measure. Proving lost profits, however, is often difficult in IP lawsuits, and an IP owner may not always be able to meet its burden of proof. There are multiple reasons for this difficulty in proof. First and foremost, absent the existence of a two-​seller market—​in which it is easy to identify each sale by an infringing competitor as a “lost sale”—​it is difficult to prove that a downturn in sales was the result of infringement, as opposed to pricing or functionality competition from a third party. Second, control over key elements of proof, such as sales records, are held by the infringer, who many not cooperate in establishing lost profits.

2.2.2.2 Unjust Enrichment Damages Unjust enrichment, also referred to as restitution, is an alternative damages measure to compensatory damages. While compensatory damages seek to restore the plaintiff to the position the plaintiff was in prior to the defendant’s wrongful act, unjust enrichment damages seek to deprive the defendant of whatever gain or benefit the defendant obtained from the defendant’s wrongful act. Thus, unjust enrichment damages take from the defendant the fruits of the defendant’s wrongful act and give them to the plaintiff.26 In effect, the defendant is forced to disgorge the defendant’s ill-​gotten gains. Unjust enrichment is descended from the common law writ of assumpsit, which was a cause of action that sought to recover the gain derived by a defendant for the wrongful use of property.27 It was typically used when a defendant had wrongfully obtained property, but then disposed of the property, making it impossible for the rightful owner to receive back the property. For example, a defendant wrongfully takes plaintiff ’s cow and sells it for $100. The plaintiff can no longer obtain back from the defendant the cow, but can obtain the $100 that the defendant received for the cow. Of course, if the fair market value of the cow in the foregoing example was $100, then there is no difference between compensatory damages and unjust enrichment damages in

25   In the United States, there are instances in which a plaintiff may offer alternative measures of damages to the court. This is true even in some IP lawsuits. For example, under the United States patent law, a prevailing plaintiff is entitled to at least a “reasonable royalty for the use of the invention by the infringer,” no matter what measure of damages the plaintiff may have sought, in effort, allowing alternative damages measures to be preserved, 35 USC § 284. In contrast, the United States copyright law, requires the copyright owner to make an affirmative choice between statutory damages and compensatory damages, thus, in effect, preventing the presentation of alternative measures of damages. 26  Restatement of Restitution (1937) § 1. 27  Dobbs (n 1) 571–​586.

672   Terence P. Ross that case. But if the fair market value of the cow was only $75 and the defendant had been able to obtain $25 extra by misleading the buyer into believing the cow produced “magic milk” that made a drinker of the milk smarter, then there is a difference between compensatory damages and unjust enrichment damages. By seeking unjust enrichment damages instead of compensatory damages, the plaintiff actually would obtain a greater recovery. In such factual settings, a plaintiff must consider which measure of damages will yield the greater award. One commentator has identified five different ways to measure the gain obtained by a defendant for purposes of making an unjust enrichment award. These are: (1) the increased assets in the hands of the defendant from the receipt of the property; (2) the market value of services or intangibles provided to the defendant, without regard to whether the defendant’s assets were actually increased; that is, the amount which it would cost to obtain similar services, whether those services prove to be useful or not; (3) the use value of any benefits received, as measured by (i) market indicators such as rental value or interest or (ii) actual gains to the defendant from using the benefits, such as the gains identified in item (5) below; (4) the gains realized by the defendant upon sale or transfer of the asset received from the plaintiff; and (5) collateral or secondary profits earned by the defendant by use of an asset received from the plaintiff, or, what is much the same thing, the savings effected by the use of the asset.28 Unjust enrichment is a damages measure that is frequently used in IP lawsuits.29 For example, the US copyright law expressly provides for the recovery by a copyright owner of “any profits of the infringer that are attributable to the infringement.”30 Indeed, provided that an award does not include a double recovery, a copyright owner may recover both actual damages and an infringer’s profits. Similarly, the Uniform Trade Secrets Act, adopted by almost all states in the US, expressly provides that in addition to recovering its actual loss, a trade secret owner may recover the “unjust enrichment” caused by the misappropriation to the extent the enrichment is not taken into account in calculating the owner’s actual loss.31 The US trademark law also explicitly authorizes a trademark owner to recover the profits of an infringer.32 Again, “subject to the principles of equity,” the trademark owner may recover both the infringer’s profits and its own damages sustained. These IP laws, however, each contemplate that the IP owner shall recover only the net profits of the infringer traceable to the infringement. This presents two issues in utilizing an unjust enrichment measure of damages. First, a court must determine what are the infringer’s net profits. Second, a court must determine what portion of the net profits is attributable to the infringement (commonly referred to as the “apportionment problem”). These are significant issues in IP lawsuits. The difficulty in making these determinations is 28 

ibid 566–​567. Indeed, only the US patent law does not allow an unjust enrichment measure of damages. 30  17 USC § 504(b). 31  Uniform Trade Secrets Act § 3(a) (amended 1985), 14 ULA 455–​456 (Supp 1999). 32  15 USC § 1117(a). 29 

Remedies   673 eased slightly by the fact that the burden is generally placed on the infringer to prove its expenses that should be deductible from gross revenues to derive net profits.33 In addition, the burden is also placed on the infringer to prove apportionment.

2.2.2.3 Statutory Damages Another alternative damages measure is called statutory damages. The US copyright law, as well as the US trademark counterfeiting and cybersquatting laws, provide for the recovery of statutory damages as an alternative measure of damages.34 Such statutory damages, however, are not available under the US patent law or trade secret laws. Statutory damages are, in effect, a throwback to the pre-​fixed damages regime that existed in Western law prior to the development of discretionary damages measures. Statutory damages are so named because they provide IP owners whose rights have been infringed with the guarantee of a monetary damages award within a range fixed by statute. Thus, under the US copyright laws, a copyright owner may receive “a sum not less than $750 or more than $30,000” for each copyrighted work infringed.35 This range is decreased to $200 per work when infringement is innocent and increased to $150,000 per work when infringement is willful.36 Under the US trademark counterfeiting law, a trademark owner may receive “not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services” infringed.37 This range is increased to two million USD when the counterfeiting is willful.38 Finally, under the US trademark cybersquatting law, a trademark owner may receive “not less than $1,000 and not more than $100,000 per domain name” infringed.39 The rationale for statutory damages is that actual damages are often difficult to prove in copyright, counterfeiting, and cybersquatting cases. Thus, if a trademark owner cannot prove the profits made by a counterfeiter because it has destroyed all sales records, the trademark owner has the option of electing statutory damages and obtaining some compensation from the defendant. While each of the US IP laws authorizing statutory damages sets a range within which an award may be made, they do not provide any formula for determining the exact amount of damages within the statutory range. The courts, however, have developed certain benchmarks for setting the statutory damages award. Thus, a court will consider the expenses saved and profits reaped by a defendant; the revenue lost by the IP owner; the deterrent value of the award; and the state of mind of the defendant in infringing the copyright or trademark. Beyond these benchmarks, a court’s discretion and sense of justice are controlling. And, provided that a statutory damages award is within the limits established by Congress, it is unlikely to be disturbed on appeal.

33

  17 USC § 504(b) (copyright); 15 USC § 1117(a) (trademark).   17 USC § 504(a) (copyright); 15 USC § 117(c) (trademark counterfeiting), 15 USC § 117(d) (cybersquatting). Statutory damages are not available for ordinary trademark infringement or trademark dilution. 35  17 USC § 504(c)(1). In order to be entitled to statutory damages, a copyright owner must first comply with certain copyright formalities. 36  15 USC § 504(c)(2). 37  15 USC § 1117(c)(1). 38  15 USC § 1117(c)(2). 39  15 USC § 1117(d). 34

674   Terence P. Ross 2.2.2.4 Augmented Damages Augmented damages are damages that are awarded to a plaintiff that exceed any compensatory measure of recovery.40 Their purpose is to punish the defendant and/​or to deter in the future the type of civil wrongdoing committed by the defendant. Augmented damages include punitive damages and statutory enhanced damages. Each type of augmented damages is discussed below. 2.2.2.4.1 Punitive Damages. Punitive damages, also known as exemplary damages, developed at common law in England. Punitive damages developed not with an intent to punish a defendant, but rather to augment compensatory damages as a sort of reward to the plaintiff for rendering the public service of bringing the defendant to account in cases in which a defendant’s conduct was particularly outrageous.41 In the US, however, punitive damages developed more clearly as a means to punish a defendant for the defendant’s conduct.42 Because of this quasi-​criminal purpose underlying punitive damages, such damages have been the subject of harsh criticism over the years. As a result, a number of rules have been developed by the judiciary in order to constrain the award of punitive damages. In IP lawsuits, punitive damages are arguably relevant only to common law actions alleging copyright infringement or trademark infringement. Punitive damages are not available in the US under the federal IP laws or the Uniform Trade Secrets Act. As discussed below, the principal approach toward augmented damages taken by the IP laws in the US is to allow statutory enhanced damages, rather than punitive damages. 2.2.2.4.2  Statutory Enhanced Damages.  Statutory enhanced damages refer to the authorization or requirement in a statute to award a multiple of the compensatory damages, most typically double or treble damages. Statutes utilizing such damage multipliers are intended to serve as liquidated damages for a particular type of wrongful civil conduct for which actual losses cannot be entirely proved. In this respect, statutory enhanced damages differ from punitive damages in that their purpose is not necessarily to punish a defendant, but rather to ensure that the plaintiff is fully and fairly compensated. And, at least with respect to the US patent law, an award of statutory enhanced damages is also intended to deter future infringement. Statutory enhanced damages play a very significant role in IP lawsuits. The patent and trademark laws in the US, as well as the Uniform Trade Secrets Act each contain a statutory enhanced damages provision. The US patent law provides that “[t]‌he Court may increase the damages up to three times the amount found or assessed.”43 Thus, it is within the discretion of the court to augment an award by a maximum of three times the compensatory damages. Because such an augmented award is limited to cases in which infringement was “willful,” it is evident that this discretion is directed at deterring infringement. Similarly, the US trademark law provides that the court may enter judgment “. . .  for any sum above the amount found as actual damages, not exceeding three times such

40  Dobbs (n 1) 452 (exemplary damages “go beyond any obvious elements of ordinary compensation”). 41  McCormick (n 7) 277–​278. 42 ibid. 43  35 USC § 284.

Remedies   675 amount . . . ..”44 Again, it is within the discretion of the court to award augmented damages with a limit of three times the actual damages. Unlike the patent law, however, the trademark law expressly states that such augmented damages “shall constitute compensation and not a penalty.”45 The Uniform Trade Secrets Act also provides for augmented damages. “If willful and malicious misappropriation exist, the court may award exemplary damages in an amount not exceeding twice any [compensatory] award . . . ..”46 While again being within the discretion of the court, the cap on augmented damages is only two times the compensatory damages. Moreover, the discretion to make such an award is circumscribed by the requirement that the misappropriation be “willful and malicious.”

2.3 Interest “Interest is the sum paid or payable for the use or detention of money.”47 In order to compensate a plaintiff fully, interest should be awarded on most monetary damages. Unfortunately, historic religious attitudes opposed to the charging of interest heavily influenced Anglo-​ American jurisprudence with respect to judgment interest, leaving a more restrictive legacy toward the award of interest than would be appropriate under contemporary economic theory. Anglo-​American law generally differentiates between prejudgment interest and post-​ judgment interest. Post-​judgment interest is a relatively simple matter to address. Although at common law post-​judgment interest was not allowed, the US in suits in federal court and every state in suits in state court has authorized by statute the award of post-​judgment interest as a matter of right to a litigant obtaining a money judgment. Thus, in all IP lawsuits, post-​judgment interest is available on any money judgment. Prejudgment interest is far more complicated. The common law rule is that, absent statute, prejudgment interest is not recoverable unless a claim is liquidated as a dollar sum or otherwise ascertainable in advance by some predetermined standard.48 Under this rule, prejudgment interest is unavailable on virtually all tort causes of action and even many contract causes of action. Historically, IP claims were subject to the foregoing common law rule and prejudgment interest was unavailable on awards of money damages. This traditional approach, however, gradually eroded over the last half of the twentieth century. In 1946, the US Congress amended the patent law to authorize the award of “interest” on a damages award without explicitly referring to “prejudgment interest.”49 In 1983, the US Supreme Court held that

44

  15 USC § 1117(a).  ibid. 46  Uniform Trade Secrets Act § 3(b) (amended 1985), 14 ULA 456 (Supp 1999). The Defend Trade Secret Act of 2016 also provides for an award of augmented damages in the event of willful and malicious misappropriation. 18 USC § 183b (b) (3) (B) (II) (ii). 47  Dobbs (n 1) 333. 48 ibid 336. 49  See Act of 1 August 1946, Ch 726, § 1, 60 Stat 778, originally codified at 35 USC § 70 and recodified under the Patent Act of 1952 as 35 USC § 284. 45

676   Terence P. Ross Congress intended by this 1946 amendment to the patent law that “prejudgment interest should ordinarily be awarded from the date of infringement.”50 Similarly, in the Trademark Counterfeiting Act of 1984, Congress expressly provided for the award of prejudgment interest.51 An award of prejudgment interest, however, is discretionary with the court,52 a significant difference from the mandatory award of prejudgment interest under the patent law. Moreover, prejudgment interest is only authorized in cases of trademark counterfeiting, not in cases of ordinary trademark infringement. By contrast, the copyright law is wholly silent on the award of prejudgment interest. Although the issue remains unsettled, the trend is toward allowing prejudgment interest on an award of money damages for copyright infringement. Such an award, however, is within the discretion of the court.

3.  Nonmonetary Remedies for the Infringement of Intellectual Property Rights Nonmonetary remedies can take a variety of forms. In IP litigation, however, nonmonetary remedies are usually coercive remedies. The essence of a coercive remedy is an order commanding an individual that has committed a civil wrong to cease and desist under penalty of criminal punishment (ie, imprisonment or a fine). The injunction is perhaps the best known coercive remedy. In Anglo-​American jurisprudence, nonmonetary remedies developed in the Court of Chancery which exercised a wide range of equitable powers. It was necessary, however, to develop certain principles to guide the exercise of these powers. The rules that were developed by the Court of Chancery to guide the exercise of its equitable powers are essentially the law of equity. Equity is an outgrowth of the ancient tradition of a subject petitioning his king for redress of a grievance outside the ordinary legal system. The king, as the ultimate source of justice, had wide discretion to grant relief. As this power was delegated to administrators, it became necessary to develop limits on the exercise of this discretion to grant relief. These limits evolved into general principles that continue to control the exercise of equity in Anglo-​ American jurisprudence to this day. Originally a nonjudicial remedy, equity in its fully evolved form became a judicial remedy. Indeed, in the US, equity and law have largely merged and are now administered by a single court of general jurisdiction. Nonmonetary remedies can be particularly useful to the IP owner that is seeking to enforce its IP rights.

50 

General Motors Corp v Devex Corp, 461 US 648, 654 (1983). Pub L No 98–​473, 98th Cong, 2d Sess, 98 Stat 1837, 2178–​2183 (12 October 1984), codified at 15 USC §§ 116–​118; 18 USC § 2320. 52  15 USC § 1117(b). 51 

Remedies   677

3.1 The Historical Development of Equity A hallmark of Western civilization from time immemorial is the right of a subject to petition his king for redress of some grievance. This petition process existed even in civilizations with well-​developed legal systems for the redress of civil wrongs. The petition process was utilized when the legal system could not offer relief in a particular situation. Most frequently, this would involve civil wrongs committed by the king himself, who was not subject to the legal system, or high-​ranking and powerful individuals who could pervert the legal system so that relief could not be obtained against them. For example, if a herd of cattle were seized from their owner without payment by the quartermaster of the king’s army, the owner of the cattle could not bring suit against the king. The owner of the cattle, however, could humbly petition the king in the interest of justice to right a wrong committed in the king’s name. The king might then override the decision of his quartermaster and order the cattle restored to their proper owner. Or, he might not. Because the king was the sovereign authority, he exercised unbridled discretion to address such petitions. In ancient Greece, common citizens acted as jurors in the administration of the legal system, but Greek kings commonly provided for a check on jurors’ judgment through the elders of the polis. Thus, if the citizenry rendered a particular ruling that had an unfair result, the elders could override its judgment to provide a more equitable result. Aristotle referred to this as “epieikeia.”53 Aristotle believed that all laws contained intrinsic flaws that led to unjust results from time to time. Epieikeia allowed for the correction of law when it was flawed.54 In effect, equity allowed a judge to circumvent those positive laws that could not provide appropriate relief in a particular situation. Similarly, Roman jurisprudence resorted to “naturalis aequitas” to correct or supplement positive law.55 Although Rome regarded traditional custom as an important, if not preeminent, legal principle, magistrates were accorded limited discretion to modify the law in order to assure an equitable result.56 This general notion of equity as a means to avoid an unfair legal result continued in Anglo-​ Saxon jurisprudence principally through the ecclesiastical courts.57 The centralization of governmental function in the Crown that took place after the Norman Conquest, however, largely supplanted the ecclesiastical courts. Yet the need for an outlet from the rigidity of the law courts quickly found a new home in an unlikely place—​the Office of the Chancellor. The Chancellor in early Medieval England was the principal administrative officer of the King and a member of the King’s Council.58 Among his duties was supervision of the royal scribes. In a non-​literate society like early Medieval England, control over writing provided the Chancellor with a significant source of power. In particular, the “writ”—​the document 53  Aristotle, Nicomachean Ethics in J Barnes (ed), The Complete Works of Aristotle (Princeton University Press 1984) 1795–​1796. 54 ibid. 55  TS Haskett, “The Medieval Court of Chancery” (1996) 14 Law and History Review 245, 267. 56  J Moser, “The Secularization of Equity: Ancient Religious Origins, Feudal Christian Influences, and Medieval Authoritarian Impacts on the Evolution of Legal Equitable Remedies” (1997) 26 Capital University Law Review 483, 500. 57  ibid 508–​514. 58  Haskett, (n 55), 247.

678   Terence P. Ross by which a common law action was initiated—​was drafted by clerks in the Office of the Chancellor. A putative plaintiff wishing to bring a lawsuit would explain to a Chancery clerk the facts of his case. The clerk would then decide which form of action would be most appropriate for that set of facts and draft the proper writ. “When the plaintiff came to the Chancery for help with an unusual set of facts to which the old writs did not fit, the chancellor sometimes issued a new kind of writ.”59 In this manner, the Chancellor had the ability to expand the jurisdiction of the King’s courts at the expense of the local courts. Thus, the Chancery was seen as innovative and more responsive to the needs of litigants. By the middle of the fourteenth century, however, the option of creating new forms of action was lost by the closure of the writ categories.60 In response, the Chancellor began to treat requests for new forms of action as petitions to the Crown for redress unavailable from the law courts and granted remedies by royal decree, thus bypassing entirely the law courts.61 The Chancellor’s ability to take such action derived from a second significant source of power. After the Norman Conquest, the traditional Anglo-​Saxon right to petition the King for redress of grievances continued, but such petitions were usually referred to the King’s Council for hearing because William I and his early successors were only infrequently present in England, spending the majority of time in their French lands.62 Over time, the Council delegated its authority to hear such petitions to a single member of the Council, the Chancellor.63 In hearing such petitions, the Chancellor was not bound by the procedures and formalities of the law courts. As a result, justice could more quickly and inexpensively be obtained in Chancery. By 1500, the Chancellor was clearly regarded as a judge and references to the Chancellor’s Court or Chancery Court began to appear. It is important to note, however, that the Chancellor was not administering a separate body of substantive law. He was merely supplementing the common law by assuring that just­ice was done through the exercise of equity. This exercise of equity was directly traceable to ancient theories that a king is ultimately responsible for assuring that justice is done. Thus, from the fifteenth century forward, there was a dual system of courts in England—​ the law courts and the Chancery Court. The principal difference between the two courts was the lack of rigidity in Chancery. Indeed, Chancery’s broad discretion to remedy civil wrongs made it an increasingly popular choice of forum for plaintiffs and forced the law courts to expand the traditional causes of action in order to stay in business. The lack of firm rules, while an early advantage of the Chancery Court, also presented the problem of inconsistent results. Thus, beginning in the late-​sixteenth century, there developed a movement to systematize the Chancery Court through the development of certain rules of equity. “By the eighteenth century the rules of equity became as strict as those of common law and the chancellors held themselves bound to respect the principles underlying the decisions of their predecessors.”64 These rules of equity were brought to America by the colonists and formed the basis for equity jurisdiction in the US. Even after the merger of equity and law in the US, these same principles control all federal and most state courts in

59 

60  Haskett, (n 55), 251. Dobbs, (n 1), 67. 64 ibid 256.

63 ibid.

61 ibid.

62 

Moser, (n 56), 531.

Remedies   679 the exercise of equity. The most significant of these principles that have an impact on IP lawsuits are discussed in Section 3.2.

3.2 General Principles of Equity It is beyond the scope of this chapter to discuss the entire range of equitable principles that has evolved since the Chancellor first began to sit in a judicial capacity. There are, however, certain general principles of equity that play a significant role in IP lawsuits that do deserve discussion. In this regard, equitable principles can be divided into three broad categories—​ substantive, procedural, and remedial. There is very little (if any) substantive law developed in equity that is directly relevant to IP litigation, but there are procedural and remedial aspects of equity, however, which are very important in IP lawsuits.

3.2.1 Procedural Aspects of Equity There are two significant procedural characteristics of a court’s equity jurisdiction that currently differentiate it from a court’s law jurisdiction. First, in equity, a case is tried before the judge without a jury. Second, an equity court has substantial discretion to allow or deny access to its unique panoply of remedies. Each of these characteristics is discussed below.

3.2.1.1 No Jury The Chancellor, or in later Medieval England, his deputy, presided over a case brought before the Court of Chancery without a jury. The Chancellor was the sole trier of both fact and law.65 This practice continued in the US.66 Even after the merger of law and equity, juries are still not utilized in equity trials to this day. In IP lawsuits, it is common to couple a request for injunctive relief with a claim for monetary damages. The claim for damages is decided by a jury, but the claim for injunctive relief is decided by a judge, albeit subject to the jury’s finding of infringement.67 In certain circumstances, and if it was more likely to have a favorable result, a plaintiff may purposefully avoid a jury trial by limiting its relief sought to an injunction.

3.2.1.2 Equitable Defenses One of the principal advantages of the Court of Chancery was the extraordinary flexibility it exhibited. “Equity courts saw their discretion as a reflection of their flexibility and as a means to justice apart from law.”68 And, while equity courts could exercise their discretion to craft more flexible remedies that would assure that justice was done, they could also deny or limit relief as a matter of discretion when justice so required. The exercise of this discretion to deny or limit equitable relief typically was implemented by the invocation of certain 65 

FW Maitland, Equity: A Course of Lectures (Cambridge University Press 1936). The Seventh Amendment to the United States Constitution only guarantees the right to jury trials to “suits at common law,” not to suits in equity. US Constitution, Amend VII. 67  The court may allow the jury in such a case to hear the claim for injunctive relief as an advisory jury. This is, however, a relatively rare procedure. 68  Dobbs, (n 1), 57. 66 

680   Terence P. Ross “equitable defenses.” The principal equitable defenses relevant to IP lawsuits are “laches” and “unclean hands.” Even though a plaintiff has shown that it is entitled to equitable relief, an equity court may limit or deny in whole such relief if it finds that either of these equitable defenses applies. Laches evolved out of the equity maxim that “equity aids the vigilant,” and has been defined in IP lawsuits as an unreasonable and inexcusable delay in the assertion of a claim of infringement by the IP owner that directly results in material prejudice to the alleged infringer. Laches is an affirmative defense that must be pleaded by the infringer. The burden of persuasion always rests with the infringer asserting it. If, however, the infringer comes forward with evidence of unreasonable delay resulting in prejudice, the burden of production shifts to the IP owner to come forward with evidence that would at least create a genuine issue of fact that the delay was excusable. Unlike statutes of limitations, there is no bright line date on which a defense of laches is triggered. “The measure of delay that courts will employ is strictly circumstantial . . . .”69 Courts will examine the facts and circumstances surrounding a case, including the market for the IP, and decide whether the delay was unfair. It is now clear, however, that laches will not shorten a statutory set period for bringing a lawsuit. Thus, the US copyright law’s three-​ year period for bringing suit on an infringement cannot be shortened by laches. If the delay between the infringement and the filing of suit is sufficiently long, prejudice to the defendant may be presumed. For example, if the delay exceeds the analogous statute of limitations for a claim at law to recover damages for the infringement, prejudice to the infringer may be presumed and the IP owner will have to come forward with facts that might excuse the delay. Thus, in effect, the analogous statute of limitations serves as a guide to whether laches should be invoked. The doctrine of unclean hands is derived from the equity maxim that “He who comes into Equity must come with clean hands.” The doctrine is rooted in the historical concept of the equity court being a recourse for the innocent who cannot obtain justice in the law courts. Thus, a litigant who is tainted by bad faith in the very matter for which equity intervention is sought should not be entitled to come into equity. The doctrine of unclean hands requires a litigant seeking the aid of an equity court to have “acted fairly and without fraud or deceit as to the controversy in issue.”70 A plaintiff need not have committed a crime for the doctrine to apply. “Any willful act concerning the cause of action which rightfully can be said to transgress equitable standards of conduct is sufficient cause for the invocation of [the doctrine].”71 In other words, the enforcement of an IP right concerns more than merely the private interests of the patent owner and alleged infringer. Such an infringement suit also concerns the public interest. After all, IP rights are public grants in the form of a patent, copyright, or trademark. And, when the IP owner is attempting to use equity to enforce its rights in a manner that may result in injury to the public, equity may reject the claim under the doctrine of unclean hands. Thus, where a patent is used to unfairly restrain competition or a

69 

P Goldstein, Copyright (Little Brown & Co 1989), 173. Precision Instrument Manufacturing Co v Automotive Maintenance Machinery Co, 324 US 806, 814 (1945). 71 ibid 815. 70 

Remedies   681 trademark is being used to misrepresent the nature or quality of a product, equity will deny relief for infringement.

3.2.2 Remedial Aspects of Equity The principal equity remedy sought in IP lawsuits is the injunction. There are three general principles that emerged from Chancery practice that remain to this day significant in deciding whether an injunction will be granted by equity. First, equity requires that there be no adequate remedy available at law. If there is an adequate remedy at law (eg, the payment of monetary damages), then there is no need for additional redress. Second, equity requires that the hardship to the plaintiff likely to result if a remedy is denied be balanced against the hardship inflicted upon the defendant if a remedy is granted. This “balancing of the hardships” may tip so dramatically in favor of the defendant that an equity court will refrain from issuing the remedy sought. Third, equity requires that the public interest always be considered before a particular remedy is granted. Each of these three general principles will be discussed briefly.

3.2.2.1 No Adequate Remedy at Law The Court of Chancery historically refused to entertain a matter unless the plaintiff could demonstrate that its remedy in the law courts was inadequate. In modern times, courts have reformulated this adequacy rule to require that a plaintiff seeking an equitable remedy show that he would suffer irreparable harm absent the granting of an equitable remedy. The types of cases that meet the adequacy rule can be classified into four distinct categories. First, there are cases in which a plaintiff is deprived of something that is unique or a special entitlement that cannot be replaced with money damages. For example, a plaintiff who has had an antique heirloom taken could not replace it with money damages from a suit at law; rather, an order in equity is required directing the return of the heirloom. Second, there are cases in which a plaintiff may have to bring repeated suits at law to protect a legal right. For instance, if a defendant repeatedly trespasses on plaintiff ’s property, the plaintiff, who would have to bring repeated suits at law for money damages, should be allowed to bring a single suit in equity enjoining the continued trespasses. Third, there are cases in which a legal remedy is available but not collectible. For example, if a musician refuses to appear at a concert, money damages will make the concert promoter whole, but if the musician has no money, then only an order of specific performance from an equity court will provide an adequate remedy to the promoter. Fourth, there are cases in which the monetary damages simply cannot be measured with a reasonable certainty. For instance, an infringer’s use of a trademark to mislead the public would be difficult to quantify as damages, but an injunction would provide some remedy to the trademark owner by limiting future losses. In IP lawsuits, there has historically existed a rebuttable presumption of irreparable harm when an IP owner sought preliminary injunctive relief. The US Supreme Court, however, has recently called into question this presumption.72 Thus, IP owners are now required 72 

eBay Inc v MercExchange, LCC, 547 US 388, 126 SCt 1837, 164 LEd2d 641 (2006). In a concurring opinion, Justice Kennedy suggested that, in cases involving a small component of a larger product and cases involving business method patents, an injunction may not be in the public interest under any circumstances.

682   Terence P. Ross to demonstrate irreparable harm on the same basis as any other litigant. Factors that are considered in analyzing whether irreparable harm exists in a particular lawsuit include the infringer’s ability to pay monetary damages, the potential loss of customers and goodwill by an IP owner because of the infringement, and the delay (if any) by the IP owner in seeking relief.

3.2.2.2 The Balance of the Hardships An equity court will generally take into consideration the respective hardships of the parties caused by granting or withholding an equitable remedy. This is generally true in IP lawsuits.73 More consideration, however, is typically given to other factors, such as irreparable harm.

3.2.2.3 The Public Interest In determining whether to issue equitable relief, courts will almost always take into consideration the public interest. If the public interest correlates with the defendant’s, this may be sufficient ground in and of itself to deny equitable relief. For example, when a company misappropriated trade secrets to design and develop an aircraft integrated weapons storage monitor and control system, which was installed in various aircraft of the United States Air Force, the trade secret owner was denied an injunction against further use by the infringer of the trade secrets because an injunction would hinder prosecution of the war in Vietnam and endanger US military personnel.74 In such a case, the public interest disfavored the issuance of an equitable remedy. In most IP lawsuits, however, the public interest supports issuance of equitable remedies. The public interest favors issuance of equitable remedies in copyright, patent, and trademark lawsuits because the US Congress has determined that it is federal public policy to protect the rights of IP owners.75 Similarly, courts have found that protection of trade secrets is in the public interest because state policy favors protection of such information.76 Of course, there may be instances in which the public interest does not favor the IP owner. For example, in trademark lawsuits, there can be a competing public interest in free and vigorous market competition that would favor a defendant utilizing an owner’s trademark for purposes of comparative advertising. It is, however, the rare case in IP lawsuits in which the public interest does not favor the IP owner.

3.3 Specific Equitable Remedies Available in Intellectual Property Lawsuits The most common equitable remedies available in IP lawsuits are injunctions and civil seizures. Injunctive relief can take at least three forms—​a temporary restraining order, a 73 

Hybritech, Inc v Abbott Laboratories, 849 F2d 1446, 1457 (Fed Cir 1988). Republic Aviation Corp v Schenk, 152 USPQ (BNA) 830, 834–​835 (NY Supp 1967). 75  Justice Kennedy’s concurring opinion in eBay Inc v MercExchange, LLC, 547 US 388, 395–​397 (2006), however, suggests that it is not in the public interest to issue an injunction when the patent owner is a patent-​assertion entity. 76  It should be noted, however, that injunctions in trade secret cases are typically more limited in duration than in other types of IP cases. Indeed, such injunctions are often limited to the period of time in which the defendant could independently have developed the trade secret at issue. 74 

Remedies   683 preliminary injunction, or a permanent injunction. In addition, when authorized by statute, an IP owner may obtain a court order allowing the seizure of infringing articles.

3.3.1 Injunctive Relief Injunctive relief can be obtained by an IP owner while an infringement lawsuit is pending. Such preliminary injunctive relief is considered to be an extraordinary remedy that should be sparingly granted. In order to issue such preliminary injunctive relief, a court must consider four factors—​the likelihood of harm to the IP owner if such interim relief is not granted; the likelihood of irreparable harm to the alleged infringer if such interim relief is granted; the likelihood that the IP owner will succeed on the merits; and the public interest. There is no formulaic approach to weighing these factors, although courts typically give greater consideration to the IP owner’s likelihood of success on the merits. A prevailing IP owner is not entitled to permanent injunctive relief as a matter of right. Rather, the prevailing property owner must demonstrate that there is a continuing need for such relief. If infringing articles have been disposed of, and there is no threat of a continuation of infringement, a permanent injunction will not be granted. When, however, the infringement was willful or the threat of renewed infringement exists, then a permanent injunction should be issued.77

3.3.2 Civil Seizures The US copyright and trademark laws both contain express authorization for court-​ordered seizures of infringing articles.78 Although the Uniform Trade Secrets Act does not expressly address seizures, the authority granted courts to compel “affirmative acts to protect a trade secret” has been interpreted to permit the seizure of the fruits of misappropriation, such as manufacturing blueprints.79 Only the US patent laws lack any arguable textual basis for the seizure of infringing articles. The civil seizure of infringing articles serves two practical purposes. First, seizure prevents infringing articles from entering the stream of commerce. Second, in the case of pretrial seizures, the seizure conclusively establishes the infringement. The same procedural rules that apply for obtaining pre-​trial injunctive relief typically apply in obtaining a pre-​trial seizure order. That said, seizure orders are even more rarely granted than injunctions. Moreover, seizure orders raise certain due process concerns when issued prior to a judicial determination of infringement. Once, however, a court has confirmed that seized articles are infringing, the aggrieved IP owner can obtain an order directing the destruction of the seized articles.

3.3.3 Continuing Developments The law of remedies continues to evolve in response to developments in IP. In particular, remedies for the infringement of IP rights have recently been forced to evolve to address 77 

See Section 3.3.3 for the standards pursuant to which such an injunction would be issued. 17 USC § 503 (copyright); 15 USC § 1118 (trademark). 79  Uniform Trade Secrets Act § 2(c) (amended 1985), 14 ULA 378 (Supp 2004). 78 

684   Terence P. Ross the rise of patent-​assertion entities and the increasing complexity of the technology used in common consumer products. Since the 1990s, there has been a fourfold increase in the number of patent lawsuits filed in the US. This increase is largely attributable to the emergence of patent-​assertion entities. Patent-​assertion entities, also known as “non-​practicing entities” or, more pejoratively, as “patent trolls,” are typically single-​purpose, limited liability companies that exist for the sole purpose of holding the ownership of one or several related patents in order to bring suit on the patents. In other words, a patent-​assertion entity (“PAE”) does not manufacture products or supply services based upon the patents it owns, but rather sues companies that do manufacture products or supply services, for the alleged infringement of patents owned by the PAE. Moreover, the PAE typically has played no role in the invention of the patents it owns. Rather, it has acquired the patents from the inventors on a speculative basis—​as a financial investment predicated upon obtaining a significant return on the assertion of the patents in litigation. Unlike the typical patent monetization efforts of traditional research entities, such as universities, PAEs do not seek to license their portfolio for new uses—​a win for both licensor and licensee—​but rather to force payments for existing uses researched, developed, and exploited entirely by a company that actually manufactures products and/​ or supplies services. In short, the PAE seeks to compel payment through litigation from successful businesses for patent infringement despite the fact that such a business independently developed the products and services it sells without any contribution from the PAE, let alone knowledge of or reliance upon the PAE’s patents. Lawsuits filed by such PAEs now constitute more than 60 percent of all patent infringement suits brought in the US. Indeed, lawsuits filed by PAEs constitute almost 90 percent of all patent suits involving technology. Needless to say, technology companies have reacted strongly against this trend which they liken to a new tax on their ability to do business. This reaction has sought—​through litigation and legislation—​to reduce the financial attractiveness of this type of “troll litigation.” Thus, the America Invents Act, enacted in 2011, established a method for companies facing lawsuits from PAEs to invalidate a PAE’s patent(s) through an administrative procedure at the United States Patent and Trademark Office.80 This new inter partes review procedure significantly increases the costs (and risks) to a PAE. Similarly, technology companies have sought through litigation to limit the remedies available to PAEs. And, their success in this regard has effected significant changes in the law of IP remedies. One of the most significant changes in the law of monetary remedies in IP relates to the calculation of royalties paid for patent infringement. Because PAEs, by definition, do not compete for sales in the marketplace with an accused infringer, a lost profits measure of monetary damages is unavailable to PAEs. Therefore, in virtually all PAE litigation, a reasonable royalty measure of monetary damages must be applied. Under this measure of damages, two determinations must be made—​the reasonable royalty percentage and the reasonable royalty base. Once these two determinations are made, the reasonable royalty rate is applied to the reasonable royalty base to calculate the monetary damages award. The rise of PAE litigation has contributed to significant changes in the second part of this reasonable royalty calculation—​determination of the reasonable royalty base. For many 80 

Public Law 112–​129 (16 September 2011).

Remedies   685 decades, the US Court of Appeals for the Federal Circuit has always limited the reasonable royalty base to those revenues attributable to the alleged patent infringement. In recent years, however, the Federal Circuit has reinvigorated this rule to limit damages that may be obtained by PAEs.81 In the context of a multi-​component product, the Federal Circuit now requires that the reasonable royalty base be apportioned down to a reasonable estimate of the value of the patented technology at issue in the suit. Thus, as a first step in this process of setting the reasonable royalty base, a determination must be made as to the “smallest salable patent-​ practicing unit.”82 Any royalties to be awarded are limited to revenues generated by sales of this smallest salable patent-​practicing unit. Moreover, if this smallest salable unit includes non-​infringing features with no relation to the patent feature, the reasonably royalty base must be reduced to apportion out these non-​infringing features.83 The result of this apportionment process is to reduce significantly the damages available in patent lawsuits involving complex technological products. United States courts have also effected significant changes in non-​monetary remedies for patent infringement. In particular, the courts have made it increasingly difficult for a PAE to obtain an award of a permanent injunction as a remedy for patent infringement. Prior to 2006, the traditional rule was that a court, as a matter of course, will issue permanent injunctions against patent infringement absent exceptional circumstances.84 In the landmark decision of eBay Inc. v MercExchange, L.L.C., (“eBay”), however, the US Supreme Court rejected this traditional rule.85 In eBay, a PAE won a jury verdict of patent infringement in the trial court, but the trial court refused to grant a permanent injunction against the infringer. On appeal, the Federal Circuit reversed and held that the trial court had to issue a permanent injunction. The US Supreme Court, however, rejected the Federal Circuit’s decision, overturning the traditional rule that a prevailing patent owner was automatically entitled to a permanent injunction after a finding of liability. The Supreme Court held that a patent plaintiff must satisfy a four-​ factor test to obtain a permanent injunction. It must demonstrate: (i) It has suffered an irreparable injury; (ii) Monetary damages alone are inadequate to compensate it for the infringement injury; 81 

A secondary impetus for the Federal Circuit expansion of this rule is the increasing complexity of the technology underlying the consumer products at issue in more recent patent lawsuits. Consumer products commonly comprise a multiplicity of cross-​functioning inventions making it difficult to determine which is responsible for the product’s success in the marketplace. The Federal Circuit has sought to narrow awards of monetary damages to reflect only the contribution of the patented invention to the accused product. 82  Virnetx, Inc v Cisco Systems, Inc, 767 F3d 1308, 1328 (Fed Cir 2014). 83  In some rare cases, non-​infringing features may be included in the reasonable royalty base when the infringing feature constitutes the basis of consumer demand for the non-​infringing feature. This is referred to as the “Entire Market Value Role.” Eg, Lucent Techs, Inc v Gateway, Inc, 580 F3d 1301, 1336 (Fed Cir 2009). The Federal Circuit, however, has in recent years significantly narrowed the availability of the Entire Market Value Role as part of its effort to limit monetary damages. See, eg, Laserdynamics, Inc v Quanta Computer, Inc, 694 F3d 51, 67 (Fed Cir 2012). 84 Eg, Richardson v Suzuki Motor Co, Ltd, 868 F2d 1226, 1247 (Fed Cir 1989). 85  547 US 388, 126 S Ct 1837, 164 LEd2d 641 (2006).

686   Terence P. Ross (iii) Considering the balance of hardships between the parties, an equitable remedy is warranted; and (iv) The public interest would be served by issuance of a permanent injunction.86 In practice, this standard probably renders permanent injunctions unavailable to PAEs. Indeed, Justice Kennedy’s concurring opinion in eBay suggests as much. The impact of the Supreme Court’s decision in eBay on IP remedies cannot be understated. Although decided in the context of a patent infringement case, lower courts subsequently have extended it to copyright and trademark cases.87 Moreover, relying upon eBay, lower courts have also overturned the traditional presumption of irreparable harm accorded IP owners seeking preliminary injunctive relief, pending trial.88 Another developing area of remedies law relates to the availability of injunctive relief in the context of so-​called Standard Essential Patents (“SEP”). An SEP is a patent that is essential to implementation of a standard set by a standardization body. Such patents have become common in certain fields requiring equipment interoperability, such as the telecommunications industry. Typically, a standardization body (eg, the European Telecommunications Standards Institute) will only adopt a patented technology as a standard for its industry, if the owner of the patent(s) agrees to grant licenses to third parties on fair, reasonable, and non-​discriminatory (“FRAND”) terms. It now appears that, at least in the European Union (EU), the owner of an SEP cannot obtain injunctive relief and/​or a product recall against an infringer unless it has first offered a license on FRAND terms to the infringer and the offer has been unreasonably refused.89 Although no court in the US has gone as far as the Court of Justice of the European Union, it is yet another area of IP remedies that requires watching. As the foregoing demonstrates, remedies for the infringement of IP are sufficiently flexible to be capable of developing to address new challenges. In particular, as the US Supreme Court has agreed to accept more cases relating to IP, many traditional rules governing remedies are receiving new scrutiny. Accordingly, it should be expected that the law of IP remedies will continue to evolve into the future.

86 

547 US at 394.

87 Eg, CoxCom, Inc v Chafeee, 536 F3d 101, 112 (1st Cir 2008) (copyright case); Herb Reed Enterprises,

LLC v Florida Entm’t Mgmt, 736 F3d 1239, 1249 (9th Cir 2013) (trademark case). 88 Eg, Salinger v Colting, 607 F3d 68, 80 (2d Cir 2010). 89  Case (-​170/​13) Huawei Technologies Co Ltd v ZTF Corp, 2016 RPC4.

Chapter 25

Cross-​B orde r In tellectual Prope rt y Enforceme nt Eun-​J oo Min AND Johannes Christian Wichard * 1. Introduction The series of lawsuits between Apple and Samsung in France, Germany, Italy, Japan, the Netherlands, the Republic of Korea, the United Kingdom (UK), and the United States (US) is one face of today’s multinational cross-​border intellectual property (IP) litigation.1 IP infringement on the Internet, which occurs millions of times daily and leads to largely automated takedowns against anonymous avatars,2 is another. IP rights are credible and effective only insofar as meaningful enforcement can be assured. The remedies available through civil proceedings are typically injunctions to desist from an infringement; compensation through payment of damages for the harm caused by the infringement; disposal of infringing goods and implements used for infringing activities outside the channels of commerce to deter further infringement; information on third persons involved in the supply chain of the IP infringing goods; and provisional measures to prevent infringement or to preserve evidence.3 As the volume of international trade grows and IP transactions increasingly take place transnationally, the challenge is to create effective

*  Eun-​Joo Min and Johannes Christian Wichard have asserted their moral rights to be identified as the authors of this Contribution. The views expressed in this chapter are those of the authors. All websites were last accessed in February 2018, unless otherwise specified. 1  Apple and Samsung have been embroiled in more than 50 lawsuits around the globe, resulting, unsurprisingly, in conflicting decisions. 2  See, eg, the Google Transparency Report (), accessed on 22 April 2016, which noted that 91,134,421 requests for URL removal had been made in the previous month on the basis of alleged copyright infringement. 3  See WTO Agreement on Trade-​Related Aspects of Intellectual Property Rights (opened for signature 15 December 1993, entered into force 1 January 1995) 1869 UNTS 299 (hereafter TRIPS) arts 44–50.

688    Eun-Joo Min and Johannes Christian Wichard enforcement mechanisms for the cross-​border context through procedures that are both fair and equitable as well as reasonably time-​and cost-​efficient.4 Any reflection on cross-​border IP enforcement must start from the territoriality principle, which is a product of the intimate connections between sovereignty, property rights, and territory.5 Territoriality in IP means that IP protection relies on national or regional legislation, and is limited to the territory of the sovereign State granting the right as part of its overall economic, social, and cultural policy. Territoriality provides predictability in IP relationships and legitimacy to IP protection. Territoriality also influences private international law (PIL) considerations, such as where an infringement action may be brought and under what law, which remedies may be sought, and with what territorial effect. It is from the territoriality principle that the global map of national IP systems emerges: a mosaic of independent, territorially limited exclusive rights, defined by the laws of each State, to be applied by the local courts. The territoriality principle is, however, coming under pressure through developments such as the increasing interdependence among actors within the global economy, and the growing concern over the costs and perceived inefficiencies of cross-​border IP enforcement.6 Such IP disputes typically involve the cross-​border import, export, and transit of physical goods; the cross-​border communication of copyrighted works through broadcasting or satellite transmissions; as well as through activities that take place on “ubiquitous” media, that is, media that transcend boundaries and can be accessed wherever technical prerequisites are met, the most prominent example being the Internet. The result is a growing tension between these two distinct features of IP: territoriality and mobility.7 On the one hand, IP relationships need a geographical locus and States continue to closely guard national sovereignty and territoriality in IP, particularly in IP enforcement. On the other hand, transnational IP exploitation involves multiple actors over complex global value chains and IP infringements routinely impact multiple jurisdictions, thus increasing the need for efficient cross-​border enforcement options. Resolving this tension will necessarily require reconsideration of the principle of territoriality in the IP system, while safeguarding the goals of territoriality: sovereignty, legitimacy, and user predictability. New approaches are explored to ensure that IP rights remain enforceable in a coherent and predictable manner in a global environment constituted by territorial rights that rely on local courts. Section 2 discusses reconsideration and recalibration of the PIL that governs

4 

See TRIPS, preamble and arts 7, 41 and 42. P Drahos, “The Universality of Intellectual Property Rights: Origins and Development” in WIPO (ed), Intellectual Property and Human Rights (Geneva 1999) 16. 6  See, eg, D Chisum, “Normative and Empirical Territoriality in Intellectual Property: Lessons from Patent Law” (1997) 37 Virginia Journal of International Law 603 (predicting that territorialism will become an unacceptable obstacle to international trade). 7  A trademark-​based dispute over the domain name between Hewlett Packard, US-​ based trademark holder, and Kim Yong Hwan, the domain name registrant in the Republic of Korea, while unusual in the complexity of the judicial process implicated, is illustrative of the challenges in cross-​border IP enforcement. The dispute, initially submitted in August 2000 to the Uniform Domain Name Dispute Resolution Policy (UDRP), resulted in three separate Supreme Court Decisions in the Republic of Korea over the subsequent 11 years: in relation to jurisdiction in 2005 (Case No 2002Da59788), applicable law for tort in 2008 (Case No 2005Da75071), and applicable law for unjust enrichment in 2011 (Case No 2009Da15596). 5 

Cross-Border Intellectual Property Enforcement    689 IP relationships, and shows how transnational IP activities are interpreted and interposed into the territorial systems governing domestic court competence, choice-​of-​law, and recognition and enforcement of judgments. Under certain conditions, local laws are now applied “extra-​territorially” and in exceptional circumstances deviations from territoriality are sought, with remedies that have transnational or even worldwide effect, in particular for infringements through ubiquitous media. Similarly, the players in IP enforcement are broadened from the traditional binary “right holder v infringer” formula to include actors previously regarded as auxiliary:  in particular, the intermediaries in the global web of supply chains. Section 3 explores the emergence of new fora for cross-​border IP enforcement, through either trade or investment arrangements or privately designed mechanisms. Section 4 provides concluding remarks.

2.  Identification of Domestic IP Enforcement Structures through Private International Law Private international law seeks to resolve questions that result from the presence of a foreign element in legal relationships by determining the court that has jurisdiction, by considering what national law or laws apply and to what territorial extent, and by addressing recognition and enforcement of judgments in States other than the State in which a judgment was issued. While there exists a body of unified PIL in some fields, to date there is no established comprehensive PIL regime for IP at the international level. As such, there are significant practical and legal challenges to navigating the jurisdictional and conflict-​of-​laws issues in cross-​border IP proceedings. A brief overview of international, regional, and national instruments, as well as case developments, follows. A majority of these instruments do not address IP exclusively, but rather include an IP chapter or are understood to apply to IP in the absence of an explicit exclusion. The exceptions are the soft law instruments referred to later, which focus exclusively on IP. Private international law is principally governed through domestic laws. Noteworthy legislative and case law developments have taken place in the last two decades in the codification and interpretation of PIL. There are also efforts to harmonize PIL at the regional level. In Europe, the Brussels I Regulation8 and the Rome II Regulation9 establish a framework for jurisdiction, applicable law, and recognition and enforcement of foreign judgments. In the Americas, under the auspices the Organization of American States, the Inter-​American Specialized Conference on Private International Law has produced some 26 Inter-​American conventions, protocols, and other instruments10; and the Montevideo Treaties of 1889 and 8  Regulation (EU) No 1215/​2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) [2012] OJ L351/​1 (hereafter Brussels I Regulation). 9  Regulation (EC) No 864/​2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-​contractual obligations [2007] OJ L199 (hereafter Rome II Regulation). 10  S Symeonides, Codifying Choice of Law Around the World (OUP 2014) 32.

690    Eun-Joo Min and Johannes Christian Wichard 1940 and the Bustamante Code of Private International Law of 1928 reflect a longstanding tradition of harmonizing PIL in the relevant regions.11 At the multilateral level, the principal source of PIL rules is the Hague Conference on Private International Law (HCCH), an intergovernmental organization that works towards the progressive unification of the rules of PIL.12 Principally led by academics, soft law initiatives have flourished in the last decade, de lege ferenda. These initiatives endeavor to remove the gaps in the existing legal frameworks and to complement legislative efforts by proposing either normative frameworks for the adjudication of cross-​border IP disputes, or by aiming to guide relevant legal processes. They include the American Law Institute (ALI) Principles Governing Jurisdiction, Choice of Law, and Judgments in Intellectual Property in Transnational Disputes of 2008;13 the European Max Planck Group’s Principles on Conflict of Laws in Intellectual Property (CLIP) of 2011;14 the Transparency Proposal on Jurisdiction, Choice of Law, Recognition and Enforcement for Foreign Judgments in Intellectual Property of 2009;15 and the Joint Proposal on the Principles of Private International Law on Intellectual Property Rights of 2010, which was drafted by Members of the Private International Law Association of Korea and Japan.16,17 The International Law Association (ILA) Intellectual Property and Private International Law Committee is currently working towards a set of Guidelines on IP and PIL.18 These initiatives are hereafter collectively referred as “IP and PIL reform projects.”

11  Eight treaties and a protocol were adopted in Montevideo in 1889, including the Treaty on International Civil Law, International Commercial Law and International Procedural Law. The Treaties were revised in 1940. The Montevideo Treaties of 1889 apply to Argentina, Bolivia, Colombia, Paraguay, Peru, and Uruguay; the Montevideo Treaties of 1940 apply to Argentina, Paraguay, and Uruguay; and the Bustamante Code of 1928 applies to 15 States in the Americas. The Bustamante Code is considered the most important Pan-​American private international law legislative document of the twentieth century: see A Schulz, A Tuñón, and R Villanueva, “The American Instruments on Private International Law,” HCCH Prel Doc No 31 (2005) 5–​13. 12  The HCCH administers a number of Conventions of relevance for IP proceedings, such as the 1965 Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, the 1970 Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, and the 2005 Convention on Choice of Court Agreements. 13 ALI, Intellectual Property: Principles Governing Jurisdiction, Choice of Law and Judgments in Transnational Disputes (ALI Publishers 2008) (hereafter ALI Principles). 14  European Max Planck Group on Conflict of Laws in Intellectual Property (CLIP), Principles on Conflicts of Laws in Intellectual Property (2011) in Conflict of Laws in Intellectual Property—​The CLIP Principles and Commentary (OUP 2013) (hereafter CLIP Principles). 15  Transparency Proposal on Jurisdiction, Choice of Law, Recognition and Enforcement of Foreign Judgments in Intellectual Property (2009) (hereafter Transparency Proposal) in J Basedow, T Kono, and A Metzger (eds), Intellectual Property in the Global Arena (Mohr Siebeck 2010) 394–​402. 16  Waseda University Global-​COE Project, Joint Proposal on the Principles of Private International Law on Intellectual Property Rights (2010) 24 The (Waseda GCOE) Quarterly Review of Corporation and Law and Society (hereafter Joint Korean Japanese Principles). 17  The influence of these IP and PIL reform projects may be seen in court judgments that make specific reference to them. See, eg, Lucasfilm Ltd v Ainsworth [2011] UKSC 39 [93]–​[94]; Case C-​170/​12 Pinckney v KDG Mediatech AG [2013] ECDR 15, Opinion of AG Jääskinen, para 59; Rundquist v Vapiano SE 798 F Supp 2d 102 (District Court (Columbia) 2011). 18  Information on the work of the ILA Intellectual Property and Private International Law Committee is available at .

Cross-Border Intellectual Property Enforcement    691 Private international law approaches will likely depend on how rigidly (or not) the territoriality principle is applied. This section considers whether the approaches towards jurisdiction, applicable law, and recognition of foreign judgments are shifting in the face of the increasingly transnational environment in which IP is exploited.

2.1 Jurisdiction Jurisdiction addresses the authority of a State’s courts over the parties to hear and decide cross-​border disputes. In simple terms, the general rule is that an action may be heard (i) at the defendant’s forum, where it is possible to obtain cross-​border remedies (general jurisdiction); or (ii) where the infringement takes place, with remedies typically limited to the forum (special or specific jurisdiction). When the validity of an IP right is disputed, in particular in the case of registered IP rights, (iii) the court of the State that granted the IP right is often the only court with power to adjudicate validity (exclusive jurisdiction).19 The practical application of these general rules is, however, far from simple.20

2.1.1 General Jurisdiction—​Defendant’s Forum The general approach found in international, regional, and national instruments is in personam jurisdiction over a defendant in its own forum (ie, domicile, (habitual) residence, or place of business).21 Since general jurisdiction is based on the close relationship between the defendant and the forum, an additional link to a place where events take place or where damages arise is not required. Therefore, general jurisdiction allows for the possibility of consolidating in one jurisdiction multiple claims arising out of the defendant’s infringement of parallel IP rights in different States. In theory, the court hearing the case will apply the various (domestic or foreign) IP laws, and the scope of a resulting judgment and remedies would then cover all relevant territories, including for the harm occurring outside the forum (eg, damages arising from the foreign sales of the infringing product), and include cross-​ border injunctions. This option may nevertheless be overridden by the limitations placed by exclusive jurisdiction rules discussed in Section 2.1.5. In 1992, the HCCH initiated a Judgments Project that explored the possibility of establishing a new multilateral instrument on the international jurisdiction of courts and the 19  Under US law structure and parlance, “personal jurisdiction” requires that the defendant has sufficient contacts with the place where the court is located, and “subject matter jurisdiction” requires that a court has jurisdiction over the legal issues in dispute; both personal jurisdiction as well as subject matter jurisdiction are required for a US court to exercise jurisdiction over the dispute. 20  Justice Hugh Laddie referred to the complexity of applying private international law in IP proceedings in Sepracor Inc v Hoechst Marion Roussel Limited ea [1999] All ER (D) [80]: “A less sensible system could not have been dreamt up by Kafka.” 21  In some States with a common law tradition, a broader understanding of general jurisdiction based on the defendant’s presence in the forum may apply, expanding to the courts of a State where the defendant entertains such systematic and continuous activities that it can be said to be “at home” or where the defendant has been served with process. These broader bases of jurisdiction are in practice narrowed through the doctrine of forum non conveniens, thus reaching similar outcomes to the general jurisdiction as applied in civil law States. See the discussion in CLIP Principles (n 14) para 2:101.N02.

692    Eun-Joo Min and Johannes Christian Wichard recognition and enforcement of their decisions, in the context of transnational disputes in civil and commercial matters, including IP. While several drafts of the new proposed instrument, entitled “Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters” were tabled (the latest being the HCCH 2001 Interim Text),22 the Judgments Project was significantly scaled down in 2003, with disagreement on IP-​related matters cited as one of the principal hurdles. This led to the adoption of the Hague Convention on Choice of Court Agreements of 30 June 2005 with a limited substantive coverage. The work on a more comprehensive instrument resumed in 2012, with the focus narrowed, however, to the recognition and enforcement of foreign judgments, thus excluding jurisdiction.23 The 2001 HCCH Interim Text reflected multilateral convergence on the defendant’s forum as a forum of general jurisdiction.24 General jurisdiction based on the defendant’s forum is also embodied in regional instru­ ments, such as the Brussels I  Regulation,25 the Bustamante Code of Private Inter­national Law,26 the Montevideo Treaties on International Civil Law and on International Commercial Terrestrial Law of 1889 and 1940;27 in national laws;28 and in IP and PIL reform projects.29 However, there is interest in recognizing other bases for general jurisdiction. With the growing number of Internet-​related IP cases and attendant challenges localizing remedies for cross-​border harm, there are proponents of applying forum actoris (the courts in the State where the injured party has its center of interests), as is seen in personality right cases,30 to IP disputes.31 Whereas such an extension may be plausible in certain areas of IP such as moral rights, which share commonalities with personality rights,32 in general, this appears to remain a minority view, found inapplicable primarily due to the procedural disadvantage that the defendant would face.33 22  Interim Text, Summary of the Outcome of the Discussion in Commission II of the First Part of the Diplomatic Conference 6–​20 June 2001 in (2002) 77 Chicago-​Kent L Rev 1015 (hereafter Interim Text); cf RC Dreyfuss, “An Alert to the Intellectual Property Bar: The Hague Judgments Convention” (2001) University of Illinois L Rev 421. 23  See HCCH Judgments Project and in Section 2.3. 24 Interim Text, art 3 and n 16.    25  Brussels I Regulation, recital 15 and art 4(1). 26 Bustamante Code, art 318. 27  Montevideo Treaty on International Civil Law, art 56; Montevideo Treaty on International Commercial Law, art 10. 28  Swiss PIL Act 1987, art 109(1) and (2); Japanese Code of Civil Procedure (2012) art 3–​2. 29  ALI Principles, § 201; CLIP Principles, art 2:101; Transparency Proposal, art 101; Joint Korean Japanese Principles, art 201. 30  Joined Cases C-​509/​09 eDate Advertising GmbH v X and C-​161/​10 Martinez v MGN Ltd [2011] ECR I-​10269, para 52. 31  E Treppoz, “Jurisdiction in internet-​related intellectual property disputes” (Conference on Jurisdiction and Dispute Resolution in the Internet Era, Geneva, 17–​18 June 2015) ; E Treppoz, “Jurisdiction in the Cyberspace” (2016) 26 Swiss Review of International and European Law 273. 32  See also Case No 32/​2015 Galí c Estado de Qatar (Barcelona Provincial Court of Appeal 2015), where the Court found that a Spanish court had jurisdiction over the infringement of a Spanish citizen’s copyright (moral rights of disclosure, paternity and integrity) by a Qatari entity and the State of Qatar that commissioned the construction of an infringing lamp model and its installation on a street in Qatar. For a discussion of moral rights in general, see Jane Ginsburg’s chapter in this volume. 33  CLIP Principles, para 2:203.C04; J Fawcett and P Torremans, Intellectual Property and Private International Law (2nd edn, OUP 2011) paras 5.63–​5.64. See also Case C-​220/​88 Dumez France SA v

Cross-Border Intellectual Property Enforcement    693

2.1.2 Infringement Jurisdiction Jurisdiction may be found on an alternative basis:  namely jurisdiction linked to the concerned action, as opposed to the general jurisdiction linked to the defendant. Special jurisdiction, referred to as specific jurisdiction in the US, is accorded at the choice of the plaintiff, when there is a “substantive connection” or “close link” between the State in which the court is located and the dispute (or in the US, between the State and the defendant’s activities), taking into account the public and private interests involved. Insofar as the “substantive connection” is with the dispute (or the actions of the defendant), the court’s power is limited to remedy harm within its own territory. The Brussels I Regulation provides that, in addition to the defendant’s forum, jurisdiction may be grounded on a “close connection between the court and the action.”34 A somewhat analogous approach may be found in the US: Courts where the defendant has voluntarily acted can adjudicate claims foreseeably arising from its acts.35 The Private International Law Act (PIL Act) of the Republic of Korea provides for international jurisdiction in cases where a party or a dispute is “substantively related” to the Republic of Korea.36 This requirement of close or substantive connection is to enhance international procedural efficiency, to ensure legal certainty and to avoid the possibility of the defendant being sued in courts which could not reasonably have been foreseen. The principles in torts jurisdiction generally apply to IP infringement, where they are adjusted to the principle of territoriality.37 Among the regional instruments, the Montevideo Trademark Treaty of 1889 foresees jurisdiction for trademark infringement in the courts of the State where the infringement was committed.38 In Europe, the Brussels I Regulation provides in matters relating to tort, for jurisdiction “in the courts for the place where the harmful event occurred or may occur.”39 In interpreting this provision, the CJEU has held that the harm “occurs” at the place where the harmful “act” is performed as well as the place where it produces “effect,” and jurisdiction exists in both places.40 This distinction is Hessische Landesbank [1990] ECR I-​49, paras 19–​22; Case C-​364/​93 Antonio Marinari v Lloyds Bank plc [1995] ECR I-​2719, para 21; Case C-​523/​10 Wintersteiger AG v Products 4U Sondermaschinenbau GmbH [2012] ETMR 31, paras 22–​25 (limiting the option for the plaintiff to sue in his domicile). See also ALI Principles, § 207 (listing “the presence of the plaintiff in that State” as one of the “Insufficient Grounds for Jurisdiction over Transnational Disputes”). 34  Brussels I Regulation, recital 16; Case C-​360/​12 Coty Germany GmbH v First Note Perfumes NV [2014] ETMR 49, para 47; Wintersteiger (n 33) para 18; Case C-​441/​13 Hejduk v EnergieAgentur.NRW GmbH [2015] ECDR 10, para 19. 35  International Shoe v Washington 326 US 310 (1945) 316. 36  Republic of Korea PIL Act 2001, art 2. See also Case No 2009Da19093 (Republic of Korea Supreme Court 2011). 37  At the multilateral level the relevant negotiations during the HCCH Judgments Project did not result in any consensus language on torts jurisdiction, and the 2001 HCCH Interim Text remained bracketed with the explanation that “the draft provision would have to remain under consideration in light of e-​commerce and IP issues.” See Interim Text, art 10 and ns 66–​70. 38  Montevideo Trademark Treaty 1889, art 4. This Treaty has been ratified by Argentina, Bolivia, Brazil, Paraguay, and Uruguay. While its practical value has been questioned, reference to the Treaty has been made, for example, in De Estrada, Martina María Injunction Proceedings Case No D.38.XLVI CSJN Revista No 78 (Supreme Court of Argentina 2011). 39  Brussels I Regulation, art 7(2). 40  Case C-​21/​76 Handelskwekerij GJ Bier BV v Mines de potasse d’Alsace SA [1976] ECR 1735, para 19.

694    Eun-Joo Min and Johannes Christian Wichard routinely referred to in IP infringement cases, including in relation to infringements that arise through the ubiquitous media discussed in Section 2.1.3.41 As to the scope of infringement jurisdiction triggered by harmful “effects,” the CJEU has based its approach on its earlier decision in Shevill v Presse Alliance SA (a defamation case), where it held that the court of the place where the harm was suffered (place of “effect”) only has the power to grant remedies (damages or injunction) for local harm.42 Because the CJEU identifies the harmful effect with a potential IP infringement, the court’s resulting jurisdiction to grant remedies is limited to the damage occurring within the territory in which the IP right is protected.43 In Japan, a Japanese court will have jurisdiction in relation to a tort action when “the place where the tort took place is located in Japan, excluding the case where the result of a wrongful act committed in a foreign country occurred in Japan, and the occurrence of such result in Japan was ordinarily unforeseeable.”44 The Swiss Federal Act on Private International Law (Swiss PIL Act) has a chapter dedicated to IP and provides IP infringement jurisdiction to the courts at the place where the act or the result occurred.45 The IP and PIL reform projects have deviated from the here-​described approaches. Under the CLIP Principles, infringement jurisdiction is with “the courts of the State where the alleged infringement occurs or may occur,” thus requiring the IP right to be protected within the forum. The CLIP Principles refer to “infringement” as a uniform concept and do not apply the distinction between the “act” and “effect” of infringement that is seen in the European and other legal systems. This CLIP approach is explained as “follow[ing] from the very nature of IP infringements that no meaningful distinction can be made between ‘act’ and ‘effect’ for the purpose of attributing jurisdiction.” In addition, under the CLIP Principles, the infringer is protected from being sued in a State when he “has not acted in that State to initiate or further the infringement and [his] activity cannot reasonably be seen as having been directed to that State” (“escape clause”).46 Therefore, if the plaintiff wishes to bring a single suit in relation to all acts of infringement occurring in multiple States, he needs to do so before a court of general jurisdiction, that is, in the State of the defendant’s domicile. This is intended to provide predictability to potential defendants, and to remove cases where the effect in the jurisdiction would be minimal or purely accidental. Unlike the CLIP Principles, the ALI Principles do not require that the infringement occurs in the State where the IP right exists, but in essence allocate jurisdiction to the place where the act of infringement occurred, and to the place of damage if the defendant’s activities were directed to that State.47 Furthermore, the court’s jurisdiction is not limited to 41  For criticism see, eg, Fawcett and Torremans (n 33) paras 5.42–​5.114; P Torremans, “Jurisdiction for Cross-​Border Intellectual Property Infringement Cases in Europe” (2016) 53 Common Market L Rev 1630–1636; C Heinze, “A Framework for International Enforcement of Territorial Rights: The CLIP Principles on Jurisdiction” in J Basedow, T Kono, and A Metzger (eds), Intellectual Property in the Global Arena (Mohr Siebeck 2010) 62–​69. 42  Case C-​68/​93 Shevill v Presse Alliance SA [1995] ECR I-​415, paras 30–​33. 43  Hejduk (n 34) para 36; Pinckney (n 17) para 45. 44  Japanese Code of Civil Procedure (2012) art 3-​3(viii); Case No H22 (ne)10001 (Japanese IP High Court 2010). 45  Swiss PIL Act 1987, art 109. 46  CLIP Principles, arts 2:202 and 2:203(1) and paras 2:202:C01-​2:202.N20; Fawcett and Torremans (n 33) paras 11.155–​11.157; Torremans (n 41) 1635; Heinze (n 41) 65. 47  ALI Principles, § 204.

Cross-Border Intellectual Property Enforcement    695 the claims occurring in the State, but extends also to claims relating to all injuries connected with the disputed conduct, wherever the injuries occur.48 This departure from territoriality is meant to facilitate consolidation and thus provide particular efficiencies, especially in the digital environment. The ALI Principles additionally provide for an alternative jurisdiction in any State to which activities are directed, or with which substantial contacts are maintained when an alleged infringer cannot be sued in a Member State of the WTO. This provision adds further flexibility in situations where defendants are “hiding” in fora whose procedural and substantive guarantees are deemed inconsistent with international norms. The approach adopted in the ALI Principles may more often lead to attributing jurisdiction in the plaintiff ’s (right holder’s) forum.

2.1.3 Jurisdictional Specificities for Ubiquitous Infringement In online IP infringement, the risk of widespread infringement is significant. Because localizing damages may be difficult, efficient enforcement may be seriously hampered. These characteristics present jurisdictional challenges that prompt special consideration. The oft-​ asked question is whether the (mere) accessibility of a website in the territory is a sufficient basis for finding jurisdiction, or whether something more is required. In Europe, applying the “act” and “effect” definition of “harmful event,”49 the CJEU has ruled that the place where the potential infringer acted will be the jurisdiction where the technical process that made the contested material visible on a website was initiated—​ typically the infringer’s place of establishment.50 The place where the damage occurred is where the right in question is protected, for example, the State in which a trademark is registered.51 In the case of infringement of copyright, which is protected without registration, the CJEU has recently clarified that mere “accessibility” of the protected work on a website is sufficient to establish special jurisdiction.52 Since an IP right exists in that jurisdiction, an infringement is theoretically possible, and whether an infringing activity has actually taken place in that territory is a question of substantive law and considered irrelevant for determining jurisdiction.53 For trademarks, some national courts in Europe have also found jurisdiction based on mere accessibility online, but the case law in these courts appears to be evolving toward requiring “targeting” the State where jurisdiction is asserted.54 In the US, where the relationship between the defendant and the forum is crucial, the “accessibility” criterion has been clearly rejected in both copyright and trademark cases, with US courts holding that infringing activity must take place within a State for the State courts

48   A Kur and B Ubertazzi, “The ALI Principles and the CLIP Project: A Comparison” in S Bariatti (ed), Litigating Intellectual Property Rights Disputes Cross-​Border: EU Regulations, ALI Principles, CLIP Project (CEDAM 2010) 103–​104. 49 50   See Section 2.1.2.   Wintersteiger (n 33) para 38; Hejduk (n 34) para 25. 51 52  Pinckney (n 17) para 44; Hejduk (n 34) para 34.   Wintersteiger (n 33) paras 27 and 29. 53  Hejduk (n 34) para 35. 54  In the trademark case of Hotel Maritime, the Hamburg District Court asserted jurisdiction based on mere accessibility, while the German Federal Supreme Court adopted an additional requirement that the website be directed at the German public: see (2003) International Litigation Procedure 297 and (2005) International Litigation Procedure 550; also Fawcett and Torremans (n 33) paras 10.64–​10.78 and RM Janal, Europäisches Zivilverfahrensrecht und Gewerblicher Rechtsschutz (Mohr Siebeck 2015) 339.

696    Eun-Joo Min and Johannes Christian Wichard to have jurisdiction over the defendant.55 Nevertheless, a court has asserted specific jurisdiction over foreign defendants based on the situs of an injury.56 In Brazil, jurisdiction was found in a case involving a US domain name registrar and the use of a US server, on the basis that the “effects of the activity occurred” in Brazil.57 The “accessibility” criterion adopted by some courts, as described, may result in granting jurisdiction in virtually all countries, thus potentially allowing a claimant with deep pockets to sue the same defendant in multiple jurisdictions for essentially the same activity. This may appear as weakening the minimum points of contact requirements in PIL principles and diminishing predictability in court proceedings. In practice, however, obtaining jurisdiction may be a hollow victory for the claimant.58 Each court will respect the territorial limitation of the IP rights that create the basis of jurisdiction by limiting the remedies to the damage suffered within the State. Therefore, it may be more efficient for a right holder to sue in a forum of general jurisdiction in order to obtain a full recovery, rather than to combine a (potentially ill-​fitting) mosaic of judgments of courts exercising limited (special or specific) infringement jurisdiction. The IP and PIL reform projects explicitly restrict jurisdiction based on accessibility. The CLIP Principles provide a special jurisdiction rule for ubiquitous infringement. Thus, CLIP states that the court with infringement jurisdiction “shall also have jurisdiction in respect of infringements that occur or may occur within the territory of another State, provided that the activities giving rise to the infringement have no substantial effect in the State, or any of the States, where the infringer is habitually resident.”59 In addition, one of the following requirements must be met: Substantial activities in furtherance of the infringement must be carried out “in its entirety” in the State where the court is situated; or the harm caused by the infringement in the State of the court must be substantial in relation to the infringement in its entirety. This CLIP provision represents a departure from the territorial limitation of the underlying IP rights for cases of abusive conduct by the alleged infringer to evade enforcement actions, but its further requirements provide connecting factors which may serve to prevent abusive conduct on the part of the plaintiff. The ALI Principles, on the other hand, do not explicitly provide a special rule for ubiquitous infringement, but as seen in Section 2.1.2, attribute jurisdiction to the courts in the State where the defendant has substantially acted; additionally, jurisdiction may be attributed to the State in which the defendant’s activities give rise to an infringement claim if that person directed those activities to that State.60 The WIPO-​commissioned 2015 Report on “Private International Law Issues in Online Intellectual Property Infringement Disputes with Cross-​Border Elements—​An Analysis of

55  For copyright see, eg, Mavrix Photo Inc v Brand Techs Inc 647 F 3d 1218 (9th Circuit 2011); ALS Scan, Inc v Digital Service Consultants, Inc 293 F 3d 707 (4th Circuit 2002). For trademarks see, eg, McBee v Delica 417 F 3d 107, 124 (1st Circuit 2005). 56  Penguin Group (USA) Inc v American Buddha 640 F 3d 497 (2nd Circuit 2011) (responding to a certified question on the scope of New York’s long arm jurisdiction). 57  Appeal No 9235751-​09.2003.8.26.0000 (Brazil TJSP São Paulo State Court of Appeals Superior). 58  P Torremans, “Jurisdiction in intellectual property cases” in P Torremans (ed), Research Handbook on Cross-​Border Enforcement of Intellectual Property (Edward Elgar 2015) 386. 59  CLIP Principles, art 2:203(2) and paras 2:203.C09–​2:203.C13. 60  ALI Principles, § 204(1) and (2).

Cross-Border Intellectual Property Enforcement    697 National Approaches”61 reviewed 56 cases from 19 jurisdictions dealing with cross-​border online IP infringement, and concluded that for the type of IP disputes reviewed, jurisdiction was frequently asserted outside the domicile of the defendant (63 percent of the cases). It is unclear (and may require further empirical research) whether this can be interpreted as an indication that court practice is moving away from the principle that jurisdiction is generally based on the defendant’s domicile. The WIPO Report further found that a “typical” cross-​ border online infringement case will concern either online marketing using a trademark or online distribution of material in which copyright subsists. The “targeting approach” is observed mainly in those cases concerned with online marketing, and the “accessibility approach” in those with online distribution.62

2.1.4 Consolidating Actions with Multiple Defendants As the actors in IP value chains become more numerous, disputes involving multiple defendants located in different States become more frequent. In Europe, the Brussels I Regulation deals with this scenario, and provides that “a person domiciled in a Member State may also be sued where he is one of a number of defendants, in the courts for the place where any of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.”63 This provision served as a basis for certain courts, especially in the Netherlands, to consolidate disputes in one forum and grant cross-​border injunctions against non-​domiciled defendants. It was applied in particular in situations where multiple defendant companies within the same group acted in different markets in an identical or similar manner in accordance with a common business policy elaborated by one of them (the so-​called “spider in the web”).64 However, the practice was halted by the CJEU in Roche v Primus, where the twin requirements of “the same situation of law and fact” were introduced to determine whether there was a risk of irreconcilable judgments.65 The Roche decision practically ruled out the application of the multiple-​defendants consolidation provision in the Brussels I Regulation to disputes involving parallel (national) IP rights, since individual IP rights, including the national parts of a European patent, are subject to different (not the “same”) national laws. The result will, however, be different for EU-​wide IP rights that are subject to uniform EU-​legislation (see Section 2.4). As a result, Roche has reinforced the principle of territoriality in IP jurisdiction. Nonetheless, this position appears to have become more nuanced over the years, and in Painer v Standard VerlagsGmbH, a copyright infringement dispute, the CJEU held that the requirement of identical legal bases “is only one relevant factor among others” and “not an indispensable requirement” for consolidation.66 61

  A Christie, “Private International Law Issues in Online Intellectual Property Infringement Disputes with Cross-​Border Elements—​An Analysis of National Approaches” (2015) . 62 63  Brussels I Regulation, art 8(1).   See Christie (n 61) paras 2.51–​2.55. 64  See Fawcett and Torremans (n 33) para 5.125; Janal (n 54) 362. 65  Case C-​539/​03 Roche Nederland BV and Others v Frederick Primus and Milton Goldenberg [2006] ECR I-​6535, paras 26 and 41. For criticism, see Fawcett and Torremans (n 33) paras 11.06–​11.10; Torremans (n 41) 1636–1642; Janal (n 54) 339. 66  Case C-​145/​10 Eva-​Maria Painer v Standard VerlagsGmbH [2011] ECR I-​12533, paras 80–81. See Torremans (n 58) 392; Torremans (n 41) 1642; Janal (n 54) 352.

698    Eun-Joo Min and Johannes Christian Wichard The Japanese Civil Procedure Code provides for an approach similar to that of the Brussels I Regulation and Roche,67 whereas in the US, the Supreme Court has adopted a narrower approach that generally prohibits a plaintiff from hauling a non-​resident defendant before a forum on the basis of its connection with a resident defendant.68 The IP and PIL reform projects set out a more flexible approach for consolidating disputes involving multiple defendants. The CLIP Principles follow the definition of the required connection adopted in Roche: “a risk of incompatible judgments requires a risk of divergence [ . . . ] which arises in the context of essentially the same situation of law and fact.” The CLIP provision, however, departs from Roche by clarifying that the “same law” requirement will be met when the relevant national laws are harmonized, as is the case within the EU for rights conferred by registered trademarks or certain aspects of copyright, or for patents issued by the European Patent Office.69 The ALI Principles similarly make “a risk of inconsistent judgments” a requirement for consolidation, but the scope of application is narrowed to actions against non-​resident defendants which relate to the forum’s IP rights at issue; or, actions where “there is no forum that is more closely related to the entire dispute.” The latter scenario is intended to cover “spider in the web” situations, as well as “parallel activities, such as mirror websites, in which no particular actor is dominant.”70 The Joint Korean Japanese Principles follow the approach of the Brussels I Regulation and limit consolidation to “claims against co-​defendants who have infringed the same IP right,” which further clarifies that claims subject to exclusive jurisdiction cannot be consolidated.71

2.1.5 How Exclusive is Exclusive Jurisdiction? The territorial nature of IP suggests limits on the court’s authority to hear certain kinds of cases: In Europe and in civil law countries, exclusive jurisdiction is limited to the courts of the State granting IP registration; or in the US, a limit on the court’s “subject matter jurisdiction.” This is particularly so for disputes relating to (in)validity of registered IP rights, which are closely linked to the public policy domain of the State granting such registration (and thus implicate the Act of State Doctrine).72 At the multilateral level, the 2001 HCCH Interim Text, which provided for exclusive jurisdiction for IP, was the source of considerable controversy, with no consensus having been reached.73 Among the regional instruments, the Brussels I Regulation contains an exclusive jurisdiction rule in relation to certain aspects of IP rights: In proceedings concerned with validity of patents, trademarks, or designs, including cases where invalidity is raised in the context of a claim for infringement, the courts of the State of registration have exclusive jurisdiction regardless of defendant’s forum.74 In GAT v LuK, the CJEU held that a 67

  Japanese Civil Procedure Code (2012) arts 3–​6 and 38 (requiring the “same legal and factual grounds”). 68   Asahi Metal Industries Co v Superior Court 480 US 102, 113 (1987) and other cases cited in CLIP Principles, para 2:206.N03, n 71. 69  CLIP Principles, art 2:206; Heinze (n 41) 72. 70  ALI Principles, § 206(1) and cmt d (2). 71  Joint Korean Japanese Principles, art 208 and accompanying explanatory notes. See also art 110 (on subjective joinder). 72  Torremans (n 58) 394. 73  Interim Text, art 12. 74  Brussels I Regulation, art 24 (4). M Pertegás Sender, Cross-​border Enforcement of Patent Rights (OUP 2002) paras 4.06–​4.80.

Cross-Border Intellectual Property Enforcement    699 German court was not entitled to determine the consequences of an alleged patent infringement when the case required a determination of the validity of a French patent, regardless of whether the issue of a patent’s validity was raised by way of an action or merely by way of a plea in objection.75 This decision limits in practice the possibility of consolidating multiple claims through general jurisdiction in the defendant’s forum or through infringement jurisdiction, and (at least implicitly) emphasizes the territoriality of IP rights.76 In Japan, actions relating to “the existence or absence or effect” of a registered IP right are subject to exclusive jurisdiction. A Japanese court was nevertheless prepared to try actions relating to the infringement of foreign patents, and held that the decision finding a foreign patent invalid could only have limited inter partes effect.77 In the Republic of Korea, the Supreme Court held that actions concerning patent validity and cancellation are subject to the exclusive jurisdiction of the State that granted the rights, but that disputes that are not about validity or cancellation (such as disputes concerning patent assignment contracts) are not subject to exclusive jurisdiction.78 Common law courts follow a different approach. In the US, there is a distinction between jurisdiction over the defendant (“personal jurisdiction”) and jurisdiction to hear the dispute (“subject matter jurisdiction”). Even a court that has general jurisdiction over the defendant may not have authority to adjudicate the issues in a particular case, and this has proved particularly true in patent cases. Thus, in Voda v Cordis, a court with power over the defendant and over a domestic patent dispute79 nonetheless refused to adjudicate claims involving foreign patents, in part because it thought comity and act-​of-​state considerations prevented it from determining the validity of the foreign rights.80 Courts in copyright cases (which do not generally involve validity issues) have proved more willing to hear foreign claims.81 But in some cases, the concept of forum non conveniens has been used to refer cases to an alternative forum that is considered better suited to decide the dispute.82 Similarly, in South Africa, in Gallo Africa v Sting Music, a dispute over copyright infringement in 19 countries between

75 

Case C-​4/​03 Gesellschaft für Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LUK) [2006] ECR I-​6509, para 25. 76   Heinze (n 41) 56; M Vicente, La propriété intellectuelle en droit international privé (Brill 2009) 400; Torremans (n 41) 1643–​1644; Torremans (n 58) 395–​404; Janal (n 54) 372. On the other hand, the CJEU has recognized the jurisdiction of a court to issue provisional measures relating to a “foreign” patent even if an invalidity defense had been raised, on the basis of Brussels I Regulation, art 35, which allows provisional measures to be obtained from a national court, even if the courts of another State have jurisdiction as to the substance of the matter; see Case C-​616/​10 Solvay SA v Honeywell Fluorine Products Europe BV [2012] All ER (D) 127, paras 36, 40, and 50. 77   Japanese Code of Civil Procedure (2012) arts 3–5(iii); KK Coral Corp v Marine Bio KK Case No 1943(wa)/​2002 (Tokyo District Court 2003). 78 79  28 USC § 1338.   Case No 2009Da19093 (Republic of Korean Supreme Court 2011). 80  Voda v Cordis Corp 476 F 3d 887, 899 (Federal Circuit 2007); Mars Inc v Nippon Conlux Kabushiki-​ Kaisha 24 F 3d 1368 (Federal Circuit 1994). 81  Boosey & Hawkes Music Publishers v The Walt Disney Co 145 F 3d 481 (2nd Circuit 1998); London Film Prods v Intercontinental Comms 580 F Supp 47 (District Court (Southern District of New York) 1984). 82  See, eg, Murray v British Broad Corp 81 F 3d 287 (2nd Circuit 1996); the doctrine is no longer applicable in the EU if a court has general jurisdiction under Brussels I Regulation, art 4: Case C-​281/​02 Andrew Owusu v NB Jackson [2005] ECR I-​1383, paras 37–​46.

700    Eun-Joo Min and Johannes Christian Wichard two South African parties, the court held that South African courts do not have jurisdiction to decide claims regarding property located outside of South Africa.83 Nevertheless, some common law courts exhibit greater flexibility in deciding cases that concern the infringement of foreign IP rights, in particular copyright. In Lucasfilm Ltd v Ainsworth, the UK Supreme Court, finding in personam jurisdiction over a UK defendant, held US copyright claims justiciable in a UK court.84 Courts in New Zealand have similarly distinguished between claims in respect of validity or existence of IP rights and claims in respect of the infringement of “unchallenged” IP rights, and granted relief against infringement of foreign copyright.85 More recently, the New Zealand High Court held that “[t]‌here was an emerging trend towards the international enforcement of foreign intellectual property rights being appropriate where the validity of those rights was not challenged,” and established jurisdiction to determine an action for infringement of a US patent.86 Like US courts, the ALI Principles address exclusive jurisdiction in relation to validity of a registered right through the concept of subject-​matter jurisdiction. In that context, an exception is provided whereby “a judgment holding registered rights granted under the laws of another State invalid is effective only to resolve the dispute between or among the parties to the action.”87 The CLIP Principles follow the approach of the Brussels I Regulation: that proceedings which result in a judgment on the validity of an IP right protected on the basis of registration must be brought exclusively in the courts in the State where the right has been registered.88 On the other hand, the CLIP Principles depart from the CJEU’s interpretation of the Brussels I Regulation, and specify that the exclusive jurisdiction provision does not apply where “validity or registration arises in a context other than by principal claim or counterclaim,” and hence allow one court to try both the infringement claim and the validity issue where validity is raised as a defense to infringement; as in the ALI Principles, the resulting judgment will be valid only between the parties.89 The Transparency Proposal would allow Japanese courts to hear actions concerning the existence, registration, validity, or ownership of foreign IP rights, if jurisdiction over the parties has been established on other grounds, with the effect of any resulting judgment limited to the parties.90

2.1.6 The Persistence of Territoriality What we can perceive from this discussion is that territoriality persists as a robust pillar that defines cross-​border IP relationships and draws boundaries to a State’s jurisdiction in transnational disputes. While some flexibility is apparent, the various approaches may appear rather incongruous. Courts with general jurisdiction accept the possibility of hearing foreign cases and provide remedies that address extra-​territorial harm. In some countries, the sphere of exclusive jurisdiction may be retreating, which thereby enables the courts to hear disputes relating to non-​registered IP rights, or infringement disputes where the validity of 83

  Gallo Africa v Sting Music [2010] ZASCA 96. Lucasfilm (n 17). See also Crosstown Music Co 1 LLC v Rive Droite Music Ltd [2010] EWCA Civ 1222. 85  KK Sony Computer Entertainment v Van Veen (2007) 71 IPR 179 (NZHC); Jedis Limited v Vodafone New Zealand Limited [2012] NZHC 2448. 86  Stewart v Franmara Inc [2012] NZHC 683. 87  ALI Principles, § 211. 88  CLIP Principles, art 2:401(1). 89  CLIP Principles, art 2:401(2); Heinze (n 41) 61. 90  Transparency Proposal, art 103. 84 

Cross-Border Intellectual Property Enforcement    701 registered IP rights is not disputed or is raised only as incidental matter, although the CJEU has so far been reluctant to follow this approach. In cases where the defendant is not subject to general jurisdiction, infringement jurisdiction may be established alternatively by a “substantive” connection between the court and the dispute. When infringement takes place online, certain courts assert jurisdiction through mere accessibility, whereas other courts require targeting or actual injury in the forum. Courts that exercise jurisdiction more liberally do, however, recognize territoriality in that they require the existence of a local IP right; some limit the territorial reach of available remedies. Territoriality has re-​emerged also in cases that involve multiple defendants, and thus sets limits on the jurisdictional creativity of certain EU courts, which had previously enabled the consolidation of disputes in one forum. The IP and PIL reform projects advocate limited departures from IP territoriality, in particular to address infringement through ubiquitous media or to avoid irreconcilable judgments in multi-​defendant disputes that involve the same or parallel law and facts. These developments, by broadening bases for jurisdiction in fora alternative to that of the defendant’s forum, may provide efficiency gains through consolidation, but may facilitate forum shopping and favor the claimant over the defendant. The courts will undoubtedly continue to find mechanisms for striking an appropriate balance in the tension created by IP’s mobility and territoriality, but there is as yet only limited convergence of approaches towards greater international consistency.

2.2 Applicable Law 2.2.1 Should Courts Apply “Foreign” IP Laws? Once the competent court has been established, it needs to determine which State’s laws govern the substance of the legal relationships, including those with a foreign element. Whereas in IP cases, jurisdiction and applicable law appear to be infrequently addressed as separate matters by courts, for the purposes of legal analysis they are distinct.91 Indeed, careful choice of applicable law could provide a way to respect the territoriality of IP rights while still achieving the efficiency benefits of consolidating foreign cases in a single court. Traditionally, the reluctance especially among common law courts to assume subject matter jurisdiction over foreign IP rights (see Section 2.1.5) similarly manifested itself in a reticence to apply foreign IP law. But the situation is changing: Courts in common law States are increasingly prepared to apply foreign IP laws to decide issues of infringement, at least where the validity of the right in question is not in dispute92 and courts in civil law countries have been applying foreign IP laws since the early twentieth century.93 91 The ALI Principles specifically address the distinction between jurisdiction and applicable law, stating (in § 103) that “[c]‌ompetence to adjudicate does not imply application of the forum State’s substantive law.” 92  Lucasfilm (n 17) (UK Supreme Court overruling the Court of Appeal’s decision); London Film Productions Ltd v Intercontinental Communications, Inc 580 F Supp 47 (District Court (Southern District of New York) 1984); Rundquist (n 17); KK Sony Computer Entertainment v van Veen (2006) 71 IPR 179 (NZHC). 93  See A Peukert, “Territoriality and Extra-​territoriality in Intellectual Property Law” in G Handl, J Zekoll, and P Zumbansen (eds), Beyond Territoriality: Transnational Legal Authority in an Age of Globalization (Queen Mary Studies in International Law 2011) 194.

702    Eun-Joo Min and Johannes Christian Wichard

2.2.2 Choice of Law and the Paris and Berne Conventions A court determines the applicable law in accordance with the conflict-​of-​law rules within its jurisdiction. While there is little legislation on this issue, there is remarkable convergence internationally towards applying the law of the State for which protection is sought. This principle of lex loci protectionis is arguably derived from the basic international treaties in IP: the Paris and Berne Conventions.94 Article 2 of the Paris Convention and Article 5(1) of the Berne Convention establish the fundamental national treatment principle according to which foreigners are to be treated like nationals of the country in which they seek protection for their IP rights. Article 5(2) of the Berne Convention provides in addition that “the ­extent of protection, as well as the means of redress afforded to the author to protect his rights, shall be governed exclusively by the laws of the country where protection is claimed.” Article 5(2), which could be interpreted as clarifying the national treatment principle in Article 5(1), has also been interpreted as a choice-​of-​law rule.95 Article 5(2) designates “the laws of the country where protection is claimed,” and Article 5(1) limits the ability of States to regulate choice of law: Because foreigners must not be subjected to a different legal treatment than nationals, an argument can be made that it would be improper to apply the law of the country of origin to foreigners’ local claims. It is fair to say therefore that the Paris and Berne Conventions have an impact on choice-​of-​law, at least with regard to “the extent of protection, as well as the means of redress.” The term “country where protection is claimed” in Article 5(2) of the Berne Convention should not be understood as referring to the lex fori, that is, the law of the country where the right is actually enforced (since a court may apply a foreign IP law), but to the lex loci protectionis, that is, the law of the country for which protection is claimed.96 The national treatment obligation is also provided for in Article 3 of the TRIPS Agreement, which reinforces the international obligation to apply the lex loci protectionis for all “matters affecting the availability, acquisition, scope, maintenance, and enforcement of intellectual property rights as well as those affecting the use of intellectual property rights specifically addressed in this Agreement.”97

2.2.3  Lex Loci Protectionis and Lex Loci Delicti Applying the lex loci protectionis as a choice-​of-​law rule means in practice that the applicable law is determined by the claimant.98 If the claimant alleges that a certain activity infringes 94  Paris Convention for the Protection of Industrial Property 1883 and Berne Convention for the Protection of Literary and Artistic Works 1886, discussed in detail by Sam Ricketson in his chapter in this volume. 95  See J Basedow, “Foundations of Private International Law in Intellectual Property” in Basedow, Kono, and Metzger (n 41) 9; J Drexl, “Internationales Immaterialgüterrecht” in J Säcker, R Rixecker, and H Oetker (eds), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol 11 (6th edn, CH Beck 2015) paras 70–​74; Fawcett and Torremans (n 33) para 13.43; J Ginsburg, “Private International Law Aspects of the Protection of Works and Objects of Related Rights Transmitted Through Digital Networks,” WIPO Doc GCPIC/​2 (1998) . 96  ALI Principles, Reporters’ Notes 120–​21; Drexl (n 95) para 70; Basedow (n 95) 12–​13; Fawcett and Torremans (n 33) paras 12.25–12.26; E Ulmer, Die Immaterialgüterrechte im Internationalen Privatrecht (Carl Heymanns 1975) 11. 97  TRIPS Agreement n 3 accompanying art 3; see Fawcett and Torremans (n 33) paras 12.66–12.68. 98  Peukert (n 93) 201–​202; Drexl (n 95) para 12.

Cross-Border Intellectual Property Enforcement    703 his rights under the law of a certain State, the court will apply this law in order to determine whether this allegation is true. Hence, infringement is a matter of substantive law,99 not a factor to be taken into account when determining the applicable law. Local and regional instruments on applicable law have widely adopted lex loci protectionis as the choice-​of-​law rule for IP cases. In the EU, the Rome II Regulation provides specifically for the lex loci protectionis principle for infringement of IP rights.100 Similarly, both Swiss and Chinese legislation provide for the principle of lex loci protectionis,101 and the ALI and CLIP Principles also adopt the lex loci protectionis as the basic rule for matters of choice of law.102 The Republic of Korea PIL Act provides that “the protection of intellectual property rights shall be governed by the law of the place where such rights are infringed.”103 The Japanese PIL Act does not contain a provision specific to IP, but provides for cross-​border torts to be governed by the law of the place of injury; however, where the occurrence of the injury in such place is unforeseeable, the law of the place where the tortuous acts occurred applies.104 While there are few cases addressing the issue, Japanese courts seem to apply the lex loci protectionis for injunctions, whereas damages may be governed by the lex loci delicti, which allows some freedom to the parties to choose the applicable law.105 US statutory law does not explicitly regulate choice-​of-​law in IP matters and there are few court decisions addressing the issue. However, in a copyright infringement case, the court distinguished between ownership and infringement and found that, while the law of the country of origin determines ownership, the lex loci delicti applies to issues of infringement.106 The problem with approaches referring to the lex loci delicti in IP matters is that they mix issues of choice-​of-​law with substantive law questions that arise under the applicable law itself: Whether an infringement has taken place in a certain State can only be decided when the law of this State is actually applied. The practical consequences of applying the lex loci delicti in IP infringement cases will, however, be largely the same as under the lex loci protectionis principle. The place where the tort was committed can only be the place where the right for 99 

100  Rome II Regulation, recital 26 and art 8(1). Hejduk (n 34) para 35. Swiss PIL Act 1987, art 110; People’s Republic of China Laws Applicable to Foreign-​Related Civil Relations 2010, art 50 (“Liability for infringing intellectual property rights is governed by the law of the place where protection is sought. The parties may also choose to apply the law of the forum after the infringement occurs;” translated by S Lu, “Law of the People’s Republic of China on the Laws Applicable to Foreign-​Related Civil Relations (full text)” (2013) 1(1) Chinese Journal of Comparative Law (2013) (185). 102  ALI Principles, § 301, para 1; CLIP Principles, arts 3:102 and 3:601. The Transparency Principles, by contrast, refer in art 301 to the law of the place of the results of the exploitation (“market impact”); see R Kojima, R Shimanami, and M Nagata, “Applicable Law to Exploitation of Intellectual Property Rights in the Transparency Proposal” in Basedow, Kono, and Metzger (n 41) 179–​227. For a general discussion, see also R Matulionyté, “IP and Applicable Law in Recent International Proposals: Report for the International Law Association” (2012) 3 Journal of Intellectual Property, Information Technology and Electronic Commerce Law 263. 103  Republic of Korea PIL Act 2001, art 24 (concerning the protection of IP); contrast art 32 (“[a]‌tort shall be governed by the law of the place where it occurred”). See also Case No 2007Na80093 (Seoul High Court 2008). 104  Japanese PIL Act 2006, art 17. 105  Kojima et al (n 102) 182–​184; T Kono, “Cross-​border infringement of intellectual Property in Japan” in Torremans (n 58) 125–​129. 106  Itar-​TASS v Russian Kurier 153 F 3d 82 (2nd Circuit 1998); see also M Leaffer, “Cross-​border enforcement of intellectual property rights in U.S.” in Torremans (n 58) 37–​38. 101 

704    Eun-Joo Min and Johannes Christian Wichard which protection is sought is protected. The IP right and the infringing activity must both be located in the same territory. Foreign rights cannot be infringed by local activity, and local rights cannot be infringed by (purely) foreign activity.107 This is a consequence of the inherent territorial limitation of IP rights.

2.2.4 Limiting the Effects of Territoriality Through Choice of Law? Territoriality has a number of consequences which, at an international level, may lead to complications:  (i) one person may hold a bundle of national or regional rights in identical subject matter (eg, in copyright, which emerges worldwide without formalities in all States where the requirements for protection are met); (ii) IP rights may be held by different persons in different territories (eg, in trademarks, where the same mark may be registered by different parties in different territories; copyright ownership may differ between jurisdictions due to the different treatment of employment relations); (iii) a certain activity may be considered infringing in one country, but legal in another (eg, it may be covered by an exception or a limitation that one country recognizes and the other does not). These complications are compounded when IP rights are used in “ubiquitous” media. If a sign is used on the Internet, such use is visible around the world and may therefore be considered infringing in every jurisdiction in which the sign enjoys protection. Even if the user holds trademark rights in a certain country, the use may infringe elsewhere, for the mark could be protected by other owners. Internet use may thus expose a user to a considerable risk of liability and these complications could impede e-​commerce. Ubiquitous use also raises the question of how different applicable laws are to be coordinated so that over-​regulation (eg, double or multiple liability), under-​regulation (no liability), as well as conflicting outcomes (liability for conduct with cross border effect that is considered legal where the defendant acted) can be avoided. Currently, this question is not addressed at the international level, but is left to individual jurisdictions. A number of IP and PIL reform projects have developed specific choice-​of-​law rules that would limit the number of applicable laws in cases of ubiquitous infringement by identifying the law(s) with the closest connection to the dispute, and applying those laws beyond their “normal” territories. The ALI Principles provide in cases of ubiquitous infringement, where the laws of multiple States are pleaded, that the court may choose to apply the law of the State with close connections to the dispute, as evidenced by the parties’ residence, the center of the parties’ relationship, the extent of the activities and the investment of the parties, and the principal markets toward which the parties directed their activities.108 These factors are considered important because they point to the State in which the policy objective of IP rights is most affected. In practice, however, the approach tends to favor the right holder’s home State.109 At the same time, however, the ALI Principles leave room for different policy objectives of other jurisdictions to apply: Any party may demonstrate that the laws 107  Peukert (n 93) 193; A Metzger, “Applicable Law under the CLIP Principles” in Basedow, Kono, and Metzger (n 41) 171; Ulmer (n 96) 13–​15. 108  ALI Principles, § 321(1) and (2). F Dessemontet, “The Law Applicable under the ALI Principles: Choice of Law in Transborder Litigation” in Bariatti (n 48) 39. 109  This approach has been criticized by Drexl (n 95) para 334 as tending to favor the application of laws of larger markets.

Cross-Border Intellectual Property Enforcement    705 of certain States produce a different outcome from that under the law(s) chosen to apply to the case as a whole, and the court must then take the difference into account in shaping the remedy. For example, when the activity in question is not considered infringing in certain States, the court would reduce the monetary award. This means that, while the chosen law will be applied beyond its territory—​and will therefore have extra-​territorial effect—​ outright conflicts with other jurisdictions are avoided. A similar approach is adopted in the Transparency Proposal.110 A somewhat more cautious proposal is offered by the CLIP Principles, which also call upon the law of the State having the closest connection for ubiquitous infringement, provided that “the infringement arguably takes place in every State in which the signals can be received.”111 Unlike the ALI Principles, the CLIP Principles place greater emphasis on the infringer and its activity than on the right holder, providing that the closest connection be determined by taking into account, in particular, the infringer’s habitual residence, the infringer’s principal place of business, the place where substantial activities in furtherance of the infringement in its entirety have been carried out, and the place where the harm caused by the infringement is substantial in relation to the infringement in its entirety.112 On the other hand, like the ALI Principles, the CLIP Principles allow any party to prove that other laws may consider the activity differently than the law of the closest connection and call upon the court to take that into consideration when fashioning the remedy.113 While these approaches definitely deserve attention, they have not been transformed into national or international law. They may provide guidance to individual courts and thus lead to a certain convergence of approaches internationally, but courts will nevertheless have to follow a territorial approach, apply the law of each State where protection is sought, and coordinate the outcome at the level of the applicable substantive laws, especially when it comes to determining remedies. Examples are provided further on in the following sections.

2.2.5 “Extra-​Territorial” Application of the Lex Loci Protectionis When applying the lex loci protectionis as the applicable substantive law, there may be room for interpretation. A judge applying the individual norm that is relied upon to protect an IP right may consider an activity sufficiently “local” to find that there has been an infringement in the forum, although the activity itself was physically performed partly or totally outside the country of protection, or was carried out over a medium like the Internet, which easily transcends borders. What is to be considered an infringing activity is a legal question that is determined under the applicable law governing the specific right in question. Common law courts sometimes consider this question under the label of “subject matter jurisdiction,” but more often as an element of an infringement claim under the applicable IP law.114 110

  Transparency Proposal, art 302 calls upon “the law of the place where the results of the exploitation of intellectual property are to be maximized,” unless this leads to an “extremely unreasonable” result with regard to a specific State: Kojima et al (n 102) 199–​200. 111  CLIP Principles, art 3:603(1); Metzger (n 107) 173–​176. 112  CLIP Principles, art 3:603(2). 113  CLIP Principles, art 3:603(3). 114  See, eg, Litecubes, LLC v Northern Light Products, Inc 523 F 3d 1353, 1366 (Federal Circuit 2008) (“whether the allegedly infringing act happened in the United States is an element of the claim for patent infringement, not a prerequisite for subject matter jurisdiction”); Shropshire v Canning 809 F Supp 2d 1139, 1143 (District Court (Northern District of California) 2011) (noting a lack of consensus on

706    Eun-Joo Min and Johannes Christian Wichard These issues are sometimes, somewhat misleadingly, referred to as “extra-​territorial application” of IP laws. However, most courts take great care to ensure that the application of IP laws is limited, by way of judicial interpretation, to the territory in which the IP right in question enjoys protection. There are, in essence, two ways of doing this: (i) by determining whether a certain activity produced a tangible effect in the State where protection is sought; or (ii) by deciding whether a certain activity was targeted at that State. In most cases, a combination of objective (effect) and subjective (targeting) criteria is employed. In addition, courts may limit the territorial effect of any remedies granted to the country (or countries) of protection. The reasons for this caution are usually twofold and both result from the territoriality of IP: The defendant should not incur liability resulting from his conduct if he could not foresee the consequences, and enjoy the opportunity to take steps to avoid them. At the same time, courts may respect potentially diverging policy choices of foreign jurisdictions and try to avoid conflicts among (territorially limited) IP laws, especially if the activity in question is considered legal where it takes place. Such conflicts could lead to contradictory legal treatment of identical fact patterns, which might stifle international trade by undermining legal certainty.115 On the other hand, the regulatory interest of domestic legislation may be compromised if the activity in question has a tangible effect or was targeted at the jurisdiction where protection is sought; the legislation concerned may then be applied “extra-​territorially” in order to close (real or perceived) enforcement gaps which might otherwise undermine its regulatory objectives.

2.2.6 “Foreign” Activities—​Local Effects116 Addressing Internet cases, the CJEU has sought to identify relevant connecting factors that link an online activity to a certain territory. The CJEU has stated that the “mere fact that a website is accessible from the territory covered by the trade mark is not a sufficient basis for concluding that the offers for sale displayed there are targeted at consumers in that territory.” This is remarkably different from the CJEU’s approach regarding infringement jurisdiction where “mere accessibility” is considered sufficient for jurisdictional purposes (see Section 2.1.3). To find infringement under local law, the CJEU requires the court to find “relevant factors on the basis of which it may be concluded that an offer for sale . . . is targeted at consumers in [its] territory,” for example, information regarding the geographical areas to which the seller is willing to deliver goods. The CJEU has applied the same criteria to determine whether sending data via a website might infringe a sui generis database right.117 If actual sales have been concluded in the EU, this will be considered sufficient; whether to treat the extraterritorial reach of the Copyright Act as a matter of subject matter jurisdiction or an element of the claim). 115 

The WTO dispute brought by India and Brazil in European Union and a Member State—​Seizure of Generic Drugs in Transit (WTO Disputes DS408 and DS409) regarding seizures on patent infringement grounds of generic drugs originating in India but transiting through ports and airports in the Netherlands to Brazil and other third country destinations, reflects the sensitivities surrounding any “extra-​territorial” effect of cross-​border enforcement. 116  See Peukert (n 93) 203–​210 (concerning “inbound regulation”). 117  Case C-​324/​09 L’Oréal SA v eBay International AG [2011] ECR I-​6011, paras 64–​65; Case C-​173/​ 11 Football Dataco Ltd v Sportradar GmbH [2013] 1 CMLR 29, paras 36–​39; the approach is also applied by English courts: see, eg, Omnibill (Pty) Ltd v Egpsxxx Ltd [2014] EWHC 3762 (IPEC) (deciding that

Cross-Border Intellectual Property Enforcement    707 in Blomqvist v Rolex, the CJEU ruled that for the purposes of the Customs Regulation,118 goods sold to a resident of a Member State from a website based in a non-​Member State may be infringing a trademark merely by virtue of the sale, regardless of whether this website could be considered as targeting EU customers.119 Off the Internet, the CJEU follows a similar approach. In a copyright case, a trader was considered to infringe a copyright in another State because infringing products were delivered to that State and because members of the public in that State were targeted.120 The situation is different where goods have not been sold and the EU has not been targeted, especially in cases involving goods in transit. Here, the CJEU has been reluctant to find infringement. In Montex v Diesel, the CJEU ruled that mere transit of goods cannot constitute trademark infringement under EU law: The risk of diversion of products to the market where the trademarks enjoy protection is not sufficient to invoke local law.121 This was confirmed in the cases involving Nokia and Philips, where the CJEU held that any suspicion of diversion must be based on the facts of the case at hand, for example, by way of documents or correspondence showing that diversion to EU customers was envisaged.122 In these in-​transit cases, the risk of policy conflicts with the countries of origin or destination is particularly high, and the legitimacy of enforcing the policy choices of the forum is rather limited in view of the weak territorial connection. Nevertheless, the situation may change with the 2015 EU Trade Marks Directive, which allows the release of goods in transit to be suspended, including when such goods are not intended to be placed on the market of the State concerned.123 The German Federal Supreme Court was similarly skeptical of applying local law to Internet activities. It adopted an objective approach in a trademark case concerning conflicts over the use of the trademark “Hotel Maritime” both on a website as well as in a domain name.124 In this case, the Court reasoned that not each and every use of a sign on the Internet should be treated as taking place in a given State, even if the sign was accessible to Internet users based there. Only where the use of the trademark had a “commercial effect” in a particular State, could the use be treated as having taken place in that State, and thus be relevant to an infringement claim under local law. In a subsequent decision, the German Federal Supreme Court denied commercial effect in a situation where the broadcasting of an

copyright infringement occurs in the UK if the website containing the infringing material is targeted at the public in the UK). 118  Council Regulation (EC) No 1383/​2003 of 22 July 2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights [2003] OJ L 196/​8. 119  Case C-​98/​13 Martin Blomqvist v Rolex SA [2014] ECDR 10, paras 34–​35; see also O Vrins and M Schneider, “Cross-​border enforcement of intellectual property: The European Union” in Torremans (n 58) 289–​293. 120  Case C-​5/​11 Titus Alexander Jochen Donner [2015] ECDR 22, paras 26–​30. 121  Case C-​281/​05 Montex Holdings Ltd v Diesel SpA [2006] ECR I-​10881, paras 23–​27. 122  Joined Cases C-​446/​09 Koninklijke Philips Electronics NV v Lucheng Meijing Industrial Company Ltd and C-​495/​09 Nokia Corporation v Her Majesty’s Commissioners of Revenue and Customs [2011] ECR I-​12435, paras 61, 71, and 78; see also Vrins and Schneider (n 119) 277–​285. 123  Directive (EU) 2015/​2436 of 16 December 2015 to approximate the laws of the Member States relating to trade marks [2015] OJ L 336 (hereafter Trade Marks Directive) recital 22 and art 10.4. 124  Hotel Maritime (n 54).

708    Eun-Joo Min and Johannes Christian Wichard Italian TV program was not targeted at Germany, but where the possibility of receiving it in Germany was an unavoidable technical consequence of the satellite transmission.125 The Canadian Supreme Court, in a leading Internet case, has also adopted an objective approach. The Court held in a dispute involving the use of a copyrighted work on the Internet that a “real and substantial connection” with Canada must exist to support the application of the Canadian Copyright Act to Internet transmissions.126 Relevant connecting factors were said to include the situs of the content provider, the host provider, the intermediaries, and the end user. The Court confirmed that such a connection could exist both in the State of transmission (or uploading) as well as in the State of reception. US courts seem to have adopted a combination of factors with similar results. In trademark cases, courts require, in order to find infringement under local law, that Internet-​based activities have a “substantial effect” on US commerce, “in light of the core purposes of the Lanham Act, which are both to protect the ability of American consumers to avoid confusion and to help assure a trademark’s owner that it will reap the financial and reputational rewards associated with having a desirable name or product.”127 Earlier case law suggests that US courts may apply US trademark law generally to foreign activities even if there has only been “some effect” on US commerce, at least when the defendant was a US citizen and the defendant’s conduct was not authorized in the foreign jurisdiction (no policy conflict).128 Similarly, in copyright cases, US courts have considered foreign acts as contributorily infringing if the “acts are intended to, and do, have an effect within the US.”129 In contrast, for direct copyright infringement, no specific intent is usually required as long as at least one complete act of infringement has taken place in the US; uploading a video from Canada to YouTube’s servers in California for display within the US was considered an act of direct copyright infringement under US copyright law, regardless of whether the defendant had actually intended the display to reach audiences in the US.130 In a similar vein, courts have held that selling and shipping goods to US consumers qualify as (direct) acts of copyright infringement, regardless of the location of the exporter (Canada), and where title passed (Canada—​since goods were sold f.o.b.).131 However, there is no liability for contributory infringement unless the primary infringement can be situated in the US; authorization of acts that infringe a foreign copyright are not covered by US copyright law.132 Courts seem to be more restrictive in patent cases. The US Federal Circuit Court held that the use of a patented system, in this case an electronic mail system (“Blackberry”), could be considered infringing a US patent even though part of the claimed system was located in Canada. The Court reasoned that control of the system and its beneficial use could 125

  [2012] GRUR 621 (German Federal Supreme Court).   Society of Composers, Authors and Music Publishers of Canada v Canadian Association of Internet Providers 2004 SCC 45, paras 1 and 60–​63. 127   McBee (n 55), referring also to the “substantial effects” test developed by the US Supreme Court in Hartford Fire Insurance Co v California 509 US 764 (1993). 128   Steele v Bulova Watch Co, Inc 344 US 280 (1952). See also M Leaffer, “Cross-​border enforcement of IP rights in US Law” in Torremans (n 58) 9–​15. 129  GB Marketing USA v Gerolsteiner Brunnen GmbH & Co 782 F Supp 763, 773 (District Court (West District of New York) 1991). 130  Shropshire (n 114). 131  Litecubes, LLC (n 114). 132  Subafilms, Ltd v MGM-​Pathe Communications Co 24 F 3d 1088 (9th Circuit 1994). But see Curb v MCA Records, Inc 898 F Supp 586 (District Court (Middle District of Tennessee) 1995). 126

Cross-Border Intellectual Property Enforcement    709 be localized in the US. At the same time, the Court did not find a related process patent infringed, holding that process claims can be infringed only when all the steps of the process are committed within the US.133 In Germany, courts have considered a patent infringed if at least part of the infringing activity took place in Germany and if the remaining parts could be attributed to the user, for example, because his activities are part of a broader scheme which can be considered directed at Germany.134 German courts are also more open to consider a process patent infringed if only part of the activities were carried out in Germany.135 The Japanese Supreme Court, in a case involving goods produced in Japan for export to the US, did not find infringement under Japanese law since the claimant (a Japanese national) held no patent in Japan. The Court refused to apply US law for reasons of territoriality.136

2.2.7 “Local” Activities—​Foreign Effects137 While not required under the TRIPS Agreement, many jurisdictions, such as the EU,138 consider the export of infringing goods an infringement of an IP right protected in the exporting State, without regard to its possibly limited effect on the local market. The same applies in broadcasting and Internet cases. US courts have considered the broadcasting from the US to Canadian customers as an infringement of US copyright law.139 Similarly, the German Federal Supreme Court held that broadcasting emissions from Germany that were targeted at a French audience infringed a German copyright, even though the emissions could be received only by a very limited audience in Germany.140 As a consequence, infringement may be found both in the State of export, transmission, or uploading, as well as the State or countries of importation or receipt, at least if the activity produced an (objective) effect in or was targeted at these countries. This means that an actor may be held liable for one act in several countries. In a rather far-​reaching application of US copyright law, US courts have held that a copyright infringement inside the US (a “predicate act” or the making of a so-​called “root copy”) 133  NTP v Research in Motion 418 F 3d 1282 (Federal Circuit 2005). See also 35 USC § 272(f) (providing for contributory infringement or inducement of infringement when direct infringement occurs outside the US but supply of the components of a patented invention for assembly abroad takes place in the US). 134  Prepaid Cards [2010] GRUR 122 (Düsseldorf Court of Appeals). 135  I Haupt, “Territorialitätsprinzip im Patent-​und Gebrauchsmusterrecht bei grenzüberschreitenden Fallgestaltungen” (2007) GRUR 187; Peukert (n 93) 209–​210. 136  Card Reader (2002) 56 Minshu 1551 (Supreme Court of Japan); cf Kojima et al (n 102) 183, 188. See also Case No 2014Da42110 (Republic of Korean Supreme Court 2015) (involving the production in Korea of components that had no use other than producing the patented product, which took place abroad, and deciding that an act of direct infringement must take place in Korea). 137  See Peukert (n 93) 210–​223 (concerning “outbound regulation”). 138  Council Regulation (EC) No 2100/​94 of 27 July 1994 on Community plant variety rights [1994] OJ L 227/​1, art 13(2)(e); Regulation (EU) 2015/​2424 of 16 December 2015 amending Council Regulation (EC) No 207/​2009 on the Community trade mark [2015] OJ L341/​21, art 9(3)(c); Council Regulation (EC) No 6/​2002 of 12 December 2001 on Community designs [2002] OJ L 3/​1, art 19(1); Trade Marks Directive, art 10(3)(c); Directive 98/​7 1/​EC of the European Parliament and the Council of 13 October 1998 on the legal protection of designs [1998] OJ L 289/​28, art 12. 139  National Football League v PrimeTime 24 Joint Venture 211 F 3d 10 (2nd Circuit 2000). 140  Sender Felsberg [2003] GRUR 328 (German Federal Supreme Court, I ZR 175/​00) (stating that, when calculating damages, the court in the country of transmission should take into account whether damages can also be claimed in the country of reception).

710    Eun-Joo Min and Johannes Christian Wichard which leads to further infringements outside the US can be remedied under US law—​that is, monetary damage can be collected even on sales and distribution of the foreign-​made copies.141 On the other hand, the US Supreme Court has considered, and rejected, a similar approach in a patent dispute.142

2.2.8 Balancing Territoriality with Effective Domestic Regulation The mentioned cases demonstrate that courts tend to balance the interests underlying the territorial limitation of IP laws against the interest in preserving the effectiveness of the lex loci protectionis. While this may stretch the territorial boundaries of individual IP laws, their application is not strictly extra-​territorial. The following trends can be observed: (i) the more clearly an activity is located in the State of protection, the more likely infringement under local law will be found, regardless of subjective (targeting) or objective (effect) criteria. Examples include the export cases and cases where the transmission or uploading has taken place in the forum; (ii) the more clearly a local effect can be demonstrated, the less important it will be to prove that the activity was targeted at the jurisdiction, or that an act was carried out in the State. An example is infringing products sold and delivered into the State; and (iii) targeting is required where neither a local act nor a local effect can clearly be found. These trends are also reflected in the CLIP Principles, which require that, under the applicable IP law, infringement can only be found if the defendant acted, produced a substantial effect in, or directed an activity to the State where protection is sought. De minimis effects should not lead to a finding of infringement.143 Also of relevance in this context is the WIPO Joint Recommendation Concerning Provisions on the Protection of Marks, and other Industrial Property Rights in Signs, on the Internet (Joint Recommendation).144 The Joint Recommendation, intended to provide a link between the global Internet and territorial laws, states that the “use of a sign on the Internet shall constitute use in a Member State [ . . . ] only if the use has a commercial effect in that Member State.” Mere visibility on a computer screen will therefore not be sufficient in order to locate potentially infringing use in the territory where protection is sought. The Joint Recommendation further provides a detailed, but non-​exhaustive, list of factors that can be relevant for determining commercial effect, many of which have been used by national courts in the cases referred to above.145

141  Los Angeles New Service v Reuters Television International, Inc 149 F 3d 987 (9th Circuit 1998); Tire Engineering & Distribution, LLC v Shandong Linglong Rubber Co, Ltd 682 F 3d 292 (4th Circuit 2012). 142  Microsoft Corp v AT&T Corp 550 US 437 (2007) (distinguishing patent and copyright disputes). 143  CLIP Principles, art 3:602(1). Art 3:602(1) shares underlying motivations with CLIP Principles, art 2:202, discussed above: see paras 3:602:C01–​3:602:C04; Metzger (n 107) 173. 144  The Joint Recommendation was adopted by the Assembly of the Paris Union for the Protection of Industrial Property and the General Assembly of WIPO in September 2001. While the Joint Recommendation lacks the force of an international treaty, it has strong persuasive authority as an expression of international consensus, as demonstrated by the express reference to it in, eg, Hotel Maritime (n 54) and L’Oréal v eBay (n 117), Opinion of the Advocate General Jääskinen, para 129. See also Drexl (n 95) paras 327–​30; JC Wichard, “The Joint Recommendation Concerning Protection of Marks, and Other Industrial Property Rights in Signs, on the Internet” in J Drexl and A Kur (eds), Intellectual Property and Private International Law (Hart 2005) 257–​264. 145  WIPO Joint Recommendation, arts 2 and 3.

Cross-Border Intellectual Property Enforcement    711

2.2.9 Ensuring Balanced Remedies The globalization of the IP value chain is prompting courts to explore remedies that address domestic IP enforcement interests, which may test the boundaries of IP territoriality. Remedies granted under lex loci protectionis may potentially have effects beyond the territory in which the right is protected. In principle, remedies should be limited, as far as possible, to the territory in which the IP right is legitimately protected. Any “extra-​territorial” spill-​over effects could be considered illegitimate, might lead to double liability if the same activity is sanctioned in several jurisdictions, or to policy conflicts with States that consider the activity in question legitimate (see Section 2.2.4). Territorial limitations can thus be a means to coordinate outcomes at the level of individual domestic courts. Similarly, the WIPO Joint Recommendation requires courts to limit the territorial scope of any remedy as much as possible to those territories where the infringing activity has produced a commercial effect.146 The CLIP Principles link the territorial scope of injunctions to the territory in which the IP right in question is protected; in Internet cases, Internet-​wide injunctions may be possible, but not in States where the activity in question is not considered infringing.147 These soft-​law approaches are indicative of a trend that provides for “extra-​territorial” remedies only in limited circumstances, for example in relation to bad-​faith conduct on the Internet, such as domain name suspension or transfer, website takedown or site blocking. Another development witnessed in recent years involves the efforts to address IP infringement through remedies sought not directly from the infringer (often located in a distant jurisdiction) but from intermediaries that are easier to identify and more accessible. A number of high-​profile actions have been filed in various States against Internet intermediaries, principally for contributory infringement. These actions are akin to consolidation because they aim to address large volume infringement, which frequently takes place in cross-​border contexts and involves multiple foreign infringers.148 Suing intermediaries, sometimes considered “nodal points” in global infringement activities, may lead to efficiency gains over actions against dispersed parties making use of intermediaries’ services. At the same time, in most jurisdictions, intermediaries benefit from certain “safe harbor” provisions, provided they take remedial action as soon as they are notified of infringements.149 The CJEU has held that courts can order an online intermediary to take measures that contribute not only to bringing to an end IP infringement by users of the intermediary’s service, but also to prevent further infringements.150 Internet Service Providers (ISPs) may also be ordered to block their customers’ access to a copyright-​infringing website.151 In Canada, one court awarded an 146  WIPO Joint Recommendation, arts 13–15, referred to, eg, by the German Federal Supreme Court in Hotel Maritime (n 54). 147  CLIP Principles, arts 2:604.1, 2:604.2 and 3:603.3. 148  See, eg, Louis Vuitton Malletier v eBay Inc (2009) 40 IIC 611 (Commercial Tribunal of Paris 2008); Tiffany Inc v eBay Inc 600 F 3d 93 (2nd Circuit 2010); Case No 2010Ma817 (Republic of Korean Supreme Court 2012); cf S Neumann, Die Haftung der Intermediäre im Internationalen Immaterialgüterrecht (Nomos 2014). 149  See, eg, US Digital Millennium Copyright Act (DMCA) 1998 § 512; Directive 2000/​31/​EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market [2000] OJ L178, art 14. 150  L’Oréal v eBay (n 117) paras 125–​144. 151  Case C-​314/​12 UPC Telekabel Wien GmbH v Constantin Film Verleih GmbH and Wega Filmproduktionsgesellschaft mbH [2014] ECDR 12, para 64.

712    Eun-Joo Min and Johannes Christian Wichard interlocutory injunction against a foreign online intermediary. The intermediary, not a party to the underlying litigation, appealed arguing that “the injunction was beyond the jurisdiction of the court, that it improperly operated against an innocent non-​party to the litigation and that it had an impermissible extraterritorial reach.” The appeal was rejected. The court reasoned that, because it had personal jurisdiction over the intermediary, it was permissible for the plaintiff to seek relief.152 Whereas the measures to be taken against intermediaries will vary, site-​blocking injunctions are increasing, particularly in relation to online copyright infringement involving foreign infringers or foreign infringing activities.153 Other remedies include orders for intermediaries to disclose customer information or to limit or terminate infringing customers’ accounts.154 Initiatives introducing IP enforcement remedies with cross-​border effect, in particular in the online context, have caused public debate on IP overreach and potential conflicts with fundamental rights.155 Courts granting blocking injunctions have emphasized that the injunctions and their enforcement must ensure a fair balance between the fundamental rights concerned,156 must be effective, proportionate, dissuasive, and must not create barriers to legitimate trade.157 The coordination of remedies in order to avoid over-​regulation and double liability is, however, left to individual courts. In the absence of authoritative international guidance, the principle of territoriality continues to provide a general yardstick for determining the reach of remedies granted by courts; the soft-​law initiatives may serve as focal points for international convergence regarding limited departures from territoriality.

2.3 Recognition and Enforcement A favorable determination of jurisdiction and applicable law, and the rendering of a favorable judgment, are of little value to the prevailing party if the terms of the judgment cannot be enforced. The benefits of judgment are similarly eviscerated if the judgment is not recognized (given res judicata effect). When deciding where to sue and whether to consolidate several actions in one forum, a diligent plaintiff will consider the possibility that it will 152

  Equustek Solutions Inc v Morgan Jack et al 2014 BCSC 1063 (Canada); Equustek Solutions Inc v Google Inc 2015 BCCA 265 (Canada); Google has filed an appeal before the Supreme Court of Canada. 153   Copyright, Designs and Patents Act (CDPA) 1988 s 97A (UK); Twentieth Century Fox Film Corp v British Telecommunications Plc [2011] EWHC 1981 (Ch); 1967 Limited v British Sky Broadcasting Limited [2014] EWHC 3444 (Ch); Twentieth Century Fox v Sky UK Limited [2015] EWHC 1082 (Ch); Cartier International v BSkyB [2016] EWCA Civ 658 (ordering site-​blocking injunctions in trademark action). Goldesel [2015] (German Federal Supreme Court, I ZR 174/​14), cf M Schaefer, “ISP Liability for Blocking Access to Third-​Party Infringing Content” (2016) EIIR 633–​638. See also Singaporean Copyright Act 2014; Australia Copyright Amendment (Online Infringement) Act 2015. 154  In Dallas Buyers Club LLC v iiNet Limited [2015] FCA 317, the Federal Court of Australia ordered major ISPs to disclose details of their respective customers to copyright holders for alleged illegal movie downloads. In doing so, the Court imposed conditions to safeguard users’ privacy and prevent potential speculative invoicing by the copyright holders. 155  See, eg, R Arnold, “Website-​blocking Injunctions: The Question of the Legislative Basis” (2015) 37 European Intellectual Property Rev 623; A Marsoof, “The Blocking Injunction—​A Critical Review of Its Implementation in the United Kingdom Within the Legal Framework of the European Union” (2015) 46 IIC 632. 156  UPC Telekabel Wien (n 151) paras 62–​64. 157  L’Oréal v eBay (n 117) paras 135–​144.

Cross-Border Intellectual Property Enforcement    713 need to enforce the resulting judgment in other jurisdictions, for example, where the defendant has assets or is conducting infringing activities. The chronicle of a cross-​border patent dispute litigated for the better part of the past decade is illustrative. The Supreme Court in the Republic of Korea rendered a judgment in LG v Obayashi Co. and Tanaka, a dispute that involved both US and Japanese patents. The judgment was recognized in the US on the basis of the doctrine of comity. The same judgment, however, was not recognized in Japan, where the court found that the Japanese courts have exclusive jurisdiction in matters concerning Japanese patents.158 IP Judgments are ordinarily subject to the general rules on recognition and enforcement of foreign judgments. A  number of regional and bilateral conventions aim to facilitate, to the extent possible, the free movement of judgments among the States parties to those conventions.159 In the absence of such agreements, a court will apply its national rules on recognition and enforcement of foreign judgments, which are frequently based on international comity—​a doctrine of deference that is based on the respect for the judicial decisions of foreign sovereignty, the desire to encourage international coordination, and the hope of reciprocal recognition by the foreign country of domestic judgments.160 While a court will typically refrain from reexamining the substance of a dispute when deciding on the recognition of a foreign judgment, it may require verification as to whether the foreign court was competent to decide on the substance of the dispute based on the jurisdictional rules of the recognizing forum. This may be particularly relevant in cases involving the consolidation of claims in a single forum. These cases may be regarded with suspicion in other States, especially if they consider the dispute subject to a rule of exclusive jurisdiction.161 In such cases, there is a risk that recognition of the judgment will be refused. The need to have a judgment recognized and enforced in other jurisdictions may therefore limit the attractiveness of consolidation and lead parties to pursue cases (somewhat inefficiently) on a country-​by-​country basis. Most PIL rules also allow a State to refuse to recognize and enforce a foreign judgment when doing so would be contrary to its public policy.162 In relation to IP, the public policy 158  Case No 2009Da19093 (Republic of Korean Supreme Court), appealed from Case No 2007Na96470 (Seoul High Court). Case No 2007Na96470 is of interest also for the reference made by the Court to The Hague Convention on Choice of Court Agreements, following the reference by the Seoul District Court to the Interim Text. See also LG Display Co, Ltd v Obayashi Seikou Co, Ltd 919 F Supp2d 17 (District Court (Columbia) 2013); M Pertegás, “HCCH and Intellectual Property” (WIPO-​ILA Seminar on IP and Private International Law, 16 January 2015) . 159  The Inter-​American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards 1979, Convention on Legal Assistance and Legal Relations with Respect to Civil, Family, and Criminal Matters 1993, Montevideo Treaty on International Procedural Law 1940, Riyadh Arab Agreement for Judicial Cooperation 1979, and Brussels I Convention would appear to regard IP as falling within their scope. 160 In LG Display (n 158), the US District Court stated that “[international comity] remains a complex and elusive concept [ . . . ] more an aspiration than a fixed rule, more a matter of grace than a matter of obligation.” 161  See, eg, Brussels I Regulation, art 45(1)(e)(ii); German Code of Civil Procedure (2005) § 328(1) n 1, as well as the 2015 Proposed Draft Text of the HCCH Working Group on the Judgments Project (hereafter 2015 HCCH Proposed Draft Text) art 5 para 3, all allowing the refusal of enforcement for lack of jurisdiction. Cf the discussion on exclusive jurisdiction in Section 2.1.5. 162  See, eg, Brussels I Regulation, art 45(1)(a); Japanese Code of Civil Procedure (2012) art 118; Swiss PIL Act 1987, art 27; German Code of Civil Procedure (2005) § 328(1) n 4.

714    Eun-Joo Min and Johannes Christian Wichard defense may involve diverse questions. Where a court determines the validity of a foreign right, would the court of the State where the right is registered recognize the foreign judgment and authorize its enforcement? What if the IP for which protection is sought involves contentious aspects such as patenting genetic sequences, or enforcement is deemed to conflict with basic rights such as privacy or free speech and the standards for protecting these rights differ in the concerned States?163 The answer to these questions will largely depend on the views of the recognizing court, and as illustrated in LG v Obayashi Co. and Tanaka cited previously, outcomes may well vary. It may be that a foreign court applies an IP norm that differs from the norm of the State where recognition is sought. Would the judgment be recognized? The answer is, generally, yes. In Europe, the CJEU case Renault v Maxicar164 involved the recognition of a French judgment in Italy. Car body parts were protected by IP in France, whereas Italy did not have equivalent protection. The CJEU ruled that the public policy exception could not apply in cases where there is a mere difference in terms of substantive law or where the law might have been wrongly applied. Similarly, in the US, in SARL Louis Féraud International v Viewfinder, a case involving designs protected under French but not under US law, the court held that the difference in substantive law was not a sufficient ground to allow the application of the public policy defense against the recognition of the French judgment in the US.165 Recourse to the public policy exception is generally envisaged only in extreme cases where the judgment constitutes a manifest breach of an essential rule of law or of a fundamental right. Remedies are a different matter. Enforcement of judgments awarding non-​compensatory damages may be challenged as a violation of public policy when such damages are not provided for in the State where recognition is sought.166 In an IP infringement case, the Spanish Supreme Court did not “consider US punitive damages as a concept that is completely counter to public policy.”167 In contrast, the Supreme Court of Japan has held that a foreign court’s order of punitive damages is contrary to the public order of Japan.168 Certain instruments on recognition and enforcement of foreign judgments contain provisions specific to IP-​related matters. For example, the Swiss PIL Act defines the conditions for recognizing foreign decisions regarding IP infringement.169

163  P Asensio “Recognition and enforcement of judgments in intellectual property litigation: the CLIP principles” in Basedow, Kono, and Metzger (n 41) 282–​283. 164  Case C-​38/​98 Régie nationale des usines Renault SA v Maxicar SpA [2000] ECR I-​2973, paras 30, 33–​34. 165  SARL Louis Féraud International v Viewfinder 406 F Supp2d 274 (District Court (Southern District of New York) 2005) 281. Nevertheless, on appeal the defense succeeded on the basis of free speech, where the court accepted that the lower level of protection for free speech under the French law was manifestly incompatible with US public policy: see SARL Louis Féraud International v Viewfinder 489 F 3d 474 (2nd Circuit 2007), from Fawcett and Torremans (n 33) para 19.20. 166  Fawcett and Torremans (n 33) para 19.02; cf 2015 HCCH Proposed Draft Text, art 9 para 1 (“Recognition or enforcement of a judgment may be refused if, and to the extent that, the judgment awards damages, including exemplary or punitive damages, that do not compensate a party for actual loss or harm suffered”). 167  Miller Import Corp v Alabastres Alfredo SL STS 13 November 2001, Exequatur 2039/​1999; from Fawcett and Torremans (n 33) para 19.46. 168  Japanese Supreme Court Judgment of 11 July 1997, cited in CLIP Principles, para 4:402.C05. 169  Swiss PIL Act 1987, art 111.

Cross-Border Intellectual Property Enforcement    715 Lastly, at the multilateral level, the HCCH Convention of 1  February 1971 on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters is in force, but with very limited membership. Further to the resumption of the HCCH Judgments Project in 2012, a Special Commission was established in 2016 to prepare a preliminary Draft Convention on the Recognition and Enforcement of Judgments in Civil and Commercial Matters. The preliminary text of the Draft Convention that results from the meetings of the Special Commission of June 2016 and February 2017, includes all IP matters in square brackets indicating the difficulties reaching consensus on which IP matters, if any, should come within the scope of the Convention.170

2.4 Special Private International Law Rules in Regional IP Systems Over the last decades, there has been a movement to reconcile the countervailing strains of globalization and regionalization of trade by creating regional (unitary) IP rights that are protected uniformly in a territory that is composed of all of the States within the region. Early examples of regionalism in IP are the Montevideo Treaties of 1889, which dealt with patents and trademarks and involved Argentina, Bolivia, Brazil, Chile, Paraguay, Peru, and Uruguay. In Africa, the African Regional Industrial Property Organization (ARIPO) and the African Intellectual Property Organization (OAPI; Organisation Africaine de la Propriété Intellectuelle) each provide a mechanism for securing IP protection across the regional territory of its membership. The European Union (EU), a “supranational” organization, is currently the most fully integrated among the many regional arrangements around the world. In Europe, each EU-​wide unitary IP right has its own jurisdictional regime. They are all based on the provisions in the Brussels I Regulation, but depart from it in a number of aspects. The EUTM Regulation (EUTMR), which establishes the European Union Trade Mark (EUTM)—​an EU-​wide right that enjoys EU-​wide protection—​provides for a hybrid legal and court system.171 The EUTMR, a lex specialis vis-​à-​vis the Brussels I Regulation, grants international jurisdiction to certain specified courts (EUTM courts), which are national courts situated in the Member State in which the defendant is domiciled or, in the absence of a domicile, has a business establishment. In the absence of such a court, the EUTMR recognizes the courts of the Member State in which the claimant is domiciled or has a business establishment. If neither the defendant nor the plaintiff is domiciled or has a business establishment within the EU, the EUTM court is a court of the State in which the European Union Intellectual Property Office (EUIPO) has its seat.172 The courts that are based on “domicile” have central competence, and their decisions in principle have effect throughout the EU. Jurisdiction may be given to the courts in the Member State where the act of infringement has been committed or threatened (place of infringement), but only to adjudicate acts of infringement committed or threatened within the territory where the

170 

2017 HCCH Preliminary Draft Convention, arts 2, 5, 6, 7, and 9bis. Regulation (EU) 2015/​2424 of 16 December 2015 amending Council Regulation (EC) No 207/​2009 on the Community trade mark [2009] OJ L341/​21 (hereafter EUTMR). 172  EUTMR, art 97. 171 

716    Eun-Joo Min and Johannes Christian Wichard court is situated.173 One key advantage of the EUTM is its potential for allowing a court to issue an EU-​wide injunction. Thus the CJEU has held that a prohibition against further infringement or threatened infringement must, as a rule, extend to the entire area of the EU (since an EUTM is protected throughout the EU), but that in certain circumstances (eg, where the infringement is limited to a single State or to a part of the territory of the EU) the territorial scope of the injunction may be restricted.174 The EUTMR also includes an article on applicable law which provides that where matters are not covered by the Regulation, the EUTM courts shall apply the applicable national law.175 For patents, the European Patent Convention (EPC) has introduced a unitary system for the administration of patents within Europe.176 An emerging Unitary Patent Protection (UPP) system,177 building on the EPC, will make it possible to acquire unitary effect for a European patent in the 25 EU Member States that have so far signed the Agreement on a Unified Patent Court 2013 (UPC).178 This Agreement aims to establish a court system composed of a central chamber as well as regional chambers, which, unlike the EUTM courts, are separate from national court systems. The UPC will, as a general rule, have exclusive competence in civil litigation on matters (including infringement, provisional and protective measures and injunctions, damages or compensation derived from provisional protection and/​or prior use, and revocation or non-​infringement) related to:  European patents with unitary effect; classical European patents (initially optional, with transitional period of seven years and opt-​out for patent holder); supplementary protection certificates issued for a product covered by such a patent; and European patent applications. The hope is that the UPC will unify jurisprudence throughout the signatory states, that it will increase predictability and eliminate parallel litigation, that it will issue judgments (injunctions, damages) affecting 25 Member States of the EU, and that proceedings will be efficient and conclude more rapidly than in many of the individual Member States.179 However, concerns 173 

EUTMR, art 98. In Coty Germany (n 34) paras 24–​38, the CJEU observed that jurisdiction for EUTM infringement and non-​infringement actions must be established on the sole basis of the EUTMR provisions. 174  Case C-​235/​09 DHL Express France SAS v Chronopost SA [2011] ECR I-​2801, paras 44–​48. In Enterprise v Europcar [2015] EWHC 300 (Ch), the territorial scope of an injunction for EUTM infringement was addressed by the UK court, which held that, even though the case involved an EUTM, the injunction (as well as the inquiry as to damages) should be limited to the UK in the absence of extensive evidence to justify an EU-​wide injunction. 175  EUTMR, art 101. 176  The EPC is legally independent from the EU and forms an international organization in its own right with membership beyond EU Member States. 177  Regulation (EU) No 1257/​2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection [2012] OJ L 361/​1; Council Regulation (EU) No 1260/​2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements [2012] OJ L 361/​89. 178  OJ C175/​01. To date the Agreement covers all EU Member States except Spain, Poland, and Croatia. 179  Select Committee of Unitary Patent Protection and the Preparatory Committee of the Unified Patent Court, “An Enhanced European Patent System” (2014) ; cf A Plomer, “A Unitary Patent for a (Dis) United Europe: The Long Shadow of History” (2015) 46 IIC 508; H Ullrich, “The European Patent and Its Courts: An Uncertain Prospect and an Unfinished Agenda” (2015) 46 IIC 1; F Baldan and E van Zimmeren, “The Future Role of the Unified Patent Court in Safeguarding Coherence in the European Patent System” (2015) 52 Common Market L Rev 1529.

Cross-Border Intellectual Property Enforcement    717 have been voiced that the UPP and UPC may in practice lead to further fragmentation of patent protection, of applicable rules, and of jurisprudence.180

3.  Other Cross-​B order IP Enforcement Fora Cross-​border IP enforcement primarily relies on State courts. Yet, international IP players are increasingly focusing on other, potentially cost-​effective, options for enforcing their IP rights, including tribunals created under regional or multilateral agreements. The inclusion of IP in the structure of the WTO Agreement signaled the growing role of IP in international trade regulation, and that recognition led to the utilization of trade dispute settlement fora as cross-​border IP enforcement mechanisms. The greatest deviation from IP territoriality is, however, probably observed in enforcement actions that rely on alternative dispute resolution (ADR) and private enforcement mechanisms, in particular, online enforcement facilitated by voluntary agreements among online platform operators and IP rights holders. These raise substantial public policy considerations.

3.1 Trade and Investment-​Related Dispute Settlement Fora Trade fora are increasingly taking on a prominent role in protecting and enforcing IP rights. Philip Morris’s endeavors to protect its trademark rights in the context of Australia’s plain packaging measures have included not only court proceedings in Australia,181 but also two investment treaty arbitrations182 and a WTO dispute.183 Two aspects of the TRIPS Agreement are worth highlighting with respect to cross-​border enforcement. First, the TRIPS Agreement embodies the current multilateral consensus on IP enforcement, and contains considerably detailed provisions on civil, administrative, criminal procedures and remedies, and border measures.184 Second, the TRIPS compliance tool enabled by the WTO Dispute Settlement mechanism allows IP trade disputes to be settled under the multilateral WTO trade rules, which creates an alternative, quasi-​judicial forum for international IP dispute resolution.185 WTO TRIPS disputes take the form of one State challenging another State’s compliance with the TRIPS Agreement, which thus follows 180  See, eg, Max Planck Institute for Intellectual Property and Competition Law, “The Unitary Patent Package: Twelve Reasons for Concern” (2012) . 181  JT International SA v Commonwealth of Australia [2012] HCA 43. 182  See the arbitration between Philip Morris Asia Limited (PMA) and the Australian Government under the Hong Kong–​Australia BIT (under UNCITRAL Rules of Arbitration, seat of arbitration—​ Singapore and the Permanent Court of Arbitration, decided in December 2015); and the arbitration between Philip Morris and Uruguay under the Uruguay and Switzerland BIT (ICSID arbitration, decided in July 2016). 183  Australia—​Certain Measures Concerning Trademarks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WTO Disputes DS434, DS435, DS441, DS458, and DS467). 184  TRIPS, arts 41–​61. 185  A Taubman, A Practical Guide to Working with TRIPS (OUP 2011) 20–​28.

718    Eun-Joo Min and Johannes Christian Wichard a traditional “diplomatic” approach of resolving disputes among States. While these cases do not deal with private disputes and do not yield private remedies, individual IP right holders’ efforts to enforce their IP will frequently be implicated, as seen in the WTO Dispute China—​ Measures Affecting the Protection and Enforcement of Intellectual Property Rights, which was largely prompted by IP right holders’ frustrations regarding requirements in local IP enforcement procedures.186 The shift in IP rulemaking and enforcement toward trade fora is continuing through the growing number of regional and bilateral trade arrangements (RTAs)187 that provide for dispute settlement of claims, including IP claims. For example, bilateral investment treaties (BITs) include chapters that envision binding investor-​state dispute settlement (ISDS) before an international arbitration panel. These agreements typically define IP as an “investment,” which thus gives investors a private right of action against a country that directly or indirectly expropriates their IP (for example, by using it without authority or by enacting laws that do not respect IP obligations), or which otherwise denies them fair and equitable treatment.188 With the growth of RTAs witnessed in the last two decades, it can be expected that recourse to the dispute settlement mechanisms will increase. It should, however, be emphasized that the ISDS system is rarely a direct tool for IP enforcement, but allows recourse against a State, not a private party. Furthermore, it is criticized as giving investors too much power over the structure of national laws and might be considered a threat to the core principle of territoriality. Indeed, these provisions are becoming exceedingly contentious in the negotiation of trade agreements.189

3.2 Alternative Enforcement Mechanisms The challenges inherent in addressing increasingly international IP transactions with territoriality-​rooted enforcement mechanisms, with the non-​negligible risk of having to deal with a multitude of procedures in different jurisdictions and potentially inconsistent outcomes, are driving many parties to opt for private dispute resolution procedures as an 186  China—​Measures Affecting the Protection and Enforcement of Intellectual Property Rights (WTO Dispute DS362). To date, 37 TRIPS-​related cases have been disputed under the WTO dispute settlement system: see . 187  In the period 1948–​1994, the GATT received 124 notifications of RTAs, and since the creation of the WTO in 1995, over 400 additional arrangements have been notified: see . 188  F Abbott, T Cottier, and F Gurry, International Intellectual Property in an Integrated World Economy (2nd edn, Wolters Kluwer 2011) 51. An example is the International Centre for Settlement of Investment Disputes (ICSID) arbitration in AHS Niger v Republic of Niger (ICSID Case No ARB/​11/​11), where infringement of domestic IP rights was one of the allegations made by the claimant. The Tribunal found Niger in violation of the Investment Agreement, but rejected the claimants’ allegations regarding IP infringement. See also H Grosse Ruse-​Khan, “Litigating Intellectual Property Rights in Investor-​ State Arbitration: From Plain Packaging to Patent Revocation,” Max Planck Institute for Innovation & Competition Research Paper No. 14-​13. 189  See, eg, “Trans-​Pacific Partnership Seen as Door for Foreign Suits Against US” New York Times (New York, 25 March 2015) (“This transatlantic trade deal is a full-​frontal assault on democracy”); “Opinion” The Guardian (London, 4 November 2013) (describing ISDS as “the remarkable ability it would grant big business to sue the living daylights out of governments”).

Cross-Border Intellectual Property Enforcement    719 alternative to going to court.190 Alternative dispute resolution can range from procedures that assist the parties to achieve a negotiated resolution of their dispute (such as mediation), to various types of independent determinations as to the merits of the dispute or certain aspects of it (such as arbitration or expert determination). Following are two examples of ADR procedures that play a role in cross-​border enforcement of IP.191

3.2.1 Arbitration Arbitration, a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute, may allow IP disputes to be resolved in ways that better meet the needs of the disputing parties, particularly in cross-​ border cases. Like court proceedings, arbitration requires localization and identification of the local laws applicable to the dispute, including the issues of infringement and validity. But in arbitration, these laws are generally chosen by the parties themselves. Thus, any impediment presented by the territorial nature of IP can be negotiated and overcome relatively easily. Traditionally, there were concerns that disputes involving registered industrial property rights affected the public interest and thus could not be resolved through a private arbitration procedure. These public policy arguments were, however, voiced less frequently vis-​à-​ vis the arbitrability of IP rights such as copyright, know-​how, and trade secrets, which are not subject to a public registration system. Increasingly, however, States have come to accept that disputes relating to all types of IP rights are arbitrable.192 Remedies granted through arbitration include most of those rendered by courts, such as damages, injunctions, infringement declarations, as well as measures for the preservation of confidentiality of evidence, the provision of a security, the production of data, and the delivery of goods. The difference between arbitral awards and court judgments is that the former generally carry inter partes and not erga omnes effect. While remedies can have an indirect effect on non-​parties, remedies with a direct effect (such as cancellation of a right from the public IP register) are generally not available in these proceedings. When arbitral awards are not followed voluntarily, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, currently in effect in more than 150 States, helps their enforcement. As such, international arbitration can facilitate the consideration 190 

The WIPO International Survey on Dispute Resolution in Technology Transactions (2013) shows a generally perceived trend towards out-​of-​court dispute resolution mechanisms. While court litigation remains the most common stand-​alone dispute resolution clause (32 percent) in technology-​related agreements, arbitration followed closely behind (30 percent). 191  There are numerous other examples of the use of ADR for IP enforcement, including the selfregulation of trade fairs, the regulation of trading names, etc. For an overview, see T Cook, “Alternative Dispute Resolution as a Tool for Intellectual Property Enforcement” WIPO/ACE/9/3 (2014) . 192  Belgium (Patent Act 1997, art 73) and Switzerland (Decision of the Swiss Federal Institute for Intellectual Property (IGE)) allow, among other things, the revocation of a patent through arbitration and the entry of such revocation in the Register. The US Patent Act (35 USC §294) also stipulates the arbitrability of patent validity, enforceability and infringement issues. Australia and the UK have taken the middle ground by allowing a challenge to patent validity to be raised and pursued in an arbitration while limiting the effect of the award as between the parties (inter partes) with no effect on the national register: T Cook and A Garcia, International Intellectual Property Arbitration (Wolters Kluwer 2010) ch 4.

720    Eun-Joo Min and Johannes Christian Wichard of infringement and validity of multiple parallel IP rights in different States, effectively consolidating what would have been multiple court proceedings into a single action that produces a single award. The parties can thereby avoid the expense and complexity of multi-​ jurisdictional litigation.193 Arbitration of IP does, however, have its limitations, the most important of which is the requirement that the parties need to consent to its application. This consensual nature makes the process unsuitable for deliberate and intentional acts of infringement.

3.2.2 Privatized Mechanisms of Online IP Enforcement The digital environment accentuates the challenges of cross-​border IP enforcement:  application of territorial rights in a largely borderless medium; absence of harmonized legal standards resulting in legal uncertainty; online, transnational, low value, high volume transactions; and quasi-​ anonymous, geographically-​ distant participants. Whereas PIL rules aim to address these challenges through the use of concepts like ubiquitous infringement (see Sections 2.1.3, 2.2.6, and 2.2.9), international litigation for large-​volume online IP disputes may nevertheless remain economically inaccessible and time-​consuming, with inherent jurisdictional risks and legal uncertainty. In order to address the needs and interests of the concerned parties, new enforcement options are developing, which rely particularly on the contractual framework governing privately-​managed online spaces, and which range from the domain name system to other online platforms, such as search engines, auction sites, social media platforms, and virtual worlds.194 This Internet infrastructure-​based approach operates without reference to the physical location of any of the parties involved, and thus avoids any PIL hurdles. It represents a growing role of privatized enforcement facilitated by private schemes and agreements, with parties opting for contractual certainty and rapid resolution over jurisdictional risk and the cumbersome traditional approach of relying on local law and local courts for territorially-​restricted remedies.195 The Uniform Domain Name Dispute Resolution Policy (UDRP) is a prime example. It provides a system, which transcends territoriality by relying on the contractual framework within the Domain Name System.196 Through the UDRP, over 60,000 trademark-​based, so 193  The WIPO Arbitration and Mediation Center provides examples of arbitration as a means of cross-​ border IP enforcement at . 194  See DG Post, “Internet Infrastructure & IP Censorship” IP Justice Journal (1 August 2015) ; J de Werra, “Alternative Dispute Resolution in Cyberspace: The Need to Adopt Global ADR Mechanisms for Addressing the Challenges of Massive Online Micro-​Justice” (2016) 26 Swiss Review of International and European Law 289–​306. 195  A study presented at the WIPO Advisory Committee on Enforcement reviewed 16 voluntary enforcement mechanisms, adopted by ten different online platforms, to address counterfeiting, piracy, and other IPR infringements. The review found that voluntary mechanisms are prevalent and cover all traditional IPR infringements. The core remedy provided by the mechanisms is some version of “take-​ down,” including removing or blocking access to infringing material. Enterprise-​level mechanisms utilize an in-​house procedure that provides little, or no, transparency of operation or outcome. See A Christie, “Voluntary Mechanisms for Resolving IP Disputes” WIPO/​ACE/​8/​10 (2012) . 196  For information on the establishment of the UDRP, see “Final Report of the First WIPO Domain Name Process,” WIPO Publication No 439 (1999) .

Cross-Border Intellectual Property Enforcement    721 called “cybersquatting” disputes, with parties from over 175 countries, have been resolved since 1999. The infrastructure-​based enforcement mechanisms do not replace court proceedings but present efficiencies that are unavailable in the conventional enforcement mechanisms, and offer an attractive alternative to elusive options of enforcing a court judgment against quasi-​ anonymous parties in distant jurisdictions. Decisions are speedy and quasi-​automated, and operate, virtually instantaneously, on anyone in any corner of the planet. Yet, important due process and legitimacy considerations remain outstanding. The relationship between these privately-​managed environments and the public legal systems conventionally associated with IP enforcement are not always clear. However, unlike arbitration, recourse to the courts system is typically not excluded, which allows at least for a minimum level of public control. Some of these systems are promoted by, and include some involvement of, public entities. The UDRP, for example, is the product of the First WIPO Internet Domain Name Process and allows for decisions to be challenged in court;197 the online copyright-​enforcement mechanisms were largely driven by the US and EU safe harbor provisions and other similar national legislation; and the agreements reached between the IP right holders and Internet intermediaries have been actively facilitated by public entities.198 Nonetheless, the mosaic seen in the application of PIL rules is being replicated in the digital environment.199 And questions abound: What is the limit to delegating adjudicatory roles to private online service providers, which award remedies outside any judicial or administrative process? How can the public guarantee the legitimacy and institutional competence of this essentially private process? What are the review mechanisms to ensure rule of law, fairness, and transparency? Is there a danger that the focus on efficient enforcement will tip the balance in favor of IP owners through easy, quick presumptions concerning rights and infringement?

4.  Concluding Remarks Cross-​border IP enforcement in the twenty-​first century is a reflection of uncoordinated converging and conflicting views regarding the right approach to the territoriality of IP rights. The issues play out at the national, regional, and international levels, with IP actors seeking the most efficient venue to obtain desired remedies while the judiciary and policy makers endeavor to provide justice, meaningful enforcement, predictability, and legal certainty in cross-​border settings. Territoriality nonetheless persists as a robust pillar defining IP relationships in the global and digital environment. In terms of PIL, a multilateral consensus has been elusive, but the deliberations at the renewed HCCH Judgments Project will be a marker of evolution. Developments in regional 197 

UDRP, para 4(k). See, eg, J Bergevin, “Preventive Actions being Developed by the European Commission to Complement Ongoing Enforcement Measures with a View to Reducing the Size of the Market for Pirated or Counterfeit Goods” WIPO/​ACE/​9/​20 (2013). 199  T Schultz, “Carving up the Internet: Jurisdiction, Legal Orders, and the Private/​Public International Law Interface” (2008) 19 European Journal of International Law 799; de Werra (n 194) 304–​306. 198 

722    Eun-Joo Min and Johannes Christian Wichard and national instruments and jurisprudence mostly clarify the application of existing principles to the new environment and remain closely tied to territorial boundaries. The IP and PIL reform projects, on the other hand, have an aspirational character particularly in addressing circumstances that test the boundaries of IP’s territoriality, such as ubiquitous infringement or disputes involving multiple defendants, and propose rules on jurisdiction and applicable law that depart fairly significantly from traditional notions of PIL. They may provide guidance to courts for more modest departures from strict territoriality and may eventually serve as focal points for international convergence. Careful choice of applicable law(s) may provide a way to respect the territoriality of IP rights while still achieving the benefits of consolidating foreign cases in a single court. Along with PIL, substantive IP law determines where an IP infringement has occurred, and to what extent any foreign elem­ ent will form part of the substantive claim. Concerns about the effectiveness of individual IP laws in a globalized marketplace may advocate for more expansive approaches, but in the absence of authoritative international guidance, territoriality provides a general yardstick for determining the legitimate reach of local laws in a way that avoids overregulation and international policy conflicts. Further harmonization of IP laws would be helpful, but is currently elusive. Notions of IP law are [re-​]interpreted in the cross-​border setting, and in the enlarged IP value chain the role of intermediaries, both as enforcers and potential contributors to infringement, is becoming more prominent. As the IP transactional space expands and IP exploitation becomes more instantly global, balancing IP enforcement—​ cross-​border enforcement in particular—​with the interests of legitimate users and third parties, and calibrating the (perceived) tension between IP and other basic rights, will be a constant challenge. While IP enforcement remains largely the domain of domestic courts, which—​in the absence of authoritative international coordination—​must deal with increasingly complex issues with traditional territorial tools, other fora are emerging. These range from dispute settlement mechanisms in the WTO and regional and bilateral trade arrangements, to alternative dispute resolution mechanisms including arbitration and online administrative procedures facilitated by the contractual web governing the Internet platforms. While the options for cross-​border enforcement continue to grow, developments are largely occurring “bottom up”: They are driven by right holders as well as by individual courts. The landscape of cross-​border IP enforcement today is an interface between these various layers of enforcement structures, which comprise fragmented and contextualized sets of rules. Achieving coherence and mutual consistency between the different legal systems and between the distinct regimes of cross-​border of IP enforcement is crucial to cross-​border commerce: But who is in charge?

Pa rt  V

T H E P OL I T IC A L E C ON OM Y OF I N T E L L E C T UA L P ROP E RT Y

Chapter 26

Users, Patents , a nd Innovation P ol i c y Katherine J. Strandburg* 1. Introduction We now know that users are important innovators, particularly in some fields. According to Eric von Hippel, who pioneered and continues to lead the field, user innovators are “firms or individual consumers that expect to benefit from using a product or a service” at the time they invent it, in contrast to seller innovators, who “expect to benefit from selling a product or a service.”1 The standard theoretical justifications for awarding patents, as well as patent doctrine itself, are grounded largely in a seller innovator paradigm. As a result, there is a risk that patent doctrine may be ineffectual or counterproductive in areas where user innovation (UI) is significant. Despite the emerging recognition of UI’s importance, its intersections with patent doctrine are not widely appreciated. The updated White House Strategy for American Innovation, published in 2015, illustrates this point.2 It discusses three ingredients for innovation: fueling the engine of private sector innovation, empowering a nation of innovators, and investing in the building blocks of innovation. While the possibility that individual citizens might be innovators is implicit in the “empowering a nation of innovators” discussion, the term “user innovation” appears nowhere in the document, and there are no initiatives aimed specifically at promoting it. Moreover, there is not even a hint of UI in the discussions of private sector innovation and innovation building blocks, despite the fact that UI can be

*  Katherine J Strandburg has asserted her moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  Eric von Hippel, Democratizing Innovation (MIT Press 2005) (Hereinafter Democratizing Innovation) (contrasting user innovators with manufacturers). Here I use the term “seller innovator,” because, as the more recent UI literature recognizes, not all seller innovators are manufacturers, while manufacturers can be user innovators of industrial processes and manufacturing equipment. 2  National Economic Council and Office of Science and Technology Policy, A Strategy for American Innovation (2015) , accessed 26 April 2017.

726   Katherine J. Strandburg important in any these categories as well: scientists inventing tools to use in their research, companies inventing new processes to use in their factories, doctors inventing medical procedures and devices, and sports enthusiasts modifying their equipment to improve its performance are all user innovators. The report’s discussion of the patent system, meanwhile, is confined to the section on private sector innovation and grounded squarely in the seller innovator paradigm. This chapter explores the interplay between UI and patent doctrine. After defining and introducing UI, it describes the standard incentive justifications for patents, and relates them to a framework of invention, disclosure of inventive ideas, and dissemination of invention embodiments. Next, it analyzes UI in light of that framework, and argues that the standard justifications for patents often do not apply. Under appropriate conditions, the standard paradigm of invention, patenting, and commercialization can be replaced by a paradigm of user invention, free revealing, peer diffusion, and, in some cases, patent-​free commercialization.3 The chapter explores the conditions under which this patent-​free UI paradigm is likely to be viable and socially desirable. It concludes with a brief discussion of potential policy approaches, particularly with relation to patent doctrine, that could strengthen the patent-​ free UI paradigm.

2.  Introduction to User Innovation 2.1 Defining User Innovation User innovators invent new or improved technologies primarily because they hope to benefit from using them.4 By contrast, seller innovators intend to profit from the sale of embodiments5 of their inventions. Examples of UIs include scientific instruments invented by researchers,6 various kinds of sporting equipment invented by participants,7 open source software,8 medical devices, medical procedures, and off-​label drug uses invented by medical 3 

Eric von Hippel, Free Innovation (MIT Press 2017) (hereinafter Free Innovation) (analyzing a version of this paradigm involving consumer inventors). 4 See Democratizing Innovation (summarizing and reviewing the user innovation (UI) literature). 5  The term “embodiment,” taken from patent law, is a shorthand way to distinguish between the idea of the invention and its practice. For a product invention, an embodiment physically instantiates the invention; it is simply what we ordinarily mean when we talk about purchasing or owning a product. One embodies a process invention by carrying out its steps. 6  William Riggs and Eric von Hippel, “Incentives to Innovate and the Sources of Innovation: The Case of Scientific Instruments” (1994) 23 Res Policy 459 (1994). 7  See, eg, C Lüthje, “Characteristics of Innovating Users in a Consumer Goods Field: An Empirical Study of Sport-​Related Product Consumers” (2004) 24 Technovation 683; N Franke and S Shah, “How Communities Support Innovative Activities: An Exploration of Assistance and Sharing Among End-​ Users” (2003) 32 Res Policy 157; C Lüthje, C Herstatt, and E von Hippel, “User-​Innovators and ‘Local’ Information: The Case of Mountain Biking” (2005) 34 Res Policy 951. 8  See, eg, K Lakhani and E von Hippel, “How Open Source Software Works: ‘Free’ User-​to-​User Assistance?” (2003) 32 Res Policy 923; E von Hippel and Gvon Krogh, “Open Source Software and the ‘Private-​Collective’ Innovation Model: Issues for Organization Science” (2003) 14 Organ Sci 209; Karim Lakhani and Robert G Wolf, “Why Hackers Do What They Do: Understanding Motivation and

Users, Patents, and Innovation Policy    727 practitioners9 or by patients and caregivers,10 banking and healthcare services invented by users,11 financial services invented by smartphone users in developing countries,12 and manufacturing processes invented by manufacturers.13 Some user innovators, though initially motivated to invent for their own use, decide at a later time to become “user entrepreneurs,”14 manufacturing and selling embodiments. User entrepreneurs are user innovators, not seller innovators, because of their motivations for invention. They often enter the commercial market after a period of peer diffusion. The term “user innovator” “categoriz[es] firms and individuals in terms of the functional relationship through which they derive benefit from a given product, process, or service innovation.”15 Moreover, “the functional role of an individual or firm is not fixed; it depends instead on the particular innovation being examined.”16 Thus, a commercial firm is a user innovator of a new manufacturing process and a seller innovator of the products it produces. User innovation can be expected to have positive social value for a variety of reasons.17 Users tend to develop products for relatively small, specialized groups that would be neglected by seller innovators. They tend to develop new functionality based on their experiential knowledge. Users often are non-​competitive, at least to some degree, and thus often freely reveal their inventions, thereby avoiding the social waste associated with Effort in Free/​Open Source Software Projects” in J Feller, B Fitzgerald, S Hissam, and KR Lakhani, (eds) Perspectives on Free and Open Source Software (MIT Press 2005). 9 

See, eg, E von Hippel, H DeMonaco, and JPJ de Jong, “Market Failure in the Diffusion of Clinician-​Developed Innovations: The Case of Off-​Label Drug Discoveries” (2014). , accessed 26 April 2017; J Gomez-​Marquez and A Young, “A History of Nurse Making and Stealth Innovation” (2016). , accessed 26 April 2017; K Strandburg, “Derogatory to Professional Character? Physician Innovation and Patents as Boundary-​ Spanning Mechanisms” in K Darling and A Perzanowski (eds), Creativity without the Law: Challenging the Assumptions of Intellectual Property (NYU Press 2017); K Strandburg, “Legal But Unacceptable: Pallin v Singer and Physician Patenting Norms” in R Dreyfuss and J Ginsburg (eds) Intellectual Property at the Edge: The Contested Contours of IP (CUP 2014); Hinsch et al, “User Innovation in Techniques: A Case Study Analysis in the Field of Medical Devices” (2014) 23 Creativity and Innovation Mgmt 484; S Bechtold, “Physicians as User Innovators” in R Cooper Dreyfuss and JC Ginsburg (eds) Intellectual Property at the Edge: The Contested Contours of IP (CUP 2014). 10  P Oliveira et al, “Innovation by Patients with Rare Diseases and Chronic Needs” (2015) 10 Orphanet J Rare Dis 41; M Goeldner and C Herstatt, “Are Patients and Relatives the Better Innovators? The Case of Medical Smartphone Applications” (2016). , accessed 26 April 2017; S Smith and S Shah, “Do Innovative Users Generate More Useful Insights? An Analysis of Corporate Venture Capital Investments in the Medical Device industry” (2013) 7 SEJ 151; S Flowers, “Chronic Disease, New Thinking and Outlaw Innovation: Patients on the Edge in the Knowledge Commons” in B Frischmann, M Madison, and K Strandburg (eds), Governing Medical Commons (CUP forthcoming). 11  P Oliveira and H Canhão, “Users as Service Innovators: Evidence from Banking to Healthcare” in K Lakhani and D Harhoff (eds), Revolutionizing Innovation (MIT Press 2014). 12  P van der Boor et al, “Users as Innovators in Developing Countries: The Global Sources of Innovation and Diffusion in Mobile Banking Services” (2014) 43 Res Policy 1594. 13  Democratizing Innovation, 19–​21. 14  S Shah and M Tripsas, “The Accidental Entrepreneur: The Emergent and Collective Process of User Entrepreneurship” (2007) 1 SEJ 123. 15  E von Hippel, Sources of Innovation (MIT Press 1998), 3–​4 (hereinafter Sources of Innovation). 16  von Hippel, Sources of Innovation. 17  J Henkel and E von Hippel, “Welfare Implications of User Innovation” in (AN Link and FM Scherer (eds), Essays in Honor of Edwin Mansfield: The Economics of R&D, Innovation, and Technological Change (Springer 2005).

728   Katherine J. Strandburg exclusivity and facilitating peer diffusion and patent-​free commercialization mechanisms for disseminating embodiments.

2.2 Users’ Capacity for Innovation In the standard paradigm, sellers are seen as well resourced and technologically sophisticated, while users are seen as mere consumers, and therefore technologically unsophisticated. User innovation research demonstrates that users and sellers are both innovative, but have different kinds of resources, knowledge, and expertise, which are advantageous for different types of innovations.

2.2.1 User Skills and Expertise Perhaps the most important user resource is experiential knowledge about user needs and preferences, and about how technology functions in various local contexts. Users acquire experiential knowledge as a low marginal cost byproduct of use, but it may be sticky, in that it is costly to transfer to sellers. Sellers have superior knowledge of mainstream preferences, manufacturing technology, and the like. These different types of knowledge lead to different types of innovations.18 The degree and sort of technical expertise required for UI varies. Inventions that require little technical expertise can be made by ordinary consumer-​users, once the need is recognized. Often, there is a strong correlation between the skills and expertise required for use and those required for invention. This is the case for scientists who invent scientific instruments and physicians who invent medical procedures. Highly motivated participants in an activity also may invest effort in acquiring technical knowledge associated with the technologies they use. User innovators also bring a wide variety of skills and expertise acquired in other parts of their lives to their innovative activities.19

2.2.2 Time and Money Sellers can aggregate revenues over a potentially large number of purchasers and can take advantage of economies of scale. Thus, user invention generally is more likely when the requisite investment is smaller.20 Resources and invention costs range widely across users and inventions, however. While some inventions require expensive materials or equipment, others require relatively small investments. Moreover, some user innovators are professional users or even large commercial firms, with access to substantial resources. User skills and expertise also vary; inventions that would be very costly for some users may be much cheaper for others. Moreover, user innovators are sometimes willing to invest resources over and above their own use value because they anticipate intrinsic, social, or reputational rewards for their innovations. Users also may leverage their resources by collaborating with other users to invent and develop their inventions or through reciprocal sharing of inventions with other user innovators.21 18 

Democratizing Innovation, 66–​76. Democratizing Innovation, 94; Free Innovation, 86–​ 87.   20  Free Innovation, 40. 21  Democratizing Innovation, 85–​89, 95–​97; Free Innovation, 41–​44.

19 

Users, Patents, and Innovation Policy    729

2.3  Scope, Prevalence, and Quality of User Invention Studies of prevalence have investigated the proportion of user inventions in a given technological arena and the fraction of users who invent. Early UI research traced the origins of inventions that were identified as important by experts in various fields. In some fields, large fractions of these high-​quality inventions were UIs.22 Moreover, users tended to invent new functional capabilities, while sellers were more likely to develop convenience or reliability improvements.23 A recent study of medical smartphone apps found that 46 percent were created by users (patients, caregivers, and healthcare professionals).24 The apps developed by users received higher ratings and generated on average three times higher revenues per year than those created by professional developers. A study of the 20 types of mobile phone-​based financial services offered in 2011 by 750 mobile operators and 200 companies belonging to the GSM Association found that at least half had been pioneered by users (all from developing countries). Services developed by users diffused to other countries twice as rapidly as those developed by seller innovators, which suggests that functionality developed by users had particularly broad appeal. The vast majority of services invented in developing countries diffused to developed countries.25 Another set of studies asks what fraction of users innovate. Across a range of technological arenas where UI was known to be important, about ten to 40  percent of users engaged in innovation.26 More than one-​third of physicians surveyed reported having discovered a novel and valuable off-​label use for an approved drug.27 As assessed by medically trained experts, about 28 percent of rare disease patients and caregivers had created useful innovations, while eight percent had created medically novel innovations.28 Researchers found (after employing various mechanisms to screen for novelty), that overall, about 25–​50 percent of firms engage in UI,29 while about two to ten percent of consumers were user innovators.30 22 

Sources of Innovation, Table 1.1.   23  Democratizing Innovation, 70–​72. See, eg, Goeldner and Herstatt (n 10). 25  van der Boor (n 12). UI research has focused mainly on developed countries. However, studies focused on developing countries suggest that user innovation may be particularly prevalent and important in those countries. See also S Praceus and C Herstatt, Consumer Innovation in the Poor versus Rich World—​Some Differences and Similarities in C Herstatt and R Tiwari (eds), Lead Market India (Springer 2012); K Fursov and T Thurner, “God Helps Those Who Help Themselves! A Study of User-​ Innovation in Russia” (2016). , accessed 26 April 2017 (finding that 24 percent of Russian user innovators lived in villages, while only 10 percent lived in large urban areas). 26   Democratizing Innovation, Table 2.1 (summarizing studies). 27 28   von Hippel, DeMonaco, and de Jong (n 9).   Oliveira (n 10). 29   S Flowers, T Sinozic, and P Patel, “Prevalence of User Innovation in the EU: Analysis based on the Innobarometer Surveys of 2007 and 2009” (2009). , accessed 26 April 2017 (around 25–​33 percent of all innovative firms for both user product innovation and user process innovation in the EU); F Gault and E von Hippel, The Prevalence of User Innovation and Free Innovation Transfers: Implications for Statistical Indicators and Innovation Policy MIT Sloan School of Management Working Paper no. 4722-​09 (2009). , accessed 26 April 2017 (more than 40 percent—​Canada); J de Jong and E von Hippel, “Transfers of User Process Innovations to Process Equipment Producers: A Study of Dutch High-​Tech Firms” (2009) 38 Res Policy 1181 (54 percent of SMEs in Netherlands); S Flowers, E von Hippel, J de Jong, and T Sinozic, “Measuring User Innovation in the UK: The Importance of Product Creation by Users” (London: NESTA 2010) (UK—​15 percent). 24 

30 

Free Innovation, 21; Fursov and Thurner (n 25).

730   Katherine J. Strandburg Though data are somewhat sparse, available results suggest that consumer innovations are often of high social value. The majority of consumer innovators in a Finnish survey believed that their innovations would be valuable to “many” (17 percent) or “some” (44 percent) other users.31 Virtually all of those who expected their innovations to have value for “many” (and none of the others) also thought their innovations could become valuable commercial products. Of course, these user innovators may be wrong in their assessments. More objective indications of value come from studies focusing on commercialization. Thus, one study found that innovations originating with users substantially out-​sold seller innovations commercialized by the same firm.32 A survey of commercial firms33 reported that approximately half of innovative firms had commercialized user product modifications and 30 percent had commercialized user-​developed products. Thirty percent of firms adopting user modifications reported that they were of high or medium importance, while about 14 percent of firms adopting user-​developed products reported that they were of high or medium importance. Moreover, many of these firms (60 percent for modifications, 40 percent for new products) reported that the UIs they adopted were new to the enterprise’s market. These studies cannot definitively determine the overall social value of UI, nor can they compare its value to that of seller innovation. They do, however, establish beyond any serious doubt that UI is widespread and is extremely important in at least some technological arenas. If anything, the phenomenon of UI is accelerating as a result of “new technologies, specifically the transition to increasingly digitized and modularized design and production practices, coupled with the availability of very low-​cost, Internet-​based communication.”34

2.4 Free Revealing and the Sharing of User Innovations User innovators often “freely reveal” their innovations to other users without intellectual property (IP) constraints.35 An invention is considered freely revealed when “all intellectual property rights to that information are voluntarily given up by that innovator and all parties are given equal access to it.”36 Though the UI literature does not specify exactly what degree of disclosure is necessary for free revealing, the implication is that revealing must be sufficient to allow the invention to be embodied by other users. When other users are able to make their own embodiments, an invention can be disseminated through peer diffusion.37 31  de Jong et al, “Market Failure in the Diffusion of Consumer-​Developed Innovations: Patterns in Finland” (2015) 44 Res Policy 1856. 32  H Nishikawa, M Schreier, and S Ogawa, “User-​Generated Versus Designer-​Generated Products: A Performance Assessment at Muji” (2013) 30 Int J Res Mark 160. 33  M Niemi and J Kuusisto, “The Role of the User in Innovation: Results from the Finnish Community Innovation Survey (CIS 2010)” (2013). , accessed 26 April 2017. 34  C Baldwin and E von Hippel, “Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation” (2011) 22 Organ Sci 1399. See also E Altman, F Nagle, and M Tushman, “Innovating without Information Constraints: Organization, Communities, and Innovation when Information Costs Approach Zero” in C Shalley, MA Hitt, and J Zhou (eds), Oxford Handbook of Creativity, Innovation, and Entrepreneurship (OUP 2015). 35  Harhoff et al, “Profiting from Voluntary Information Spillovers: How Users Benefit by Freely Revealing Their Innovations” (2003) 32 Res Policy 1752; Democratizing Innovation, 77–​92. 36  Democratizing Innovation, 85. 37  Eric von Hippel, “Horizontal Innovation Networks—​By and for Users” (2007) 16 Ind Corp Change 293.

Users, Patents, and Innovation Policy    731 Free revealing was first studied under the rubric of collective invention in historical case studies of commercial firms,38 where it was considered quite surprising in light of the ordinarily competitive relationships among such firms. The cases often involved groups of firms using relatively new manufacturing technologies. Although the firms were market competitors, they had a common interest in improving the new technology to the point where they could compete with more established firms using older technology. For at least some period of time, their anticipated benefits from free revealing apparently outweighed their concerns about free riding.39 Commercial firms also sometimes freely reveal innovations in certain basic technologies while focusing competition on complementary innovations.40 Free revealing also has been observed in a number of cases involving user innovator hobbyists and in studies of open source software.41 Despite the reported cases of free revealing among commercial competitors, competitive use generally makes free revealing less likely and IP protection more likely. Overall, about 40–​60  percent of commercial firms protect their UIs with IP, loosely defined, and only about 10–​20  percent of firms reported sharing their UIs with other firms or institutions.42 However, IP protection was much less common and transfers more common among small and medium entities in a Dutch survey.43 Even when sharing their UIs, firms do not ordinarily freely reveal them to all and sundry. The most common reason for sharing was “to allow a supplier to build a more suitable final product,” though many firms also were motivated by the opportunity to gain feedback and expertise or to enhance their reputations.44

38 

See, eg, R Allen, “Collective Invention” (1983) J Econ Behav Organ 1 (blast furnaces); P Meyer, Episodes of Collective Invention, US Bureau of Labor Statistics Working Paper WP-​368 (2003). , accessed 26 April 2017 (blast furnaces, steam engines, open source software, Bessemer steel, Homebrew Computer Club); Alessandro Nuvolari, “Collective invention during the British Industrial Revolution: the case of the Cornish pumping engine” (2004) 28 Cambridge J Econ. 347 (2004); C and A Nuvolari, “Inventive Activities, Patents, and Early Industrialization” (2016) 32 Rivista di Storia Economica 77; Democratizing Innovation, 77–​79; J Henkel, “Champions of Revealing—​The Role of Open Source Developers in Commercial Firms” (2008) 18 Ind Corp Change 435; S O'Mahony and B Bechky, “Boundary Organizations: Enabling Collaboration Among Unexpected Allies” (2008) 53 Admin Sci Q 422; J Bessen, “Open Source Software: Free Provision of Complex Public Goods” (2005). , accessed 26 April 2017. 39  See J Bessen and A Nuvolari, “Diffusing New Technology Without Dissipating Rents: Some Historical Case Studies of Knowledge Sharing” (2014). , accessed 26 April 2017. 40  See, eg, J Henkel, “Software Development in Embedded Linux—​Informal Collaboration of Competing Firms” in W Uhr, W Esswein, and E Schoop (eds), Wirtschaftsinformatik 2003/​Band II (Springer 2003); J Henkel, “Selective Revealing in Open Innovation Processes: The Case of Embedded Linux” (2006) 35 Res Policy 953; Henkel (n 38); O’Mahony and Bechky (n 38); Bessen (n 38). 41  Democratizing Innovation, 79–​80. 42  Flowers, von Hippel, de Jong, and Sinozic (n 29) (41 percent have IP, 10.9 percent shared (52 percent for no charge)—​UK); Gault and von Hippel (n 29) (46.4 percent have IP on modifications, 17 percent share modifications (76 percent of these for no charge), 60.3 percent have IP on new technologies, 19 percent share new technologies (47 percent of these for no charge)). 43  de Jong and von Hippel (n 29) (25 percent transferred to producer (48 percent of these for no charge); 13 percent protected with IP). 44  Gault and von Hippel (n 29).

732   Katherine J. Strandburg Consumer-​ user innovators, who often invent non-​ competitive technologies, rarely resort to IP protection45 or attempt to commercialize their inventions46 and the vast majority are willing to freely reveal them.47 Even when user innovators are willing to share their innovations, however, there appear to be barriers to free revealing.48 While 49 percent of Russian consumer innovators49 and 33 percent of UK consumer innovators50 reported sharing details of their inventions with at least some other user, only 18 percent in Finland51 and 18  percent in the US52 reported having done so. Two surveys of Japanese consumer innovators reported very different results, with one finding that only 10.8 percent of user innovators had shared their inventions with others,53 and a second reporting rates of sharing on the order of 70 percent.54 Rare disease patients and caregivers are a textbook case of non-​ competitive user innovators, but only 30 percent reported making any effort to share their innovations with others. Among that 30 percent, few engaged in the level of sharing that would be necessary to make their inventions accessible to a broad swath of potential users. For example, only about eight to ten percent shared information about their inventions online, while fewer than three percent engaged in other activities aimed at more widespread revealing, such as time spent helping others to use the innovation, documenting how to use it, or showing it to medical professionals.55 Similarly, although 66  percent of physicians who developed off-​label drug indications disclosed the information informally to local colleagues, only 22 percent made efforts to reveal their discoveries more widely through publications or professional meetings. Other than a desire to develop more supporting evidence before sharing their discoveries, the most common explanations for not revealing related to the time and effort that would have been required. Consistently, nearly three-​quarters indicated that they would take advantage of quick online reporting to a physician community if it were available.56 One might guess that user innovators would be more likely to freely reveal those inventions that they expect to be most useful to other users. Surprisingly, free revealing efforts do not seem to be strongly correlated to inventors’ perceptions of their inventions’ potential usefulness for others. By contrast, commercialization efforts, when they are made, are highly correlated with the inventor’s perception that the invention will be valuable to other users.57 45   E von Hippel, J de Jong, and S Flowers, “Comparing Business and Household Sector Innovation in Consumer Products: Findings from a Representative Study in the United Kingdom” (2012) 58 Manag Sci 1669 (UK—​2 percent of consumer-​user inventors); de Jong et al (n 31) (Finland—​4.7 percent); S Ogawa and K Pongtanalert, “Visualizing Invisible Innovation Continent: Evidence from Global Consumer Innovation Surveys” (2011). , accessed 26 April 2017. (US—​ 8.8 percent, Japan—​0 percent). 46  See, eg, Free Innovation, 71. 47  de Jong et al (n 31) (6 percent commercialized, while 84 percent were willing to freely reveal). 48  See, eg, Free Innovation, 70–​72. 49  Fursov and Thurner (n 25). 50 51   von Hippel, de Jong and Flowers (n 45).   de Jong et al (n 31). 52  Ogawa and Pongtanalert (n 45). 53  Ogawa and Pongtanalert (n 45). 54  Susumu Ogawa and Kritinee Pongtanalert, “Exploring Characteristics and Motives of Consumer Innovators: Community Innovators vs. Independent Innovators” (2013) 56 Research-​Tech Mgmt. 41. The reason for the difference in results is unclear. 55  Oliveira et al (n 10). 56  von Hippel, DeMonaco, and de Jong (n 9). 57  de Jong et al (n 31); von Hippel, DeMonaco, and de Jong (n 9).

Users, Patents, and Innovation Policy    733 Because the vast majority of user innovators who do not freely reveal also do not commercialize their inventions, a high percentage of user inventions are essentially lost to society. If these lost consumer UIs are of low quality or idiosyncratic to their inventors, that is no particular cause for concern. But, in light of what we have seen so far, there is good reason to worry that socially valuable user inventions are being lost, simply because of the direct costs of free revealing.

2.5 User Communities User innovation often has been studied in the context of user communities58 that form knowledge commons,59 within which users share their innovations and pool resources. The initial emergence of a user community may or may not have much to do with innovation. Participants in an activity may form a community to engage in the activity, share information, organize joint events, lobby for relevant public policies, enforce professional standards, or simply to establish rewarding social relationships with other participants. By allowing widely dispersed users to locate and interact with one another, the Internet has led to a flowering of user communities. User communities are natural focal points for pooling users’ innovative efforts. Active participants in user communities ordinarily are highly dedicated to the focal activity. Dedication can arise from, or result in, the knowledge and skill associated with UI. Dedicated participants are particularly likely to benefit from UI and are thus generally more willing to invest in it. They also benefit from access to others’ innovations and may therefore contribute to developing and improving them. Community membership often provides opportunities for users to acquire greater expertise and to enhance their capacity both to innovate and to make use of other users’ innovations. By gathering likely user innovators together, user communities also foster the development of institutional mechanisms to encourage reciprocal sharing. Communities can impose formal rules or use informal reputational mechanisms to enforce sharing regimes, overcoming the temptation to free ride on other users’ contributions while holding out on sharing one’s own.60 Physicians, for example, have adopted an ethical norm against exclusivity regarding medical procedures and have enforced it vigorously.61 User communities also may make innovation more efficient, by providing economies of scope that aggregate “many people with diverse problem-​solving skills and types of expertise to identify problems and/​or solutions.”62 58  Democratizing Innovation, 93–​106; Franke and Shah (n 7); J West and K Lakhani, “Getting Clear about Communities in Open Innovation” (2008) 15 Ind Innovat 223; S Shah, “Open Beyond Software” in D Cooper, C DiBona, and M Stone (eds), Open Sources 2.0: The Continuing Evolution (O'Reilly 2005). 59  See B Frischmann, M Madison, and K Strandburg, Governing Knowledge Commons (OUP 2014). 60  K Strandburg, “Norms and the Sharing of Research Materials and Tacit Knowledge” in R Dreyfuss, H First, and D Zimmerman (eds), Working Within the Boundaries of Intellectual Property (OUP 2010); K Strandburg, “User Innovator Community Norms: At the Boundary between Academic and Industry Research” (2009) 77 Fordham Law Rev. 2237. 61 Strandburg, Legal but Unacceptable (n 9); Strandburg, Derogatory to Professional Character (n 9). 62  C Hienerth et al, “User Community vs. Producer Innovation Development Efficiency: A First Empirical Study” (2014) 43 Res Policy 190.

734   Katherine J. Strandburg Free revealing is common in user communities, as is illustrated by numerous case studies of communities in which free revealing is the norm.63 A  survey of Japanese consumer-​ user innovators found that user community members were about 30 percent more likely than independent innovators to have shared details of their inventions with others.64 The fact that physicians form a relatively close-​knit user community may also explain the relatively high rates at which they engaged in at least minimal revealing compared to consumer inventors.65 User communities also promote collaboration. While only about eight to 28 percent of consumer-​user innovators in a variety of surveys reported having collaborated with others,66 community members in the Japanese survey were nearly five times more likely than other consumer inventors to have sought assistance from others while developing their inventions.67 Despite all of its benefits, membership in a user community appears to be relatively rare. For example, only eight percent of the consumer innovators in the Japanese survey were community members.

3.  The Patent Law Scholar’s Lens Patents are intended to promote “progress of . . . the useful arts” by using the “fuel of interest” to feed the “fire of genius.”68 Patent exclusivity furnishes the fuel by allowing patent holders (or their licensees) to charge supracompetitive market prices. In theory, patents provide three types of incentives: to invent, to disclose, and to commercialize. Patents purportedly are needed to provide these incentives because of market failures caused by “free rider” problems. Patents can solve these free rider problems, but only at the cost of market exclusivity, which imposes deadweight economic losses, and taxes follow-​on innovation. Patent doctrine thus attempts to cabin the granting and scope of patents to balance the incentive benefits against those costs. In doing so, courts focus mainly on the incentive to invent theory, though they often refer to the incentive to disclose theory. Outside the university technology transfer arena, the incentive to commercialize theory has been primarily a matter of scholarly debate, with little if any impact on patent doctrine.

3.1 The Incentive Justifications for Patents 3.1.1 The Incentive to Invent Justification The need for an incentive to invent is the most often-​cited justification for the patent system.69 The associated free rider story essentially is that inventing a new technology and 63

64  Ogawa and Pongtanalert (n 54).   See, eg, Democratizing Innovation, 77–​80, 93–​106. 66 von Hippel, DeMonaco, and de Jong (n 9).      Free Innovation, 25–​26. 67  Ogawa and Pongtanalert (n 54). 68  Abraham Lincoln, Second Lecture on Discoveries and Inventions (11 February 1859). , accessed 26 April 2017. 69  See, eg, Paulik v Rizkalla, 760 F2d 1270, 1276 (Fed Cir 1985) (“But the obligation to disclose is not the principal reason for a patent system; indeed, it is a rare invention that cannot be deciphered more 65 

Users, Patents, and Innovation Policy    735 bringing it to market requires upfront investment. Once embodiments of an invention are offered for sale—​and the invention thereby revealed—​competitors can copy it cheaply. They can then sell embodiments at a price that is too low to allow the original inventor to recoup her upfront investment. Anticipating this free riding, potential inventors will not invest. Patents address this problem by providing a period of market exclusivity, during which an inventor can prevent competitors from selling embodiments of her invention, charge supracompetitive prices, and recoup her upfront investment. The incentive to invent justification for patents implicitly assumes that potential inventors will forego inventing unless they can recoup their invention costs through commercial sales of embodiments. It is a seller innovator story that relies on an assumption that innovators are strictly competitive.

3.1.2 The Incentive to Disclose Justification Courts often speak of the incentive to invent and incentive to disclose justifications in the same breath, as though both apply to all inventions, but in fact, they apply to different sorts of inventions. The incentive to invent problem arises only when an invention is self-​disclosing, in that commercially exploiting it simultaneously reveals it to competitors.70 There is no incentive to invent problem for non-​self-​disclosing inventions that can be commercially exploited in secrecy, either because they are used in-​house (eg, a manufacturing process) or because they are difficult to reverse engineer (famously, the formula for Coca-​Cola). More precisely, for non-​self-​disclosing inventions there is a natural period of market exclusivity measured by the time it takes for competitors to reverse engineer or independently re-​invent them. If that trade secrecy period is long enough for the inventor to recoup her upfront costs, there is no need for a patent incentive to invent. However, patent doctrine is not satisfied with encouraging invention in the first instance. It seeks also to promote progress by incentivizing early disclosure of inventive ideas, so that they are available to potential follow-​on inventors. Thus, to obtain a patent, an inventor must provide a disclosure of her inventive idea, to be published when the patent is issued. Under US law, the disclosure must be sufficient to “enable” a “person having ordinary skill in the art” (PHOSITA) to make and use the invention.71 Courts and commentators often refer to disclosure as a quid pro quo for the award of a patent.72 The patentee foregoes any advantages in the follow-​on invention race that would have flowed from keeping the inventive idea secret, in exchange for a prolonged period of exclusivity regarding embodiments of the patented invention. The incentive to disclose justification assumes that this exchange is socially beneficial.73 Like any justification for patents, the incentive to disclose story assumes a commercially motivated inventor. Like the incentive to invent justification, it assumes that innovators are readily from its commercial embodiment than from the printed patent. The reason for the patent system is to encourage innovation and its fruits: new jobs and new industries, new consumer goods and trade benefits.”) Such direct statements of the dominance of the incentive to invent rationale are rare, but its primacy is evident in the case law. 70  K Strandburg, “What Does the Public Get? Experimental Use and the Patent Bargain” (2004) 2004 Wis L Rev 81. 71  35 USC § 112. 72  See Strandburg (n 70). 73  See, eg, M Meurer and K Strandburg, “Patent Carrots and Sticks: An Economic Model of Nonobviousness” (2008) 12 Lewis & Clark L Rev 547, 577–​578 for a critique of this assumption.

736   Katherine J. Strandburg competitive. Unlike the incentive to invent story, however, it need not assume a seller innovator. For example, an iconic incentive to disclose fact pattern involves a manufacturing process improvement that cuts costs or improves output quality. Many inventions of this sort are UIs—​the manufacturer inventor intends to profit by using the improved process, rather than by selling or licensing it.

3.1.3 Incentive to Commercialize Justifications Scholars sometimes also present an incentive to commercialize justification for patents.74 (Courts rarely mention this justification.) This terminology can be confusing. Marketing embodiments is the ultimate goal of any seller innovator and the ability to charge higher prices in a commercial market is the presumed source of the “fire of interest” that patents are expected to provide. Thus, commercial sales are assumed by every justification for patenting, including the incentives to invent and to disclose: There is ordinarily no need for a separate discussion of incentives to commercialize. The incentive to commercialize literature relates only to a particular scenario, in which inventor and commercializer are separate entities. To add to the potential for confusion, incentive to commercialize theories address two distinct stages of the commercialization process. When inventor and commercializer are separate entities, commercialization involves three steps. First, in what we might call a matchmaking stage, the commercializer must learn about the invention and decide to undertake its commercialization. Depending on how this occurs, the inventor and commercializer may need to negotiate terms, such as how to divide the eventual profits. Second, in a development stage, the commercializer must invest in whatever activities are necessary to make the invention commercially marketable. Such activities might include creating a prototype, developing technical specifications, devising a user-​friendly design, developing and optimizing manufacturing processes, market research, and, if the invention is very innovative, developing consumer demand. Finally, the commercializer must actually produce and distribute embodiments. Incentive to commercialize theories focus on the first two stages. One version of the incentive to commercialize justification focuses on the point during the matchmaking stage when an inventor must disclose her invention to a potential commercializer. While the incentive to invent justification focuses on potential free riding by competing sellers, this justification is concerned about free riding by potential commercializers in what is called “Arrow’s Paradox.” Potential commercializers will not agree to a deal until the inventor informs them in some detail about the invention. After learning about the invention, the commercializer is in a position to free ride. Rather than concluding the deal, the commercializer can develop and market the invention independently, leaving the inventor empty-​handed. Anticipating this problem, inventors will not invest in inventions that they cannot commercialize on their own. Patents can solve this free rider problem by permitting inventors to maintain ownership of their inventions, even after disclosing them to commercializers.

74 

For various views on the incentive to commercialize, see, eg, T Sichelman, “Commercializing Patents” (2010) 62 Stan L Rev 341, 344; M Abramowicz and JF Duffy, “Intellectual Property for Market Experimentation” (2008) 83 NYUL Rev 337, 340; M Burstein, “Exchanging Information Without Intellectual Property” (2012) 91 Tex L Rev 227; C Hrdy, “Commercialization Awards” (2015) Wis L Rev 13.

Users, Patents, and Innovation Policy    737 Although this argument is theoretically plausible, its practical importance is debatable, given that inventors and commercializers routinely find ways to avoid Arrow’s Paradox by using non-​disclosure agreements and phased disclosure techniques.75 Inventors may even prefer such alternatives, both because detecting and proving patent infringement by an absconding commercializer may be difficult, and because patenting undercuts the option of relying on trade secrecy during the eventual commercialization. The matchmaking stage often poses much more serious problems for inventors, however. Before they can engage in negotiations with potential commercializers, inventors must seek them out and engage their attention. These sort of matchmaking issues can remain quite daunting even after patenting. A second version focuses on the development stage, arguing that commercialization may fail because competing sellers can free ride on a commercializer’s development costs, even if invention costs can be recouped by first mover advantages or are otherwise covered. This is a fairly radical argument from the perspective of standard patent doctrine. Patents are available only for nonobvious inventions, which are presumed to require investments too large to be recouped through first mover advantages. By denying patents on obvious inventions, the doctrine implicitly assumes that the corresponding invention costs are small enough to be recouped through first mover advantages. Obviousness doctrine ordinarily does not account for development costs, which suggests the implicit assumption that any free-​rideable development costs also are small. While there have been some proposals to award exclusive rights based solely on commercialization costs, they have gone nowhere.76 The only influence that the incentive to commercialize justification appears to have had on patent law is in the university technology transfer context, where it famously gave birth to the Bayh-​Dole Act. The Bayh-​Dole Act allows universities to own patent rights on federally funded inventions.77 University discoveries and inventions are somewhat special, in that they often meet the novelty and nonobviousness requirements, but the usual incentive to invent and incentive to disclose justifications are not applicable. Here, the upfront costs of invention are covered by government or philanthropic funding, while disclosure of research results is ensured by academic “publish or perish” norms. Policymakers nonetheless worried that unpatented university inventions might languish in the ivory tower because of failures at the matchmaking or development stages. At the matchmaking stage, Arrow’s Paradox is not at issue, given that academics publish their results in publicly accessible journals. The worry was that academics might not invest much effort in practical implementation of their ideas, while potential commercializers might not learn of results reported in the academic literature. Commercial firms presumably would be more familiar with the relevant patent literature, while patent revenues (funneled by the university into researchers’ personal or research coffers) would motivate academic researchers to engage in the technology transfer process. At the development stage, the concern was that commercializers would be unwilling to invest in developing university inventions unless they could recoup their development costs through patents on the inventions. While the argument that patents should be used to cover

75 

76  See, eg, Sichelman (n 74); Abramowicz and Duffy (n 74). Burstein (n 74). On the ownership of academic inventions see the discussion by Michael Spence in Chapter 29 of this volume. 77 

738   Katherine J. Strandburg development costs has been generally unpersuasive, it was more successful in the university context, perhaps because of an expectation that university inventions would be embryonic, so that development would require unusually large investments.

3.2 Patent Doctrine’s Blindness to User Innovation Patent doctrine makes no explicit distinction between different types of inventors (except with regard to some patent office fees) and does not inquire into their motives. Whether an inventor is an individual, a university, a non-​profit entity, a commercial firm, a user innovator, a seller innovator, or an innovator with some other motivation, the standards for obtaining a patent are the same. Because patent incentives rely on commercialization, and because courts and commentators have tended to emphasize the incentive to invent justification, patent doctrine generally reflects a seller innovator paradigm. Because of its seller innovator focus, the patent discourse treats “commercialization” as essentially synonymous with dissemination of embodiments. In the UI context, sales are not the primary incentives and commercialization is not the only important dissemination mechanism. It would thus be surprising to find that patent doctrine is currently optimal for promoting UI.

4.  User Innovation: Invention, Disclosure, and Dissemination of Embodiments As patent theory recognizes, invention, disclosure, and dissemination of embodiments all are crucial to realizing an invention’s social value. This section discusses how, and under what circumstances, UI can successfully navigate each of these aspects without the need for patents, such that a patent-​free UI paradigm is viable.

4.1 User Innovation and Competition Patents are justified by the concern that socially valuable innovation will be deterred by fears of competitor free riding. For seller innovators, innovation is a purely competitive enterprise. The fundamental reason that a patent-​free UI paradigm can be viable, is that user innovators nearly always obtain at least some non-​competitive (or otherwise non-​free-​rideable) value from their innovations. The patent-​free UI paradigm relies on three primary consequences of that difference: i) use itself ordinarily has some non-​competitive value, which may be enough to motivate invention; ii) user innovators, unlike seller innovators, often obtain significant non-​competitive benefits and non-​free-​rideable reputational rewards from freely revealing their inventions to other users, which can be sufficient to motivate free revealing, even at some direct cost; and iii) UIs often can be successfully disseminated by peer diffusion, in which other users produce their own embodiments based on the information that the inventor freely reveals. When these three conditions are fulfilled, UI does not encounter the free rider problems that justify patents in the seller innovation context.

Users, Patents, and Innovation Policy    739 An invention’s non-​competitive use value is a critical determinant of whether the patent-​ free UI paradigm is viable. User innovations run the gamut in this regard. Some, such as household tools, are strictly non-​competitive, in that their use value is unaffected by whether others use them. In addition, some inventions have network effects, in that they become more useful to each user when others adopt them. There also are UIs, however, such as commercial manufacturing processes, that ordinarily have purely competitive use value. Many technologies have both competitive and non-​competitive or synergistic aspects. When use is sufficiently competitive, user innovators might be willing to invent, only if they can maintain use exclusivity through patenting or trade secrecy.78 However, use exclusivity can be much more socially costly than sales exclusivity. The social value stemming from use of an invention’s embodiments has two sources: direct value to users, and collateral value of that use to non-​users. During a period of exclusive sales, embodiments are distributed to multiple consumers. Social benefits include the total value of those consumers’ use of the embodiments, plus any collateral value to non-​users. Social benefit is reduced during the exclusive sales period because of supracompetitive pricing, but still is likely to be substantial. During a period of exclusive use, however, the invention is not disseminated to other users. Moreover, the inventor’s competitive edge is strictly zero sum and thus has no net social value. The social benefit during exclusive use thus is limited essentially to the collateral value of that exclusive use for non-​users, plus any non-​competitive use value accruing to the single exclusive user. Unless use has substantial collateral value for non-​users, society is deprived of nearly all of the invention’s social value during the exclusivity period. Worse yet, the purely competitive private rewards of exclusive use can incentivize user innovators to make socially wasteful investments in highly competitive inventions whose social benefits are outweighed by their social costs. To illustrate the point, we consider four possible user inventions: a new advertising technique, an improved piece of sports equipment, a new medical procedure, and an improved manufacturing process.

4.1.1  Advertising Technique Suppose a new advertising technique simply persuades buyers to switch from one competing product to another. Such a purely competitive invention has no social value, since it merely transfers customer revenue from one advertiser to another. Any investment in developing such an invention is socially wasteful. Nonetheless, exclusive use of the technique might deliver enough private rewards to motivate its invention.

4.1.2  Sports Equipment Improved sports equipment often has both competitive and non-​competitive benefits for its athlete users. Consider an improved tread for athletic shoes that provides a competitive edge if used exclusively, but also provides a safety benefit to every player who uses it. Because

78  Franke and Shah (n 7); C Baldwin et al, “How User Innovations Become Commercial Products: A Theoretical Investigation and Case Study” (2006) 35 Res Policy 1291.

740   Katherine J. Strandburg winning is a zero-​sum game, the competitive edge provided to an exclusive user has no social value. A user inventor’s exclusive use of the improved tread also has no significant collateral value to non-​users (unless it somehow makes the sport more enjoyable for spectators). The social value realized during exclusive use of the improved tread thus is nil compared to its potential social value, when all users enjoy its safety benefits. It is also much less than would be realized during a period of exclusive sales of the improved shoes. If the safety benefits are sufficient to sustain the patent-​free UI paradigm, patenting would be unnecessary and socially costly. Here again, however, the private benefits of exclusive use might entice the inventor to patent.

4.1.3  Medical Procedure From the perspective of its physician users, a medical procedure innovation also combines competitive and non-​competitive benefits. The medical procedure is different from the improved tread for athletic shoes because it creates collateral social value for at least some patients, even when used exclusively by a single doctor. However, since a single physician can treat only a few patients, that social benefit is likely to be dwarfed by the social value that would be realized if the procedure were available to all doctors. Thus, exclusive use still has a high social cost. The evidence suggests that the patent-​free UI paradigm generally is viable for medical procedure innovations.79 If so, patenting is socially undesirable in this case as well.

4.1.4  Manufacturing Process Consider a manufacturing process innovation that produces higher-​quality products. This innovation has purely competitive benefit for its manufacturer user inventor, which would dissipate entirely if the process were adopted widely by other users (in this case, other manufacturers). Thus, like the advertising technique, it has no noncompetitive use value and hence use has no direct social value. However, because the process produces improved products, its use—​even if by a single manufacturer—​has significant collateral value for non-​ user consumers.80 Such an invention can produce substantial social value even during a period of exclusive use. Moreover, because the inventor’s private returns stem only from the invention’s competitive value, the patent-​free UI paradigm is not viable. Patenting or other exclusivity mechanisms are socially desirable to incentivize innovation in this case. As the balance of this chapter explains, the interplay between competitive and non-​ competitive use value helps determine whether a patent-​free UI paradigm can succeed without succumbing to the free rider problems that justify patenting. The innovation’s collateral social value to non-​users helps determine the social cost of relying on exclusivity to fix any failures. 79  See Strandburg, Derogatory to Professional Character? (n 9); Strandburg, Legal but Unacceptable (n 9). 80  See also K Strandburg, “What If There Were a Business Method Use Exemption to Patent Infringement?” (2008) Mich St L Rev 245, 272 (arguing that exclusive use of industrial processes also may be less socially costly because such processes often are tightly tailored to a particular product, rather than widely applicable).

Users, Patents, and Innovation Policy    741

4.2 User Invention and Incentives to Invent The UI literature focuses on technological developments that are new to the world (roughly equivalent to the patent law concept of “novelty”), but does not generally employ a prerequisite comparable to patent law’s nonobviousness standard. The UI literature also does not precisely define the point at which “invention” has occurred. Ordinarily, though the assumption is that a user innovator actually reduces her invention to practice in a form that is valuable to her for her own use.

4.2.1 User Motivations for Invention User innovation research has provided both theoretical and empirical insight into why users invent, what kinds of inventions they are likely to make, and who is likely to become a user inventor.81 Users are motivated to invent when existing technology does not meet their needs. Seller innovators naturally focus their market research and R&D efforts on appealing to relatively large groups of mainstream customers, rather than on meeting the needs and preferences of small groups outside of the mainstream. Existing technology thus is most likely to be unsatisfactory for two types of users: “lead users,” who are dissatisfied with mainstream technology because they are on the cutting edge of use, and users who have persistently non-​mainstream needs and preferences.82 The basic use motivation is often supplemented by altruistic motivations, expectations of reputational rewards, the anticipated benefits of free revealing, and various benefits of participating in the invention process.83 In a large-​scale survey of Finnish consumers, in addition to the benefits of use, relatively large fractions of consumer innovators were motived by enjoyment of the creative process (20 percent), by altruism (13 percent), and by the potential to learn from the process (12 percent). By contrast, very few (three percent) were motivated by potential profits from sales.84 User community membership facilitates learning and collaboration that make invention less costly. It also appears to enhance hedonic motivations to invent. A Japanese study found that community innovators were more likely than independent innovators to identify enjoyment, learning, the desire to help others, and reputation as motivations for their innovative activities, while independent innovators were more likely to identify avoiding the cost of purchasing an existing product.85 The combination of use and hedonic motivations may even make community members more likely to create innovations that are both more useful and more novel (in patent parlance, these inventions would be more likely to be nonobvious).86

4.2.1.1 Lead Users Lead users include scientists who are attempting to measure newly discovered phenomena in ways that exceed the capabilities of existing instruments, sports enthusiasts 81 

See, eg, Democratizing Innovation, 33–​76; Free Innovation, 115–​126. Democratizing Innovation, 19–​44. 83  C Raasch and E von Hippel, “Innovation Process Benefits: The Journey as Reward” (2013) 33 Sloan Manage Rev. 84  de Jong et al (n 31). 85  Ogawa and Pongtanalert (n 54). 86  RM Stock et al, “Impacts of Hedonic and Utilitarian User Motives on the Innovativeness of User-​ Developed Solutions” (2013) , accessed 26 April 2017. 82 

742   Katherine J. Strandburg who are attempting new maneuvers that test the limits of existing equipment, and so on. Lead users’ problems and preferences are unlikely to surface in traditional market research or to attract investment from seller innovators. The factors that drive lead users to the cutting edge—​such as dedication, high need, or intrinsic enjoyment—​are likely to mean that lead users “are positioned to benefit significantly by obtaining a solution to those needs.”87 Lead users’ needs and preferences often are predictive of future market trends. They “face needs that will be general in a marketplace, but  . . .  face them months or years before the bulk of that marketplace encounters them.”88 Because lead users provide insights into the evolving direction of broader market demands, companies have some incentive to ferret out their needs and preferences to gain a competitive advantage. One branch of the UI literature makes this point and explores how firms can best identify and engage with lead users.89 In practice, though, these efforts do not seem to substitute for lead UI. While some firms have adopted lead user approaches to market research, many have not. In any event, lead users may not find it worthwhile to devote the necessary time and energy to communicating their needs and preferences to seller firms, given that these firms remain focused on anticipating the evolution of the mainstream market, rather than on satisfying the current needs and preferences of lead users themselves. For those on the cutting edge, UI often continues to be the most effective strategy. Thus, even if lead user market research eventually is widely adopted by sellers, lead UI is likely to continue.

4.2.1.2 Unusual Needs and Preferences Seller innovation fails to satisfy the needs and preferences of some groups of users simply because there are too few of them to comprise a commercially attractive market. Rare disease patients and caregivers are a notable example of such a group. Rare disease patients are often quite ill, so that they and their caregivers have strong demand for innovations addressing their needs. High levels of UI among rare disease patient and caregivers reflect this reality.90 In other contexts, user needs and preferences are simply heterogeneous. In such markets, the traditional approach for sellers is to optimize profits by designing a range of products, each aimed at some reasonably large swath of customers. Customers are left to “satisfice” based on the available options. User invention has the potential to produce a better fit with heterogeneous user needs. As one strand of the UI literature recognizes, one way for sellers to accommodate users with heterogeneous preferences is to design toolkits or other mechanisms that lower the costs of customization and facilitate UI.91 A user’s incentive to innovate in these situations will depend on the degree of misfit between her preferences and available market options, and on the overall value she places on the particular use in question.

87 

Sources of Innovation, 107.   88  Democratizing Innovation, 19–​31. 90  Oliveira et al, supra note 10. Democratizing Innovation, 133–​146. 91  Democratizing Innovation, 147–​164. 89 

Users, Patents, and Innovation Policy    743

4.2.2 Free Riders, User Inventors, and Patents As discussed earlier, the story behind the incentive to invent justification for patents is that seller inventors will be unable to recoup their inventive costs because competitors will free ride. The incentive to invent justification is much weaker in the UI context because invention costs are usually offset by at least some non-​competitive use value. Thus, patent exclusivity will often be unnecessary to motivate a user innovator, when it might have been necessary to motivate a seller innovator. Of course, when invention costs exceed non-​competitive benefits, additional incentives to invent may be needed. Patenting is one means to provide them. Even in such cases, UI is socially beneficial when it is cheaper or provides different inventions than seller innovation.

4.3 Free Revealing of User Inventions and Incentives to Disclose 4.3.1 Comparing Free Revealing and Patent Disclosure The concept of free revealing has two parts: The invention must be “revealed” to other users, and it must be “free” (in that others are permitted to make and use it). The revealing aspect of free revealing is similar in many ways to the disclosure that must be made in exchange for a patent. Free revealing is not understood to mean that every potential user must be enabled to make an embodiment. Rather, free revealing means that information about the invention is accessible to the dedicated users who are likely to implement it for their own use and engage in follow-​on invention. This standard for revealing is quite similar to the enablement requirement of patent law. While patent disclosure is “revealing,” it certainly is not free. Both patent disclosure and free revealing allow others to use the inventive idea in follow-​on innovation, but free revealing occurs only when inventors also forego exclusive rights in embodiments. The “free” in free revealing thus refers primarily to other users’ freedom to make and use the invention.

4.3.2 Motivations for Free Revealing 4.3.2.1 Benefits of Free Revealing Potential benefits of freely revealing a UI to other users include network effects, the possibility that others will test, comment upon, and help to improve the invention, the potential for reciprocal access to other users’ innovations, benefits from a shared innovation process (such as learning from others), reputational rewards, and altruistic and other hedonic benefits.92 A user inventor also may benefit by combining free revealing with preferential access to some complementary asset that improves the invention’s use value. Possible examples of such assets include superior skill or expertise, specialized equipment, and scarce materials. In one strategy, the inventor freely reveals her invention, but maintains

92  Democratizing Innovation, 77–​91; J Lerner and J Tirole, “Some Simple Economics of Open Source” (2002) 50 J Ind Econ 197 (2002); Raasch and von Hippel (n 83).

744   Katherine J. Strandburg a competitive edge through exclusive use of the complementary asset. In a second, the inventor metes out access to the complementary asset in exchange for compensation. Freely revealing the invention then helps create a “customer base” for the complementary asset. The benefits of free revealing are minimal for purely competitive user inventions and maximal for purely non-​competitive inventions. Thus, the more an invention’s non-​competitive use value outweighs its competitive value, the more willing the inventor will be to freely reveal it. User communities enhance the benefits of free revealing by making it easier to reach active users who can and will embody the invention for themselves, improve it, and reciprocally reveal their own innovations. User communities also facilitate reputational rewards and provide “sociability, support, information, a sense of belonging, and social identity,”93 all of which enhance the benefits of free revealing. A user belonging to a user community also is much more likely to freely reveal a partially developed invention in the expectation of finding other users to assist in developing it into a workable technology.

4.3.2.2 The Direct Costs of Revealing Besides foregoing any benefits of exclusivity, inventors who freely reveal may or may not incur direct revealing costs, depending on whether the invention is self-​disclosing94 and on the tools and infrastructure available in a given context. To reveal her invention effectively, a user innovator must codify it in a format that will enable other users to make and use it and make the codified information available to potential users who are capable of producing their own embodiments. User communities reduce the direct costs of free revealing by providing convenient access to dedicated and capable users. They often also provide infrastructure and tools that make revealing less costly and more effective.95 For example, a simple website devoted to a particular type of use can greatly reduce the costs of finding dedicated users and delivering information to them, as can more traditional journals, regular in-​person meetings, and so on.

4.3.3 Free Revealing, Free Riding, and Patents Except for inventions with high competitive use value, the benefits of free revealing will often outweigh the benefits of exclusivity. Even when inventors do not seek exclusive use, however, free revealing can be deterred if its direct costs are sufficiently onerous;96 indeed, such costs often seem to be the primary barrier to free revealing. By enhancing the benefits and reducing the costs of free revealing, user communities help to make free revealing more attractive to inventors.

93  Democratizing Innovation, 93–​97; see also Lakhani and Wolf (n 8); S Shah, “Understanding the Nature of Participation & Coordination in Open and Gated Source Software Development Communities” in Best Paper Proceedings of the Sixty-​Third Annual Meeting of the Academy of Management (CD), ISSN 1543–​8643 (2004). 94  See K Strandburg, “Users as Innovators: Implications for Patent Doctrine” (2008) 79 U Colo L Rev 467 for the distinction between self-​disclosing and non-​self-​disclosing inventions. 95  Democratizing Innovation, 93. 96  See de Jong et al (n 31) and von Hippel, DeMonaco, and de Jong (n 9), both pointing out that even if user innovators are non-​competitive, diffusion may fail because “the benefits that accrue to adopters [will] be partially or entirely an externality from their point of view.”

Users, Patents, and Innovation Policy    745 When an invention’s competitive use value is substantial, the inventor will weigh the competitive advantages of exclusivity against the non-​competitive benefits of free revealing. An inventor will not opt to patent unless patenting offers more robust exclusivity than trade secrecy. As a result, there will be situations in which inventors prefer free revealing to trade secrecy, even though they prefer patents to free revealing. In such cases, the very availability of patents deters free revealing.97 That unfortunate possibility does not arise in the seller innovator context, since sellers derive no benefits from free revealing that could possibly outweigh the benefits of secrecy. Even if the inventor prefers trade secrecy to free revealing, such that patenting would induce earlier disclosure, the trade-off between early disclosure and prolonged exclusivity is much less likely to be socially worthwhile in the UI context. On the whole, unless a user invention confers collateral benefits on non-​users during the exclusivity period, the patent incentive to disclose is unlikely to be socially beneficial.

4.4 Diffusion, Dissemination, and Incentives to Commercialize 4.4.1 Modes of Disseminating User Innovations User innovation research has identified four modes of UI dissemination for: inventor mode, community mode, network exchange mode, and commercial mode.98 During the inventor mode, the inventor creates an invention and develops it for her own use. Use during this mode is either exclusive to the inventor or confined within a very small group. Some UIs are sufficiently idiosyncratic that the inventor mode is enough from a social perspective. User innovators may stop at this mode even when dissemination would be socially valuable either because they seek competitive advantage from exclusive use or because they are insufficiently motivated to freely reveal their inventive ideas or to produce and sell embodiments of their inventions. User innovator firms ordinarily do not freely reveal or sell embodiments because they opt for exclusive use. The limited available data suggest that other user innovators most often stop at the inventor mode simply because they do not expect the private benefits of pursuing the other options to outweigh the costs.99 The community and networks modes are forms of peer diffusion. Both depend on other users’ willingness and capacity to make their own embodiments of the invention. In the community mode, a few dozen or so dedicated users learn of the technology and replicate it for their own use. These dedicated producer-​users often make their own improvements and modifications, which then spread among the group. In the network exchange mode, the group of users expands to include some who are not willing or able to produce their own embodiments without assistance. Producer-​users either assist these users to make their

97 

See Strandburg, Business Methods (n 80) p 250. S Shah and C Mody, “Creating a Context for Entrepreneurship: Examining How Users’ Technological and Organizational Innovations Set the Stage for Entrepreneurial Activity,” in B Frischmann, M Madison, and K Strandburg (eds), Governing Knowledge Commons (OUP 2014). See also Baldwin et al (n 78). 99  Free Innovation, 65–​76. 98 

746   Katherine J. Strandburg own embodiments or produce embodiments for them. Network exchange differs from commercialization because producing for other users is a sideline for these producer-​users, who assist other users for little or no compensation (enough to cover their costs, perhaps). In the network mode, the version supplied by producer-​users is often an incomplete kit, rather than a fully operational product. Most importantly, the network exchange mode remains relational, and is based on informal exchanges negotiated among individuals who are linked in a social network. For some user inventions, all potential users are sufficiently competent and social relationships are such that peer diffusion in one of these modes will meet society’s needs for dissemination of embodiments. For others, however, commercial production may eventually be needed to reach less sophisticated potential users.100 In the commercial mode, sellers produce embodiments for consumer-​users to purchase. The commercial mode generally involves standardization of the design and use of the technology, so that a firm can obtain economies of scale, and a transition from relational exchanges to arms-​length market transactions. There are several paths to commercial dissemination of user inventions. Often, commercial dissemination follows a period of peer diffusion, either because a producer-​user eventually decides to become a user entrepreneur or because an existing seller firm recognizes a growing market and adopts the invention. In such cases, commercial dissemination proceeds without patents, as part of a patent-​free UI paradigm. User innovators also may opt for commercial dissemination, via entrepreneurship or by partnering with an existing commercializer, directly from the inventor mode. Few do so, however. In the Finnish survey, for example, only six percent of consumer-​user innovators commercialized their inventions; some degree of peer diffusion was about three times more common.101 When user inventors do opt to go directly from the inventor mode to market, they frequently pursue exclusive sales strategies, such as patenting.102 Not surprisingly, such direct commercialization efforts are negatively correlated with willingness to freely share knowledge about one’s inventions.103 When opting to move directly from the inventor mode to the commercialization mode, user innovators may confront some free rider issues similar to those confronted by seller innovators. Since user innovators are motivated to invent by their own use, however, incentive to invent issues do not arise. Moreover, unlike supposedly embryonic university inventions, user inventions are likely to have relatively low development costs, since they ordinarily will have been reduced to practice by the inventors for their own use.

4.4.2 Dissemination by Peer Diffusion 4.4.2.1 Peer Diffusion and the Stages of Dissemination In peer diffusion, the “commercializer” comprises the community of dedicated users who possess the knowledge, skills, and resources needed to produce embodiments for their own use. Assuming the inventor has produced an embodiment of the invention for her own use, there will ordinarily be at least a subset of dedicated users with the necessary capacity.

100  102 

101  de Jong et al (n 31). See Baldwin et al (n 78); Free Innovation, 73. 103 Shah and Tripsas (n 14).   de Jong et al (n 31).

Users, Patents, and Innovation Policy    747 The matchmaking stage of dissemination by peer diffusion occurs through free revealing. As long as an inventor freely reveals her invention to a sufficient number of dedicated and capable users who believe the invention will be valuable to them, the peer diffusion process can begin. The development stage may have been completed before revealing, when the inventor honed the invention for her own use. Often, though, peer diffusion results in further development, as producer-​users improve and adapt the invention based on their own expertise, preferences, and needs. Moreover, collective development can occur even when a user shares an incomplete inventive idea, or one that she has not successfully embodied for her own use. (In patent terminology, this means that peer diffusion might be used to complete the invention stage.) In peer diffusion, distribution occurs through producer-​users, who make their own embodiments and, in the network mode, assist in distributing embodiments to other users within relational networks.

4.4.2.2 Peer Diffusion’s Limitations Peer diffusion can fail or be incomplete for several reasons, even when an inventor has attempted to freely reveal her invention. Peer diffusion can fail at the matchmaking stage if the information revealed by a user inventor does not reach the necessary nucleus of potential producer-​users. For example, a user inventor might reveal her invention to several of her friends, but if they do not have the interest or capacity to make their own embodiments, the peer diffusion process will flounder. Peer diffusion also can fail at the development stage if development of an embodiment suitable for the community or network mode requires expertise or resources that are beyond the combined capacity of the user community. For example, physicians are common inventors of medical devices, instruments, and procedures to use in treating their patients. While medical procedures are developed and distributed by peer diffusion, development by peer diffusion is impractical for many medical devices because it requires specialized engineering and regulatory expertise, along with financial and other resources, that the physician community is unlikely to contribute in a collective development process. Finally, peer diffusion can fail at the distribution stage if the community and network modes do not reach all interested users. The community mode fails to distribute embodiments to users who are unwilling or unable to make their own embodiments. While the network mode can reach some such users, it will fail if some potential users do not have the requisite social relationships, or if assisting all potential users is too burdensome for producer-​users. It is difficult to assess peer diffusion’s effectiveness empirically, since it is hard to know what proportion of UIs would provide significant social value if disseminated. Moreover, most of the available data provide only very crude yes/​no indicators of dissemination and do not probe the extent of dissemination. In light of this yes/​no threshold, reported peer diffusion rates seem quite low, at least for consumer-​user inventions. In studies in six countries, only about five to 21  percent of consumer-​user innovators reported that their inventions had been adopted by any other users.104 The Finnish study, which asked respondents to evaluate their inventions’ likely value to other users, found similar rates of adoption regardless of 104 

Free Innovation, 68, 71.

748   Katherine J. Strandburg the inventor’s assessment.105 The survey of physician off-​label drug innovations found quite different results from the consumer inventor surveys, however: 86 percent of physician innovators reported that their discoveries were being used by at least a “few” other physicians.106 Because free revealing is a prerequisite to peer diffusion, low rates of dissemination may be due primarily to low rates of free revealing, rather than to low rates of adoption after an invention is revealed. The Finnish study provides some support for this conjecture.107 Only 16 percent of consumer inventors in that survey reported that their inventions had been adopted by any other user. Rates of even minimal revealing were also low, however; only about 18 percent reported revealing to at least one other user. Thus, as a fraction of revealed inventions, the reported adoption rate is 88 percent—​quite high. This adoption rate is comparable to the 86 percent minimal adoption rate for physician innovator, whose rates of minimal revealing were much higher. The differences in minimal dissemination rate between the consumer and physician inventors appear to be due primarily to very different rates of revealing. Producer-​users in the community mode are not simply passive recipients of revealed innovations. By deciding which inventions to adopt, they play an important role in quality screening of UIs. The physician innovator survey inquired about the extent of dissemination, and allowed the authors to probe the relationship between perceived invention value and user adoption. While only 24 percent overall reported adoption by “many” or “nearly all” physicians, 48 percent reported such high levels of dissemination for discoveries of major importance.108 These differences in the extension of dissemination did not appear to result from any calibration of diffusion effort to invention value. Like the consumer-​user inventors in the Finnish study, physician innovators did not make significantly greater efforts to reveal their more important innovations, even though greater revealing effort did seem to foster greater dissemination of valuable innovations.109 The greater extent of dissemination of more important inventions reflects the quality screening function performed by other users. Quality screening is also evidenced by the observation that, while greater revealing effort appeared to lead to more widespread adoption of important discoveries, it had no apparent effect on adoption of minor discoveries. The Finnish consumer survey suggests an interesting wrinkle regarding the role of other users in quality screening.110 About 15 percent of inventions deemed “valuable to none” were adopted by at least one other user, presumably because the inventors underestimated the value of those inventions. Not surprisingly, inventors made no effort to commercialize such inventions. Peer diffusion is thus the only viable path for disseminating such undervalued inventions. Just as user communities increase the benefits of free revealing for inventors, they increase the effectiveness of peer diffusion at every stage of dissemination by providing access to dedicated and capable users, education and support for users to develop the capacity to create their own embodiments, and relational paths along which information about the invention can flow and collaborative development can occur. They also may bring users of varying 105 

106  von Hippel, DeMonaco, and de Jong (n 9). de Jong et al (n 31). 108  von Hippel, DeMonaco, and de Jong (n 9). de Jong et al (n 31). 109  von Hippel, DeMonaco, and de Jong (n 9). See also Free Innovation, 67–​72. 110  de Jong et al (n 31). 107 

Users, Patents, and Innovation Policy    749 levels of dedication and expertise together to make distribution via the network mode more effective. Consistent with this expectation, in a Japanese study, community innovators’ innovations were nearly four times as likely as independent innovators’ inventions to be adopted by others, although the inventors’ self-​assessments of their inventions’ valuation were similarly distributed.111

4.4.3 Commercialization After Peer Diffusion If the patent-​free UI paradigm is to succeed, sellers must pick up the slack when peer diffusion cannot effectively distribute embodiments to all potential users. After a period of peer diffusion, commercialization must occur without patent protection. As a result, peer diffusion may continue in parallel with commercial dissemination if some dedicated users enjoy making their own “home brew” embodiments or want to customize them in some way. What motivates sellers to step in under these circumstances? User innovators absorb the costs of invention, avoiding incentive to invent issues. User innovation and peer diffusion also reduce commercialization costs at both the matchmaking and development stages. Matchmaking costs are substantially reduced. When peer diffusion reaches enough users to provide a commercially attractive market, the invention can easily come to the attention of a seller firm. After free revealing and peer diffusion have occurred, there is no longer an Arrow’s Paradox issue. Since the invention has been freely revealed, there are no licenses to negotiate. Peer diffusion essentially crowdsources market research and helps to develop a potential customer base. It provides a trial period during which an invention’s potential appeal can be assessed. User innovators and producer-​users may also absorb significant costs of developing, testing, and improving the invention. As a result, sellers can rather easily step in to exploit their own strengths, such as economies of scale, production facilities, and distribution channels aimed at mainstream users. Even if traditional sellers are not interested in stepping in, peer diffusion may entice accidental user entrepreneurs112 into making the transition from producer-​user to commercial supplier. Accidental user entrepreneurs often are motivated by rewards over and above the financial profits that motivate traditional sellers. They usually are dedicated users who find pleasure in the process of developing innovations for their chosen activity and in interacting with other users—​their potential customers. When they observe demand outpacing the capacity of the community and network modes, they may relish the opportunity to give up a day job and immerse themselves more completely in an activity they love. Because of these collateral rewards, accidental user entrepreneurs are likely to be willing to accept somewhat lower profits than seller firms and to commercialize inventions aimed at smaller, more specialized markets. Accidental user entrepreneurs often have competitive advantages over traditional seller firms as well. They usually continue to be active lead users and to maintain relationships with other users, giving them a leg up in discerning opportunities for further innovation, learning about new inventions at the peer diffusion stage, and identifying potential customers. They may benefit from their reputations as users, because potential customers either believe that user entrepreneurs’ skill or experience will lead to better quality products or 111 

Ogawa and Pongtanalert (n 54).

112 

Shah and Tripsas (n 14).

750   Katherine J. Strandburg simply prefer to purchase from fellow users. Moreover, while foregoing patents, accidental user entrepreneurs may rely heavily on trademarks, which allows them to cash out their reputations in the user community to gain an enduring advantage over traditional sellers.

4.4.4 Patents, Peer Diffusion, and Incentives to Commercialize The peer diffusion-​commercialization sequence has significant social advantages over exclusivity-​based commercialization directly from the inventor mode. It circumvents the concerns raised by the incentive to commercialize justifications for patenting, solving matchmaking issues, and reducing distribution costs, without imposing the economic deadweight loss and transaction costs of patenting or trade secrecy, Moreover, because peer diffusion can continue in parallel with commercialization, lead users can produce a continuing stream of follow-​on innovations.

5.  User Innovation, Patent Doctrine, and Innovation Policy: Some Implications Various policy efforts may help society to reap the potential benefits of the patent-​free UI paradigm. This section discusses two approaches:  Promoting user communities and modifying patent doctrine.113

5.1 Promoting User Communities One promising approach for increasing the viability of the patent-​free UI paradigm is to strengthen user communities.114 User communities promote UI by facilitating collaboration, increasing the benefits and decreasing the costs of free revealing, and making successful peer diffusion more likely. As a result, user communities also make patenting relatively less attractive to user innovators, except for the most highly competitive inventions. Tools and infrastructure can greatly reduce the costs and improve the effectiveness of all stages of UI and promote the emergence and viability of user innovator communities. Examples include online archives of UIs, educational materials, platforms

113  In addition to the policy suggestions here, see A Torrance and E von Hippel, “The Right to Innovate” (2015) Mich St L Rev 793; M Burstein, “Rethinking Standing in Patent Challenges” (2015) 83 Geo Wash L Rev 498, 536; M Carrier, Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law (OUP 2009); R Dreyfuss, “Does IP Need IP? Accommodating Intellectual Production Outside the Intellectual Property Paradigm” (2010) 31 Cardozo L Rev 1437; W Fisher III, “The Implications for Law of User Innovation” (2010) 94 Minn L Rev 1417; W Seltzer, “The Imperfect is the Enemy of the Good: Anticircumvention versus Open Innovation” (2010) 25 Berkeley Tech LJ 911; L Vertinsky, “An Organizational Approach to the Design of Patent Law” (2012) 13 Minn JL Sci & Tech 211, 278; S Mehra, “Paradise Is a Walled Garden? Trust, Antitrust, and User Dynamism” (2011) 18 Geo Mason L Rev 889; Free Innovation, 127–​139. 114  For similar suggestions, see Free Innovation, 124–​126.

Users, Patents, and Innovation Policy    751 for communicating with other users, “maker spaces,”115 and technologies such as 3D printing. Tools and infrastructure are costly to create and maintain, however, and are subject to collective action problems, creating a sort of chicken-​and-​egg situation in which communities to support and maintain them cannot emerge without them. As a result, outside interventions to provide tools and infrastructure can have big social payoffs. Various approaches are possible.116 Individuals sometimes invest in tools and infrastructure out of altruism, to obtain reputational benefits, or because they place unusually high value on innovation in a particular arena.117 Commercial firms sometimes create infrastructure for user communities into order to gain a window into user preferences and to benefit from UIs.118 However, these private efforts are unlikely to be socially optimal. Governments and charitable foundations also can invest in user community infrastructure or can encourage the development of technologies that facilitate user invention and production of embodiments. The Internet is the most obvious example of publicly-​funded infrastructure that supports user communities, but more targeted support is also desirable. One example of such a venture is Patient Innovation, a non-​profit organization that provides an online forum for rare disease patients and caregivers to reveal their own UIs and learn about the innovations of others.119 Patient Innovation also enlists volunteer medical professionals to help in screening the contributions for safety and efficacy. Besides creating tools and infrastructure for user communities, public and charitable institutions could “devote more resources to scanning communities of practice to ascertain beneficial innovations that can be brought to scale”120 and to publicizing UIs, thereby relieving user innovators of some of the direct costs of revealing and matchmaking. Policy initiatives aimed at shoring up user communities need not be limited to consumer innovators, but could be aimed to promote UI by professionals and in the commercial sector more generally wherever use has a socially valuable non-​competitive component. For example, public support could be provided for the type of online community for sharing off-​label drug uses favored by physicians.121 Professional societies could be encouraged to evaluate whether their activities could be designed more intentionally to promote the 115  Makerspaces have been described as “community centers with tools,” See . They range widely in sophistication. See, eg, P Svensson and R Koss Hartmann, “Policies to Promote User Innovation: Evidence from Swedish Hospitals on the Effects of Access to Makerspaces on Innovation by Clinicians” (2016) , accessed 26 April 2017 (discussing the impact of hospital makerspaces—​“staffed facilities with prototyping tools and the expertise in using them”—​on physician user innovation). 116  See, eg, Frischmann, Madison, and Strandburg (n 59) 474–​475 for examples of knowledge commons infrastructure. 117  See, eg, P Meyer, “An Inventive Commons: Shared Sources of the Airplane and Its Industry” in Frischmann, Madison, and Strandburg (n 59) (describing how the collective invention of the airplane was facilitated by the publication of a bibliographic work by Octave Chanute). 118  See, eg, Free Innovation, 90–​99; Y Antorini et al, “Collaborating with Customer Communities: Lessons from the Lego Group” (2012) MIT Sloan Manage Rev. 119  P Oliveira et al, “Challenges and Opportunities in Developing and Sharing Solutions by Patients and Caregivers, the Story of a Knowledge Commons for Patient Innovation” in Frischmann, Madison, and Strandburg (n 59). 120  P Lee, “Social Innovation” (2014) 92 Wash UL Rev 1, 64. 121  von Hippel, DeMonaco, and de Jong (n 9). See also R Abbott, “The Sentinel Initiative as a Knowledge Commons” in Frischmann, Madison, and Strandburg (n 59).

752   Katherine J. Strandburg sharing, evaluation, and improvement of user-​developed tools and methods relevant to their professional practice. While there certainly are reasons to be wary of the anti-​competitive potential of industry associations, governments might also seek targeted opportunities to facilitate cooperation between firms involved in socially valuable emerging technologies, such as alternative energy. In these situations, competition might be undermining the more rapid progress that collective invention could provide. The Strategy for American Innovation’s section on empowering a nation of innovators is supportive of the Maker Movement, crowdsourcing, citizen science, and involving the public in “co-​creation” with government agencies to improve their operation. Because these activities overlap with UI, public initiatives supporting them will also encourage UI. However, it would be wise to focus at least some policy efforts and resources more specifically on user communities given the social value that the patent-​free UI paradigm could provide.

5.2 Modifying Patent Doctrine to Account for User Innovation In adapting patent doctrine to account for UI, the goal should be to avoid patenting inventions for which the patent-​free UI paradigm is viable.122 In the US, for example, nonobviousness and patentable subject matter are the primary doctrinal approaches to avoiding socially undesirable patents. Both could be adapted to account for UI. Undesirable patenting of UIs also could be deterred by exempting users and modifiers from infringement liability.

5.2.1 Obvious to an Innovative User The nonobviousness requirement aims to avoid “[g]‌ranting patent protection to advances that would occur in the ordinary course” from the efforts of a “person having ordinary skill in the art.”123 It compares the differences between the claimed invention and prior technology to advances that would have been likely to occur without patent incentives. In KSR International Co. v Teleflex, Inc., the Supreme Court clarified that the PHOSITA is “a person of ordinary creativity, not an automaton,” who can be expected to respond to a “design need or market pressure” by “pursu[ing] the known options within his or her technical grasp,” in light of the “background knowledge possessed by a person having ordinary skill in the art.” The Court also recognized that “familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit [aspects of several pieces of prior technology] together like pieces of a puzzle.”124 While KSR involved seller innovation, its goal of avoiding the social costs of unnecessary patents is equally valid for UI. Thus, the nonobviousness inquiry should take into account the motives and skills of potential user innovators. Doing so would be consistent with both the statutory basis for the nonobviousness requirement and the Supreme Court’s

122 

123 

See also Dreyfuss, Does IP Need IP? (n 113). KSR Int’l Co v Teleflex, Inc, 550 US 398, 427 (2007).

124 

KSR, 418–​421.

Users, Patents, and Innovation Policy    753 interpretation of it in KSR.125 In the seller innovation context, the PHOSITA is understood to possess the ordinary skill of an experienced designer of the relevant type of technology.126 Similarly, where UI is common, the PHOSITA should be understood to possess the ordinary skill, not of a mainstream user, but of the type of lead producer-​user who engages in innovation. Courts may already be applying the nonobviousness requirement in ways that lean away from patenting UIs. The doctrine’s emphasis on technical difficulty tends to focus attention on problem-​solving, rather than on problem-​finding.127 In addition, the doctrine of “analogous arts,” which determines the scope of prior art considered in obviousness analysis, sweeps in prior technology from outside the field of the invention that is “reasonably pertinent to the particular problem” to be solved.128 While commentators have criticized both of these aspects of nonobviousness analysis from a seller innovator perspective,129 both are well suited to UI. For user innovators, problem-​finding is a costless side effect of use. Thus, a nonobviousness doctrine that does not give it much weight is appropriate. The broad sweep of the analogous arts doctrine is similarly appropriate to UI’s aggregation of users’ diverse skills and backgrounds. While adapting nonobviousness doctrine to account for UI would require only relatively minor reinterpretation of current doctrine, there might be significant practical problems. In many arenas, the user-​generated prior art is not documented in forms easily accessible to patent examiners (and might not be documented at all). A similar prior art gap is widely believed to have led to the issuance of large numbers of “bad” patents on business methods.130

5.2.2 Patentable Subject Matter Exemptions 5.2.2.1 General Considerations For some categories of inventions, the patent-​free UI paradigm will be routinely effective, so that patents are unnecessary for the vast majority of inventions in the category. Unnecessary patents impose transaction costs related to application, examination, and validity litigation; costs related to enforcement and licensing; and deadweight economic losses. Worse 125  35 USC § 103. Courts may already take into account user experience in at least some cases. For example, in a case involving an invention relating lacrosse stick heads, the court defined the PHOSITA as “a skilled designer who has either played lacrosse or, in the alternative, although not having played the game, is knowledgeable about how accomplished players use a lacrosse stick, and what performance features such players expect from their lacrosse sticks in the course of playing the sport on the collegiate or professional level.” STX, Inc v Brine, 37 F Supp 2d 740, 750–​751 (D Md 1999), aff 'd, 211 F3d 588 (Fed Cir 2000). See also Dreyfuss (n 113) 1468; L Pedraza-​Farina, “Patent Law and the Sociology of Innovation” (2013) Wis L Rev 813, 819. 126  See, eg, Chisum on Patents, § 5.03[e]‌. 127  See J Fromer, “A Psychology of Intellectual Property” (2010) 104 NWUL Rev 1441; RK Sawyer, “Creativity, Innovation, and Obviousness” (2008) 12 Lewis & Clark L Rev 461, 473–​477. The doctrine does not explicitly make such a distinction, however. See, eg, KSR, 550 US at 418 (referencing “demands known to the design community or present in the marketplace” as a potential factor). (Emphasis added.) 128  See, eg, In re Klein, 647 F3d 1343, 1348 (Fed Cir 2011). 129  See, eg, Fromer (n 127); Sawyer (n 127); J Sherkow, “Negativing Invention” (2011) BYUL Rev 1091, 1116–​1120; Pedraza-​Farina (n 125). 130  See, eg, R Dreyfuss, “Are Business Method Patents Bad for Business?” (2000) 16 Santa Clara High Tech LJ 263.

754   Katherine J. Strandburg yet, the availability of patents can endanger otherwise viable peer diffusion and free revealing regimes.131 Patent availability can tempt user community members to hold some of their inventions out from the common pool, while continuing to benefit from innovations freely revealed by others. Such defections decrease the benefits of the free revealing and peer diffusion system and can lead eventually to its unraveling, since users may respond by patenting their own inventions defensively or keeping them secret.132 Moreover, patent availability may attract outsiders, who can free ride on unpatented UIs to create and patent follow-​on inventions.133 Assuming that equivalent innovations would have emerged from the patent-​free UI paradigm within a reasonable time, such outsider patents also impose unnecessary transaction and exclusivity costs, and contribute to destabilizing peer diffusion and free revealing. If a category of inventions for which the patent-​free UI paradigm is expected to be viable can be defined with reasonable accuracy, a patentable subject matter exemption would be socially beneficial. The proposed adaptations to nonobviousness doctrine, while beneficial, cannot substitute for a subject matter exemption. The evaluation of nonobviousness is sufficiently contestable that many patents are issued only to be invalidated later. Those erroneously issued patents impose costs that would be avoided by a subject matter exclusion. Thus, even if perfectly applied, a nonobviousness filter is likely to allow too many patents in arenas where a patent-​ free UI paradigm is viable. Erroneously issued patents aside, the nonobviousness doctrine takes an individualistic view of invention and does not account for the ways in which patents can destabilize an otherwise viable free revealing and peer diffusion system. Of course, a patentable subject matter exemption could drive inventors of non-​self-​ disclosing inventions to opt for trade secrecy rather than freely revealing. Even if that occurs, there may be little or no social loss because the social benefits of patenting over trade secrecy are particularly dubious for the kinds of inventions for which a patent-​free UI paradigm would be viable. Indeed, because the benefits of free revealing must be relatively high if the patent-​free UI paradigm is to be viable, the unavailability of patents may well drive inventors to free revealing, rather than to secrecy, in the contexts where one might make the case for a subject matter exemption. This socially beneficial possibility does not arise in the seller innovation paradigm.

131 Strandburg, Norms (n 60); Strandburg, User Innovator (n 60).

132  In the copyright context, “viral” or “copyleft” open source software licenses are used to stabilize sharing regimes against defectors and outsiders. They work basically by holding the “stick” of copyright infringement liability over anyone who distributes a modified version of the community’s code without an open source license. While similar licensing regimes have been proposed in the patent context, they require community members to obtain patents that would otherwise be unnecessary. Moreover, the proposed licenses are useless against non-​users, who can assert follow-​on patents against community members with no fear of infringing the community’s patents. See J Schultz and J Urban, “Protecting Open Innovation: The Defensive Patent License as a New Approach to Patent Threats, Transaction Costs, and Tactical Disarmament” (2012) 26 Harv JL & Tech. For a different tactic, see G Van Overwalle, Inventing Inclusive Patents: From Old to New Open Innovation, in P Drahos, G Ghidini, and H Ullrich (eds), Kritika: Essays on Intellectual Property, Vol 1 (Edward Elgar 2015), which proposes an “inclusive patent” that could be used to “enforce sharing behaviour and take non-​sharing users to court.” 133  K Strandburg, “Intellectual Property at the Boundary” in D Harhoff and K Lakhani (eds), Revolutionizing Innovation: Users, Communities and Open Innovation (The MIT Press 2016).

Users, Patents, and Innovation Policy    755 5.2.2.2 Subject Matter Exemptions for Processes User invention and peer diffusion are particularly likely to be effective for process innovations, which rely primarily on user expertise and skills, are generally easy for users to embody, and are often relatively cheap to invent. Patents on processes also are especially likely to be used to prolong low social value exclusive use. Given the likelihood that processes will be invented by users and disseminated through peer diffusion, a subject matter exemption may make sense for most processes, except in contexts, such as commercial manufacturing, where their social value resides primarily in collateral benefits to non-​ users. This suggestion comports with physicians’ ethical strictures against patenting medical methods, with the subject matter exemptions many countries outside of the US afford to medical procedures134 and with widespread resistance to the patenting of business methods and software. Interestingly, in the US, patents on processes have always been more controversial than patents on products, and courts have struggled to define when processes should be patentable.135 In fact, three out of four of the Supreme Court’s recent patentable subject matter opinions deal with process patents.136 The UI theory does not suggest that all processes should be unpatentable, however. When the social value resulting from a process accrues primarily to non-​users, while its value to users is almost entirely competitive, the patent-​free UI paradigm is unlikely to be viable. Moreover, when an invention’s primary social benefits arise from its collateral value to non-​ users, rather than from disseminating embodiments widely among users, there is no reason to anticipate particularly high social costs from exclusive use. User innovation provides no rationale for a subject matter exemption for processes of this ilk. As discussed earlier, user inventors of highly competitive inventions face some of the same free rider problems encountered by seller innovators. Patents may be effective in overcoming these problems. At one point, US courts used a “machine-​or-​transformation-​of-​matter” test to identify patentable subject matter. While the test was generally understood to involve questions of “abstraction,” it may have reflected intuitions arising from this distinction. For example, in Gottshalk v Benson, from which the test evolved, the software innovation at issue was a broadly useful algorithm with high non-​competitive use value. In invalidating the patent, the Court contrasted that algorithm to several industrial processes, concluding that “[t]‌ransformation and reduction of an article ‘to a different state or thing’” is a “clue” to patentability.137 The Court was on to something, but misinterpreted the “clue.” Each of those industrial processes produced a product, thereby creating social value primarily for non-​users, while their use value appears to have been purely competitive, meaning that free 134 

See, eg, Bechtold (n 9); S Tina Piper, “A Common Law Prescription for a Medical Malaise” in C Ng, L Bently, and G D’Agostino (eds), The Common Law of Intellectual Property: Essays in Honour of Professor David Vaver (Hart Publishing 2010). 135  See, eg, J Thomas, “The Post-​Industrial Patent System” (1999) 10 Fordham Intell Prop Media & Ent LJ 3 (1999). 136  Alice Corp v CLS Bank Int’l, 134 S Ct 2347 (2014); Mayo Collaborative Servs v Prometheus Labs, Inc, 132 S Ct 1289 (2012); Bilski v Kappos, 561 US 593 (2010). Note also that the fourth case, Ass’n for Molecular Pathology v Myriad Genetics, Inc, 569 US _​_​, 133 S Ct 2107 (2013), involved gene patents, another area in which advances are likely to occur within a user community of physician and scientific researchers and where exclusive use arguably has high social costs. See, eg, R Dreyfuss and J Evans, “Preemption, Inventing Around, and the Case of Genetic Diagnostics” (2011) 63 Stan L Rev 1349. 137  Gottschalk v Benson, 409 US 63, 70 (1972).

756   Katherine J. Strandburg revealing and peer diffusion were extremely unlikely. Diamond v Diehr, consistently, upheld the patentability of an industrial manufacturing process with purely competitive use value and substantial collateral value for non-​users. Though the opinions in the case focused on the process’s incorporation of a software element, the Court based its decision in part on the observation that “[i]ndustrial processes . . . are the types [of inventions] which have historically been eligible to receive patent-​law protection.”138

5.2.3 User Exemptions from Infringement Liability Another way to account for UI in patent doctrine would be to exempt those who make or use an invention—​but do not sell it—​from infringement liability.139 When a particular type of technology can be disseminated effectively by peer diffusion, such an exemption discourages patenting by leaving inventors effectively without targets for suit. This is essentially the effect of a US law that exempts medical practitioners from remedies for infringing medical procedure patents.140 Unlike a subject matter exemption, a user infringement exemption maintains the value of patenting for seller innovators to the extent that there is a sufficiently large market of mainstream users who are unable or unwilling to embody the invention for themselves. It thus implicitly distinguishes between inventions based on the likelihood that the patent-​free UI paradigm is viable.141 The exemption approach also has the attractive feature of allowing follow-​on peer development and customization by producer-​ users, even for seller innovations. As a result, a user exemption would effectively expand the right to repair patented products afforded under the current patent exhaustion doctrine to accommodate user customizations and improvements.142 Like patentable subject matter exemptions, user exemptions could be problematic for inventions with strictly competitive use value and significant collateral value to non-​users, where the patent-​free user innovator paradigm is not viable. If such an invention is self-​ disclosing, the ability to sue competing users may be necessary to provide an incentive to invent. If it is non-​self-​disclosing, user inventors may not disclose such inventions unless they can use patents to maintain exclusive use. Of course, trade secrecy would remain available for such inventions and might be socially preferable to patenting, just as it sometimes is for

138 

Diamond v Diehr, 450 US 175, 184 (1981). See K Strandburg, Users as Innovators (n 94) (arguing that patent law’s experimental use exemption should apply to users of research tools); Dreyfuss (n 113) 1469–​1470. See also Fisher (n 113) 1475 (suggesting “an exemption for noncommercial activities involving patented products and processes”); Torrance and von Hippel (n 113) 822, 824 (arguing for broad research and personal noncommercial use exemptions); Strandburg, Business Methods (n 80); K Strandburg, “Patent Fair Use 2.0” (2011) 2 UC Irvine L Rev 266; O Tur-​Sinai, “The Trans-​Pacific Partnership: Experimental Use of Patents on the International Agenda” (2014) 16 NCJL & Tech 63 (arguing for an experimental use exemption in patent law internationally, in part because of the importance of user innovation). 140  35 USC §287(c). This provision technically leaves infringement liability intact, thus allowing patent holders to sue suppliers on secondary liability theories. It was enacted in response to lobbying from physicians seeking to preserve a user innovator peer diffusion regime. Strandburg, Derogatory to Professional Character? (n 9); Strandburg, Legal but Unacceptable (n 9). 141 Strandburg, Business Methods (n 80) 268. 142  See, eg, A Katz, “The First Sale Doctrine and the Economics of Post-​Sale Restraints” (2014) BYUL Rev 55; Fisher (n 113); A Perzanowski and J Schultz, “Digital Exhaustion” (2011) 58 UCLA L Rev 889. 139 

Users, Patents, and Innovation Policy    757 seller innovations. In any event, an infringement exemption could be tailored to preserve the effectiveness of patents for industrial processes and similar technologies.

6. Conclusions On the whole, patents are less likely to be socially beneficial for UIs than for seller innovations because user innovators are less likely to need patent-​based incentives to invent, disclose, and disseminate their innovations. The patent-​free UI paradigm is most likely to be viable when an invention’s value to users has a substantial non-​competitive component and when the direct costs of free revealing are not too large. Patents will also be especially socially costly when used to prolong a period of exclusive use of such technologies. When an invention’s use value is predominantly competitive, its overall social value will be small unless use produces significant collateral value for non-​users. When that is the case, as it ordinarily is for manufacturing processes, the patent-​free UI paradigm is unlikely to be viable and the social costs of use exclusivity are similar to those for exclusive sales. For such inventions, the social desirability of patents depends on much the same considerations as for seller innovations. User communities increase the viability of the patent-​free UI paradigm, as well as its desirability to user innovators. Because of that paradigm’s social welfare benefits, public policy should aim to strengthen such communities. When the patent-​free UI paradigm is viable, patenting is both unnecessary and socially costly. Where possible, patent doctrine should be adapted to avoid patenting in such contexts. Possible doctrinal adaptations include accounting for UI in the nonobviousness doctrine, patentable subject matter exemptions in arenas where the patent-​free UI paradigm is viable, and user exemptions from infringement liability. Given the potential social benefits, these and other policy alternatives for promoting successful UI deserve serious consideration.

Chapter 27

T r aditional K nowl e d g e , Indi genou s Pe opl e s , a nd L o cal C om mu ni t i e s Susy Frankel 1. Introduction Claims to the protection of traditional knowledge in its own right and to associated biological and genetic resources are longstanding, but since the formation of the World Trade Organization (WTO) and the passage of its Trade-​Related Aspects of Intellectual Property Rights (TRIPS) Agreement, linkage issues between these claims and intellectual property (IP) have escalated as both political concerns and legal questions.1 As IP and trade have converged in international agreements, developing country members of those agreements that generate less globally recognized IP (in particular patents, copyright, and trademarks) than developed countries do, but that are nonetheless required to protect those developed countries’ IP, have asked why the system does not protect their kind of “intellectual property”; which includes cultural symbols and expressions, and technological contributions. In both developed and developing countries indigenous peoples have asked similar questions about the scope of IP protection. As global trade has expanded, so too has the desire of traders and of consumers for the new, the exotic, and the previously undiscovered. This juxtaposition of that which is unique and globalization is, perhaps ironically, often manifested in the marketing practices of those who are major beneficiaries of globalization; multi-​national companies. Many corporations use traditional knowledge, in one way or another, to sell their products. The Ford Motor Company, for example, found a Māori2 design enhanced the aesthetics of one of its vehicles.3 Cosmetic companies adorn their products 1  Agreement on Trade-​Related Aspects of Intellectual Property Rights, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 UNTS 299; 33 ILM 1197 (adopted on 15 April 1994, entered into force 1 January 1995), (“TRIPS Agreement”). 2  Māori are the indigenous people of Aotearoa (New Zealand). 3  This use of Māori inspired design is described in the documentary “New Zealand Up For Grabs” directed by T Mill and M Maniapoto. It is also discussed in Waitangi Tribunal, Ko Aotearoa Tēnei: A

Traditional Knowledge, Indigenous Peoples, & Local Communities    759 with references to their use of natural substances that are often purportedly extracted from plants or fruits found in exotic places of great natural beauty, such as the Amazon. Similarly, the diet and supplements industry claim that plants and fruits of far-​off lands keep the locals slim and could equally well cure western obesity. The above-​mentioned are largely uses of traditional knowledge for marketing-​related purposes. Other uses of traditional knowledge include infusion in cultural products, such as songs. The successful song, “Sweet Lullaby,” for example, which the band Deep Forest recorded and sold in large numbers, used a prior recording of a lullaby sung by a woman from the Solomon Islands. The prior recording was made by the United Nations Education, Scientific and Cultural Organization (UNESCO). The two Frenchmen, who are Deep Forest, never seem to have had anyone’s permission to use the recording. Money has not been paid to UNESCO for its recording and neither was the woman, known as Afunakwa, whose voice is heard in Deep Forest’s recording, ever paid or acknowledged.4 Deep Forest also manipulated the prior sound recording of Afunakwa’s voice. At the very least, that seems somewhat contradictory to Deep Forest’s own expectations. As artists who come from a country with perpetual moral rights, they enjoy the right to object to distortion, mutilation, or other modification in relation to their works.5 UNESCO perhaps lacked the motivation to pursue any claim and Afunakwa may have lacked the means. Even if either of them had tried to take any legal action the possibility of enforcement was dim, as there was no copyright protection in the Solomon Islands6 or any international protection for the traditional knowledge used. Another example is found in the 2016 Oscar winning movie “The Revenant,” which includes in its sound track the voice of an Inuit woman singing. Permission was never obtained for that use.7 Unfortunately, such uses of indigenous peoples’ culture without their knowledge, permission, or any recompense are far from rare. Report into Claims Concerning New Zealand Law and Policy Affecting Māori Culture and Identity (2011), , (“Ko Aotearoa Tēnei”). By way of full disclosure, I was Consulting Counsel to the Waitangi Tribunal in relation to this claim. 4  Don Niles, “Stealing Music from/​in Papua New Guinea” in Kathy Whimp and Mark Busse (eds), Protection of Intellectual, Biological and Cultural Property in Papua New Guinea, (ANU epress 2013) 116–​ 124, 119–​120. The author gives a view as to why places like the Solomon Islands and Papua New Guinea have no copyright laws. 5  Berne Convention for the Protection of Literary and Artistic Works, 24 July 1971, 1161 UNTS 31 (“Berne Convention”), art 6bis provides for the intentional minimum standards of moral rights. In France, this would include the right of attribution and a right to protect the integrity of the work, see Code de la propriété intellectuelle (French Code of Intellectual Property), art L121-​2. 6  The Solomon Islands is a member of the WTO and as a least-​developed country is not obliged yet to comply with IP obligations of the TRIPS Agreement, art 66.1 providing a transition period of ten years for least-​developed country members. There have been successive extensions of this time; the latest is until 2021. See Council for Trade-​Related Aspects of Intellectual Property Rights, Extension of the Transition Period under Article 66.1 for Least Developed Country Members, Decision of the Council for TRIPS, IP/​C/​64 (12 June 2013). The Solomon Islands is not a member of the Berne Convention at WIPO but is via the TRIPS Agreement, which incorporates the Berne Convention. Although at one stage the Solomon Islands was a British Protectorate, neither the Solomon Islands nor Papua New Guinea, its near neighbor, have local copyright legislation, see Niles (n 4). 7  An article in the Guardian reported that “A little more than halfway through the Oscar-​winning Leonardo DiCaprio movie The Revenant, a voice recites a poem in a Native American language. In the scene, Hikuc, a Pawnee portrayed by Arthur Redcloud, is building a shelter for DiCaprio’s frontiersman, Hugh Glass. But the lines of poetry are recited not in the Plains Indian Pawnee dialect, but in the Inupiaq

760   Susy Frankel One of the oft-​cited third-​party uses of traditional knowledge is to gain a greater understanding of flora and fauna and their potential uses as medications. This “bioprospecting”8 can lead to the unauthorized use of biological and genetic resources. Sometimes traditional knowledge is a vital starting point that may lead to a patentable invention or a marketable product. Because, as one commentator notes, the path between the traditional knowledge and a marketable pharmaceutical is not necessarily linear,9 the patent system tends to sever the connection between the knowledge and the product. The invention is said to lie in the identification and synthesis of the naturally found active ingredient. Whereas, the knowledge that led to that invention is considered merely an idea for others to use in their research. This subservient role for traditional knowledge also means that it is not, in many instances, considered “prior art” and thus does not affect findings in relation to patentability because the knowledge is not included when determining whether an invention is novel and meets the inventive step requirement.10 In these circumstances, the people from whom the knowledge is sourced usually gain no benefit and possibly cannot even afford to purchase the product in question, even if they wished to do so. The assertion, therefore, that the use of the traditional knowledge was not significant to the commercial result does not sit well with traditional knowledge claimants. There are some “celebrated” cases of misappropriation of traditional knowledge associated with biological and genetic resources that have been used as illustrative in the international political debate. One example is that of turmeric, where patents on its long-​ established wound healing qualities were granted and then eventually revoked for lack of novelty (among other things). The use of the neem tree is another example.11 The neem-​ related patent was revoked in Europe, but in the United States (US) it was not revoked because the Indian complainant was unable to present published evidence of the traditional knowledge, as prior art, involving its use as an insecticide.12 These sorts of famed examples may be the exception (particularly in terms of scale of offence), but they are also

language of Arctic Alaska, and the voice, it has emerged, is that of Doreen Nutaaq Simmonds, a Fairbanks, Alaska, resident who had no inkling that a recording of her would be used in the film—​which has grossed millions and earned 12 Oscar nominations, winning best director and best actor”—​see . 8  Bioprospecting is the exploration of biological resources primarily for the development of genetic resources for their commercial value. 9  Graham Dutfield, “A critical analysis of the debate on traditional knowledge, drug discovery and drug-​based biopiracy” (2011) 33.4 European Intellectual Property Review 237; Graham Dutfield, “Why traditional knowledge is important in drug discovery” (2010) 2.9 Future Medicinal Chemistry 1405. 10  TRIPS Agreement, art 27 requires that patents meet these criteria. See generally Chapter 17 (“Patents: a Global Kaleidoscope”) by Dan Burk in this volume. 11  For an overview of uses of turmeric, neem, and kava as instances of appropriation of traditional knowledge see, Susette Biber-​Klemm, Thomas Cottier, and Danuta Szymurs Berglas, Rights to Plant Genetic Resources and Traditional Knowledge: Basic Issues and Perspectives (Swiss Agency for Development Cooperation and World Trade Institute 2006), 134–​147. 12  See discussion in Graham Dutfield, “From Traditional Medicine to Modern Drugs” in Tania Bubela and E Richard Gold (eds), Genetic Resources and Traditional Knowledge: Case Studies and Conflicting Interests (Edward Elgar Publishing 2012), where he suggests that the US publication rule should be abolished; Petra Ebermann, Patents as Protection of Traditional Medical Knowledge? A Law and Economics Analysis (Intersentia 2012), 101.

Traditional Knowledge, Indigenous Peoples, & Local Communities    761 illustrative of the norm. The literature suggests both that bioprospecting is very important to the pharmaceutical industry,13 and that some of the traditional knowledge related to bioprospecting has not resulted in success.14 This may make such bioprospecting similar to other processes of trial and error. The failure of the commercial enterprise may have deterred some companies from such bioprospecting, but that failure does not justify misappropriation of the traditional knowledge or non-​consensual uses of related genetic and biological resources (known as biopiracy).15 Even unsuccessful pirates can cause cultural offence and may inhibit other development opportunities. The literature also suggests, however, that this sort of bioprospecting is likely to be successful when done with consent and when the development is conducted in partnership with the people who provide the knowledge.16 One commentator has said that biopiracy has made the search for medicinal uses of plants 400 percent more efficient than it would have been if traditional knowledge was not used.17 In his ground-​breaking work, Daniel Robinson studied different instances and causes of biopiracy, including patent-​ related uses of misappropriated genetic resources and misappropriated genetic resources that have occurred independent of any patents being applied for, spurious plant variety right claims, and uses of trade marks for generic plant names that can be misleading to consumers.18 The effects of these activities vary from case to case. In some cases, the misappropriations have had severe consequences for the economic prospects of the local communities. Robinson, for example, looks at instances where producers’ export opportunities have been harmed and where researchers, local communities, and even some governments are left out of the product development and commercialization stages. In some of these instances, cultural offense is also involved and there can be a breakdown of relationships in addition to adverse environmental effects.19 13  Terri Janke, Our Culture: Our Future, Report on Indigenous Cultural and Intellectual Property Rights (Michael Frankel & Company 1998), 24 suggests that 74 percent of the pharmaceutical industry products are derived from plants that have analogous traditional knowledge uses. This report also gives examples of biopiracy in Australia. 14  See, for example, Reuters, “Would-​be fat-fighter Hoodia Nothing but side effects,” (28 October 2011) . 15  “Biopiracy” is a term often credited to the Rural Advancement Foundation International (now known as the ETC Group) arising from its work on patents relating to traditional knowledge and genetic resources. See Pat Mooney, Conserving Indigenous Knowledge: Integrating Two Systems of Innovation, (Independent Report RAFI and UNDP 1994), . The WIPO negotiations, discussed later, have suggested ways to combat biopiracy, see WIPO, The Protection of Traditional Knowledge: Draft Articles, WIPO Doc No WIPO/​GRTKF/​IC/​31/​FACILITATORS TEXT REV. 2 (30 September 2016) art 4bis (“IGC Draft Articles”). 16  DJ Claudie, SJ Semple, NM Smith, and BS Simpson, “Ancient but New: Developing Locally Driven Enterprises Based on Traditional Medicines in Kuuku I’yu Northern Kaanju Homelands, Cape York, Queensland, Australia,” in Drahos and Frankel (eds), Indigenous Peoples Innovation: Intellectual Property Pathways to Development (ANU E Press 2012) (hereafter “Drahos and Frankel”). 17  Shannon F Smith, “All Hands on Deck: Biopiracy and the Available Protections for Traditional Knowledge” (2014) 10 Journal of Animal and Natural Resources Law 273274. 18  D Robinson, Confronting Biopiracy: Challenges, Cases and International Debates (Earthscan/​ Routledge 2010). 19  ibid. For a discussion of environmental effects see Rosemary J Coombe, “The Recognition of Indigenous Peoples’ and Community Traditional Knowledge in International Law” (2001) 14 St Thomas Law Review 275.

762   Susy Frankel The injustices relating to the misappropriation of traditional knowledge and biological and genetic resources are threefold in nature. First, there is no protection for the traditional knowledge. Second, others may gain protection for inventions and creative works that use that traditional knowledge. And third, such uses bring no benefit and sometimes cause detriment to the knowledge and the people from whom it is sourced. The second and the third are in effect consequences of the first and, therefore, intensify the calls for protection of the knowledge. As IP encourages third parties to find and use traditional knowledge and biological resources, it has fueled the debate over the appropriate uses of that knowledge and those resources.20 Although others may gain IP rights over products and processes that use traditional knowledge, the injustices are certainly not either exclusively caused by, or able to be fixed by, IP rules. The problem is intensified because the reason that IP encourages third party uses of traditional knowledge goes to the heart of IP law’s rationales. Patent law-​related incentives encourage innovation of traditional knowledge about, for example, plants. Copyright is purposively permissive about making use of aspects of one work in the creation of others, particularly where that other work was not or is no longer protected by copyright.21 Trademark law encourages the use of symbols and words (signs) that may initially be unrelated to and do not describe the products they are applied to and, thus, trademark law can incentivise businesses to utilize symbols and words originating from indigenous communities in exotic lands. All areas of IP law have rules about what third parties cannot use because it is protected and what can be used because it falls into the public domain, which is defined as that not protected by IP, as the examples earlier discussed show. The protection of traditional knowledge does not require abolition of the public domain, but rather it contests what the contours of that domain are or ought to be. Protecting traditional knowledge does remove it from the public domain, although not entirely, as some uses remain permitted. However, as many traditional knowledge holders did not place their knowledge in the public domain, in the way IP law has framed it, claims that the public domain will be worse off with the protection of traditional knowledge need to be treated with caution. This leads to two paths of analysis. The first is to consider whether IP rules can protect traditional knowledge. As discussed later in this chapter, the answer is, for the most part, no. The second, therefore, is how to protect traditional knowledge so that it can be developed in ways that do not destroy it or harm the communities from which it comes. At present, the dominance of IP law does not accommodate traditional knowledge concerns. Consequently, traditional knowledge does not only need protection, but it also requires an effective way to interact with IP law. This is complicated, as the two areas operate in different frameworks. The traditional knowledge of local communities and indigenous peoples exists in the context of a community’s relationship with its environment and its 20 

For a discussion of the extractive nature of IP, see Peter Drahos, Intellectual Property, Indigenous People and their Knowledge (CUP 2014) at 1–​14. 21  Where a work is so protected, copyright law incorporates the notion that it is legitimate for third parties to use the ideas of others (or knowledge and facts) in order to build new expressions. This is recognized as part of the international copyright rules. TRIPS Agreement, art 9(2), provides “Copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such.”

Traditional Knowledge, Indigenous Peoples, & Local Communities    763 identity. The knowledge often has governance mechanisms that ensure its use and development is maintained from generation to generation. This may involve some members of the communities, frequently elders, being “in charge” of the knowledge. Such communities, therefore, have a guardianship role in relation to the knowledge rather than one of ownership. IP law, in contrast to concepts of guardianship, has been described as an extractive property order: The concept of an extractive property order refers to property systems in which the systems allow one group (the extractor group) to obtain control of assets belonging to a second group without the extractor group obtaining consent and offering proper compensation for the asset transfer.22

The nature of an extractive property order is that it excludes some participants. Where IP and traditional knowledge conflict is precisely at the point where IP incentivizes the use of traditional knowledge and excludes those who provide the knowledge.23 As a consequence of the incentives that are embedded in IP that contribute to the extraction of traditional knowledge, there has, in international negotiations, been a confluence of the absence of protection of traditional knowledge and IP’s use of that knowledge. For several reasons, IP law mostly does not assist with the protection of traditional knowledge.24 In such situations other laws or even systems of sui generis protection may play a role in providing some protection or, as is more often the case, there is simply no protection. The unavailability of IP as a protection mechanism is only part of the matter, however. Those whose traditional knowledge is exploited by others, therefore, have increasingly questioned why their knowledge and the products of their culture, which could be described as their “intellectual property,” cannot be protected through globalized IP agreements, but can be expropriated. Nor can they see why that expropriation should have international protection. The inclusion of IP in the international trade regime has not only provided a platform for this expropriation to increasingly occur, but the trade-​related regime has also impacted local development of that traditional knowledge. The high levels of IP protection required in countries with low levels of locally based IP production has not helped the protection of 22 

Drahos (n 20), 4. He describes at 6–​11 how this applies to IP. Something that is descriptive of the character or quality of goods cannot usually be a trademark, except where it has acquired as secondary meaning that is distinct from the descriptive meaning. The details of the law around this principle vary between jurisdictions, but the broad principle is enshrined in international IP. The TRIPS Agreement, art 15, for example, requires that “Any sign, or any combination of signs, capable of distinguishing the goods or services of one undertaking from those of other undertakings, shall be capable of constituting a trademark. . . . Where signs are not inherently capable of distinguishing the relevant goods or services, Members may make registrability depend on distinctiveness acquired through use.” See also Darrell A Posey and Graham Dutfield, Beyond Intellectual Property (International Development Research Centre 1996), “The Quick and Easy Way to Own a Rainforest,” describing The Body Shop’s “rainforest” trademark, 86. 24  There are a variety of reasons in each field of IP why traditional knowledge cannot be protected. Where the traditional knowledge is longstanding it may mean that copyright is inapplicable because of a lack of originality or patents for lack of novelty or inventive step (each case will vary on its facts). Also, the knowledge may also have outlived the term of copyright and patent, and so on. For an overview of the difficulties and misfit between IP and traditional knowledge, see Susy Frankel, Intellectual Property in New Zealand (2nd edn, Lexis Nexis 2011) 131–​151. See also Daphne Zografos, Intellectual Property and Traditional Cultural Expressions (Edward Elgar 2010). 23 

764   Susy Frankel traditional knowledge, but rather has focused countries on protecting foreign IP for other economic and political gains. Trade-​related goals have resulted in many countries having higher standards of IP protection than their stage of development merits, via implementation of the TRIPS Agreement. In the TRIPS Agreement, the position of developing countries is partially reflected particularly in Articles 7 and 8 (objectives and principles), but even these articles do not address developing country concerns regarding traditional knowledge. And subsequent to the TRIPS Agreement many countries have also entered into bilateral trade agreements that increase the level of IP protection even further. Yet, because the pressure for these agreements comes from wealthy countries and trading blocks, most notably the US and the European Union (EU), there is little recognition for the wealth of developing countries in biodiversity, traditional knowledge, and innovative uses of that knowledge. Moreover, only some of that knowledge is commercialized and, when it has been, there are few positive stories of the proceeds flowing back to the communities from where the knowledge came. One possible success story involves certification labeling, which has rewarded some local communities as they are then paid a fair price for their commodities, such as coffee and bananas.25 That is not directly a form of traditional knowledge protection and is notably one of the few examples of local communities successfully using IP tools.26 As the evident contrast between the IP protection available to developed countries and developing countries has become stark,27 it is not surprising that the discussion of traditional knowledge and its relationship to IP has expanded. The claims to traditional knowledge protection have also contributed to a wider debate about the role of IP. This has also fostered a better understanding that traditional knowledge involves innovation and creativity. As the Director of the Intellectual Property Division at the WTO has said: With this greater respect [for traditional knowledge and its holders] and acknowledgement comes a clearer, wider recognition that traditional knowledge systems are indeed innovative, dynamic and directly relevant to practical needs; that collective and cumulative forms of innovation and creativity have value and worth in themselves; that indigenous peoples do trade and do engage with the wider community, have done so for millennia, and today simply seek to do so on terms that are more equitable and culturally attuned.28

This chapter explains how the issues around the protection of traditional knowledge have emerged and intensified as the trade and IP relationship has developed and expanded, particularly since the completion of the TRIPS Agreement. The claims for the protection of traditional knowledge come 25  See generally Christoph B Graber and Jessica C Lai, “Indigenous Cultural Heritage and Fair Trade: Voluntary Certification Standards in the Light of WIPO and WTO Law and Policymaking” in Drahos and Frankel, (n 16), 95, and 29(3) Prometheus 287. 26  Daphne Zografos Johnson, “Using Intellectual Property Rights to Create Value in the Coffee Industry” (2012) 16 Marquette Intellectual Property Law Review 283. 27  Some large developing countries, however, particularly China, are showing a significant increase in their use of the IP system. China has led several aspects of WIPO’s patenting and trademark tables. See WIPO, “Intellectual Property Statistics” at ​ and “WIPO Global Patent Filings Rise in 2014 for Fifth Straight Year”; “China Driving Growth,” Geneva, 14 December 2015, PR/​2015/​786, stating “innovators filed some 2.7 million patent applications to mark another worldwide annual rise in 2014, as application activity in China outstripped the combined total in its next-​closest followers, the United States and Japan.” 28  Antony Taubman, “Preface: Indigenous Innovation: New Dialogues, New Pathways” in Drahos and Frankel, (n 16), xv–​xvi.

Traditional Knowledge, Indigenous Peoples, & Local Communities    765 from the large developing countries, from communities within those countries, and from indigenous minority populations that live in developed countries. Following this introduction, Section 2 discusses aspects of local communities in developing countries and indigenous minorities in developing and developed countries and the scope of what amounts to traditional knowledge. The same part explains why it is neither possible nor necessary to define traditional knowledge in an overly prescriptive way. Section 3 gives an overview of the international negotiations that have debated and in some instances continue to address the protection of traditional knowledge both within IP law and by other means. Section 4 considers the relationship between traditional knowledge and IP law frameworks, including the so-​called public domain and how the existing categories of IP do not fit traditional knowledge constructs. Section 5 discusses and gives examples of how some countries have progressed protection at national level. The chapter concludes with some observations about the future and the need for national laws to develop in conjunction with investment in the maintainence and appropriate development of traditional knowledge in order to both benefit its holders and to progress an international resolution.

2.  Indigenous Peoples, Local Communities, and the Scope of Traditional Knowledge 2.1 What Are Local Communities and Who Are Indigenous Peoples? There is no agreed meaning of indigenous peoples. The term is used to cover peoples who might be described as the original inhabitants of that land. Even the United Nations Declaration on the Rights of Indigenous Peoples does not give a definition.29 In the World Intellectual Property Organization (WIPO) glossary of terms, this absence of definition is acknowledged. The same glossary explains that there is no agreed definition of local communities.30 It is entirely appropriate that the international IP system refrains from defining what amounts to indigeneity, or indeed local communities, in view of the enduring political debate over that very concept.31 The United Nations (UN) (of which WIPO is a specialized agency) has stated that indigeneity is a matter of identity more that definition. It explains that in order to understand what “indigenous” means the UN system has not adopted an official definition:32 Instead the system has developed a modern understanding of this term based on: − Self-​identification as indigenous peoples at the individual level and accepted by the community as their member. 29 

United Nations Declaration on the Rights of Indigenous Peoples, adopted by General Assembly Resolution 61/​295 on 13 September 2007. 30  WIPO glossary, “Indigenous and Local Communities,” at . 31  For a detailed overview of indigenous peoples around the world, see generally, The Indigenous World . 32  United Nations, Indigenous Peoples Indigenous Voices fact sheet, at . Another definition framed for the purposes of the International Labour Organization (ILO) is found in Covenant 169, art 1.1 of the International Labour

766   Susy Frankel

− − − − − −

Historical continuity with pre-​colonial and/​or pre-​settler societies. Strong links to territories and surrounding natural resources. Distinct social, economic, or political systems. Distinct language, culture, and beliefs. [Status as] non-​dominant groups of society. Resolve to maintain and reproduce their ancestral environments and systems as distinctive peoples and communities.

It is consistent with the broad approach taken internationally for the IP system to take the widest possible approach to the meaning of “local communities” and “indigenous people.” WIPO, as the main international organization undertaking international negotiations for the protection of traditional knowledge, uses the combination of the two terms so as to be all encompassing and not to leave out any group. While this inclusiveness is important, some differences are also relevant precisely because the calls for protection of traditional knowledge come from different sources, including local communities, indigenous peoples, and other groups. Some indigenous peoples and local communities inhabit developing countries and others live in developed countries.33 Large developing countries have, on the world stage, been pushing for the protection for traditional knowledge.34 The agenda of these countries in some instances coincides with small countries and indigenous peoples’ claims to protection of traditional knowledge, but the goals of differing groups are not always the same. Indigenous peoples and local communities may often be seeking rights as minority populations both within the countries in which they live as well as on the international stage. So, for example, when Ngāti Koata, a Māori iwi (tribe) sought to prevent the use of Ka Mate Ka Mate (the haka35) by the Fiat motor company in Italy, they were simultaneously seeking protection of the haka from unauthorized commercial use in New Zealand.36

Organization on Indigenous and Tribal Peoples in Independent Countries, 27 June 1989, 28 ILM 1382, 1384–​85 as: (a)  Tribal peoples in independent countries whose social, cultural and economic conditions distinguish them from other sections of the national community, and whose status is regulated wholly or partially by their own customs or traditions or by special laws or regulations; (b)  Peoples in independent countries who are regarded as indigenous on account of their descent from the populations which inhabited the country, or a geographical region to which the country belongs, at the time of conquest or colonisation or the establishment of present State boundaries and who, irrespective of their legal status, retain some or all of their own social, economic, cultural and political institutions. 33  See Susy Frankel and Megan Richardson, “Cultural Property and ‘the Public Domain’ Case Studies from New Zealand and Australia,” in Christoph Antons (ed), Traditional Knowledge, Traditional Cultural Expressions and Intellectual Property Law in the Asia-​Pacific Region (Kluwer Law International 2009). 34  The proposal in the TRIPS Council discussed below, for example, was initially proposed by Peru, Brazil, and others. 35  The haka is a kind of performance of traditional words and choreographed movement, see T Kāretu, Haka the Dance of a Noble People (National Library of New Zealand 1993); W Gardiner, Haka: A Living Tradition (Hodder Moa Beckett 2001). 36 See Ko Aotearoa Tēnei, (n 3), 40–​41.

Traditional Knowledge, Indigenous Peoples, & Local Communities    767

2.2 Frameworks for Defining the Scope of Traditional Knowledge Defining traditional knowledge is complicated because its parameters are as broad as the peoples who claim it are diverse. In 2011, WIPO explained traditional knowledge as:37 . . . intellectual activity in a traditional context, and includes the know-​how, skills, innovations, practices and learning that form part of traditional knowledge systems, and knowledge embodying traditional lifestyles of indigenous and local communities, or contained in codified knowledge systems passed between generations and continuously developed following any changes in the environment, geographical conditions and other factors. It is not limited to any specific technical field, and may include agricultural, environmental and medicinal knowledge, and any traditional knowledge associated with cultural expressions and genetic resources.

In other international bodies, the focus does not begin with the notion of “intellectual activity.” The United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) provides that:38 Indigenous peoples have the right to maintain, control, protect and develop their cultural heritage, traditional knowledge and traditional cultural expressions, as well as the manifestations of their sciences, technologies and cultures, including human and genetic resources, seeds, medicines, knowledge of the properties of fauna and flora, oral traditions, literatures, designs, sports and traditional games and visual and performing arts. They also have the right to maintain, control, protect and develop their intellectual property over such cultural heritage, traditional knowledge, and traditional cultural expressions.

The UNDRIP approach also considers the broader notion of cultural heritage. While WIPO understandably frames its consideration of traditional knowledge as connected to IP, it appears to acknowledge some of the wider non-​IP-​based drivers of protection. As at the time of this writing WIPO’s explanation of traditional knowledge reads: Traditional knowledge (TK) is knowledge, know-​how, skills and practices that are developed, sustained and passed on from generation to generation within a community, often forming part of its cultural or spiritual identity. While there is not yet an accepted definition of TK at the international level, it can be said that: • TK in a general sense embraces the content of knowledge itself as well as traditional cultural expressions, including distinctive signs and symbols associated with TK. • TK in the narrow sense refers to knowledge as such, in particular the knowledge resulting from intellectual activity in a traditional context, and includes know-​how, practices, skills, and innovations.

37 

The Protection of Traditional Knowledge: Revised Objectives and Principles, WIPO Document WIPO/​GRTKF/​IC/​18/​5 (10 January 2011), annex 18. 38  United Nations Declaration on the Rights of Indigenous Peoples, adopted by General Assembly Resolution 61/​295 on 13 September 2007, art 31.

768   Susy Frankel • Traditional knowledge can be found in a wide variety of contexts, including: agricultural, scientific, technical, ecological and medicinal knowledge as well as biodiversity-​related knowledge.39

These sorts of definitions are not designed to be prescriptive or applied in formalistic ways and are, therefore, better described as guidance frameworks that function to explain the scope of traditional knowledge. Such frameworks do not necessarily, on their own, either determine what is in or out of the concept or, where protection exists at national level, determine the parameters of any actual protection. This has led to criticism of international definitions for their broadness. At international level, however, the need for specificities in a definition beyond a general guiding framework is questionable because an international norm can be broad in order to allow several different ways in which it can be complied with. This is particularly appropriate for the protection of traditional knowledge, which by its nature will have different customary rules and parameters in different local communities and groups of indigenous peoples. Where the protection of traditional knowledge might be related to specific and identified communities’ definitions that reflect that the customs of that community can be more precisely described, they may still incorporate somewhat broad notions. As an example, mātauranga Māori (traditional knowledge of Māori), which has been described as: Mātauranga Māori in a traditional context means the knowledge, comprehension or understanding of everything visible or invisible that exists across the universe. Mātauranga Māori takes many forms, including language (te reo), traditional environmental knowledge (tāonga tuku iho, mātauranga o te taiao), traditional knowledge of cultural practice, such as healing and medicines (rongoā), fishing (kai moana) and cultivation (mahinga kai).40

Lawyers, in particular, like precise definitions and calls for them are usually accompanied by claims about the necessity of certainty in order to uphold the rule of law. The necessity of bright line rules can, however, be overstated. IP law is not alien to defining the scope of a concept rather than its every detail, and in fact often utilizes such an approach at both international and domestic levels. In patent law, for example, the TRIPS Agreement does not define what an invention is. In national laws invention is often broadly framed. The notion of the scope of the Statute of Monopolies not defining, but framing invention in the patent law of many jurisdictions is another example.41 Importantly, it is not just the scope of subject matter that is relevant but what is in fact actionable based on the scope of the exclusive rights. Subject matter and the scope of exclusive rights can function together to give sufficient boundaries to the scope of protection.42 39 WIPO, Traditional Knowledge, ​. See also WIPO List and Brief Technical Explanation of Various Forms in which Traditional Knowledge May be Found, WIPO/​GRTKF/​ IC/​17/​INF/​9, . 40  See . See also the discussion of mātauranga Māori in, Ko Aotearoa Tēnei, (n 3), 32–​38. 41  See the decision of the Australian High Court in National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 (HCA). The notion of patentable subject matter in the US is also somewhat broad. See, for example, Rebecca Sue Eisenberg, “Wisdom of the Ages or Dead-​Hand Control? Patentable Subject Matter for Diagnostic Methods After In Re Bilski” (2011) 3 Case Western Reserve Journal of Law Technology & Internet 67. 42  See discussion later in this chapter.

Traditional Knowledge, Indigenous Peoples, & Local Communities    769 Not only is the pursuit of more precise definitions of traditional knowledge at international level unnecessary, it is also like “quicksand” that works against progress.43 Moreover, “traditional knowledge” suggests that the knowledge is old and is static rather than either capable of development or involving innovation. Traditional knowledge systems, however, are often innovative and involve dynamic elements. Often it is demonstrably incorrect to frame traditional knowledge as static. Although traditional knowledge might be old, it is usually passed from generation to generation in traditional form in order to both preserve and also to develop that knowledge. Where the knowledge is sacred in some way, the goal of protection may be more about preservation than development, as it is hard if not impossible to develop something under threat.44 Importantly, simply because the knowledge is “traditional” does not limit it to the past; rather, knowledge guardians use traditional knowledge innovatively. Examples are the use of Aboriginal techniques to control fire in parts of Australia, and Māori waterway management in conjunction with the New Zealand government to, among other things, control river pollution.45 The innovative nature of traditional knowledge can also be used to apply that knowledge to create products for commodification, but both the nature of the innovation and the reason for protecting the knowledge are frequently directed to other goals. So, for example, knowledge about how to harvest a plant in order to maximize its medicinal qualities is knowledge that is based around a system and a place rather than a product. [I]‌ndigenous innovation is often place-​based innovation that is cosmologically linked to land and an indigenous group’s relationship with that place, rather than to laboratories.46

Consequently, in many circumstances innovative aspects of traditional knowledge can be ripe for the picking for those seeking commodification in other spheres. Often traditional knowledge is publicly available because of its importance to a local community’s or indigenous people’s identity and culture. This function of traditional knowledge gives rise to a kind of collective responsibility rather than individual ownership of the knowledge. This is a guardianship role.47 To continue with the illustrative example from Māori, the guardianship (kaitiaki) relationship is described as:48 . . .  the elements that make [Māori culture] distinctive in the world can be traced to the relationships kaitiaki built up with the land, water, flora, and fauna of [New Zealand]. In this way, the mauri, or inner well-​being of land and water spaces, and the whakapapa of flora and fauna do not just serve to articulate the human relationships with these things; they are the building blocks of an entire world view and of Māori identity itself. They play a similar role to

43

  See Drahos and Frankel (n 16), 9–​13.   The Lego Company for its bionicle toy range made use of Māori words which had sacred meaning, but after discussion with the Māori other words were used. This incident is reported in the television documentary “New Zealand Up For Grabs,” directed by Toby Mill and Moana Maniapoto. It is also discussed in Ko Aotearoa Tēnei (n 3). See also Daniel J Gervais, “Spiritual but not Intellectual? The Protection of Sacred Intangible Traditional Knowledge” (2003) 11 Cardozo Journal of International and Comparative Law 467. 45  These examples are discussed in Peter Drahos and Susy Frankel, “Indigenous Peoples Innovation and Intellectual Property: The Issues,” in Drahos and Frankel (n 16). 46  Drahos and Frankel (n 16), 13. 47  Ko Aotearoa Tēnei (n 3), 38–​43. 48  ibid 115–​116. 44

770   Susy Frankel the core definers of Western culture such as the arts, democracy, the rule of law, and so forth. But while the more human-​centred Western culture tends to define itself by reference to its own thought and labour, Māori culture relies on pre-​existing, pre-​human definers –​mountains, rivers, plants, animals, and so on. Māori culture seeks to reflect rather than dominate its surroundings. That is why the relationship between humans and taonga species is a definer of Māori culture itself. It is a preoccupation of the body of distinctive Māori knowledge that today we call mātauranga Māori.49

The collective responsibility of guardianship may also be accompanied by customary rules about how the knowledge can be used, who can use it, and other customary expectations. Sometimes the knowledge may be publicly available, but its use is subject to expectations in keeping with the relevant customary law. That law, however, is often not recognized by the dominant legal culture at national level or at international level and, therefore, the knowledge is treated as if it is in the so-​called public domain. That public domain status has led to various negotiations for an international agreement to protect traditional knowledge.

3.  International Bodies and Traditional Knowledge The settings and scope of the international dialogue about protecting traditional knowledge has grown immensely, but resolutions are scarce. A number of international bodies have issued statements about IP rights and traditional knowledge, including the UN, in its Declaration on the Rights of Indigenous Peoples50 and the Convention on Biological Diversity (CBD).51 Some have also turned to negotiating agreements. This section discusses the international negotiations at WIPO, the CBD and its related Bonn Guidelines and Nagoya Protocol, as well as the WTO and other trade agreements.

3.1 WIPO Negotiations In the later parts of the twentieth century the position of developing countries in the international IP system became a significant part of WIPO’s work. As part of that focus WIPO undertook a fact-​finding mission about traditional knowledge.52 That mission resulted in a series of recommendations designed to improve awareness about the concerns of traditional 49

50 N 38.  ibid. Rio Convention on Biological Diversity 1760 UNTS 79; 31 ILM 818, ​, (CBD), art 2 defines biological resources as including “genetic resources, organisms or parts thereof, populations or any other biotic component of ecosystems with actual or potential use or value for humanity.” Genetic resources are defined as “genetic material of actual or potential value,” and genetic material is defined as “any material of plant, animal, microbial or other origin containing functional units of heredity.” 52 WIPO Intellectual Property Needs and Expectations of Traditional Knowledge Holders: WIPO Report on Fact-​finding Missions on Intellectual Property and Traditional Knowledge (1998–​1999) (WIPO 2001). The report of that exercise is several hundred pages long. It contains lengthy details of the fact-​finding missions and a number of conclusions, which the report accepted could not all be addressed by WIPO. 51 

Traditional Knowledge, Indigenous Peoples, & Local Communities    771 knowledge holders. The report recommended a series of goals, including preventing unauthorized use of traditional knowledge; investigating options for traditional knowledge holders to collectively acquire, manage, and enforce IP rights; developing new mechanisms to protect and enforce the protection of traditional knowledge; and creating and testing, with the close involvement of indigenous peoples and local communities, of “best contractual practices,” including guidelines and model clauses for contracts, as well as the provision of information on and protection against “unfair contract terms.”53 That report eventually led the members of WIPO to meet as an intergovernmental committee (WIPO-​IGC) to discuss the protection of traditional knowledge and to draft appropriate treaties.54 This process has been ongoing since 1995 and has yet to reach an agreement.55 The barriers to resolution are predominantly political, but those political differences manifest as drafting differences in the treaties proposed. The draft treaties to protect traditional knowledge include protection in the context of biological and genetic resources and traditional cultural expressions (TCEs).56 In addition to the negotiating process, WIPO has supported the development of search tools and systems for the classification of traditional knowledge57. These are primarily directed to providing information that can be used in patent examination to ensure that traditional knowledge is considered part of the prior art. It has also developed detailed analysis of the issues regarding when and how traditional knowledge should be disclosed as part of patent applications.58 Early stages of the treaty drafting process focused on objectives and principles that have remained core to the treaties as they have evolved.59 The draft noted by the Assembly in 2015 and discussed in 2016 includes the following text entitled policy objectives: This instrument should aim to: Provide Indigenous [Peoples] and [local communities] [and nations]/​[beneficiaries] with the [legal and practical/​appropriate] means, [including effective and accessible enforcement measures/​sanctions, remedies and exercise of rights], to: a. [prevent] the [misappropriation/​ misuse/​ unauthorized use/​ unfair and inequitable uses]of their traditional knowledge; 53 ibid 26. 54 

WIPO also states its work complements the International Treaty on Plant Genetic Resources for Food and Agriculture of the United Nations Food and Agriculture Organization; see . 55  Prior to this WIPO also provides a model set of provisions for protection of expressions of folklore Model Provisions for National Laws on the Protection of Expressions of Folklore Against Illicit Exploitation and Other Prejudicial Actions (WIPO/​UNESCO 1985). 56  See IGC Draft Articles, earlier n 15. For WIPO’s work see generally . 57  See “Online Databases and Registries of Traditional Knowledge and Genetic Resources” . 58  WIPO, “Technical Study on Disclosure Requirements Related to Genetic Resources and Traditional Knowledge” Doc 786, . 59  WIPO, Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore “Consolidated Document Relating to Intellectual Property and Genetic Resources,” Document prepared by the Secretariat, WIPO/​GRTKF/​IC/​25/​5, 30 May 2013.

772   Susy Frankel b.  [control ways in which their traditional knowledge is used beyond the traditional and customary context;] c.  [promote [the equitable sharing of benefits arising from their use with prior informed consent or approval and involvement or approval and involvement]/​[fair and equitable compensation], as necessary; and] d.  encourage [and protect] [tradition-​based] creation and innovation. [Prevent the grant of erroneous intellectual property/​[patent rights] over [traditional knowledge and [[traditional knowledge] associated [with] genetic resources].]]60

Whether WIPO members will conclude treaty negotiations is not clear.61 In any event, the draft treaties serve as useful guidance to domestic lawmakers who might want to protect traditional knowledge at national level even in the absence of any international agreement to do so.

3.2 The Convention on Biological Diversity, the Bonn Guidelines, and the Nagoya Protocol The CBD has the primary goal of sustaining “the diversity of life on Earth” and in that framework recognizes state ownership and control over biological and genetic resources.62 The CBD treats biological and genetic resources as property that should be administered by governments.63 At the same time, it recognizes the rights of indigenous peoples within the state in relation to both the biological and genetic resources and the traditional knowledge associated with them. This recognition is found in Article 8(j) of the CBD which states: Each contracting Party shall, as far as possible and as appropriate: Subject to national legislation, respect, preserve and maintain knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles relevant for the conservation and sustainable use of biological diversity and promote their wider application with the approval and involvement of the holders of such knowledge, innovations and practices and encourage the equitable sharing of the benefits arising from the utilization of such knowledge innovations and practices.

How to make Article 8(j) effective was the subject of a lengthy negotiation process involving several Conferences of the Parties. In 2002, one of these conferences adopted voluntary guidelines—​the Bonn Guidelines on Access to Genetic Resources and Fair and Equitable Sharing of the Benefits Arising out of their Utilization (Bonn Guidelines).64 The Bonn 60

  WIPO, Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore Thirty-​First Session, Document prepared by the Secretariat, “The Protection of Traditional Knowledge: Draft Articles,” WIPO/​GRTKF/​IC/​31/​4, 13 May 2016. There is an updated facilitators’ version of this in the IGC Draft Articles, (n 15), 4. Bracketed text indicates that the text is under negotiaiton. 61  For discussion of issues, at and about the WIPO negotiations, see DF Robinson, P Roffe, and A Abdel-​Latif (eds), Protecting Traditional Knowledge: The WIPO Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore (Routledge 2017). 62  See CBD, (n 51). 63  CBD, (n 51), art 3. 64  CBD Conference of the Parties, Decision VI/​24 A (2002) (“Bonn Guidelines to the CBD”).

Traditional Knowledge, Indigenous Peoples, & Local Communities    773 Guidelines attempted to bridge the gap between state ownership and indigenous peoples’ interests by encouraging patent applications to include “the disclosure of the country of origin of the genetic resources and of the origin of traditional knowledge.”65 The Bonn Guidelines were voluntary and that eventually led a subsequent Conference of the Parties to create the Nagoya Protocol,66 which recognizes rights of indigenous peoples to genetic resources. There are two key mechanisms that the Protocol adopts from the CBD. The first is the requirement of prior and informed consent (known as PIC) from knowledge holders before a biological or genetic resource and associated traditional knowledge is used. The second mechanism is the equitable sharing of benefits from the use of the resources and the knowledge.67 The Nagoya Protocol arguably has two significant weaknesses. First, its framework is entirely dependent on the state recognizing the rights of indigenous peoples to their traditional knowledge in the first instance.68 In other words, the Protocol does not give traditional knowledge rights to those who do not have them independent of the Protocol. Second, it does not include a disclosure requirement, which is particularly problematic because of the nature of the relationship between biopiracy and patents.69

3.3 The TRIPS Agreement, the WTO TRIPS Council, and post-​TRIPS Trade Agreements The TRIPS Agreement provides no protection for traditional knowledge yet, as discussed above, it has had a significant impact on the debate around protection as well as on incentivizing the use of traditional knowledge. This nexus led to the Doha Round of multilateral trade negotiations, including a discussion in the TRIPS Council about the protection of traditional knowledge. As other discussions in the WTO have stalemated, this negotiation has also been stopped in its tracks. This effort began as part of the review of Article 27.3(b) of the TRIPS Agreement and included a discussion on relationship between the TRIPS Agreement and the CBD.70 There remains no agreement between members of the WTO on

65   Bonn Guidelines to the CBD, (n 64), art 16(d)(ii). See also discussion in Paul Kuruk, “Regulating Access to Traditional Knowledge and Genetic Resources: The Disclosure Requirement as a Strategy to Combat Biopiracy” (2015) 17(1) San Diego International Law Journal 1, 8. 66   The Nagoya Protocol is a supplementary agreement to the CBD; Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity (UN Doc UNEP/​CBD/​COP/​DEC/​X/​1, adopted on 29 October 2010). According to the CBD website, “[i]‌ts objective is the fair and equitable sharing of benefits arising from the utilization of genetic resources, thereby contributing to the conservation and sustainable use of biodiversity.” 67 68  Nagoya Protocol, (n 66), arts 5 and 6.   CBD, (n 51), art 15. 69  Daniel F Robinson, “Biopiracy and the Innovations of Indigenous Peoples and Local Communities” in Peter Drahos and Susy Frankel (eds), Indigenous Peoples’ Innovation Intellectual Property Pathways to Development (ANU E Press 2012) 77. 70  See generally “Article 27.3b, traditional knowledge, biodiversity” at . See also Daniel J Gervais, TRIPS Agreement Drafting History and Analysis (Sweet & Maxwell 2012) paras 1.79–​1.94.

774   Susy Frankel this relationship, however. Indeed, the US has contested the mandate of the TRIPS Council to discuss traditional knowledge. The main proposal at the WTO was a disclosure requirement for the origin of biological and genetic resources in the patent system. One of the barriers to creating an international disclosure requirement is disagreement over the interpretation of the existing requirements of the TRIPS Agreement. Some consider the TRIPS Agreement requires that countries issue patents without disclosure of the origin of biological and genetic resources. If that is the case then there is a conflict between the TRIPS Agreement and any requirement for a disclosure requirement. Others consider that a domestic law disclosure requirement is compatible with TRIPS because the requirements of patentability are not defined in TRIPS, or are limited to those explicitly named in Article 27.71 This argument is in part based on the fact that countries can implement the obligations of the Agreement as they see fit and can provide more extensive protection than what is in TRIPS.72 WTO members cannot go below the minimum standards but a disclosure requirement does not do this.73 The US insists that there is no conflict between the CBD and the TRIPS Agreement. It has, therefore, taken the position that if there are issues about access to biological and genetic resources, they are not IP-​related matters and should not be addressed by a disclosure requirement.74 In the TRIPS Council the US has proposed that any issue of access to genetic resources and benefit sharing can and should be resolved through contracts, rather than by amendment of the TRIPS Agreement.75 The US has not ratified the CBD so it would not have a treaty conflict, in any event. The matter is not so simple, however, for countries that are members of both agreements. Most members of the WTO are also CBD members. The benefits of a disclosure requirement would be much more effective if there is an international obligation that includes the US. In contrast to the US, the EU is supportive of mandatory disclosure, but not of patent revocation as a consequence of non-​disclosure.76 An added complexity to the TRIPS Council debate was that the discussions were tied to an equally controversial discussion over the protection of geographical indications, an issue on which the EU and the US do not agree.77 71  TRIPS Agreement, art 27 requires that countries provide patents for inventions provided they are new, (novel) involve an inventive step (are not obvious) and are capable of industrial application (are useful). 72  TRIPS Agreement, art 1.1. 73  The arguments around the compatibility of a disclosure requirement with the TRIPS Agreement are traversed in Christophe Bellmann, Graham Dutfield, and Ricardo Meléndez-​Ortiz, Trading in Knowledge: Development Perspectives on TRIPS, Trade, and Sustainability (Earthscan 2003). A proper analysis of the compatibility of the disclosure requirement with TRIPS requires a full interpretation using the customary rules of interpretation of public international law found in the Vienna Convention on the Law of Treaties 1969. 74  Also, the US has not ratified the CBD. See discussion in Laura Grebe, “Requiring Genetic Source Disclosure in the United States” (2011) 44 Creighton Law Review 367, 386. 75  Council for Trade-​Related Aspects of Intellectual Property Rights, “Communication from the United States: Article 27:3 (b), Relationship Between the Convention on Biological Diversity and the TRIPS Agreement,” IP/​C/​W/​257, 13 June 2001. 76  See generally Jonathan Carr “Agreements that Divide: TRIPS vs. CBD and Proposals for Mandatory Disclosure of Source and Origin of Genetic Resources in Patent Applications” (2008) 18 Journal of Transnational Law and Policy 131, 149–​152. See discussion at section 4.2.2 regarding possible consequences of a disclosure requirement. 77  See Chapter 19 (“Trade Marks and Allied Rights”) by Dev Gangjee, this volume.

Traditional Knowledge, Indigenous Peoples, & Local Communities    775 Many bilateral free trade agreements (FTAs) refer to the protection of traditional knowledge, but do not provide substantive norms on what is required.78 Even where the two countries both protect traditional knowledge, their FTAs have not been used to achieve an agreement on norms. The reason may be that those parties who seek protection for traditional knowledge assets have not used trade agreements to drive norms more generally in the IP field.79 But if the multilateral negotiations to protect traditional knowledge assets do not progress, then bilateral or plurilateral trade agreements may very well be the way forward for norm development. The challenges that arise in developing norms at international negotiations are many and include how IP law and traditional knowledge have differing frameworks.

4.  Intellectual Property Frameworks and Traditional Knowledge Neither existing IP law nor the so-​called public domain provide a framework that adequately takes into account the claims for the protection of traditional knowledge.

4.1 The Public Domain as the Home of Traditional Knowledge IP law defines the public domain by reference to IP law’s coverage. That which IP law does not protect or no longer protects is consequently in the public domain. The contours of that domain are various and disputed because IP law differs among countries. Traditional knowledge is not widely protected and is often treated as part of the public domain. There are exceptions, as traditional knowledge is protected in some countries. For example, the law of the Cook Islands provides for protection of traditional knowledge including to: (a) use, transmit, document or develop the knowledge in any way (whether commercial or not); (b) receive commercial returns from any use or development of the knowledge.80 Protection in one jurisdiction does not extend across borders as there is no international agreement to provide for any level of protection of traditional knowledge. Even if a country enacts a law like that of the Cook Islands, obtaining protection elsewhere is next to impossible without an international agreement requiring minimum standards of protection of traditional knowledge. Also, traditional knowledge laws, like that of the Cook Islands, define the subject matter of protection around local traditional knowledge and associated 78 

See Susy Frankel, “Attempts to Protect Indigenous Culture through Free Trade Agreements,” in Christoph Graber, Karolina Kuprecht, and Jessica Lai (eds), International Trade in Indigenous Cultural Heritage: Legal and Policy Issues (Edward Elgar 2012). 79 ibid. 80  Traditional Knowledge Act 2013 (Cook Islands), s7.

776   Susy Frankel customary rules81 This means that, even where national laws protect traditional knowledge, it may elsewhere be treated as if it is in the public domain. Much of the objection to the protection of traditional knowledge both nationally and internationally is cast in terms of shrinking the public domain. An illustrative example of that discussion is found in the following passage from the report on a claim about Māori traditional knowledge: On several occasions counsel suggested that because the claimants were responsible for making the taonga works [works embodying traditional knowledge] publicly available they must have anticipated that they were there for everyone to use. The Crown’s view was that taonga works and mātauranga Māori [Māori traditional knowledge] have been freely available for others to use because they are in the public domain, and it is now too late to pull them out of the public domain and re-​impose IP rights on them. The Crown also argued that once mātauranga Māori is in the public domain it is difficult to control its use. The Crown submitted that there is neither a practical way nor any need to protect mātauranga Māori once it is published. Further, the Crown said that trying to pull mātauranga Māori back from the public domain would undermine other interests. Those interests include [those of] the people who have and continue to make use of taonga works in the public domain, and other rights such as freedom of expression.82

The IP-​driven construction of the public domain is not only contestable,83 but it is also at odds with customary systems of knowledge which simply do not include the concept of unrestricted use.84 The nuances of appropriate use will vary among cultures and even within indigenous communities. In relation to the public domain, the Māori view, which is shared with other indigenous peoples, is that their knowledge is not outside the scope of expectations about use. In other words, the knowledge is public, but not the domain of all. This approach, at a broad level, does not differ from other areas of IP where the patent or copyright work, for example, is available to the public, but its use is regulated by patent and copyright law respectively. The traditional knowledge claim is often not that the knowledge must be kept secret,85 but rather than it is treated in accordance with community norms, customary law, or similar 81  Traditional knowledge is defined in section 4 of the Traditional Knowledge Act 2013 (Cook Islands) as meaning “knowledge (whether manifested in tangible or intangible form) that is, or is or was intended by is creator to be, transmitted from generation to generation and (i) originates from a traditional community and (ii) is or was created, developed, acquired or inspired for traditional purposes.” The section then goes on to give examples. 82  See also, Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore Seventeenth Session, Note on the Meanings of the Term “Public Domain” In the Intellectual Property System with Special Reference to the Protection of Traditional Knowledge and Traditional Cultural Expressions/​Expressions of Folklore, WIPO/​GRTKF/​IC/​17/​INF/​8, 24 November 2010. 83  See Frankel and Richardson, (n 33); William Van Caenegem, “The Public Domain: Scienta Nullius?” [2002] European Intellectual Property Review 324. Also A Taubman, “Nobility of Interpretation: Equity, Retrospectivity, and Collectivity in Implementing New Norms for Performers’ Rights,” (2004-​05) 12 Journal Intellectual Property Law 351. 84  See Kathy Bowrey, “Indigenous Culture, Knowledge and Intellectual Property: The Need for a New Category of Rights?” in Kathy Bowrey, Michael Handler, and Diane Nicol (eds), Emerging Challenges in Intellectual Property (OUP 2011), 47. 85  Claims for secrecy do exist, but they are only a small part of the overall concerns.

Traditional Knowledge, Indigenous Peoples, & Local Communities    777 governance frameworks, such as kaitiakitanga (Māori values and relationships).86 This includes situations where Māori are the guardians (kaitiaki) of knowledge and are able to exercise that guardian relationship. To illustrate this further, there have been many instances in which Māori have shared knowledge with Europeans and made their knowledge and culture available. In particular, settler Europeans worked closely with Māori in order to document mātauranga Māori. Elsdon Best, an anthropologist working in New Zealand in the early twentieth century, for example, documented much mātauranga Māori.87 The first copyright law of New Zealand was an ordinance to protect a book about and entitled “Māori Grammar.” It was authored by a missionary, Reverend Maunsell.88 More recently, Murdoch Riley authored a very detailed book about traditional healing.89 Māori also publish their own cultural work which embodies their knowledge.90 Several Māori have said that sharing knowledge, and determining how much to give away is important, but they did not and do not expect their mātauranga Māori to be used offensively or in ways that defeat the ability of Māori to use their own knowledge.91

4.2 The Overlap of Traditional Knowledge and Intellectual Property As it presently stands, neither international IP law nor many national regimes protect traditional knowledge. The main substantive international IP agreements—​the TRIPS Agreement and its incorporated agreements, the Berne Convention92 and the Paris

86  Ko Aotearoa Tēnei, (n 3), 17, stating “. . . Kaitiakitanga is the obligation, arising from the kin relationship, to nurture or care for a person or thing.” 87  Eldon Best, Spiritual and Mental Concepts of the Māori (Wellington, Dominion Museum Monograph No 2, GP, 1922). 88  Maunsell also translated the Old Testament into Māori. 89  M Riley, Māori Healing and Herbal (Viking Sevenseas 1994). 90  For example, a compendium of waiata (songs and chants), Ngā Mōteatea, collected and translated by Apirana Ngata and Pei Te Hurinui Jones (Auckland University Press, reprinted 2004). 91  I make these comments based on my role as Consulting Counsel and report drafter on IP law for the Waitangi Tribunal. I attended many hearings and heard much of the evidence first hand. These observations are, of course, my own, and not the views of the Tribunal. 92  Berne Convention, art 15 (4) provides:

(a) In the case of unpublished works where the identity of the author is unknown, but where there is every ground to presume that he is a national of a country of the Union, it shall be a matter for legislation in that country to designate the competent authority which shall represent the author and shall be entitled to protect and enforce his rights in the countries of the Union.   This is thought by some to provide some kind of recognition of the possibility of protection folklore, see UNESCO-​WIPO World Forum on the Protection of Folklore, “1967,1982,1984: Attempts to Provide International Protection for Folklore by Intellectual Property Rights,” UNESCO-​WIPO/​ FOLK/​PKT/​97/​19, 21 March 1997. The same document at page 5 also recognises that, in fact, copyright cannot protect “folklore” adequately, http://​unesdoc.unesco.org/​images/​0022/​002201/​ 220179EO.pdf.

778   Susy Frankel Convention93—​do not protect traditional knowledge. Consequently, the national regimes that implement those agreements are not required to have such protection. As discussed, those agreements and domestic IP laws do, however, have a variety of mostly adverse impacts on traditional knowledge. Although, IP protects something different from traditional knowledge, for the most part, there are overlaps between the regimes. To better understand the relationship between IP and traditional knowledge first the reasons why categories of IP do not work for traditional knowledge is explained. This misfit of the two areas has largely resulted in their development as separate regimes. Because of the different goals of the two sorts of protection, separate regimes is sensible. As the regimes often conflict, however, reinforcing these independent worlds is not a solution for the points of conflict. After discussing the misfit, this section then turns to consider some of the mechanisms devised to create an interface between the two areas.

4.2.1  The Misfit of Traditional Knowledge and Intellectual Property The most discussed conflict between patents and traditional knowledge is the situation in which a patentee uses the knowledge to create an invention and then owns and exploits the patent without acknowledgment or payment of any kind to the source or guardians of the knowledge.94 When the knowledge is passed down from previous generations, it is not patentable because it is not considered novel or inventive enough to protect. But even where it is innovative, there is still a question because discoveries, abstract ideas, and laws of nature are not patentable. Nor is knowledge on its own patentable as patents protect inventions, which involve new and inventive applications of knowledge.95 Where the knowledge is applied to create inventions, traditional knowledge may well be patentable. A  cooperative effort among scientists and the Chuulangun Aboriginal Corporation in Australia provides a good example. David Claudie, Chairman of the Chuulangun Aboriginal Corporation, in collaboration with scientists from the University of South Australia, used their different approaches of testing and observation to create new medicinal developments relating to the Uncha plant.96 From the perspective of the indigenous peoples, Kuuku I’yu of Northern Kaanju, who were involved in this venture, the goal was to create their “own planning for sustainable natural resources management and economic development . . . [and] to protect their own cultural and intellectual property.”97 Such uses of traditional knowledge often take place without this kind of cooperation because under Australian law (and the laws of many other countries), the knowledge and the biological and genetic resources are not necessarily legally recognized as belonging to indigenous people, but rather are treated as if they are in the public domain.

93 

Paris Convention for the Protection of Industrial Property, 828 UNTS 303 (adopted on 20 March 1883, entered into force 16 April 1970), as revised at Stockholm (14 July 1967). 94  D Fabricant and N Farnsworth, “The Value of Plants used in Traditional Medicine for Drug Discovery” (2001) 109 Environmental Health Perspectives 69. 95  For further discussion, see Dan Burk in this volume. 96  David J Claudie, Susan J Semple, Nicholas M Smith, and Bradley S Simpson, “Ancient but New: Developing Locally Driven Enterprises Based on Traditional Medicines in Kuuku I’yu Northern Kaanju Homelands, Cape York, Queensland, Australia” in Drahos and Frankel, (n 16). 97  ibid 35–​36.

Traditional Knowledge, Indigenous Peoples, & Local Communities    779 In this example, the indigenous people were represented through a corporation. The corporation did not act as the owner, but as a conduit to ensure that the biological resources were appropriately sourced. The Chuulangun Aboriginal Corporation and the University of South Australia applied for two patents resulting from their research. They also recognized the limitations of patents regarding ownership and the term of protection as finite. As they explain: This patenting process has raised other issues besides those of costs and timelines [the finite term of patents]. Patents do not allow “ancestors” or whole clan groups to be name only “inventors” according to a narrow definition. While the Chuulangun Aboriginal Corporation can be an owner on the patent, their ancestors or clan group as a whole cannot be named as the inventors. Traditional owner preference would also be to patent plants from the particular area. While it may be possible to genetically map plants to particular areas and patent extracts from them, a pharmaceutical commercial partner buying the right to use the IP covered by the patent may want to ensure it is covered for extracts from the species generally so no one else can produce what it perceives as the “same” product.98

The differences between an individualized approach to ownership of patents and the collective interests and guardianship role of holders of traditional knowledge is central to why patents are not a good fit for traditional knowledge. The same is true of other forms of IP and in particular copyright.99 Fundamentally copyright, like patents, protects applied or commodified knowledge. Copyright is for the particular expression100 of literary, dramatic, musical, and artistic works.101 Where traditional knowledge is used to create works that are analogous to copyright works and that knowledge is embodied in those works, they may receive copyright protection. These are often referred to in international negotiations as traditional cultural expressions (TCEs). WIPO describes TCEs as: . . . integral to the cultural and social identities of indigenous and local communities, they embody know-​how and skills, and they transmit core values and beliefs. Their protection is related to the promotion of creativity, enhanced cultural diversity and the preservation of cultural heritage.102

If copyright does exist in relation to a TCE it protects the particular expression found in the copyright work, not the knowledge and customary norms embodied in that expression. Also, copyright works must be original. They need not be novel or require an inventive step as patents do, but copyright does not vest in copies of existing works. Some uses of traditional knowledge will result in original copyright works, but those that involve copying, particularly to ensure authenticity, may not qualify as copyright works precisely because they are copies. Similar to patents, however, ownership of copyright is individualized and gives certain entitlements to use and create or authorize the creation of copies. This is in contrast to notions of developing a culture for collective and guardianship interests, which lie behind 98 ibid, 51.

99  See Frankel, (n 24), 132–​151. TRIPS Agreement, art 9:2 provides that “copyright protection shall extend to expressions and not to ideas, procedures, methods of operation or mathematical concepts as such.” 101  Berne Convention, art 2. 102  See WIPO, “Traditional Cultural Expressions,” available at ​. 100 

780   Susy Frankel the expectations that indigenous peoples have for the use of much traditional knowledge. This does not mean that indigenous peoples do not create modern items of culture that might qualify for copyright. It does, however, mean that their knowledge is not protected or able to be controlled independently from or as part of that copyright protection. This becomes problematic when copyright (like patents) expire, while guardianship obligations in relation to the traditional knowledge do not expire. Trademarks and geographical indications (GIs) can be perpetual and so they might initially look like a good fit for protecting the enduring nature of traditional knowledge. However, the requirement for a named owner on the trademark or GI register mostly is incompatible with the customary rules and expectations that govern uses of traditional knowledge. As with copyright and patents, there is more likely to be a collective interest, which sits poorly with the requirement of a named owner for registration.103 In contrast to the situation with the main type of registered trademark, GIs, collective trademarks and some certification trademarks can be owned by a collective entity.104 This makes such regimes appear, at first blush, to be effective legal tools for the protection of traditional knowledge. Much like copyright and patents, these regimes function to protect the commodification of the knowledge not the misuse or misappropriation of that knowledge. The trademark-​related marketing value of indigenous peoples and, by implication, their knowledge was shown when Aveda tried to obtain exclusive rights to use the word “indigenous” on cosmetics. Aveda’s use of “indigenous” met some considerable resistance and eventually it discontinued its use and withdrew the trademark.105 More broadly, one trader can misappropriate traditional knowledge and gain a trademark relating to that knowledge. Many of these misappropriations have resulted in offensive uses. The Washington Redskins provides an example.106 Perhaps more positively, but also somewhat problematically, there are examples of trademark registration as a kind of second-​best option to the protection of traditional knowledge. For example, Māori attempts to protect the longest place name as a trade mark are described in the report known as Ko Aotearoa Tēnei.107 As the report explains: Tamatea Pokaiwhenua was renowned as a navigator and discoverer. He travelled most of the coastline of these islands [of New Zealand], naming as he went. On his way down the east coast, he stopped at the long stretch of sandy beach now known as Porangahau in central Hawke’s Bay, probably because it was one of the few good landing-​places along that stretch of coastline. The story goes that he, his brother uhenga-​Ariki, and the crew of his waka became embroiled in a conflict with those who already lived in that place. In the hostilities uhenga-​ Ariki was killed. Grief stricken, Tamatea climbed to the top of a nearby peak and played a

103 

For a discussion of the overlap of trademarks and traditional knowledge, see Susy Frankel, “Trademarks and Traditional Knowledge and Cultural Intellectual Property Rights” in Graeme B Dinwoodie and Mark D Janis (eds), Trademark Law and Theory (Edward Elgar 2008). 104  Daniel Gervais, “Traditional Innovation and the Ongoing Debate on the Protection of Geographical Indications” in Drahos and Frankel, (n 16). 105  See the “Statement on discontinuation of ‘Indigenous’ product line and trademark.” Press Release, Aveda, Aveda Announces Discontinuation of Indigenous Product Collection (4 November 2003), . 106  Pro-​Football, Inc v Blackhorse et al, 111 USPQ2d 1080 (TTAB 2014), affirmed No 1:2014cv01043—​ Document 161 (ED Va 2015). See also, Rebecca Tsosie “Indigenous Identity and Sports Mascots: The Battlefield of Cultural Production” (2016) The Federal Lawyer 9. 107  Ko Aotearoa Tēnei, (n 3), 65–​66.

Traditional Knowledge, Indigenous Peoples, & Local Communities    781 lament to his brother on his nose flute. The tune was so haunting and his grief so complete that the peak from that moment came to be known as Te Taumata whaka tangi hanga koauauo tama tea urehaeaturi puka ka pi ki maunga horo nuku po kai whenua ki tana tahu in memory of the event. Rerekohu Robertson translated the name for us as: “the hill on which Tamatea with his big knees who roamed the country played his lament on his flute to the memory of his brother”. That name is now famous as the longest place name in the world.108

Roberston, the witness who gave evidence about the value of this place name to the Waitangi Tribunal, explained how he tried to use the trademark system because there were no alternative forms of protection. The trademark registration was a misfit because it required some alteration of the place name as it was otherwise unregistrable as geographically descriptive. And, in any event, the registration was not effective to protect mātauranga Māori (the traditional knowledge) that is associated with the place name.109 This demonstrates that GIs, which require accurate place names, are a better fit, but they too present problems. The inadequate scope of GI protection as a mechanism for protecting the traditional knowledge of indigenous peoples and local communities arises because GIs, like trademarks, are primarily framed for the protection of commodities. GIs are granted to a community of producers for use on the products associated with a geographical region.110 One of the rationales for GI protection is the connection between the product and the land. Underpinning GIs is the recognition of claims that no one should be able to use certain names either of or associated with geographical regions for products unless the product is made by traditional techniques of a region or raised in a particular environment, such as wine with grapes from Bordeaux or from Champagne, or cheese matured in the caves at Roquefort. This narrative of the connection with the land (the terroir) resembles how indigenous peoples and local communities explain their traditional knowledge as part of and integral to their relationship with the land. A GI, however, only protects the commodity, not the knowledge, and it is only useful if the knowledge holders want to commodify their knowledge.111 Consequently, GIs have, in effect, become a mechanism to protect traditional knowledge of communities in developed nations because those communities choose to use that knowledge to make commodities and have access to resources to do so.112 Although developing countries have GIs, most successful GIs have emerged from Europe. Meanwhile, non-​commodified place-​based traditional knowledge, even if innovative, is without protection. As one author explains, innovation connected to traditional knowledge “may often be situated at the intersection of ‘culture’ and technology. By contrast, GIs are generally situated 108

109  Ko Aotearoa Tēnei, (n 3), 38–​39.   Ko Aotearoa Tēnei, (n 3), 38. TRIPS Agreement, art 22:1 provides “Geographical indications are, for the purposes of this Agreement, indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin.” 111  See Antony Taubman, “Saving the Village: Conserving Jurisprudential Diversity in the International Protection of Traditional Knowledge” in Jerome H Reichman and Keith E Maskus (eds), International Public Goods and Transfer of Technology Under a Globalized Intellectual Property Regime (CUP 2005), 521. See also Tim Josling, “The War on Terroir: Geographical Indications as a Transatlantic Trade Conflict” (2006) 57 (3) Journal of Agricultural Economics 337; Elizabeth Barham, “Translating terroir: the global challenge of French AOC labeling” (2003) 19 Journal of Rural Studies 127. 112  See Susy Frankel, “The Mismatch of Geographical Indications and Innovative Traditional Knowledge” (2011) 29(3) Prometheus 253. 110 

782   Susy Frankel at the intersection of culture and commerce.”113 If indigenous peoples and local communities wish to exploit their traditional knowledge commercially, a GI mechanism may be an effective tool to do this. However, a GI does not alone achieve development and they are expensive to register, market, and maintain. GIs are not the first step in development, even if they are sometimes useful at a later stage.114 There is a considerable amount of traditional knowledge which has little or no resemblance to the core categories of IP; patents, copyright, and trademarks. This includes secret knowledge that is not used openly for any kind of development, let alone commercial development, and consequently it falls outside of any western innovation framework. The protection of secret or even sacred traditional knowledge nevertheless has analogues in the IP systems. The existence of trade secrets115 and breach of confidence116 doctrines, while they do not alone provide a solution for the protection of traditional knowledge, illustrate that protecting confidentiality is not foreign to IP law. Furthermore, the doctrines are treated as necessary adjuncts, if not full-​blown regimes in several jurisdictions. At the opposite end of the spectrum from secrecy are iconic symbols, such as flags and emblems. Some of these are regarded as so culturally important that they receive protection within the IP framework. They are also recognized internationally because of their importance to communities and culture (framed as countries and their people).117 In sum, traditional knowledge cannot be protected adequately through the use of IP law both because IP was designed for other purposes and because it should not impose on traditional knowledge holders values that they do not share. The mismatch is, in part, created by the way in which IP (and, where it exists, traditional knowledge protection) are rationalized and justified and the frameworks that such justifications create. The incentive rationale of IP tends to value innovation—​the creation of new and better products. This assumes certain institutions relating to IP creation and maintenance. Traditional knowledge is based more on systems and relationships than commodity oriented production and many of those features are not recognized in the dominant or western legal system.118 These relationships are, therefore, not thought of as innovation-​related institutions or communities in the same way as laboratories, teams of scientists, authors, or other creators, firms, and universities are. Kinship systems that are based on community and environmental linkages fall outside of this structure and thus so does their knowledge and its application.119

113 

Gervais, (n 104), 134. Some advocate for the use of GIs for western rural development, see Daniele Giovannucci, Elizabeth Barham and Rich Pirog, “Defining and Marketing Local Foods: Geographical Indications for U.S. Products” (2010) 13 Journal of World Intellectual Property 94. 115  See generally Rochelle C Dreyfuss and Katherine J Strandburg, The Law and Theory of Trade Secrecy A Handbook of Contemporary Research (Edward Elgar 2006). 116  See generally Tanya Aplin, Lionel Bently, Phillip Johnson, and Simon Malynicz, Gurry on Breach of Confidence The Protection of Confidential Information, Second Edition (OUP 2012). 117  Paris Convention, art 6ter Marks: Prohibitions Concerning State Emblems, Official Hallmarks, and Emblems of Intergovernmental Organizations. 118  Drahos and Frankel, (n 16), 4. 119  In some societies, modern indigenous peoples’ institutions may have some legal recognition. In modern day New Zealand, for example, the iwi (tribal grouping) is a legally recognized institution for some purposes. 114 

Traditional Knowledge, Indigenous Peoples, & Local Communities    783

4.2.2  The Traditional Knowledge and Intellectual Property Interface The ill-​fit of traditional knowledge and IP frameworks can create conflict. The emerging solution is not to try and fit traditional knowledge protection into the IP system, but to fashion protection for it in a sui generis system.120 Sui generis rules avoid the problem of having to make general rule changes to IP law, which could have deleterious consequences beyond traditional knowledge (such as giving indefinite protection to all rights), for it would introduce into IP law norms generated by other value systems. Where sui generis protection schemes already exist, there are differences between them. Some involve pluralistic elements where the customary laws of the traditional knowledge holders are incorporated into the system.121 Other regimes are governed solely by the dominant legal system. Sui generis systems tend not to have global support. Moreover, even where such regimes do exist, the conflicts between them and IP may cause one to defeat the other. This is why mechanisms that create interfaces between the two systems are also required. For example, New Zealand has provided a partial interface in both trademark and patent law. Both of the relevant statutes require a Māori advisory committee to provide the Commissioners of Trade Marks and Patents, respectively, with advice on conflicts with Māori culture.122 Under trademark law, a conflict with Māori values which amounts to offensiveness means that the trademark must not be registered.123 Impact on Māori values amounting to a matter of ordre public may prevent patent registration.124 A requirement that the use of genetic and biological resources, in the process of creating a patentable invention, is disclosed in patent applications also would provide an interface between traditional knowledge and the patent system.125 As discussed, requirements for disclosure of the origin of biological and genetic resources have grown from the Convention on Biological Diversity (CBD).126 They were discussed at the WTO in regard to the TRIPS Agreement and continue to be negotiated at WIPO. The core disclosure-​related proposal, which is similar in all of those fora, is that there should be an international agreement requiring that patent applicants must disclose, in the relevant patent application, the source of any biological or genetic material and/​or traditional knowledge used in the invention. There are many variables about the details that such a requirement might impose.127 At one

120

  Sui generis means a standalone system.   Ko Aotearoa Tēnei, (n 3). See also Miranda Forsyth “Do You Want it Gift Wrapped?: Protecting Traditional Knowledge in the Pacific Island Countries” in Drahos and Frankel, (n 16). 122   Discussed in Susy Frankel “A New Zealand Perspective on the Protection Traditional Knowledge” in Christoph Graber, Karolina Kuprecht, and Jessica Lai (eds), (n 78), 439. 123   Trade Marks Act 2002, s17(1)(c) provides: 121

The Commissioner must not register as a trade mark or part of a trade mark any matter—​ . . . (c) the use or registration of which would, in the opinion of the Commissioner, be likely to offend a significant section of the community, including Māori. 124

  Patents Act 2013, ss225-​228. Ko Aotearoa Tēnei, above (n 3), 212, recommends expansion of this interface and also recommends the development of a sui generis regime. To contribute towards achieving this, the Tribunal recommended that the committee should have powers greater than merely being advisory and that the Commissioner should be “required to take formal advice from it, and work in partnership with a member of the Māori committee when making patent decisions that affect the kaitiaki relationship.” 125  See discussion earlier. 126  CBD, (n 51). 127  See (n 84).

784   Susy Frankel extreme would be disclosure of the genetic or biological resource if it was integral to the invention, such as a process for isolating an active ingredient in a plant. This presumably should, in some way, be disclosed in any event. At the other extreme is the disclosure of traditional knowledge that was involved in the research process, but is not a part of the invention itself, such as a patent for how to synthesize the active ingredient. The former may sometimes be mandated by existing patent law,128 but the latter is not usually required.129 Whatever the scope of the disclosure requirement a related matter, if such disclosure is to work with the rest of the patent system, is the consequences for the patent if the patent application did not make the relevant disclosure.130 There is a spectrum of possibilities from no consequence to patent revocation. Several possibilities exist between these two extremes, such as re-​examination of the patent application to determine whether the invention is patentable in light of the disclosure or a penalty of some kind. As WIPO explains: Since disclosure requirements generally have both formal and substantive aspects, the consequences of failure to comply with either aspect may differ. Failure to comply in formal terms may not necessarily have serious consequences, provided it is not fraudulent and is remedied in a timely manner. Failure to comply in substantive terms (such as requirement to disclose sufficient material to sustain patent claims) may have major consequences for the fate of a patent application or granted patent. The consequences of failure to comply with a particular disclosure obligation may, in principle, flow from the reason for the imposition of the requirement. A failure to disclose genetic resources necessary to carry out the invention may lead to the refusal, narrowing or invalidation of claims that would depend for their legitimacy on that disclosure. A failure to provide adequate information to substantiate entitlement to apply for or be granted a patent may lead to the loss of the patent right. There is an uncertain area where disclosure requirements are not derived from substantive requirements relating to patentability of the invention or the entitlement of the applicant to receive a patent. Some disclosure requirements may be linked to distinct legal mechanisms, including in foreign jurisdictions, and may be aimed at monitoring or enforcement of regulations or specific contracts.131

In sum, the overlap between IP law and the existing, developing, and aspirational protection of traditional knowledge assets and the use of that knowledge for creativity and innovation is vast. The overlap is both practical and legal. At the international level, there are several ongoing negotiations, discussed previously in the chapter, about how traditional knowledge might be protected across borders. Even though there are few jurisdictions in which traditional knowledge is formally protected in the mainstream legal system.

128 

TRIPS Agreement, art 29 requires that an applicant for a patent shall disclose the invention “in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art and may require the applicant to indicate the best mode for carrying out the invention known to the inventor at the filing date.” 129  This is recommended in Ko Aotearoa Tēnei, (n 3). 130  See WIPO “Technical Study on Disclosure Requirements Related to Genetic Resources and Traditional Knowledge” Doc 786, . 131 ibid, 5.

Traditional Knowledge, Indigenous Peoples, & Local Communities    785

5.  National Protection Regimes In addition to interface mechanisms to address the overlap between traditional knowledge and IP, there are some national regimes that provide sui generis protection. Without national regimes, trans-​border mechanisms, such as national treatment, cannot function to protect traditional knowledge effectively.132 As noted earlier, some countries, such as the Cook Islands, have enacted traditional knowledge protection. Other countries with sui generis protection include Peru, India, and China.133 The Peruvian regime was created predominantly in response to biodiversity concerns and the development of plant breeders’ rights that did not necessarily take account of traditional breeding practices. One description of the motivations behind the law was as follows: Protecting TK has been perceived as a means of promoting equity and ensuring that indigenous communities are empowered to make the decisions that impact their TK and, ultimately, their cultural patrimony. Indeed, the protection of TK is an essential tool in the creation of viable livelihoods and the sustainable development of communities throughout the country.134

There are several pieces of legislation that make up the Peruvian framework. The main protection regime for traditional knowledge relies on trade secret and competition law principles, and creates rules around licensing traditional knowledge.135 The system also establishes a register of traditional knowledge. A  registration mechanism is also used in India, where entry on the Traditional Knowledge Digital Library puts information into the “prior art,” and bars anyone from patenting it. China has similarly created a register of Chinese Traditional Medicine.136 Developed countries, by comparison, have less sui generis protection and almost no interface mechanisms to deal with the inevitable conflicts between IP and the protection of traditional knowledge. In the US, the Redskins federal trademark registration was revoked on grounds that relate to disparagement rather than protection of traditional knowledge (although the two can overlap).137 In Australia there was a case that involved the unauthorized use of an aboriginal artwork. The judgment in that dispute offered a limited way to protect traditional knowledge.138 The case involved works known as “Magpie Geese” and “Water 132   See WIPO seminar, “The Cross-​Border Protection of Intellectual Property and its Relevance for the Protection of Traditional Knowledge, Traditional Cultural Expressions and Genetic Resources,” Geneva, 23 June 2015, WIPO/​IPTK/​GE/​2/​15/​, . 133   Susanna E. Clark, Isabel Lapeña, and Manuel Ruiz, “The Protection of Traditional Knowledge in Peru: A Comparative Perspective,” (2004) 3 Washington University Global Studies Law Review 755. 134 135  ibid 772–​7 74.  ibid 770. 136 WIPO, Online Databases and Registries of Traditional Knowledge and Genetic Resources, at . 137  See (n 106). The provision this was based on was challenged sucessfully as not consistent with free speech, see Matal v Tam,  ; Lisa Ramsey, “A Free Speech Right to Trademark Protection?” (2016) 106 Trademark Reporter 797. 138  Bulun Bulun v R&T Textiles Pty Ltd, Minister for Aboriginal and Torres Strait Island Affairs (intervening) (1998) 157 ALR 192. Another case awarding damages for “cultural harm” resulting from

786   Susy Frankel Lilies at the Waterhole” that had been copied on fabric that was imported to Australia. The artist, Bulun Bulun, brought proceedings against the company, R & T Textiles, who admitted copyright infringement and withdrew the fabric from sale. They said they were unaware of the copyright ownership and consented to the proceedings to look at the issues it raised. Bulun Bulun was a member of the Ganalbingu people and had created his artworks with permission and then sold the work to Maningrida Arts and Crafts Centre. An elder of the Ganalbingu people also claimed an equitable right in the copyright subsisting in the artistic works. The artwork incorporated traditional ritual knowledge belonging to the Ganalbingu people. Bulun Bulun was found to have a fiduciary duty to the Ganalbingu people. He had created the works as part of his traditional responsibilities of Ganalbingu custom and law. Bulun Bulun gave evidence about how he consulted with other traditional owners about reproductions because to do otherwise would threaten his people’s society. It was on this basis that a named elder claimed an equitable interest in the copyright on behalf of the Ganalbingu people. This claim did not succeed because the works were not works of joint authorship. However, the Court held that Bulun Bulun owed a fiduciary duty to the Ganalbingu people to protect the knowledge which he had been permitted to use under customary law. On the facts, the Court found that duty had been fulfilled. This case recognized the customary law within the dominant law framework only to the extent that customary law was relevant to the fiduciary duty and, therefore, the case provided precedent for only a very limited right of redress in the context of Australian indigenous rights. In New Zealand, as noted, there has been extensive discussion of protection of mātuaranga Māori and some interface mechanisms have been enacted, including Māori advisory committees within trademark139 and patent registration procedures.140 Sui generis protection also exists, but it is thin. However, the recommendations from the Waitangi Tribunal141 copyright infringement was Milpurrurru v Indofurn Pty Ltd (1991) 21 IPR 481. That case involved the reproduction of Aboriginal artworks on carpets imported from Vietnam. For a discussion of these cases and related issues, see Kathy Bowrey, “International Trade in Indigenous Cultural Heritage: An Australian Perspective,” in Graber, Kuprecht, and Lai, (n 78). 139 

See Trade Marks Act 2002 (NZ), ss 177–​180. Section 178 provides:

The function of the advisory committee is to advise the Commissioner whether the proposed use or registration of a trade mark that is, or appears to be, derivative of a Māori sign, including text and imagery, is, or is likely to be, offensive to Māori. 140 

See Patents Act 2013 (NZ), ss 225–​228. Section 226 provides:

The function of the Māori advisory committee is to advise the Commissioner (on request) on whether—​

(a)  an invention claimed in a patent application is derived from Māori traditional knowledge or from indigenous plants or animals; and (b)  if so, whether the commercial exploitation of that invention is likely to be contrary to Māori values. 141  The Waitangi Tribunal is a tribunal of inquiry established by the Treaty of Waitangi Act 1975 (NZ), s 5. The Tribunal investigates claims made under the Treaty of Waitangi (Te Tiriti O Waitangi). The Treaty is a founding document of New Zealand. For the Treaty’s history see Claudia Orange, The Treaty of Waitangi (Bridget Williams Books 1992). The Treaty sets out the agreement between Māori and the Crown over the governance of New Zealand and is consequently of constitutional significance. The Treaty of Waitangi is in both Māori and English and both versions are official versions, as they are

Traditional Knowledge, Indigenous Peoples, & Local Communities    787 (the body charged with hearing the claim for the protection of mātuaranga Māori) are extensive and form one of the more detailed analyses of how to provide protection for traditional knowledge in a global economy. The Tribunal’s recommendations are the outcome of proceedings initiated in 1991. Six claimant iwi (a tribal group) brought proceedings142 alleging that successive governments of New Zealand (the Crown) had failed to allow Māori to exercise te tino rangitiratanga143 (self-​determination and control) over things Māori and, in particular, over the body of knowledge; mātauranga Māori.144 The Waitangi Tribunal is not a court that makes a final decision, but rather it has the power to make recommendations to the government. The process involves hearing evidence and considering submissions. It culminates in a report with recommendations. The report, with the Māori title Ko Aotearoa Tēnei, was issued in 2011, and in summary “is about Māori culture and identity; New Zealand’s laws, government policies and practices that affect that culture; and whether Māori are able to live and develop (both culturally and economically) as Māori.”145 Perhaps a unique feature of the process is that the claim, and consequently the report, is framed around the Treaty of Waitangi (the treaty between Māori and the British Crown when New Zealand was colonized). That is undoubtedly a unique feature for Māori as claimants for the protection of traditional knowledge. The analysis, however, speaks beyond the shores of New Zealand. Not only does the report examine compatibility with existing IP instruments, such as the TRIPS Agreement, but it also provides a framework for sui generis and interface protection that is undoubtedly applicable to other indigenous peoples and local communities. The central issues in the claim were who should control the claimants’ knowledge (mātauranga Māori) and the outputs of that knowledge (taonga works). The claimants sought control so as to maintain and develop their guardianship (kaitiaki) relationship with taonga works (treasured works which are analogous to TCEs).146 Because of the centrality of the kaitiaki relationship, the Tribunal distinguished between works where there is a kaitiaki and works where there is no kaitiaki and, therefore, can be no kaitiaki relationship. Consequently, if the relationship does not exist there is not the need for protection.147 This recognition of the kaitiaki relationship led to the distinction between taonga works and taonga-​derived works. This is important because the lesser protection recommended

not direct translations of each other, see Treaty of Waitangi Act 1975, s 2, which defines “the Treaty” as including both the English and Māori version set out in sch 1 of the Act. The Second Article, Ko te Tuarua, is of direct relevance to IP and is the Treaty basis for Ko Aotearoa Tēnei (n 3). 142   The claimants were Haana Murray of Ngāti Kurī, Hema Nui a Tawhaki Witana of Te Rarawa, Te Witi McMath of Ngāti Wai, Tama Poata of Ngāti Porou, Kataraina Rimene of Ngāti Kahungunu, and John Hippolite of Ngāti Koata. 143   Te tino rangitiratanga is guaranteed to Māori under the Second Article of the Treaty of Waitangi. 144 145  Frankel, (n 68), 440.   Ko Aotearoa Tēnei (n 3). 146  Ko Aotearoa Tēnei (n 3), 38–​43. 147  Works for which there is a kaitiaki are taonga works. If there is not kaitiaki, the report calls the works taonga-​derived works, Ko Aotearoa Tēnei (n 3), 84–​85. The distinction between taonga-​derived works and taonga works might also be seen as reflecting the reality that allowing non-​Māori to use Māori culture is also a benefit for Māori, as such use contributes to the culture’s survival. It is for that reason that the Tribunal also said it did not recommend mātauranga Māori be treated as owned by Māori. The Tribunal said that “building a legal wall around mātauranga Māori would . . . choke it,” Ko Aotearoa Tēnei, (n 3), 92.

788   Susy Frankel for taong0-​derived works and the greater protection for taonga works acknowledges that aspects of Māori culture are free to be used, albeit not offensively (because they are in the so-​ called public domain), but that taonga works merit greater protection because of the kaitiaki relationship. The Tribunal also dealt with competing interests (such as those of IP owners and members of the general public who use Māori culture),148 and concluded that such interests should be weighed against the Māori interests in taonga works. In sum, Ko Aotearoa Tēnei recommends shifting that balance so that the Māori interests, in appropriate circumstances, become a key protected interest. The broad recommendations that the Tribunal made in order to achieve the protection of taonga works and mātauranga Māori are: 1. New standards of legal protection governing the use of taonga works, taonga-​derived works, and mātauranga Māori . . . (a) A general objection mechanism to prohibit the derogatory or offensive public use of taonga works, taonga-​derived works, or mātauranga Māori . . .149 (b) A mechanism by which kaitiaki can prevent any commercial exploitation of taonga works or mātauranga Māori (but not taonga-​derived works) unless and until there has been consultation and, where found appropriate, kaitiaki consent . . .150 2. An expert commission to have wider functions in relation to taonga works, taonga-​ derived works, and mātauranga Māori.151 The Tribunal also made recommendations relating to IP aspects of genetic and biological resources along with issues arising in other parts of the research process, such as questions related to bioprospecting and biosecurity.152 The Tribunal concluded that the Treaty of Waitangi requires a reasonable degree of protection of the kaitiaki relationship between Māori and biological and genetic resources, described as taonga species.153 The Tribunal’s overall recommendation was that decision-​making mechanisms, such as registering patents, need to value the Māori interest as a key factor. In relation to an application for a patent, this would include consideration of kaitiaki interest in ensuring that mātauranga Māori is relevant prior art that is taken into account in the determination patentability (for example, whether an invention is novel and involves an inventive step) or whether the invention should be excluded from patentability because it conflicts with the kaitiaki relationship more broadly and is, therefore, contrary to ordre public.154 In order to 148

  Some people with competing interests, including New Zealand artists and designers as well as other holders of |IP rights, gave third-​party evidence at the hearings of the claim, Ko Aotearoa Tēnei, (n 3), 74–​77. 149   The Tribunal recommended that anybody should be entitled to object to the derogatory or offensive public use of taonga works, taonga-​derived works, or mātauranga Māori. 150   The Tribunal recommended that only kaitiaki should be entitled to object to any non-​derogatory or non-​offensive commercial use of taonga works or mātauranga Māori. 151   In order to achieve effective calibration, the Tribunal’s recommendations include that the government establish a commission with multi-​disciplinary expertise (encompassing mātauranga Māori, IP law, commerce, science, and stewardship of taonga works and documents at both commissioner and secretariat levels). The proposed Commission’s “wider functions” including adjudicative, facilitative, and administrative functions. Ko Aotearoa Tēnei, (n 3), 99–​100. 152  Ko Aotearoa Tēnei, (n 3), 115. 153  Ko Aotearoa Tēnei, (n 3), 114–​115. 154  The Patents Act 2013, s15 enacted an ordre public exception. Section 15(3) states that “The Commissioner may, for the purpose of making a decision under this section, seek advice from the Māori

Traditional Knowledge, Indigenous Peoples, & Local Communities    789 achieve this, the Tribunal recommended the establishment of a Māori committee “to advise the Commissioner of Patents about whether mātauranga Māori or taonga species have contributed in any way to the invention, and whether the proposed use is consistent with or contrary to tikanga Māori.”155 As the motivation and rationales for traditional knowledge protection depend on local communities and in some instances their customary law, the details of that protection and practical aspects will differ between countries and also communities. It is for that reason that any international regime that is created must be broad in its framing. The broadness, however, can also act as a barrier (although not necessarily an insurmountable one, if the will is there) to completing international negotiations.

6. The Future In order to both provide protection for traditional knowledge, particularly against its misuse, and to address the conflicts between IP rules and the protection of traditional knowledge, a number of international bodies have been involved in negotiations. Even though international resolution looks unlikely in the short term, the relationship between the two areas will continue to feature in international IP debates until the interface between them reaches at least some minimum level of agreement. The international protection of IP requires national laws. The same is true of the protection of traditional knowledge across borders. The examples of national regimes outlined in this chapter show how a country can calibrate156 its laws to meet local needs.157 National and international norms for the protection of traditional knowledge are evolving simultaneously. The traditional knowledge debate embodies many of the key tensions that are found across IP law and that are relevant to scoping its parameters. They are constantly tested. Protection is one matter, but protection alone is rarely enough without investment and development. The traditional knowledge debate might be better framed as one not only about knowledge, indigenous rights, or equality, but also about innovation opportunities that should be supported by national governments and industry. As Peter Drahos and I have said in other work: Perhaps the most important thing for indigenous innovation is to make “indigenous innovation” rather than traditional knowledge the primary term of art in this field. Then policy-​ makers would have to start asking how they might support indigenous innovation, as opposed

advisory committee or any person that the Commissioner considers appropriate.” The exception is not explicitly expressed as providing an ordre public exception to protect Maori interest to the extent that the Tribunal recommended. It could be interpreted that way, but it remains to be seen how it will be interpreted. 155 

Ko Aotearoa Tēnei, (n 3), 212. On the calibration narrative in IP law generally, see Daniel J Gervais, “TRIPS and Development,” in Daniel J Gervais (ed), Intellectual Property, Trade and Development (OUP 2007). 157  See Susy Frankel, “Traditional Knowledge and Innovation as a Global Concern,” in Daniel J Gervais (ed) International Intellectual Property: A Handbook of Contemporary Research (Edward Elgar Publishing, 2015), 244–​245. 156 

790   Susy Frankel to dividing the spoils from traditional knowledge. Answering that question would lead to others. How might we encourage collaboration between cosmologically anchored indigenous networks and scientific networks? How might we intervene in the IP system to increase the bargaining power of indigenous innovators? What can we do to turn indigenous networks into development networks? One suspects this approach would lead to a more testing but ultimately richer world for science, and a better world for indigenous people in which they would gain the respect that comes from being seen as innovators.158

158  Peter Drahos and Susy Frankel, “Indigenous Peoples Innovation and Intellectual Property: The Issues,” in Drahos and Frankel, (n 16).

Chapter 28

In tellectual Prope rt y, Deve l opment, a nd Ac c e s s to Knowle d g e Carolyn Deere Birkbeck * 1. Introduction Over the past 20  years, concerns about how knowledge, ideas, and technologies are governed have spurred developed and developing countries, private industry and civil society groups to demand the reform of intellectual property (IP) rules. Calls for reform are nothing new; battles between advocates of private and public interests in the design and implementation of IP laws have raged since the first copyright and patent laws arose several centuries ago, and have accompanied the evolution of modern international IP laws since the late nineteenth century.1 Amidst citizens’ efforts to curb the excesses of IP regulation, regulators across the developed world face demands to rethink the IP system from a growing diversity of businesses, scientists, and artists concerned that prevailing IP laws and institutions do not adequately foster creativity and innovation or respond to changing consumer needs and technological possibilities.2 At one end of the spectrum, a range of powerful, multinational companies argue that their investments in research, innovation, and creativity are threatened by IP rules and enforcement levels they consider too weak. They lobby governments for higher IP protection as the basis for IP negotiations with developing countries, and as a core precondition for broader

*  Carolyn Deere Birkbeck has asserted her moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  F Machlup and E Penrose, “The Patent Controversy in the Nineteenth Century” (1950) 10 Journal of Economic History 1. See also C May and S Sell, Intellectual Property Rights: A Critical History (Lynne Rienner Publishers 2015); C May, “The Hypocrisy of Forgetfulness: the Contemporary Significance of Early Innovations in Intellectual Property” (2017) 14 Review of International Political Economy 1. 2  See, eg, AB Endres and CE Giffin, “Necessity is the Mother, but Protection May Not Be the Father of Invention: The Limited Effect of Intellectual Property Regimes on Agricultural Innovation” (2012) 15 Columbia Science and Technology Law Review.

792   Carolyn Deere Birkbeck political and economic cooperation. At the other end of the spectrum, some public interest scholars and civil society groups point to mounting evidence of fundamental flaws in the prevailing system of IP rules. Arguing that the push for ever-​stronger IP rules can compromise an array of public interests and perversely undermine innovation and creativity, they call for an overhaul of the global IP system. In the middle, opponents of the so-​called IP “maximalist” agenda advocate greater balance in IP rules as well as more creative application of, and maneuver within, existing rules to better address public and development interests. Many developing countries and civil society organizations emphasize, for instance, the importance of defending and using the many exceptions, limitations, and exemptions that already exist in IP laws for public interest purposes. Across stakeholder groups, numerous initiatives to advance alternative models, policy approaches, rules, and initiatives for governing knowledge have also emerged and some have gained significant traction. In addition, within many developing countries, there are government agencies and stakeholders keen to explore how they can better tailor and use different kinds of IP protection—​trademarks, copyright, utility models, and patents—​to support local creators, researchers, innovators, and artists in their effort to secure economic returns and attract foreign investment. At the international level, the many debates on IP, the public interest, and development have been amply illustrated by the politics surrounding the negotiation and implementation of the World Trade Organization’s (WTO) 1994 Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS). For most developing countries, TRIPS has been viewed as an overwhelmingly asymmetric deal that under-​ informed and ill-​ prepared developing country negotiators were “forced to swallow” through coercive negotiations.3 Ironically, however, in the face of pressures to adopt even higher TRIPS-​“plus” standards, critics now often defend TRIPS as the benchmark of what is acceptable, due to its incorporation of a number of important flexibilities and public interest provisions.4 In short, almost 25 years post-​TRIPS, fundamental divisions persist about the use of flexibilities available in international IP laws and whether levels of IP protection are too weak or too strong.5 In 2001, the conclusion of the Doha Declaration on TRIPS and Public Health was hailed by its supporters as evidence that the pendulum of IP protection could swing toward a “rebalancing” of the global IP regime to better address public interest and development

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See, eg, P Drahos, “Bilateralism in Intellectual Property” Policy Paper (Oxfam 2001); M Khor and C Raghavan, “WTO Secretariat Explains Its TRIPS ‘Negotiating History’ ” South North Development Monitor (SUNS) Daily News Report (11 June 2011). 4  J Stiglitz, “How Intellectual Property Reinforces Inequality” New York Times, 14 July 2013. 5  See R Okediji, “The International Copyright System: Limitations, Exceptions and Public Interest Considerations for Developing Countries” UNCTAD—​ICTSD Project on IPRs and Sustainable Development, Issue Paper No 15 (UNCTAD 2006); K Outterson, “Should Access to Medicines and TRIPS Flexibilities Be Limited to Specific Diseases?” (2008) 34 American Journal of Law and Medicine 317; S Musungu, S Villanueva, and R Blasetti, Utilizing TRIPS Flexibilities for Public Health Protection through South-​South Regional Frameworks (South Centre 2004); D Gervais, “TRIPS and Development” in D Gervais (ed), Intellectual Property, Trade and Development: Strategies to Optimize Economic Development in a TRIPS-​Plus Era (OUP 2007).

Intellectual Property, Development, and Access to Knowledge    793 interests.6 In 2007, the adoption of a Development Agenda for the World Intellectual Property Organization (WIPO) was similarly viewed as a political victory. In practical terms, however, both initiatives still  face implementation challenges, and debates on desirable levels of IP protection are far from settled. At the international level, for instance, developed countries continue to press for TRIPS-​plus standards of IP protection and enforcement at the WTO and WIPO, as well as through regional and bilateral FTAs and negotiations for “mega-​regionals,” such as the TransPacific Partnership (TPP) Agreement and the failed Transatlantic Trade and Investment Partnership (TTIP). At the national level too, the economic interests at stake in IP regulation evolve as commercial opportunities and technologies change and new policy challenges arise. In short, debates on IP rules and the public interest persist, old IP battles are frequently refought, and governments face recurring challenges of striking the appropriate balance between private and public interests. This chapter reviews the evolution of debates on IP and development and places them in the wider context of debates on IP and the public interest. In so doing, it highlights links between calls for greater attention to development in the global IP system and campaigns that occur under the broad umbrella of “access to knowledge” (A2K). To understand the rise of both sets of concerns, an appreciation of the history of the IP system and of the engagement of developing countries and public interest communities is vital. A full review of the emergence and perspective of the access to knowledge movement is, however, beyond the scope of this chapter, which instead focuses primarily on development considerations. This review proceeds in three parts. To provide context for contemporary debates, Section 2 introduces longstanding debates on IP and public policy issues as well as the substance of debates on IP, development and access to knowledge. Section 3 provides a historical review of how development issues were debated in the international IP system up until the end of the TRIPS negotiations. Section 4 reviews post-​TRIPS debates on the Agreement itself and the institutional and legal challenges that most developing countries face in implementing TRIPS and other national IP reforms. To illustrate the evolving debate on IP and development—​and the enduring concerns—​S ection 4 provides an overview of the politics of IP-​related capacity building for developing countries, followed by a summary of the origins of,  and debates on, the WIPO Development Agenda. The chapter concludes with observations on the continuing challenges of addressing public interest and development concerns in the increasingly complex global IP system. 6 Abbott, The TRIPS Agreement, Access to Medicines and the WTO Doha Ministerial Conference, Geneva: Quaker United Nations Office (QUNO 2001); Maskus, “Ensuring Access to Essential Medicines: Some Economic Considerations,” (2002) 20 Wisconsin International Law Journal, 563–​582; Mayne, “The Global Campaign on Patents and Access to Medicines: An Oxfam Perspective,” in P Drahos and R Mayne (eds), Global Intellectual Property Rights: Knowledge, Access and Development (Palgrave Macmillan, 2002) 244–​259; FM Scherer and J Watal “Post-​TRIPS Options for Access to Patented Medicines in Developing Nations” (2002) 5, 4 Journal of International Economic Law 913–​939; WHO Medicines, Health Economics and Drugs (Geneva: World Health Organization (2002); WHO Determining the Patent Status of Essential Medicines in Developing Countries, (Geneva: Médecins Sans Frontières/​UNAIDS/​World Health Organization 2004).

794   Carolyn Deere Birkbeck

2.  The Public Interest and Development in Intellectual Property Decision-​M aking The history of the global IP system sets the political backdrop for developing country responses to, and engagement with, debates on the content and implementation of IP rules.

2.1 Longstanding Debates on IP, the Public Interest, and Access to Knowledge Contemporary debates on IP, development, and A2K at the international level echo long-​ standing tensions within countries over competing public policy goals. Often misperceived as purely technical in nature, IP laws in fact have a bearing on a range of critical areas of public policy, from industrial and health policy to cultural and education policies. IP laws are a central means through which governments manage the ownership, availability, and use of ideas and technologies, and the distribution of profits from them. They can have an impact on international competitiveness, the pace and focus of innovation, and the availability of new technologies, knowledge, and creative works. A core challenge for governments is how best to achieve the appropriate balance between providing incentives for innovation and creativity on the one hand, and on the other, ensuring the availability of the inputs necessary for further innovation and affordable public access to the products and works that emerge. To discern the right balance, governments must adjudicate a range of arguments for or against stronger IP protection from stakeholders with a diversity of private interests and public goals. In short, since the first efforts to make “property out of knowledge,” IP lawmaking has been a political process “in which particular conceptions of rights and duties are institutionalized; each settlement prompts new disputes, policy shifts, and new disputes again.”7 Governments have, for instance, sought to balance private rights by including safeguards and exceptions in IP laws that enable them, under selected circumstances, to promote public policy goals, such as building local industry or boosting the availability and affordability of new inventions, ideas, technologies, and knowledge. To achieve these ends, governments widely include provisions in their IP laws that limit the scope of patentability, permit compulsory licensing, require local use or “working” of patents, and allow for “fair use” of copyrighted materials. To guard against the abuse of the monopoly privileges that inhere in private IP rights, many governments further balance IP laws with anti-​trust (competition) laws.8 In addition, some governments link IP laws with laws related to broader public policy objectives (such as laws to promote the availability of medicines, protect genetic resources, or stimulate local industrial capacity). Governments have also debated and implemented adjustments to the terms of protection for patented inventions and

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May and Sell (n 1). Correa (2007). For a discussion of the relationship between IP and competition law, see the chapter by C Scott Hemphill in this volume. 8 

Intellectual Property, Development, and Access to Knowledge    795 copyrighted works (which affects when works fall into the public domain and may be used without permission or payment). Within many developed countries, disputes among investors, producers, and inventors of IP, and their consumers (and also among different kinds of producers) have prompted significant shifts in IP laws over time. The United States (US) and Europe have, for example, experienced several cycles of IP reforms, adjusting the terms of IP protection to their stage of economic development and to the changing preferences and political influence of interest groups.9 To help build domestic industries, some businesses lobby for weaker patent rights to enable them to copy and adapt foreign technologies. Knowledge-​intensive industries, on the other hand, usually lobby for stronger patent protections to protect their investments in R&D. Consumers and public health advocates frequently appeal for weaker patent rights to make products like medicines cheaper. Creators, artists, and authors in cultural industries sometimes call for stronger copyright protections. Yet, to promote the availability of educational materials, librarians and educators assert the importance of fair use exceptions to copyrights. Because IP laws confer distinct economic opportunities and costs on different stakeholders and interest groups, the process of IP reform is often a war of ideas among competing interest groups pitting “conviction against conviction, argument against argument, assumption against assumption.”10 Notably, despite the ongoing process of debate and settlement between IP consumers and producers within their borders, developed countries have long pushed for stronger rules on IP protection at the international level, where they are generally IP producers (and exporters) and most developing countries remain IP consumers (and importers).11 In both developed and developing countries, there are calls for greater attention to the public interests at stake in legal and policy debates that affect the governance of ideas, knowledge, creativity, and new technologies.12 Civil society groups in both developed and developing countries argue, for instance, that contemporary IP rules and practices compromise more affordable access to a range of knowledge-​based goods and services, and can undermine human rights ranging from freedom of expression to the rights to health and food.13 Across the world, there are public demands for more freely available and affordable scientific publications, software, books, seeds, government data, and medicines, as well as for a more open Internet.14 From such concerns, a broader A2K social movement has emerged in favor of embedding policymaking on IP in the context of development goals and the public interest imperatives of more affordable access to scientific advances, medicines, education, and culture.15 9

10  Machlup and Penrose, (n 1), 10, 28.   See Machlup and Penrose (n 1); May and Sell (n 1). A Subramanian “The International Economics of Intellectual Property Rights Protection: A Welfare-​Theoretic Trade Policy Analysis,” (1991) 19, 8 World Development 945–​956. 12  This analysis draws from C Deere Birkbeck, Global Knowledge Governance and Intellectual Property: An Agenda for Governing in the Public Interest, Report of the Expert Taskforce on Global Knowledge Governance and Intellectual Property (Edward Elgar forthcoming). 13  See A Abdel Latif, “Developing Country Coordination in International Intellectual Property Standard-​Setting” TRADE Working Paper 24 (South Centre 2005); D Matthews, “Intellectual property rights, human rights and the right to health” in W Grosheide (ed), Intellectual Property Rights and Human Rights: A Paradox (Edward Elgar 2009). For a discussion of IP and human rights, see the chapter by Laurence Helfer in this volume. 14  R Stallman, Free Software, Free Society: Selected Essays of Richard Stallman (GNU Press 2010). 15  For a draft of a 2005 proposed “Access to Knowledge Treaty” by a range of civil society advocates, see . For a summary of these ideas, see The Washington 11 

796   Carolyn Deere Birkbeck The launch of civil society campaigns for A2K was an explicit effort to reframe global IP debate and to develop a trans-​national approach that engages both developed and developing countries.16 At the heart of IP policy debates are concerns about the privatization of a growing proportion of the world’s knowledge and ideas and how rules on the ownership of IP impact the distribution of benefits, profits, and power in the global economy.17 The twenty-​first-​ century quest to own and control ideas and technologies has been compared to the nineteenth-​century land grabs in the US, and to enclosure of the commons in eighteenth-​ century England.18 On this point, critics underscore that well-​organized and powerful industry groups lobby so effectively for stronger IP protection that they regularly drive or “capture” national government policy and regulatory outcomes.19 At the international level as well, IP right-​holders are better organized with better access to government than public interest groups and thus dominate the global IP landscape—​from agenda-​setting and treaty negotiations to debates on the implementation of international norms.20 At both the national and international level, there are few effective safeguards against regulatory capture by IP right-​holders. Meanwhile, policymakers face tough questions about what best motivates creativity and scientific investigation and what policy and legal options exist to ensure the public benefits, but frequently lack a sound evidentiary base with which to combat opposed and entrenched interests. Those against the enclosure of the commons find themselves locked in debate with companies that argue that enclosure is the only viable business model to provide incentives for investment in R&D, new cultural expressions, and innovation.21 Private commercial Declaration on Intellectual Property and the Public Interest (2011) . See also P Drahos, “Access to Knowledge: Time For a Treaty?” (2005) 9 Bridges Monthly Review 15; P Drahos and R Mayne (eds), Global Intellectual Property Rights: Knowledge, Access and Development (Macmillan 2002). 16 

For information on this campaign, see . K Maskus and J Reichman, “The Globalization of Private Knowledge Goods and the Privatization of Global Public Goods” (2004) 7 Journal of International Economic Law 279. 18  J Boyle, “The Second Enclosure Movement and the Construction of the Public Domain” (2003) 66 Law and Contemporary Problems 33. 19  US professor Carl Shapiro, for instance, makes the case for US patent reform, arguing that “the theory of regulatory capture suggests that the USPTO is too inclined to issue patents, or to allow broad claims, without giving sufficient weight to the costs that these patents impose on parties other than patent applicants, namely other companies and final consumers.” See C Shapiro, “Patent System Reform: Economic Analysis and Critique” (2004) 19 Berkeley Technology Law Journal 1017. 20  WIPO’s Development Agenda Recommendations are “conspicuously absent from most WIPO curricula and materials” and yet to be integrated in WIPO’s capacity building. J Beer and C Oguamanam, “Intellectual Property Training and Education: A Development Perspective,” ICTSD Issue Paper (ICTSD 2010). For an example of development-​related criticism that prompted the cancelation and postponement of WIPO capacity building conferences, see W New, “US, WIPO Training Program on IP Rights in Africa Comes Under Fire,” (12 February 2012) Intellectual Property Watch, available at ; R Hermann, “Meetings on IP and Innovation in Africa Open in Tanzania,” Intellectual Property Watch, (12 March 2013), available at . 21  P Yu, “International Enclosure: The Regime Complex and Intellectual Property Schizophrenia” (2007) 1 Michigan State Law Review 1, available at . 17 

Intellectual Property, Development, and Access to Knowledge    797 interests also sometimes collide with ethical and spiritual values in ways that are difficult to reconcile. A particularly striking example is the pitting of life sciences companies in favor of rights in genes, genetic information, and genetic materials against objectors citing human rights, religious, spiritual, and moral grounds.22 To respond to a discourse that favors stronger IP protection, non-​ governmental organizations (NGOs), international organizations (IOs), and scholars in favor of development and greater access to knowledge have worked to reframe IP debates to better facilitate discussion of their public interest priorities. Conscious of the power that words such as piracy and concepts such as intellectual property rights have acquired in international debates, developing countries, academics, and NGOs have worked to develop and use alternative discourses and frames—​and to embed them in as many international processes and declarations as possible and in commentary by the international media. Some critics argue that the very term “intellectual property” is problematic. For some, the conflation of a range of different types of rights (trademarks, patents, copyrights, etc.) under the single IP umbrella confounds the potential for nuanced public policy debate by bundling together rights with different histories, rationales, and public policy  implications. Instead of a careful discussion of the pros and cons of specific aspects of copyright, patent, or trademark protection, the conflation of such categories oversimplifies and perpetuates a divisive stand-​off between advocates arguing either for or against IP protection. The language of IP can also promote false analogies and associations. The discourse of IP “rights” is misleading, some argue, proposing that such rights are more accurately described as monopoly “privileges” granted by states to advance particular goals.23 To shift the discourse, some NGOs distinguish IP rights from fundamental human rights, such as the right to health.24 Indeed, the success of NGO efforts to shift the frame of international debate on compulsory licensing away from a focus on IP as critical to innovation in favor of a human rights frame was crucial to prompting governments to address the relationship between TRIPS and public health.25 Proponents of a more balanced 22  G Dutfield, Intellectual Property Rights, Trade and Biodiversity (Earthscan 2000); G Dutfield, Intellectual Property and the Life Sciences Industries: A Twentieth Century History (Dartmouth Publishing Company 2003). 23  See, for example, Boyle, (n 18), and J Boyle, Shamans, Software, and Spleens: Law and the Construction of the Information Society (Harvard University Press 1996); J Braithwaite and P Drahos, Global Business Regulation, (CUP 2000); P Drahos, A Philosophy of Intellectual Property (Dartmouth Publishing Co. Ltd 1996); R Okediji, “The International Relations of Intellectual Property: Narratives of Developing Country Participation in the Global Intellectual Property System,” (2003a) 7, 2 Singapore Journal International and Comparative Law, 315–​385; and G Tansey and T Rajotte, (eds), The Future Control of Food (Earthscan 2008). 24  See J Stiglitz, Globalization and its Discontents (Allen Lane 2002), 245–​246; A Jaffe and J Lerner, Innovation and Its Discontents: How Our Broken Patent System Is Endangering Innovation and Progress and What To Do About It, (Princeton University Press, 2004). In both instances, the authors allude to concerns that the increasing strength of IP protection may impede the rate of progress and innovation, by increasing the price of knowledge that is the vital input into research. 25  S Sell and A Prakash, “Globalization and Governance: Examining the Contest between Business and NGO Agendas in Intellectual Property Rights,” paper presented at the 43rd Annual Convention of the International Studies Association (ISA), New Orleans, LA: 23–​27 March 2002; S Sell, “TRIPS and the Access to Medicines Campaign,” paper presented at the Access to Medicines for the Developing World: Facilitation or Hindrance?, sponsored by the University of Wisconsin Law School, Madison, WI: 9–​10 March 2002.

798   Carolyn Deere Birkbeck approach to global IP policy also contrast the “faith-​based” momentum toward ever-​ higher IP standards with “evidence-​based” approaches to IP policymaking.26 Critics of the push for ever-​stronger IP protection also seek to characterize their agenda as pro-​competitive, pro-​development, or balanced, rather than as anti-​IP. In so doing, they emphasize that stronger IP protection is, at its core, a deeply anti-​competitive and protectionist policy instrument.27 In addition, some legal scholars and economists underscore that innovation and creativity do not rely exclusively upon IP rights to flourish but that many options within and alongside IP law exist. Whereas industry associations emphasize the need for IP protection to guarantee returns on their investments, critics highlight that much “private” innovation relies heavily on taxpayer funded contributions.28 A growing community of economists, lawyers, and scientists also document the failure of the current IP system to generate innovation for neglected diseases and promote alternatives, such as a Medical R&D Treaty and a Prize Fund for medical research.29 Further, numerous civil society and non-​profit initiatives have emerged to respond to the challenges of innovation and access and provide practical alternatives to conventional IP practices, such as the Creative Commons licensing, prizes for innovation, and patent pools to facilitate R&D.30 They also emphasize the importance of the public domain.31 Observing that the world’s great scientific, scholarly, and creative works have always built on the work of earlier innovators and artists, they insist that the IP system must be fashioned so as to ensure affordable access to research inputs and to maintain the scope for sharing of key ideas, creative works, and technologies.32 Amidst debates on how to address Internet piracy, advocates of open-​source software and the possibilities the Internet generates for cultural production and creativity advance the ideas of “free software” and “free culture.”33 Meanwhile, NGOs argue that the rhetorically powerful language of “piracy” has spread far beyond the realm of logic. They characterize as misleading the regular references by industry groups such as the International Federation 26 

Boyle, (n 18). JN Bhagwati, “After Seattle: Free Trade and the WTO” (2001) 77, 1 International Affairs 15–​30; C Correa, Intellectual Property Rights, the WTO and Developing Countries: The TRIPS Agreement and Policy Options, (Third World Network (TWN) 2000); Stiglitz (n 24), 245–​246. 28  See, for instance, J Love, “Transparency, cost benefit analysis and de-​linkage of R&D from price of the products for Rare and Neglected Pediatric Diseases,” Written Submisssion US Senate Committee on Health, Education, Labor and Pensions (HELP) Hearing on Treating Rare and Neglected Pediatric Diseases: Promoting the Development of New Treatments and Cures, 4 August 2010, Knowledge Ecology International: Washington, DC. 29 MSF, Fatal Imbalance: The Crisis in Research and Development for Drugs for Neglected Diseases, Geneva: Médecins Sans Frontières (2001). 30  M Chan, New business models for medical innovation. World Health Organization, 5 July 2013, available at: . 31  See, for instance, Boyle, (n 18). 32  G Dinwoodie and R Dreyfuss, “International Intellectual Property Law and the Public Domain of Science” (2004) 7, 2 Journal of International Economic Law 431–​445; M Heller and R Eisenberg, “Can Patents Deter Innovation? The Anticommons in Biomedical Research” (1998) 280 Science 698–​701; A Jaffe and J Lerner, Innovation and Its Discontents: How Our Broken Patent System Is Endangering Innovation and Progress and What To Do About It (Princeton University Press 2004); L Lessig, The Future Of Ideas: The Fate Of The Commons in a Connected World (Random House 2001). 33  L Lessig, Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity (Penguin Press 2004). 27 

Intellectual Property, Development, and Access to Knowledge    799 of Pharmaceutical Manufacturers Association (IFPMA) to high-​quality, low-​cost generic copies of patented drugs as “pirate” products—​such copies often rely on the exploitation of legal flexibilities available in national and international laws, rather than patent infringement. Moreover, they argue that the IFPMA and its member companies often blur the legal issues at hand. There are real counterfeit challenges, for instance, where companies label and sell medicines using a trademarked term (irrespective of whether the medicines are indeed identical in quality to the trademarked products). In the political sparring of international negotiations, however, US government representatives have repeatedly lumped legally produced generic products in the same category as “counterfeits,” (even where there has been no wrongful use of another company’s brand name) and have gone further to designate entire countries as “pirates.” The fact that certain developing country laws or practices narrow the profit margins of IP holders does not, however, necessarily make them illegal under national or international law.34 Further, not all copying is piracy or theft. In most countries, for instance, copyright laws specify at least some exceptions to copyright (such as copying for personal use), although whether you can then ship such copies to countries where there is no such exception remains an open question for domestic and international law. The ongoing drive by a diversity of developing country governments and civil society groups to “balance” the global IP system in favor of public and development interests, has produced several concrete outcomes. These include the 2001 WTO Declaration on the Agreement on Trade-​related Aspects of Intellectual Property Rights (TRIPS) and Public Health,35 the 2007 WIPO Development Agenda,36 WIPO’s 2013 Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled (VIP Treaty), and the 2013 decision by WTO Members to extend the transition period for least developed countries (LDCs) to comply with TRIPS until July

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Leading legal scholars noted that the use of words like “theft” and “piracy” to describe unauthorized copying is often misleading because both terms obscure important differences between physical and intellectual property. See W Landes and R Posner, The Political Economy of Intellectual Property Law (AEI-​Brookings Joint Centre for Regulatory Studies 2004). 35  Declaration on TRIPS and Public Health (2001). For commentary on the Declaration’s aim see F Abbott, “The Doha Declaration on the TRIPS Agreement and Public Health: Lighting a Dark Corner at the WTO,” (2002) 5 Journal of International Economic Law 469. For a discussion on para 6 of the Declaration providing for a waiver solution, see D Shanker, “The Paragraph 6 Solution of the Doha Public Health Declaration and Export under the TRIPS Agreement” (2004) 7 Journal of World Intellectual Property 365. 36  For the original proposal in 2004 and the subsequent adoption of WIPO Development Agenda in 2007, see WIPO, Proposal by Argentina and Brazil for the Establishment of a Development Agenda for WIPO. WO/​GA/​31/​11, and Member States Adopt a Development Agenda for WIPO (WIPO 2007). Commentary on its history, origin, and adoption include: P Yu, “A Tale of Two Development Agendas,” (2009) 35 Ohio Northern University Law Review 464; S Bannerman, “The WIPO Development Agenda Forum and Its Prospects for Taking into Account Different Levels of Development” in J De Beere (ed), Implementing the World Intellectual Property Organization’s Development Agenda (Wilfrid Laurier University Press 2009); South-​Centre, (2004) Establishing a “Development Agenda” for the World Intellectual Property Organization (WIPO): Commentary on Proposal by Argentina and Brazil. Retrieved from accessed 18 March 2015; P Paranaguá, “The WIPO Development Agenda: Another Stillbirth? A Battle between Access to Knowledge and Enclosure” Social Science Network (2005). Retrieved from accessed 18 March 2015.

800   Carolyn Deere Birkbeck 2021.37 Although these initiatives show that attention to the public interest in IP governance has grown in the 20-plus years since the TRIPS Agreement was concluded, the implementation of each remains a work in progress. Further, these developments have neither put to rest the contentious global politics of IP regulation nor addressed broader, recurring challenges facing those working to advance the public interest and development in IP governance.38

2.2 Intellectual Property and Development: The Substance of the Debate Since the late 1960s, developing countries have argued that flexibility with respect to the scope and terms of IP rights is central to their ability to promote national industrial capacity, generate employment, and address distinct development needs, such as affordable access to essential technologies and knowledge (eg, medicines, seed varieties, and educational materials).39 The push to strengthen international IP rules has long been perceived by developing countries as an aggressive intrusion into the preserve of domestic regulation.40 Debate on the TRIPS Agreement—​both during its negotiation and its subsequent implementation—​has revealed a full spectrum of views on the relationship between IP and development. When the TRIPS negotiations began, the laws of many developing and some developed country WTO members provided lower standards of protection than those required by TRIPS; some developing countries did not have any modern IP laws at all.41 Further, IP standards, institutions, and enforcement differed considerably among countries. In 1988, for example, the length and scope of patent protection across developing countries varied widely.42 Most developing countries nonetheless shared at least one common characteristic:  The administration and enforcement of IP standards—​ even by their own assessments—​was weak. During the TRIPS negotiations and afterward, economists and legal experts focused on developing countries contested sweeping assumptions about the positive relationship between stronger IP protection and development, and cautioned that the economic case for stronger IP laws in the poorest countries was limited.43 They advised of the high short-​term 37 

The extension decision recognizes progress towards implementation of the TRIPS Agreement by LDCs. At the same time, it reaffirms their ability to make full use of the flexibilities provided by the Agreement to address their needs, including to create a “sound and viable technological base” and to overcome their capacity constraints. 38  S Sell, Private Power, Public Law: The Globalization of Intellectual Property Rights (CUP 2003); S Haunss, Conflicts in the Knowledge Society: The Contentious Politics of Intellectual Property (CUP 2013); S Haunss and K Shadlen, Politics of Intellectual Property: Contestation over the Ownership, Use, and Control of Knowledge and Information (Edward Elgar 2009). 39  S Patel, P Roffe, and A Yusuf (eds), International Technology Transfer (Kluwer Law International 2001). 40  D Mowery and N Rosenberg, Technology and the Pursuit of Economic Growth (Cambridge, Cambridge University Press 1989) 41  C May, A Global Political Economy of Intellectual Property Rights: The New Enclosures? (Routledge 2000) 1. 42 Dutfield, Intellectual Property Rights, (n 40), and WIPO (1998). 43  See, for example, M Binley, “Intellectual Property Rights: A Strategic Instrument of Developing Nations,” Working Paper, International Business and Trade Law Programme, Faculty of Law, University

Intellectual Property, Development, and Access to Knowledge    801 costs as regards price increases for goods and knowledge vital to development, noting that the potential economic returns of higher IP protection remained a very distant prospect for such countries.44 Further, they observed that, in order to implement IP reforms, the poorest countries would need to develop or import the relevant legal expertise, forcing countries to rely on external financial, legal, and technical assistance.45 Developing countries also expressed concern that TRIPS would consolidate the developed world’s monopoly on the ownership of ideas, exacerbate the international technology gap, and facilitate the transfer of capital from developing to developed countries.46 As net importers of IP, many developing countries sought to employ the same strategies of copying and reverse engineering used by developed countries at similar stages of development to build national industries and wanted to tailor IP laws to that purpose.47 While some policymakers in developing countries were attracted by the proposition that stronger IP protection could encourage foreign direct investment (FDI), innovation, and technology transfer, there were also fears that strengthened IP regulations might increase the price of technologies, creative works, and educational materials for their citizens.48 Opponents of pro-​IP pressures criticized the double-​standard of asking developing countries to adopt levels of IP protection stronger than those developed countries used at similar levels of development.49 Questions also arose about the fairness of requiring developing countries to devote scarce public resources to help private foreign multinational corporations collect licensing fees and royalties.50 In 2002, it was estimated that TRIPS implementation would lead developing countries to pay an estimated US$40 billion in rents annually to the US alone.51 of Toronto (1992); A Deardorff, “Should Patent Protection be Extended to All Developing Countries?” (1990) 13, 4 World Economy 497–​508; G Grossman and E Helpmann, Innovation and Growth in the Global Economy (MIT Press 1991); C Primo Braga, “The Developing Country Case For and Against Intellectual Property Protection” in W Siebeck (ed), Strengthening Protection of Intellectual Property in Developing Countries: A Survey of the Literature (World Bank 1990) 69–​86. 44  K Maskus, “Normative Concerns in the International Protection of Intellectual Property Rights” (1990) 13, 3 World Economy 387–​409. 45  J Finger and P Schuler, “Implementation of Uruguay Round Commitments: The Development Challenge” (2000) 23 World Economy 511. 46  Once TRIPS was in place, similar concerns were expressed by a range of economists, including Finger and Schuler (n 45); K Maskus, Intellectual Property Rights in the Global Economy (Institute for International Economics (IIE) 2000); Stiglitz (n 24). 47  P Drahos, “Negotiating Intellectual Property Rights: Between Coercion and Dialogue” in P Drahos and R Mayne (eds), Global Intellectual Property Rights: Knowledge, Access and Development (Palgrave and Oxfam 2002) 161–​182; Maskus (n 44); S Sell, Power and Ideas: North-​South Politics of Intellectual Property and Antitrust (State University of New York Press 1998). 48  For summaries of debates that took place during the TRIPS negotiations, see CIPR, Integrating Intellectual Property Rights and Development Policy (Commission on Intellectual Property Rights/​ CIPR 2002); Correa (2000); UNCTAD The TRIPS Agreement and Developing Countries, E 96IID10, Geneva: United Nations Conference on Trade and Development (UNCTAD 1996). 49  May and Sell (n 1); C May, “The Hypocrisy of Forgetfulness: The contemporary significance of early innovations in intellectual property” (2006a) 13, 3 Review of International Political Economy 480–​515; S Musungu “Rethinking Innovation, Development and Intellectual Property in the UN: WIPO and Beyond” TRIPS Issues Papers #5, Geneva: Quaker United Nations Office (QUNO) 2005. 50  See Maskus (n 46); Finger and Schuler (n 45). 51  This figure combines estimates of US$21 billion in income from copyrights and US$19 billion in income from patents. Put another way, the economic gains TRIPS generates for the United States were

802   Carolyn Deere Birkbeck In sum, when TRIPS emerged in 1994, critics viewed the agreement as an overwhelmingly asymmetric deal that under-​informed and ill-​prepared developing country negotiators had been “forced to swallow” through coercive negotiations.52 The market access concessions that developing countries were promised in exchange for TRIPS were far weaker than anticipated.53 Several prominent international economists characterized TRIPS as an essentially protectionist agreement, questioned its place in a regime that purports to advance a more open, competitive, and liberalized global economy, and joined NGOs in calling for the removal of the TRIPS Agreement from the suite of WTO framework agreements. Renowned economist Jagdish Bhagwati stated, for instance, that TRIPS: does not belong to the WTO because it does not pass the test of mutual advantage  . . .  it facilitates, even enforces with the aid of trade sanctions, what is in the main a payment by the poor countries (which consume intellectual property) to the rich countries (which produce it). By putting TRIPS into the WTO, in essence we legitimated the use of the WTO to extract royalty payments.54

Post-TRIPS, developing country governments led by India, Brazil and Argentina, sustained a critique that challenged the evidence and assumptions with respect to the linkages between IP, technology transfer, and innovation, and questioned the legitimacy of TRIPS as an agreement forged through coercion. They underscored that the regulatory changes that TRIPS demanded of their countries would impose both immediate and long-​term dynamic costs on their economies, whereas the impact of tariff concessions on developed countries would be one-​off and temporary.55 They also argued that the TRIPS Agreement’s purported benefits (ie, innovation by or for developing countries and increased foreign direct investment) were nebulous, uncertain, and would vary widely by country.56 Alongside development experts, they also widely denounced the Agreement for its “one size fits all” approach,57 arguing it could not deliver FDI, innovation, or technology transfer to countries with vastly different innovative capacities, economic circumstances, and development needs.58 They also highlighted the arbitrariness of TRIPS deadlines, arguing that transition periods should have been based on realistic estimates of the time and resources required for

estimated to be 13 times more valuable than the tariff liberalization commitments it secured through the Uruguay Round. See J Finger and P Schuler “Implementation of Uruguay Round Commitments: The Development Challenge” (2000) 23, 4 World Economy 511–​525. Also see Maskus (n 46). 52   See, for example, P Drahos, “Bilateralism in Intellectual Property” Policy Paper, Oxford: Oxfam; https://www.anu.edu.au/fellows/pdrahos/reports/pdfs/biltateralism_ip.pdf and M Khor and C Raghavan, “WTO Secretariat Explains Its TRIPS ‘Negotiating History’,” South North Development Monitor (SUNS) Daily News Report, 11 June 2001. 53   ibid. Also see S Ostry, “The Uruguay Round North-​South Grand Bargain: Implications for Future Negotiations,” in DM Kennedy and JD Southwick (eds), The Political Economy of International Trade Law: Essays in Honour of Robert E. Hudec (CUP 2002) 285–​300. 54   J Bhagwati, “Afterword: The Question of Linkage” (2002) 96 The American Journal of International Law 126. 55  K Maskus, (n 46). 56  Finger and Schuler, (n 45) op cit M Khor, The WTO, the Post-​Doha Agenda and the Future of the Trade System: A Development Perspective, presented at the Asian Development Bank Annual Meeting, Shanghai, China 10 May 2002. 57  Sell (n 47). 58  See, for instance, Maskus (n 46).

Intellectual Property, Development, and Access to Knowledge    803 implementation, not offered as a “second prize in the negotiations” in lieu of more flexible or development-​oriented obligations.59 In the following years, some development assistance agencies intervened in what became an international battle to influence the discourse about the impacts of TRIPS on developing countries and their implementation options. In 2002, advocates in favor of a more development-​oriented approach to IP protection welcomed the Report of the UK Department for International Development’s independent Commission on Intellectual Property Rights (CIPR) as a major victory.60 The Report, as well as the research, fact-​finding, and public meetings conducted by the Commission lent considerable analytical and political support to the perspective advanced by developing countries and NGOs and was widely used in their campaigns.61 Arguing for a more nuanced approach, moving beyond assertions that stronger IP protection would produce development gains, the Commission’s Report was considered a high-​water mark in the effort to advance a more balanced approach to IP and development issues. In 2004, the call for a WIPO Development Agenda (see Section 4.3) was a further effort to reframe the discourse on IP and development.62 By calling for greater emphasis on the relationship between the international IP system and development, proponents of the WIPO Development Agenda hoped to shift debate from a narrow focus on the promotion of IP as an end in itself and to inject new momentum on appropriate rules for IP protection. The ensuing discussion of the WIPO Development Agenda revealed growing interest among developing countries in how to make better use of the IP system. It has, for instance, spurred numerous empirical studies on IP and development, and on the different legal options and national experiences with regard to IP. Developed countries seized on the interest in “making IP work for development,” hoping that a focus on “IP for development” could assuage some developing country concerns and foster greater compliance with international IP norms.

3.  Developing Countries in International Standard-​Setting on Intellectual Property 3.1 Early Days of the Global Intellectual Property System To understand contemporary debates on development and IP, an appreciation of how the engagement of developing countries in international IP standard-​setting has evolved since the early days of the global IP system is vital. Since the late 1800s, developed countries have worked to develop, strengthen, and harmonize international IP laws and to internationalize IP protection. The first formal encounters between developing countries, Western concepts 59

60  CIPR (n 48).   Finger and Schuler, (n 45) op cit. DFID/​DTI, The UK Government Response to the Report of the Commission on Intellectual Property Rights “Integrating Intellectual Property Rights and Development Policy” (UK Department for International Development/​DFID and UK Department of Trade and Industry/​DTI 2003). 62  A Menescal, “Changing WIPO’s Ways: The 2004 Development Agenda in Historical Perspective” (2005) 8, 3 The Journal of World Intellectual Property 762–​795; author’s interview with Ahmed Abdel Latif, Egyptian Ministry of Foreign Affairs, November 2006. 61 

804   Carolyn Deere Birkbeck of IP, and international IP rules began during the colonial era.63 As colonial powers imposed their respective legal regimes in their colonies, variations in the IP regimes of developing countries emerged. Only a handful of developing countries were among the original signatories of the first major international IP treaties—​the Berne and Paris Conventions—​and fewer participated in their negotiation.64 Of the twelve countries that participated in the original negotiations for the Berne Convention for the Protection of Literary and Artistic Works (two as observers), only three countries now classified as developing were present: Haiti, Liberia, and Tunisia. In the case of the Paris Convention for the Protection of Industrial Property, only Brazil, Ecuador, El Salvador, and Guatemala were founding members of the Union, along with Tunisia, which became a member through adherence as a French protectorate.65 Notably, almost half of the original signatories to the Paris Convention lacked national patent regimes at the time of their ratification, including Ecuador, El Salvador, Guatemala, Serbia, Switzerland, and the Netherlands.66 In the subsequent decade, the reach of the Berne and Paris Conventions gradually extended across the developing world, primarily through the accessions of the major colonial powers (France, Germany, Italy, Belgium, Spain, and the United Kingdom).67

3.2 Developing Countries and Intellectual Property in the Post-​colonial Era A second phase began in the post-​colonial era. With decolonization in the 1950s and 1960s, the diversity of approaches to IP law among developing countries continued. Although there were regional differences in the approach to IP regulation, most national IP systems in developing countries were dominated by foreign commercial priorities. Local expertise and institutional capacity to manage IP systems were generally weak. Despite independence, most developing countries maintained strong policy and legal links with their formal colonizers, particularly where countries had emerged from colonization with weak and fragile governments. As such, the IP laws that many newly sovereign countries promulgated after independence closely resembled earlier colonial laws or those of former 63 

C Deere Birkbeck, “Developing Countries in the Global IP System Before TRIPS: The Political Context for the TRIPS Negotiations” in Carlos Correa (ed), Research Handbook on Intellectual Property Law and the WTO (Edward Elgar 2010), 22–​51. 64  The Berne and Paris Conventions began with 14 and 11 signatories respectively. 65  Other developing countries that joined the Paris Union in its first decades were the Dominican Republic (1890), Mexico (1903), Cuba (1904), Morocco (1917), Lebanon (1924), Syria (1924), and South Africa (1947). See S Patel, “The Patent System and the Third World” World Development 13–​14. 66  See P Roffe and G Vea, “The WIPO Development Agenda in a Historical and Political Context” in N Netanel (ed), The Development Agenda: Global Intellectual Property and Developing Countries (OUP 2008); E Schiff, Industrialization Without National Patents: The Netherlands, 1869–​1912; Switzerland, 1850–​1907 (Princeton University Press 1971). 67  R Okediji, “The International Relations of Intellectual Property: Narratives of Developing Country Participation in the Global Intellectual Property System” (2003) 7, 2 Singapore Journal International and Comparative Law 315–​385; S Ricketson, The Berne Convention for the Protection of Literary and Artistic Works: 1886–​1986 (Kluwer Centre for Commercial Law Studies 1987).

Intellectual Property, Development, and Access to Knowledge    805 colonial powers. Most former British colonies and dominions, for instance, enacted copyright laws based on the same 1911 British Copyright Act that had served as the foundation for their colonial laws.68 Across Africa, regional arrangements facilitated the enduring influence of former colonial powers on IP laws. In September 1962, twelve francophone African countries signed the Libreville Agreement, which established a regional framework for industrial protection largely based on French legislation and created the African and Malagasy Patent Rights Authority (OAMPI).69 The Agreement was updated in 1977 at which time OAMPI became the African Intellectual Property Organization (OAPI), but French influence on the legal provisions in the Agreement and on national copyright laws continued.70 Meanwhile, in Asia, the newly independent Indian government sought the advice of two national expert committees on appropriate reforms to its patent system.71 The Patent Enquiry Committee (1948–​1950) concluded that, “the Indian patent system has failed in its main purpose, namely to stimulate inventions among Indians and to encourage the development and exploitation of new inventions for industrial purposes in the country so as to secure the benefits thereof to the largest section of the public.”72 Later, the Ayyangar Committee (1957–​1959) noted that foreigners held 80 to 90 percent of Indian patents. The Committee argued that this limited the affordability and accessibility of goods in India while enabling foreigners to gain monopolistic control of the local market.73 On the advice of these two committees, India reformed its IP laws to better address its specific social priorities (eg, increased access to medicines at lower prices), economic realities (eg, low domestic capacity for R&D), and national development priorities (eg, building national industrial capacity, fostering R&D in areas of national significance, and rural development).74 Convinced that national economic development demanded a strong government role in shaping the economy, many governments in the Americas also intervened with policies designed to build domestic industrial capacity and shift their comparative advantage in the international economy.75 Common strategies deployed by Argentina, Brazil, Colombia, 68  T Kongolo, “The African Intellectual Property Organizations: The Necessity of Adopting One Uniform System for All Africa” (2000) 3, 2 The Journal of World Intellectual Property 265–​288. 69  See B Cazenave, “The African Intellectual Property Organisation (OAPI): From Libreville to Bangui” (1989) 19 Industrial Property: Monthly Review 8–​9. For a review of TRIPS reforms in francophone Africa, see Chapter 7 of C Deere, The Implementation Game: The TRIPS Agreement and the Global Politics of Intellectual Property Reform in Developing Countries (OUP 2008). 70 ibid. 71  S Vedaraman, “The New Indian Patents Law” (1972) 3 International Review of Industrial Property and Copyright Law 39–​54, 43. 72  Government of India, Patent Enquiry Committee, Interim Report, August (Ministry of Industry and Supply, India 1949). 73  R Ayyangar, Report on the Revision of the Patent Law (Government of India Press 1959). 74  A Ramanna, “Shifts in India’s Policy on Intellectual Property: The Role of Ideas, Coercion and Changing Interests” in P Drahos and U Suthersanen (eds), Death of a Patent System (Lawtext Press 2005) 150–​174. 75  The contribution of state-​led approaches to development remains intensely disputed as does the question of the appropriate lessons to draw for contemporary development strategy. See A Amsden The Rise of ‘the Rest’: Challenges to the West from Late-​Industrializing Economies (OUP 2001); A Amsden and T Hikino, “Staying Behind, Stumbling Back, Sneaking Up and Soaring Ahead: Late Industrialization in Historical Perspective” in Convergence of Productivity: Cross-​national Studies and Historical Evidence, edited by W. Baumol, R. Nelson, and E. Wolff (OUP 1994), Part IV, Section 11; R Wade, “What Strategies Are Viable for Developing Countries Today? The World Trade

806   Carolyn Deere Birkbeck Mexico, and Peru, for instance, included import controls to protect domestic markets, subsidies to channel investment into new sectors, regulations on foreign investment to protect and spur technology transfer and opportunities for local economic actors, as well as the reform of IP regimes to make modern technologies cheaper and foreign innovations more widely available. Specific IP reforms included restrictions on the private rights of patent holders (which mostly affected foreigners because they overwhelmingly held the rights) and licensing practices that were more favorable to local producers.76 The approach adopted by the Andean Community (established in 1969 by Chile, Colombia, Bolivia, Ecuador, and Peru) exemplified the “reformist” agenda. United by a joint commitment to industrial development and deeper regional integration, the Andean countries adopted common rules on FDI, IP (including on licenses and royalties), and technology transfer.77 The Andean Community’s Decision 24, adopted in 1970, was the centerpiece of this approach.78 The Decision set forth a series of performance requirements for foreign investors and stipulated that all contracts covering technology imports, patents, and trademarks be submitted to Member States for examination and approval. In Colombia, for instance, the criteria for evaluating technology contracts included consideration of the potential effects on the national balance of payments and employment.79 A further significant element of the Andean approach was that members were barred from unilaterally forging IP agreements with third countries or through international organizations that were considered contrary to their common IP policies.80 The reformist efforts by some developing countries to tailor IP laws to national priorities were exemplified by their approach to IP protection for pharmaceuticals. In 1970, India adopted a new Patent Law which allowed patents on the methods or processes related to new medicines but not on medicines themselves. The new law also limited the term of patents in areas of social concern, such as food and health, to seven years (in contrast to 14 years for other inventions), including for pharmaceutical processes. This law then became the legal foundation for India’s generic drug industry.81 Brazil, Mexico, and Argentina similarly Organisation and the Shrinking of ‘Development Space’,” (2003) 10, 4 Review of International Political Economy 621–​644; World Bank, World Development Report: Knowledge for Development (World Bank and OUP 1988/​1989). 76  Sell (n 47), 80–​85, provides a summary of these efforts. For a broader view of IP policies in Latin America at the time, see C Correa, “Transfer of Technology in Latin America: A Decade of Control” (1981) 15, 1 Journal of World Trade Law 388–​409; P Roffe, América Latina y la Nueva Arquitectura Internacional de la Propiedad Intellectual: De los ADPIC-​TRIPS a los Nuevois Tratados de Libre Comercio (Editorial La Ley Facultdad de Derecho, Universidad de Buenos Aires 2007). 77  See F Abbott “Bargaining Power and Strategy in the Foreign Investment Process: A Current Andean Code Analysis” (1975) 3, 2 Syracuse Journal of International Law and Commerce 319–​362; E Adler, The Power of Ideology: The Quest for Technological Autonomy in Argentina and Brazil (University of California Press 1987); B Remiche, Le rôle du système des brevets dans le développement: Le cas des pays andins (Libraires Techniques 1982). 78  Another element of the ANCOM framework was a foreign investment code that limited foreign ownership and control of domestic enterprises. 79  J Baranson, North-​South Technology Transfer: Financing and Institution Building (Lomond Publications 1981). 80  Roffe and Vea (n 66). 81  P Roffe, “The Political Economy of Intellectual Property Rights: A Historical Perspective” in J Foudez, M Footer, and J Norton (eds), Governance, Development and Globalization (Blackstone Press 2000), 396–​413.

Intellectual Property, Development, and Access to Knowledge    807 lowered standards of patent protection to stimulate local production of generic medicines. From 1971 to 1996, Brazil did not, for example, permit patents on chemical products or on pharmaceutical and nutritional processes and products.82 Importantly, the revised IP laws of the “reformist” developing countries did not diverge radically from prevailing practice in developed countries. Indeed, IP standards among developed countries also varied considerably at that time.83 Through legislative or procedural means, many developed countries favored domestic IP owners over foreigners.84 There was also diversity in the scope and term of IP rights and in the range of exceptions to patentability. Notably, in the 1970s, while many developed countries recognized patents on the process for manufacturing pharmaceuticals, they were slow to award patents on the products themselves. The IP policies of reformist developing countries were nonetheless unpopular in developed countries, particularly among pharmaceutical cartels that had hitherto dominated the international market for medicines.85

3.3 The Rise of Developing Countries in the International Intellectual Property System With the end of the colonial era, the growth in the number of sovereign developing countries resulted in an expanding membership of international IP agreements.86 Developing country membership of the Paris Union grew from three to 15 between 1900 and 1958, and then to 44 by 1973.87 African countries were the swiftest to join the international IP system. Egypt, Morocco, and Tunisia, for instance, became members of the Paris Union before 1960, followed by a further 22 African country members by 1975. Membership of the Berne Convention also grew. The International Bureau for the Protection of Intellectual Property (BIRPI, the predecessor of WIPO) moved swiftly to facilitate a system whereby newly independent states in Africa and Asia could issue “declarations of continued adherence” to treaties to which their former colonial powers were parties and which applied to their colonial territories.88 The automatism and

82 

C Gontijo, “Changing the Patent System: From the Paris Convention to the TRIPS Agreement—​ The Position of Brazil” Global Issue Papers (Heinrich-​Böll Stiftung 2005). 83  P Roffe, “Abuses of Patent Monopoly: A Legal Appraisal” (1974) 2, 9 World Development 15–​26. 84  C May, “Why IPRs Are a Global Political Issue” (2003) 25, 1 European Intellectual Property Review 1–​5; D Matthews, Globalising Intellectual Property Rights: The TRIPS Agreement (Routledge 2002). 85  P Drahos, “Negotiating Intellectual Property Rights: Between Coercion and Dialogue” in P Drahos and R Mayne (eds), Global Intellectual Property Rights: Knowledge, Access and Development (Palgrave & Oxfam 2002) 161–​182. In the 1960s, for example, Mexico’s success in the manufacture of steroids contributed to the decline of European producers’ dominance in that area. See G Gereffi, “The Pharmaceutical Industry and Dependency in the Third World” (Princeton University Press 1983). 86  Deere Birkbeck, (n 63) op cit. 87  In 2007, the Paris Union had over 170 members, including 115 developing countries (not including Eastern European states or those in the Commonwealth of Independent States). 88  R Okediji, “The International Relations of Intellectual Property: Narratives of Developing Country Participation in the Global Intellectual Property System” (2003) 7, 2 Singapore Journal International and Comparative Law 315–​385; S Ricketson, The Berne Convention for the Protection of Literary and Artistic Works: 1886–​1986 (Kluwer Centre for Commercial Law Studies 1987).

808   Carolyn Deere Birkbeck formalism of this process forestalled careful reflection among new signatories as to the alignment of these agreements with their national interests.89 The post-​colonial responses of developing countries to the international IP system nonetheless varied by region. As noted, governments in the Americas were skeptical of the merits of international IP agreements and proceeded cautiously.90 In 1970, only eight countries from Latin America and the Caribbean were members of the Paris Union, and most countries in the Americas postponed joining until the 1990s, after the adoption of TRIPS. In Asia, for instance, Korea, Bangladesh, and Malaysia only joined the Paris Union in 1980, 1990, and 1998, respectively, while India became a member in 1998, Pakistan in 2004, and Thailand in 2008. In addition, most Latin American countries also declined to join the Berne Convention: Many had already adhered to inter-​American treaties regulating copyright and joined the United Nations Educational, Scientific and Cultural Organization’s (UNESCO) 1952 Universal Copyright Convention (UCC),91 which was less protective than the Berne system.92 (Notably, the US also did not accede to the Berne Convention until 1988.) In the 1960s, a distinct developing country discourse on international IP regulation emerged. India, along with the Andean countries, Argentina and Brazil, articulated a distinct developing country voice on international IP regulation as part of a wider push for international reforms to facilitate their industrialization, and boost their access to technologies and knowledge. In 1961, Brazil tabled a first proposal on patents and developing countries at the UN General Assembly, resulting in a General Assembly Resolution calling on the UN Secretary General to prepare a study that would include analysis of the effects of patents on developing country economies and a survey of patent legislation.93 Concerned about the progressive strengthening of the Paris Convention since its inception,94 Brazil’s goal was to use the Resolution and subsequent UN report to push for revisions to the Convention that would better address the special needs of developing countries.95 Developing countries were also active in promoting reforms of international copyright treaties in the 1960s. Led by India, they argued that their efforts to improve mass education were constrained by

89 

See R Okediji, “The International Relations of Intellectual Property: Narratives of Developing Country Participation in the Global Intellectual Property System” (2003) 7, 2 Singapore Journal International and Comparative Law 315–​385; A Lazar, “Developing Countries and Authors’ Rights in International Copyright” (1971) 19, 1 Copyright Law Symposium 1–​42. 90  Roffe and Vea (n 66). 91  U Anderfelt, International Patent Legislation and Developing Countries, (Martinus Nijhoff 1971). 92  The UCC specifies, for instance, that the standard copyright term should be the life of the author plus (at least) 25 years whereas the Berne Convention calls for a copyright term of the life of the author plus 50 years. 93  UN General Assembly (1961) Resolution 1713 (XVI) on the Role of Patents in the Transfer of Technology to Underdeveloped Countries, 19 December, New York: United Nations (UN). Also see P Kunz-​Hallstein, “The Revision of the International System of Patent Protection in the Interests of Developing Countries” (1979) 10, 6 International Review of Industrial Property and Copyright Law 649–​670. 94  P Roffe, América Latina y la Nueva Arquitectura Internacional de la Propiedad Intellectual: De los ADPIC-​TRIPS a los Nuevois Tratados de Libre Comercio (Editorial La Ley Facultdad de Derecho, Universidad de Buenos Aires 2007). 95  The resolution called for the UN Secretary General’s report to consider the advisability of holding an international conference to examine problems related to patents and the special needs of developing countries.

Intellectual Property, Development, and Access to Knowledge    809 publishing cartels and the high royalties and licensing fees demanded by developed country copyright holders. This concern culminated in a campaign to revise the Berne Convention and the UCC to increase access in developing countries to information, literature, and artistic works.96 Meanwhile, growing developing country activism at the UN provoked concern within BIRPI and among its developed country members that developing countries might challenge the agency’s primacy on international IP issues and push for other parts of the international system, such as the UN Economic and Social Council (ECOSOC), to play a greater role.97 In 1962, keen to attract a greater number of developing countries in what was largely a developed country club, BIRPI’s members established a Committee of Governmental Experts charged with considering structural and administrative reforms that would facilitate the Bureau’s transformation into a fully fledged international organization that could later be incorporated into the UN system.98 In 1966, the nine developing countries99 attending discussions on the reform of BIRPI successfully ensured that membership of the proposed new international organization would not require accession to either of its two core conventions (Paris and Berne). In 1967, a Convention establishing WIPO was approved at the Stockholm Diplomatic Conference. At the same meeting, after much wrangling between developed and developing countries, a Protocol was added to both the Berne Convention and the UCC, extending selected special rights to developing countries to limit the rights of authors and publishers in the area of translation and reproduction.100 Concerns from copyright holders in developed countries, however, prevented the ratification of the Berne Protocol. A further four years of intense negotiations yielded a less ambitious Appendix to the Berne Convention (the so-​called Paris revisions), which grants developing countries special permissions to issue compulsory licenses for the translation and reproduction of copyrighted works, but establishes more 96 

Drahos (n 47). For a history of these efforts, see C Johnson, “The Origins of the Stockholm Protocol” (1970–​1) 18, 91 Bulletin of the Copyright Society of the USA 103–​104; I Olian, “International Copyright and the Needs of Developing Countries: The Awakening at Stockholm and Paris” (1974) 7, 2 Cornell Journal of International Law 3–​26; S Ricketson, The Berne Convention for the Protection of Literary and Artistic Works: 1886–​1986 (Kluwer Centre for Commercial Law Studies 1987); P Yu, “Currents and Crosscurrents in the International Intellectual Property Regime” (2004) 38 Loyola of Los Angeles Law Review 323–​443. For a critical perspective on the Berne Convention, see A Story, “Burn Berne: Why the Leading International Copyright Convention Must Be Repealed” (2003) 40, 3 Houston Law Review 763–​802. 97  S Ladas, Patents, Trademarks, and Related Rights: National and International Protection (Harvard University Press 1975); S Musungu and G Dutfield “Multilateral Agreements and a TRIPS-​plus World: The World Intellectual Property Organisation” Issues paper #3, (Quaker United Nations Office (QUNO) 2003) and Quaker International Affairs Program (QIAP). 98  A Bogsch, The First Twenty Five Years of the World Intellectual Property Organization from 1967 to 1992, WIPO Document 881 (E) (World Intellectual Property Organization (WIPO) 1992); S Musungu and G Dutfield, “Multilateral Agreements and a TRIPS-​plus World: The World Intellectual Property Organisation” Issues paper #3 (Quaker United Nations Office (QUNO) 2003) and Quaker International Affairs Program (QIAP), 4. 99  In total, 39 Member States participated in the second meeting of the Committee of Governmental Experts in 1966. See S Patel, “The Patent System and the Third World” (1974) 2, 9 World Development 3–​14. 100  See C Johnson, “The Origins of the Stockholm Protocol” (1970–​1) 18, 91 Bulletin of the Copyright Society of the USA 103–​104.

810   Carolyn Deere Birkbeck restrictive conditions than the original Protocol.101 Subsequent use by developing countries of the Appendix countries was minimal, however, due to the complicated procedures it established for issuing compulsory licenses.102 Meanwhile, calls for reform of the Paris Convention intensified.103 In the 1970s, nationals of developing countries held only around one percent of the world’s 3.5 million patents.104 Major corporations from five industrialized countries owned 80 percent of patents granted worldwide at that time.105 Further, over 80  percent of the patents in force in developing countries were held by foreigners and registered on the basis of research conducted elsewhere.106 Developing countries thus argued that international patent rules were intrinsically unbalanced in favor of developed countries.107 They also questioned the purported links between stronger IP protection and increased domestic innovation, noting that even where patents were granted in their countries, “a very small number were actually used in domestic production.”108 In addition, they contended that the monopoly IP rights frustrated competition and made many technologies unaffordable in their markets. In the 1970s, developing country calls for reform of the IP system were a central component of wider efforts to promote fairer international economic relations. In 1970, building on their success pushing for the creation of UN Conference on Trade and Development (UNCTAD) in 1964 and incorporating the principle of special and differential treatment into the General Agreement on Tariffs and Trade (GATT),109 developing countries achieved a UN General Assembly Resolution on an “International Development Strategy for the Second UN Development Decade,”110 which included a call for a program to promote 101 

See N Tocups, “The Development of Special Provisions in International Copyright Law for the Benefit of Developing Countries” (1982) 28, 2 Journal of the Copyright Society of the USA 402–​450; A Story, “Burn Berne: Why the Leading International Copyright Convention Must Be Repealed” (2003) 40, 3 Houston Law Review 763–​802; UNESCO, Records of the Conference for the Revision of the Universal Copyright Convention (United Nations Educational, Scientific and Cultural Organization (UNESCO) 1973). 102  Okediji (n 89), 328, observes that the Appendix is “generally acknowledged as a failure in terms of its utility to and use by developing countries.” 103  For a review of developing country engagement at BIRPI and WIPO, see C May, The World Intellectual Property Organization: Resurgence and the Development Agenda (Routledge 2006). 104  S Patel, “Intellectual Property Rights in the Uruguay Round: A Disaster for the South?” (1989) Economic and Political Weekly 978, 980. Also see P Roffe and T Tesfachew “The Unfinished Agenda” in S Patel, P Roffe, and A Yusuf (eds), International Technology Transfer (Kluwer Law International 2001) 381–​404, 381. 105  P O’Brien, “Developing Countries and the Patent System: An Economic Appraisal” (1974) 2, 9 World Development 27–​36. 106  ibid. O’Brien observes that these patents bore “no relation whatsoever to the flow of domestic inventive activity.” 107  P Drahos, “Developing Countries and International Intellectual Property Standard Setting” (2002) 5, 5 The Journal of World Intellectual Property 765–​789. 108 ibid. 109  For discussion of the emergence of UNCTAD and Part IV of the GATT, see R Gardner, “GATT and the United Nations Conference on Trade and Development” (1964) 18, 4 International Organization 685–​704; R Rothstein, Global Bargaining: UNCTAD and the Quest for a New International Economic Order (Princeton University Press 1979); J Whalley, Developing Countries and the Global Trading System (Macmillan 1989); M Williams Third World Co-​operation: The Group of 77 in UNCTAD (Pinter 1991). 110  UN General Assembly (1970) Resolution 2626 (XXV) on an International Development Strategy for the Second United Nations Development Decade, 24 October, New York: United Nations (UN).

Intellectual Property, Development, and Access to Knowledge    811 technology transfer and a “review of the international conventions on patents.”111 In the 1972 “Consensus of Brasilia,” Latin American governments claimed that IP regimes had “become inadequate and have been exploited by technology exporters to impose consumption patterns and obtain production, distribution, and trade privileges.”112 The same year, developing countries called on UNCTAD to update a 1964 UN study on patents113 in order to further improve its understanding of the role of the international patent system in technology transfer. While the WIPO Director General continued to voice a preference for new international instruments to address problems such as transfer of technology and restrictive business practices, developing countries pushed for a revision of existing IP conventions.114 In 1974, developing countries won the adoption by the UN General Assembly of a “Declaration and Program of Action on the New International Economic Order,”115 which included specific proposals to promote international cooperation in science and technology, industrialization of developing countries, and fairer terms for technology transfer. Reflecting their concern about the unequal global distribution of technology ownership, developing countries also achieved statements in the 1974 UN Charter of Economic Rights and Duties of States affirming that “[e]‌very State has the right to benefit from the advances and developments in science and technology for the acceleration of its economic and social development” and that all countries should cooperate to develop “internationally accepted guidelines or regulations for the transfer of technology.”116 To further advance their agenda on technology transfer, developing countries worked in the 1970s to empower several parts of the UN system, including UNCTAD, ECOSOC, and the UN Industrial Development Organization (UNIDO). At UNCTAD, developing countries advanced negotiations for a Code of Conduct on the Transfer of Technology

111  For further background on this Resolution, see S Patel, “The Patent System and the Third World” (1974) 2, 9 World Development 3–​14. 112  Cited in R Seidel, Toward an Andean Common Market for Science and Technology (Cornell University Press 1974). The consensus was issued at a regional conference on science and technology organized by the Organization of American States (OAS) in Brazil. Also see E White, “La cuestión de la propriedad industrial en américa latina y su papel en el proceso de desarrollo e integración económica: un examen de las actuales tendencias legislativas, con especial referencia al tratamiento de las patentas” paper presented at the Institute for the Integration of Latin America of the Inter-​ American Development Bank, as a contribution to the Expert Meeting on the Role of the Patent System, Geneva: sponsored by the United Nations Conference on Trade and Development (UNCTAD), 20 August. 113 UNDESA, The Role of Patents in the Transfer of Technology to Developing Countries, Report of the Secretary General 65IIBI (United Nations Publication 1964). 114 WIPO, Report of WIPO Director General to ECOSOC on Relations between the UN and WIPO (World Intellectual Property Organization (WIPO) 1973). 115  For a history of the NIEO and surrounding discussion, see JN Bhagwati, The New International Economic Order: The North-​South Debate (MIT Press 1977); R Cox “Ideologies and the NIEO” (1979) 31, 2 International Organization, 257–​280; SD Krasner, Structural Conflict: The Third World Against Global Liberalism (University of California Press 1985); C Murphy, Emergence of the NIEO Ideology (Westview Press 1984); R Rothstein, Global Bargaining: UNCTAD and the Quest for a New International Economic Order (Princeton University Press 1979). 116  UN General Assembly (1974) Resolution 3281 (XXIX) on Charter of Economic Rights and Duties of States, 12 December, New York: United Nations (UN).

812   Carolyn Deere Birkbeck (CCTT) to promote technology transfer under more advantageous terms.117 They also called for a UN Code of Conduct on Transnational Corporations (TNCs) to better regulate the monopoly power of transnational corporations and their contribution to national development.118 While the push for the Codes ultimately failed, developing countries used the negotiations to question the scope of rights, including IP rights, extended to foreign individuals and companies active within their borders.119 In 1974, WIPO concluded an agreement with the UN, thereby establishing itself as a UN-​ specialized agency and securing recognition as the primary UN actor in the area of IP.120 Developing countries used the WIPO-​UN agreement as an opportunity to link WIPO’s mandate and activities more explicitly to the development agenda they were advancing across the UN system. Whereas the 1967 Convention establishing WIPO had emphasized the desire of its Member States to promote “the protection of intellectual property throughout the world” and to modernize and improve the efficiency of the administration of its conventions, the 1974 Agreement between WIPO and the UN assigned WIPO broader responsibilities, namely “for promoting creative intellectual activity and for facilitating the transfer of technology related to industrial property to the developing countries in order to accelerate economic, social, and cultural development.”121 In 1975, UNCTAD’s report on the role of the international patent system in the transfer of technology suggested the need for revision of international IP conventions.122 Developing countries seized its conclusions to push for the 1975 UN General Assembly to advance a resolution calling for the reform of the Paris Convention so as to ensure that it met the “special needs of developing countries.”123 Soon thereafter, WIPO established an Ad Hoc Group

117 

A Code was drafted but never adopted. See UNCTAD (1985) Draft International Code of Conduct on the Transfer of Technology, Geneva: United Nations Conference on Trade and Development (UNCTAD). 118  The developing country agenda in this respect was clearly reflected in a 1973 UNCTAD Resolution affirming the sovereign right of countries “to take the necessary measures to ensure that foreign capital operates in accordance with the national development needs of the countries concerned, including measures to limit the repatriation of profits.” See UNCTAD (1973) Third Session, Volume 1, Resolution 56 (111), Publication E73IID4 Geneva: United Nations Conference on Trade and Development (UNCTAD). 119  The provisions of the Code and its political history are analyzed by S Conrood, “The United Nations Code of Conduct for Transnational Corporations” (1977) 18, 3 Harvard International Law Journal, 209–​227 and Sell (n 47). 120  Anderfelt (n 91); A Bogsch, The First Twenty Five Years of the World Intellectual Property Organization from 1967 to 1992, WIPO Document 881 (E) (World Intellectual Property Organization (WIPO) 1992); May, The World Intellectual Property Organization: Resurgence and the Development Agenda (Routledge 2006); S Musungu and G Dutfield, “Multilateral Agreements and a TRIPS-​Plus World: The World Intellectual Property Organisation” TRIPS Issues Paper 3 (Quaker United Nations Office (QUNO) and Quaker International Affairs Program (QIAP) 2003). 121  See WIPO, Agreement Between the United Nations and the World Intellectual Property Organization, WIPO Publication 111 (World Intellectual Property Organization (WIPO) 1975). 122  UN (1975) The Role of the Patent System in the Transfer of Technology to Developing Countries, report prepared jointly by the UN Department of Economic and Social Affairs (UNDESA), the United Nations Conference on Trade and Development (UNCTAD) Secretariat and the International Bureau of the World Intellectual Property Organization (WIPO), E 75IID6, Geneva: United Nations (UN). 123  UN General Assembly (1975) Resolution 3362 (S-​VII), para 3, Section III, Development and International Economic Cooperation, 19 September, Geneva: United Nations (UN).

Intellectual Property, Development, and Access to Knowledge    813 of Governmental Experts on the Revision of the Paris Convention. To set the framework for the subsequent Diplomatic Conference, WIPO’s members adopted a Declaration of Objectives in 1977,124 which emphasized that industrial property systems should help advance the industrialization of developing countries, including by improving access to technology, the terms of technology transfer, the actual working of inventions in developing countries, and greater inventive activity within their borders.125 When governments formally began the review process in 1980, however, the Paris Union became a battleground between developed and developing countries. In contrast to the developing country agenda, developed countries hoped to harness the Paris revision process to strengthen IP protections and after several years of politically-​charged talks, the negotiations ultimately collapsed.126

3.4 The Road to TRIPS: A Contested Process and Outcome Led by the US, the push for stronger international IP protection intensified in the mid-​1980s. Discouraged by their failure to advance strengthened international IP commitments at WIPO, developed countries and knowledge-​based multinational companies turned to the multilateral trading system as an alternative forum.127 Rapid advances in information and communication technologies had increased opportunities for international trade in knowledge-​based goods, and also the possibilities for imitation, copying, or unauthorized use of technologies, thus altering the economic dynamics of the “content” and “R&D”-​based industries.128 Amidst growing trade in IP-​related goods and services, the US pharmaceutical, chemical, electronic, software, and entertainment industries faced increasing threats from foreign competitors. Concerns focused initially on the growing industrial strength of Japan, but intensified with competition from cheaper products of newly industrializing countries such as Korea and Taiwan. Facing threats to their profit margins, foreign export markets, and also domestic market shares, US industries complained that their competitors were “free-​riding” on their R&D investments, and called on their government to help halt imitation and reverse engineering abroad. As the focus of concern increasingly turned to newly industrializing and other developing countries, the US harnessed the support of Japan and the European Union (EU). Together, they worked to extend the length and breadth of IP rights at the international level.129 A core part of this strategy was the inclusion of IP in the Uruguay Round of the GATT negotiations.

124   WIPO (1979) Diplomatic Conference for the Revision of the Paris Convention: Basic Proposals, PR/​ DC/​3, 25 June, Geneva: World Intellectual Property Organization (WIPO). 125 126  Drahos (n 47) 166.  ibid. 127  F Abbott, “Non-​violation, Nullification and Impairment Causes of Action under the TRIPS Agreement and the Fifth Ministerial Conference: A Warning and Reminder” Occasional Paper 11, Geneva: Quaker United Nations Office (QUNO 2003); M Stilwell and E Tuerk, “Non-​violation Complaints and the TRIPS Agreement: Some Considerations for WTO Members” TRADE Occasional Papers, (South Centre 2000). 128  C May, A Global Political Economy of Intellectual Property Rights: The New Enclosures? (Routledge 2000). 129  Drahos (n 47).

814   Carolyn Deere Birkbeck As the Uruguay Round advanced, developing countries faced mounting political and economic pressures to acquiesce to demands for stronger IP protection within the world trading system.130 Progress on developing country priorities in the Round, namely improved market access for textiles and agriculture, was made dependent on accepting TRIPS as part of a “single undertaking” of Agreements.131 Hamstrung by limited negotiating capacity and limited knowledge of the technical issues at hand, the majority of developing countries did not participate in the TRIPS discussions and were unaware of the full implications. Over the course of the negotiations, fewer than twenty developing countries had the resources and expertise to follow the negotiations closely. For the most part, the primary goal of developing countries was to narrow the focus of the IP negotiations and stall progress. A core group of developing countries, led by Brazil and India, engaged more directly in the negotiations with the goal of limiting the scope of the Agreement and securing provisions that would help defend their policy space. Developed countries, however, launched an economic and diplomatic offensive to force developing countries to concede. As pressures to conclude the Round intensified, developing countries ultimately succumbed and signed TRIPS as part of the suite of WTO Agreements that emerged from the Uruguay Round.132 The final Agreement was deeply contested:  It went far further than developing countries wanted, setting the stage for battles over its interpretation and implementation, as well as ongoing debates on the fairness of the international IP system.

4.  The Post-​TRIPS Era: Ongoing Contests on Development and the Public Interest 4.1 Debate on the TRIPS Agreement Despite their success in securing the TRIPS agreement as an outcome of the Uruguay Round, developed countries were not satisfied and viewed the agreement as too weak. While developed countries called for faster TRIPS implementation, greater enforcement, and even stronger international IP standards, developing countries sounded a collective alarm at the scope of obligations included in TRIPS.133 Denouncing its “one size fits all” approach,134 they proposed revising the Agreement to better reflect their different levels of development and to defend—​and where possible expand—​TRIPS flexibilities.135 Developing countries were

130   P Drahos, “Global Property Rights in Information: The Story of TRIPS at the GATT,” (1995) 13, 1 Prometheus, 6–​19; S Sell, Private Power, Public Law: The Globalisation of Intellectual Property Rights (CUP 2003). 131   T Stewart, The GATT Uruguay Round: A Negotiating History, 1986-​1992, (Kluwer 1993). 132   For a critical assessment of the implications of the Round for developing countries, see B Hoekman and M Kostecki, The Political Economy of the World Trading System: The WTO and Beyond (CUP 2001); C Raghavan, Recolonization: GATT, the Uruguay Round and the Third World (Third World Network 1990); UNDP, Making Global Trade Work for People (UNDP and Earthscan 2003). 133  Finger and Schuler (n 45). 134  Sell (n 47). 135  See, for example, statements from the Group of 77 and China, Proposed Input of the Group of 77 and China for the Preparation of the Chairman's Text for UNCTAD XI, Preparatory Committee for UNCTAD

Intellectual Property, Development, and Access to Knowledge    815 joined by critics who questioned the legitimacy of TRIPS, both for its coercive negotiation process and for the specifics of its requirements, and who raised questions about the development impacts of TRIPS and the appropriate nature and scope of global IP regulation. While no developing country formally challenged the need to comply with TRIPS, it was only when the first implementation deadlines for developing countries approached that many governments become fully aware of the implications of their obligations under the Agreement.136 In 2000 and 2001, for instance, all countries with a year 2000 deadline for adopting most of the TRIPS Agreement faced external scrutiny by the TRIPS Council regarding their TRIPS implementing legislation.137 As criticism from developed countries intensified, many developing countries recognized the need to assert their views on the scope of their TRIPS obligations and the options available to them. Thereafter, they began concrete efforts to push for revisions to TRIPS, for affirmation of the flexibilities available to them, and for more time, assistance, and resources to implement the Agreement. Developing country demands for attention to “implementation issues” highlighted the challenges arising across the suite of WTO Agreements, including TRIPS.138 Developing countries also started to submit specific proposals for reforming TRIPS to better reflect their different levels of development, and became more active participants in global IP debates. This growing assertiveness was particularly visible at the TRIPS Council, but also emerged in a range of other international fora. From 1995 to 2007, for instance, there were some 143 TRIPS-​related submissions to the WTO by individual developing countries or groups of countries on substantive matters being discussed or negotiated within the Council.139 While most of these submissions were made to the TRIPS Council, some submissions were also directed to the General Council, Ministerial Conferences, and the WTO Working Group on Technology Transfer (WGTT).140

XI, 10 December, (United Nations Conference on Trade and Development (UNCTAD) 2003); Group of 77 and China, Declaration of the Group of 77 South-​Summit held in Havana, 10 to 14 April (South Centre 2000). 136 

Notably, the TRIPS Agreement had a number of different deadlines for implementation by developing countries. Where most developing countries were required to implement most of the agreement by 2000, least-​developed countries were provided a longer timeframe, until 2005, for implementing the Agreement (a deadline which has subsequently been extended by WTO Member States until 2013 and most recently until 2021). Those developing countries with a year 2000 deadline that had not previously granted pharmaceutical product protection were also given an extra five years to grant protection to such products. In 2001, the Doha Declaration extended the timeframe for implementation of such protection for least developed countries until 1 January 2016 (which was subsequently extended until 2033 or until countries cease to be least-​developed). 137  D Matthews, Globalising Intellectual Property Rights: The TRIPS Agreement (Routledge 2002) 78–​107. 138  South Centre, Implementation-​Related Issues and Concerns: The Way Forward After Cancun (South Centre 2004). 139  This figure includes ten submissions from China regarding the Transitional Review Mechanism of China and one submission on the same subject by Taiwan. Note that some of these submissions are notifications by countries of their support or co-​sponsorship of existing submissions to the TRIPS Council. 140  In 1999, for instance, nine submissions related to art 27.3(b) and one submission on development, technical assistance, and transition arrangements were addressed to the General Council. The G-​77 submitted a further statement on development-​related issues to the 1999 WTO Ministerial

816   Carolyn Deere Birkbeck At the WTO, developing countries had both defensive and offensive negotiating objectives. On the defensive side, they aimed to resist pressures to further strengthen TRIPS obligations and, in particular, to protect flexibilities in the agreement against developed country efforts to narrow their interpretation. On the offensive side, they sought to clarify and expand the TRIPS flexibilities to better align with their needs and to eliminate ambiguities that might render them vulnerable to bilateral pressures. They also sought to roll back some TRIPS obligations and to acquire longer transition periods. These overarching objectives were exemplified by developing country views on the TRIPS Article 71.1 Review, which called for a general review of the implementation of TRIPS after its first five years. In 2000, the G-​77 argued that the TRIPS Review should be used as an opportunity to make TRIPS “more responsive to the needs of the South and to ensure access of developing countries to knowledge and technology on preferential terms.” Further, they claimed that “WTO Agreements should be implemented taking into consideration the need to extend the implementation period of particular Agreements that pose problems to developing countries.”141 The push for the Doha Declaration on TRIPS and Public Health, which affirmed the existence of TRIPS flexibilities, was a further defensive objective. For developing countries, this Declaration was politically important because powerful developed country WTO Members were deploying a range of diplomatic and economic pressures to prevent countries from using TRIPS flexibilities,142 creating uncertainty at the international level about how “these flexibilities would be interpreted and how far their right to use them would be respected.”143 Developed country pressures on developing countries to adopt higher IP standards and eschew TRIPS flexibilities were exercised through vehicles as varied as commercial diplomacy, the threat of sanctions, the launch of WTO dispute settlement proceedings, and monitoring, where performance on IP protection was reviewed and judged on a recurring basis. The US, the EU and key industry lobbies also sustained pressure through strategic efforts to insert their IP priorities into discussion in multiple international fora and organizations ranging from WIPO to the World Customs Union and Interpol as well as in bilateral trade negotiations. As many developing countries relied on capacity building to meet their TRIPS obligations, this too was used as a key vehicle to exert pressure (see Section 4.2). The degree to which individual developing countries engaged in TRIPS debates varied by issue and fluctuated over time. Throughout the post-​TRIPS decade, most developing countries had too few professional staff to participate actively in TRIPS discussions. In Geneva, the majority of developing country missions had just two or three staff to monitor the entire range of WTO issues. Further, fifteen of the smallest and poorest WTO members had no permanent representation to the organization. Even among the more active countries, the intensity of engagement in TRIPS discussions varied according to the initiative, leadership skills, personal conviction, and entrepreneurial spirit of particular diplomats Conference. In addition, four submissions on technology transfer were submitted to the WGTT between 2003 and 2005, and one to the General Council in preparation for the Ministerial Conference in 2001. 141  Group of 77 and China, Declaration of the Group of 77 South-​Summit held in Havana, 10 to 14 April (South Centre 2000). 142  See, for instance, C Correa, Integrating Public Health Concerns into Patent Legislation in the Developing Countries (South Centre 2002). 143  WTO, “Technical Note on the Accession Process: Note by the Secretariat (Revision 28 November)” WT/​ACC/​10/​Rev3 (World Trade Organization (WTO) 2005).

Intellectual Property, Development, and Access to Knowledge    817 based in Geneva.144 In many cases, communication between Geneva and national capitals was very weak, even within the same ministries, and the prospects of consultation with a broader range of ministries back home was limited. In the absence of clear substantive instructions and oversight from national capitals, several Geneva-​based diplomats took the lead and filled the void in devising and advancing a national position. Not surprisingly then, the positions of many developing country governments were sometimes not consistent over time, and in some cases, the positions and perspectives offered varied across issues and international fora.145 To address issues of limited individual capacity, developing countries often worked collectively. The African Group, for instance, was involved in many IP-​related submissions to the WTO (eg, on issues of public health, issues related to the exclusions from patentability permissible under TRIPS Article 27.3(b), and issues related to development and technical assistance and LDC deadlines for TRIPS implementation).146 The greatest number of developing country IP submissions to the WTO came in the period between 2000 and 2003. The increase was in large part due to the negotiations related to the 2001 Doha Declaration on TRIPS and Public Health and to the launch of the Doha Work Programme (commonly known as the Doha Round), which included a mandate for further discussion of the relationship between TRIPS and the Convention on Biological Diversity (CBD), the protection of traditional knowledge and folklore, and the reviews of Article 27.3(b) exclusions and under Article 71.1. In addition, the Doha Agenda included a mandate for negotiations on geographical indications (supported by a subgroup of developing countries). At Doha, developing countries also achieved the establishment of a Working Group on Technology Transfer (WGTT) and, with Canada, an extension of the moratorium on “non-​violation and situation” complaints. Further, TRIPS issues were incorporated into the post-​Doha agenda on “Implementation Issues” and “Special and Differential Treatment,” where developing countries argued forcefully for special consideration of the many challenges they faced in attempting to implement TRIPS. As developing countries grew more confident, their strategy at the TRIPS Council evolved. At the outset, key governments and NGOs had been cautious about the idea of seeking amendments to TRIPS, fearing that developed countries might use the opportunity to also incorporate into TRIPS new obligations, such as those contained in the WIPO Internet Treaties, which dealt with copyright protection for works and performances distributed on the Internet. As global IP debates advanced, however, developing countries advanced several formal proposals to amend TRIPS. In 2005, they achieved agreement among WTO Member States on the so-​called August 6th Decision, which aimed to implement the Doha Declaration and resulted in the first and only TRIPS amendment to date. Further in 2006 and 2007, almost eighty developing countries co-​sponsored the submission of a draft TRIPS amendment to incorporate disclosure of origin requirements in patent applications.147 The participation by developing countries on these specific matters was 144  In trade and IP negotiations, the room for entrepreneurship by diplomats is enhanced by the highly technical nature of negotiations. 145  Abdel Latif, (n 13). For a review of who was active, see Deere (2008). 146  As of January 2008, the African Group comprised all 41 African WTO members. 147  WTO, “Doha Work Programme—​The Outstanding Implementation Issue on the Relationship between the TRIPS Agreement and the Convention on Biological Diversity—​Communication from

818   Carolyn Deere Birkbeck aided and spurred by technical and political support from critics of TRIPS. The involvement of NGOs was particularly notable on issues of public health, food security, and biopiracy, and significantly influenced the timing, nature, and intensity of developing country engagement in debates.

4.2 Capacity Building and National IP Reforms to Implement International IP Norms As international debates on TRIPS evolved, many developing countries embarked on legislative changes to meet their deadlines for TRIPS implementation. In so doing, they faced a suite of pressures to adopt even higher standards than those in the TRIPS Agreement and to forego use of TRIPS flexibilities, as noted above. The US and Europe again deployed diplomatic and economic pressures through multiple channels—​bilateral, multilateral, and direct lobbying at the national level. The US government’s unilateral Special 301 monitoring Watch list, with its associated threat of economic sanctions, was a key component of this effort, and developing countries also faced intense lobbying from major international R&D companies, entertainment industries, and industry associations representing IP right holders. As governments and civil society groups campaigned to defend and clarify the rights of developing countries to use TRIPS flexibilities, their scrutiny of foreign IP-​related assistance to developing countries also grew. Since the late 1990s, IP-​related capacity-​building and technical cooperation activities had been the subject of growing concern in some developing country governments, sparked in particular by civil society concerns about how IP reforms could affect access to medicines.148 Alongside their campaign for the 2001 Doha Declaration on TRIPS and Public Health, for instance, critics highlighted that most legal advice to developing countries failed to convey the ways governments could use TRIPS flexibilities to tailor their IP systems according to national needs.149 Brazil, China, Colombia, Cuba, India, Pakistan, Peru, Thailand and Tanzania—​Revision” IP/​C/​W/​474, (World Trade Organization 2006). 148 

Subsequent scholarly and policy studies that raise concerns about the effectiveness and orientation of WIPO’s technical assistance and capacity-​building for developing countries, include: T Pengelly, Technical Assistance for the Formulation and Implementation of Intellectual Property Policy in Developing Countries and Transition Economies, ICTSD Programme on IPRs and Sustainable Development Issue Paper No 11 (ICTSD 2005); M Kostecki, “Intellectual Property and Economic Development: What Technical Assistance to Redress the Balance in Favour of Developing Nations?,” IPRs and Sustainable Development Series, Issue Paper 14 (ICTSD 2006); C May, “Capacity Building and the (Re)production of Intellectual Property Rights,” (2004) 25 Third World Quarterly 821; C May, The World Intellectual Property Organization: Resurgence and the Development Agenda (Routledge 2006); C Deere, The Implementation Game: The TRIPS Agreement and the Global Politics of Intellectual Property Reform in Developing Countries (OUP 2008). On IP-​related capacity building more broadly, see P Yu, “Intellectual Property Training and Education for Development,” Legal Studies and Research Paper Series, Research Paper No 12-​31 (Drake University 2012); J de Beer and C Ogyamanam, IP Training and Education: A Development Perspective (ICTSD 2010). 149  The issue rose to prominence with articles by renowned developing country experts and NGOs around the year 2000, and gained credibility with the 2002 report of the UK government’s Commission on Intellectual Property Rights (CIPR). See CIPR (n 48). Also see DFID/​DTI (n 61). Also see (n 17).

Intellectual Property, Development, and Access to Knowledge    819 In most developing countries, weaknesses on IP law and policy within government, combined with limited stakeholder engagement, public expertise, and policy debate on IP issues, created a context in which the power and influence of external assistance was high.150 As many developing countries lacked modern IP laws and institutions,151 they relied substantially on support from external actors to comply with relevant international agreements, engage in international debates and build the institutional capacity needed to devise, administer, and enforce appropriate national IP laws and policies. To assist in national IP reforms related to TRIPS implementation, most developing countries received—​and continue to receive—​IP-​related assistance from a number of foreign sources. These sources include international organizations (eg, WIPO, UNCTAD, the UN Development Programme (UNDP), the WTO, and the World Health Organization (WHO)) as well as developed country government agencies and non-​governmental actors, such as corporations, private consulting firms, chambers of commerce, NGOs, think tanks, and academics. Among bilateral donors, the US government was the largest and most active player (its efforts now involve over 15 US government agencies), while the EU, Japan, and Korea also offered considerable financial and in-​kind assistance. External donors typically focused their assistance on specific issues of interest to them (eg, health-​related IP issues in the case of the WHO, and IP enforcement in the case of developed country and industry providers). Critics argued that external IP assistance too often reflected the priorities of developed countries keen to “export” their legal regimes and policy preferences,152 and of IP right-​holders working to advance their own private interests.153 Indeed, some private sector providers candidly described their 150  For the political significance of capacity-​building as a factor in the broader struggle over IP rules and their implementation, see C Deere (n 148). 151  M Leesti and T Pengelly, Institutional Issues for Developing Countries in Intellectual Property Policymaking, Administration and Enforcement, Study Paper No. 9 (Commission on Intellectual Property Rights 2002). Also see T Pengelly, Technical Assistance on IPRs for developing countries: some strategic issues and recommendations for future priorities, paper prepared for the Second Bellagio Series of Dialogues, Bellagio, 18–​21 September 2003. 152  Similarly, the US PTO describes the objectives of its IP Attaché Program in developing countries to include: to encourage effective IP protection and enforcement by US trading partners for the benefit of US stakeholders; advocating US government IP policy, interests and initiatives; improving IPR protection and enforcement by conducting training activities with host governments; and helping to secure high quality IP provisions in international agreements and host country laws, and working to monitor the implementation of these provisions. See . For a summary of the European Patent Office’s assistance to developing countries at this time, see European Patent Office, Worldwide Cooperation: The European Patent Office and its programme for International Cooperation (EPO 2003). For scholarly analyses of bilateral IP assistance, see D Matthews and V Munoz-​Tellez, “Bilateral Technical Assistance and TRIPS: The United States, Japan and the European Communities in Comparative Perspective” (2006) 9 Journal of World Intellectual Property, 629–​653, and P Roffe, D Vivas, and C Vea, Maintaining Policy Space for Development: A Case Study on IP Technical Assistance in FTAs, ICTSD Programme on IPRs and Sustainable Development Series Issue Paper No. 19 (ICTSD and DFID 2007). 153  For an NGO perspective from 2003, see K Balasubramaniam, “WIPO Patent Agenda II: Technical Assistance and Access to Medicines: Consumer Perspectives” Conference on the WIPO Work Programme and How to Involve Consumers, organised by the Transatlantic Consumer Dialogue (TACD), Consumers International World Congress, Lisbon, Portugal, 13–​17 October 2003; MSF, Doha Derailed—​Technical “Assistance”: A Case of Malpractice? (Médecins Sans Frontières 2003); J Kuanpoth, “Intellectual

820   Carolyn Deere Birkbeck initiatives to influence IP forms in developing countries as lobbying exercises.154 A further powerful component of assistance to developing countries was cooperation at the technical level among national and regional IP offices, regulatory agencies, and networks of government officials.155 Among international organizations, WIPO has long boasted the largest and broadest portfolio of IP-​related capacity-​building activities for developing countries. The WIPO Secretariat has provided technical and legal advice to developing countries on the ratification and implementation of WIPO treaties for over 40 years.156 In 1995, the Secretariat forged an agreement with the WTO in 1995 to help countries meet their 2000 deadline for TRIPS implementation.157 Over time, WIPO devoted more of the organization’s budget to development assistance, an increase made possible through rising revenues due to increased use of WIPO services related to its Patent Cooperation, Madrid and Hague treaties, through which WIPO received payments for the international registration of patents, trademarks and designs.158 Its portfolio of assistance also expanded to include legal assistance and advice on reform of IP laws, technical and infrastructural support to enhance the operations and capacity of national and regional IP institutions, and staff training. Within many developing countries, IP offices looked to WIPO for technical support for IP reforms. As main recipients of WIPO’s assistance, IP offices generally held WIPO in high regard as a source of authoritative expertise on IP laws, resources for institution-​building, and Property-​Related Technical Assistance, Cooperation and Capacity Building: The Thailand Experience,” paper presented at the policy dialogue on IP-​related Technical Cooperation for Developing Countries, Geneva: sponsored by the International Centre for Trade and Sustainable Development (ICTSD), 12–​13 June 2005. 154  For examples, see the website of the US Chamber of Commerce’s Global IP Center, available at: . It states, for instance, that it has conducted a series of programs, in partnership with country-​based missions in Geneva, to champion the value of strong IP protection and enforcement to economic development, particularly in developing countries. 155  In addition, the day-​to-​day private practices of IP right-​holders, and stakeholders in the non-​ profit sector (eg, NGOs and civil society), such as self-​regulation efforts, partnerships, legal practices, initiatives, and advocacy form the landscape in which capacity-​building occurs and to which it contributes. Further, beyond national IP laws, a range of institutions, regulations, court decisions, and administrative actions impact the outcomes of IP laws and policies on the ground. See P Drahos, The Global Governance of Knowledge: Patent Offices and their Clients (CUP 2010). 156  A Bogsch, The First Twenty-​Five Years of the World Intellectual Property Organization from 1967 to 1992, WIPO Document 881 (E), (World Intellectual Property Organization 1992). For an analysis of WIPO’s role in IP-​related capacity building, see C Deere Birkbeck, “WIPO’s Development Agenda and the Push for Development-​oriented Capacity-​building on Intellectual Property: How Poor Governance, Weak Management and Inconsistent Demand Hindered Progress,” Global Economic Governance Working Paper 105 (University of Oxford 2016). 157  LDCs were originally granted an extension until 2006, a timeframe that was subsequently extended until 2013, then 2021, and in the case of patents for pharmaceutical products until 2033. See WIPO-​WTO, Agreement Between the World Intellectual Property Organization and the World Trade Organization, Publication 223(E) (World Intellectual Property Organization/​WIPO 1996). The two organizations subsequently forged several initiatives on technical cooperation, including a 1998 effort to help developing countries meet their 1 January 2000 deadline for implementing the WTO’s TRIPS Agreement, a 2001 program to assist LDCs to implement TRIPS, and a 2005 agreement to intensify cooperation for LDCs upon the extension of their transition period for TRIPS implementation until 1 July 2013. 158 WIPO, World Intellectual Property Organization: 1992-​2007 (WIPO 2003).

Intellectual Property, Development, and Access to Knowledge    821 training. However, some developing countries with a tradition of independent policymaking on IP policy were skeptical of WIPO’s neutrality, as were some developing country government agencies (such as Ministries of Foreign Affairs and Ministries of Health) and civil society groups. Concerned about the lack of transparency of WIPO’s development activities and bias in their content, they warned against assumptions that WIPO’s assistance embodied the neutrality and development-​orientation anticipated of UN agencies.159 Several larger developing countries, such as Brazil and India, while not significantly reliant on WIPO’s assistance for their own domestic IP reforms, expressed concern that the WIPO Secretariat’s legislative advisors failed to properly advise countries of TRIPS flexibilities and the options available to them. They feared that pressure from WIPO, among other donors, would lead to precedents that reflected a narrow interpretation of the rights and safeguards in TRIPS. Although viewed as less obviously biased than much of the bilateral assistance on offer from countries such as the US, WIPO’s assistance was deemed an important target for reform given the organization’s outsized influence on the socialization of IP professionals in developing countries and on draft IP legislation.160 Although the WIPO Secretariat tried to allay some concerns, capacity-​building remained a core area of concern for proponents of the WIPO Development Agenda (see Section 4.3).161 In their 2004 proposal for a WIPO Development Agenda, for instance, the Friends of Development called for more resources; greater emphasis on the development priorities and circumstances of recipient countries; more demand-​driven activities; improved transparency of the allocation, purpose, and content of development activities; and, to minimize the potential for bias in WIPO’s assistance, the separation of those divisions of the Secretariat involved in the administration of WIPO’s capacity-​building activities from those engaged in its norm-​setting activities. Despite the subsequent approval in 2007 of a number of WIPO Development Agenda recommendations on capacity building, debates on WIPO’s assistance to developing countries are far from resolved. In practice, two competing frames are still used in regard to WIPO’s development cooperation, each of which reflects broader debates about the purpose of WIPO and the relationship between IP protection and development. The first frame presents WIPO’s core purpose as the promotion of IP protection, proclaims the benefits of protection, and asserts the importance of the “use of IP for development.” This frame is regularly used by developed countries, the WIPO Secretariat, and IP right-​holders, as well as by some developing countries, particularly representatives of IP offices. Within this frame, development-​oriented IP assistance consists of activities designed to strengthen national IP rules and institutions and to support efforts by inventors and creators to acquire and enforce IP rights. A second frame presents a more nuanced view of WIPO’s purpose and of the role of IP in development. Insisting that WIPO’s purpose must be to ensure that the IP system serves the higher goal of development, development advocates note unresolved questions about the extent to which the IP system delivers more innovation, technology transfer, and FDI; they emphasize the need for a carefully tailored suite of laws and policies designed to spur national 159  Several complaints along this line were made at WIPO’s Permanent Committee on IP and Development (PCIPD), a committee that had preceded the CDIP. 160  For analysis of the socialization of IP professionals through training, see J Morin, K Daley, and R Gold, “Having Faith in IP: Empirical Evidence of IP Conversions” (2011) 3 WIPO Journal 93. 161  The following analysis draws from C Deere Birkbeck (n 156).

822   Carolyn Deere Birkbeck innovation and creativity in ways that serve development. In this frame, the potential for the use of IP tools and the IP system for development is acknowledged, but the focus on making IP better “work for development” is considered just one of the possible components of development-​oriented assistance. The higher imperative in their view is to help countries design, implement, and benefit from more balanced legal frameworks at the global, regional, and national levels that would better address their development needs. In line with such thinking, a number of civil society groups and legal experts, as well as staff of international organizations such as the South Centre, UNCTAD and WHO have offered advice on legal options they deem better suited to addressing development needs and goals162 as well as tools to help countries assess IP policy priorities and technical assistance needs.163

4.3 The WIPO Development Agenda As developing countries worked to implement TRIPS, they became increasingly frustrated by persistent pressures upon them in multiple international fora—​at WIPO, the WTO, and in bilateral, regional, and plurilateral negotiations—​to limit their use of TRIPS flexibilities and to further strengthen international and national IP rules beyond TRIPS’ minimum standards. At WIPO, for instance, developed countries proposed to negotiate new TRIPS-​ “plus” rules for substantive patent harmonization and IP enforcement, both of which developing countries opposed. In 2004, a group of twelve developing countries, led by Brazil and Argentina, proposed a WIPO Development Agenda.164 They hoped that a collective call for a more “development-​ oriented” WIPO could serve as a strategic tool for pushing back against the proliferating pressures from developed countries and IP right holders. Supporters of the Development Agenda viewed it as a vehicle to spur broader changes in WIPO’s purpose, institutional culture, and portfolio of activities, and to shift the balance of the global IP system toward development priorities.165 Together, the “Friends of Development” concluded their submission to WIPO with eight demands, which included calls for WIPO to address development in all aspects of its work; work toward fairer international IP rules and norm-​setting; increase attention to promoting technology transfer; improve civil society involvement in WIPO’s work; ensure greater development-​orientation in WIPO’s capacity-​building; and establish a Working Group to discuss the implementation of the proposed Development Agenda. 162  See, for instance, S Musungu, Designing Development-​oriented Intellectual Property Technical Assistance Programmes, paper prepared for the Second Bellagio Series of Dialogues, Bellagio, 18–​21 September 2003; D Vivas-​Eugui and C Bellmann, “Towards development oriented technical assistance in Intellectual property policymaking,” paper prepared for “Reflections on IPR Technical Assistance to Developing Countries and Transition Economies,” workshop 15–​17 September 2004, Burnham Beeches, UK; and C Correa, “Formulating Effective Pro-​development National Intellectual Property Policies,” in C Bellmann, G Dutfield, and R Mélendez-​Ortiz (eds), Trading in Knowledge, Development Perspectives on TRIPS, Trade and Sustainability (Earthscan 2003), 209–​218. 163  M Leesti and T Pengelly, Assessing Technical Assistance Needs for Implementing the TRIPS Agreement in LDCS: A Diagnostic Toolkit (ICTSD 2007). 164  See WIPO, Proposal by Argentina and Brazil (n 36). 165  See C Deere Birkbeck, Governing the World Intellectual Property Organization: The Power Politics of Institutional Crisis and Reform (Routledge 2016).

Intellectual Property, Development, and Access to Knowledge    823 At the 2004 WIPO General Assembly, Member States agreed to establish an Intersessional Intergovernmental Meeting (IIM) to discuss the Development Agenda proposals. The IIM met three times and in late 2005 became the Provisional Committee on the Development Agenda (PCDA). In 2005, the Group of Friends of Development submitted a further proposal that focused on four areas: a) reviewing the mandate and governance of WIPO; b) promoting pro-​ development norm-​ setting at WIPO; c) establishing principles and guidelines for WIPO’s technical assistance work and evaluation (discussed later in this section); and d) establishing guidelines for future work on technology transfer and related competition policies.166 A number of other delegations and regional groups also submitted proposals. The PCDA met twice and considered some 111 proposals throughout 2006 and 2007, ultimately recommending the adoption of a reduced number of proposals and the creation of a new WIPO Committee on development and IP.167 Numerous scholars have underscored the importance of understanding the Development Agenda’s adoption at the 2007 WIPO Assemblies as a negotiated outcome born of strategic compromise rather than a statement of political consensus.168 At the 2007 WIPO annual Assemblies, Member States were so divided they were unable to agree upon the organization’s program and budget for the next biennium. Developing countries were determined to bury the push for substantive patent harmonization and there were growing allegations of misconduct and mismanagement on the part of WIPO’s Director General. When developed countries spearheaded a campaign to remove him, the besieged Director General backed the Development Agenda as a way to secure developing country support. An optimistic reading is that the Development Agenda’s adoption signaled recognition by Member States of the need to move beyond an agenda “essentially limited to promotion and protection of intellectual property rights, to embracing the need to assist developing countries in different aspects of this crucial area.”169 A more sober interpretation is that the Development Agenda emerged from distinct political circumstances: Developed countries viewed it as an unfortunate, but necessary, concession while developing countries grasped the opportunity to push forward with the adoption of at least some recommendations that could advance development, even if these were less ambitious than those originally envisioned. Understanding the adoption of the WIPO Development Agenda170 as a political compromise, rather than a shared desire for a coherent or measurable agenda for action,

166  See WIPO, Proposal to Establish a Development Agenda for WIPO: An Elaboration of Issues Raised in Document WO/​GA/​31/​1, IIM/​1/​4, Annex (WIPO 2005). 167  For detailed summaries of discussion and debate at these meetings, see the relevant WIPO reports as well as the reporting by Intellectual Property Watch. For a developing country perspective on the debates, see the quarterly IP Negotiations Monitor, published by the South Centre, as well as meeting reports by the Third World Network and its news service SUNS. Also see M Khor and S Shashikant, Negotiating a “Development Agenda” for WIPO (Third World Network 2009). 168  Roffe and Vea (n 66); S Sell, “Everything Old is New Again: The Development Agenda Now and Then” (2011) 3 WIPO Journal 17; C May, The World Intellectual Property Organization: Resurgence and the Development Agenda (Routledge 2006c); P Yu, “A Tale of Two Development Agendas” (2009) 35 Ohio Northern University Law Review 465. Also see (n 1). 169 See JIU Report “Review of Management and Administration in the World Intellectual Property Organization (WIPO),” JIU/​REP/​2014/​2 (UN Joint Inspection Unit 2014). 170  See WIPO, General Report of the 2007 WIPO Assemblies, A/​43/​16, para 334 (WIPO 2007).

824   Carolyn Deere Birkbeck helps explain its mixed bag of recommendations.171 Some of the 45 Development Agenda recommendations are very specific while others are broadly aspirational, vague, or ambiguous. The recommendations also demand different levels of action that range from one-​ off studies to multi-​year processes of institutional transformation. In 2008, the WIPO General Assembly agreed to create a Committee on Development and IP (CDIP) to oversee the implementation of the Development Agenda Recommendations and undertake further work. In April/​May 2009, WIPO Members agreed to a project-​based approach to the implementation of the recommendations, with work to proceed through six clusters:  Cluster A  (Technical Assistance and Capacity-​building), Cluster B (Norm-​ setting, Flexibilities, Public Policy, and the Public Domain), Cluster C (Technology Transfer, Information and Communications Technologies [ICT], and Access to Knowledge), Cluster D (Assessment, Evaluation, and Impact Studies), Cluster E (Institutional Matters including Mandate and Governance), and Cluster F (Other Issues).172 Subsequent debates on the Development Agenda reveal enduring, underlying contests over WIPO’s mandate and purpose when it comes to development matters. Whereas it is commonplace for Member States to articulate different interests and perspectives on the priorities and activities of international organizations, most such agencies nonetheless enjoy broad consensus on their overarching purpose (eg, to promote public health in the case of the WHO, or to protect refugees in the case of UN Refugee Agency). At WIPO, however, Member States have long been unable to reconcile the competing visions that developed and developing countries have for the organization. By virtue of being a UN agency, development advocates argue that WIPO’s purpose and activities must be guided by UN system’s wider development concerns. Developing countries argue that the Development Agenda and WIPO’s agreement with the UN affirm the centrality of development objectives to WIPO’s mandate and the importance of mainstreaming development throughout the organization, insisting that the organization’s commitment and responsiveness to the needs of developing countries must be a core benchmark against which its performance and accountability is assessed.173 Developed countries, on the other hand, have retorted that WIPO’s legal foundations and mandate for promoting and protecting IP, as found in the WIPO Convention174 and ratified by 189 Member States, have not been modified by either the UN Agreement or the Development Agenda. (The latter were decisions adopted by the WIPO General Assembly; they were not formal amendments to the organization’s mandate as stated in the WIPO Convention, which would require an amendment of that treaty.)175 171  See WIPO, “The 45 Adopted Recommendations under the WIPO Development Agenda” available at accessed 3 February 2015. 172 See Proposal from The People’s Democratic Republic of Algeria, Brazil and the Islamic Republic of Pakistan, Fourth Session of the CDIP, November 16–​20, CDIP/​4/​9 (WIPO 2009); and Proposal from Group B, Fourth Session of the CDIP, November 16–​20, 1009, CDIP/​4/​10 (WIPO 2009). 173  See C Deere Birkbeck, “Inside View—​Strengthening WIPO’s Governance for the Next 50 Years: A Time for Action” (2014) Intellectual Property Watch, 26 September 2014. 174  See WIPO Convention, art 3. 175  The WIPO-​UN agreement entered into effect on 17 December 1974, upon its approval by the General Assembly of the United Nations and General Assembly of WIPO. A Protocol incorporating the agreement was subsequently signed on 21 January 1975 by the two executive heads of the organizations, namely Kurt Waldheim, Secretary-​General of the United Nations, and Árpád Bogsch, Director General of WIPO.

Intellectual Property, Development, and Access to Knowledge    825 The enduring contestation over WIPO’s purpose is rooted in an underlying lack of consensus on the extent to which the IP system delivers on its promises of promoting innovation and creativity and, as a result, on the appropriate content of IP rules and their interpretation.176 Such disagreements over WIPO’s mandate, and the relationship between IP and development, persistently hamper efforts to advance stronger development-​orientation in the organization. They arose, for instance, as a central topic in acrimonious and drawn-​out debates among Member States on the terms of reference for an independent Review of the implementation of the Development Agenda,177 and also on the follow up to a 2011 External Review of WIPO’s development assistance. In 2014, protracted debates spurred frustrated developing countries to sound an alarm that developed countries were taking the substance of WIPO discussions on development back to the pre-​Development Agenda years.178 Mounting concern among developing countries that the Development Agend was not properly feeding into the decision-​making and deliberations of other WIPO bodies—​on issues ranging from the program and budget, to capacity building and norm-​setting—​led them to propose a mechanism to support mainstreaming of the Development Agenda across the work of WIPO’s many committees.179 After considerable debate, WIPO Members agreed on a “Coordination and Monitoring Mechanism for the WIPO Development Agenda” in 2010 and adopted a series of principles on monitoring, assessing, and reporting modalities as well as coordination among WIPO Committees to ensure that development considerations form an integral part of the organization’s work.180 Among other provisions, the decision instructed the relevant WIPO bodies to include a description of their contribution to the implementation of the Development Agenda Recommendations in their annual reports to the Assemblies.181 However, some seven years later, Member States remained divided in 2017 over which WIPO bodies should be considered “relevant.”182 While developing countries insisted that bodies such as the Program and Budget Committee (PBC) and the Committee on WIPO Standards (CWS) should be considered “relevant,” developed countries refused.183 176  V Muzaka, “Contradictions, frames and reproductions: The emergence of the WIPO Development Agenda.” (2013) 20 Review of International Political Economy 215. 177  See C Saez, “WIPO Committee on Development and IP Opens with Overloaded Agenda,” (2014) Intellectual Property Watch, available at ​. 178 See Summary by the Chair, Thirteenth Session of the CDIP, 19–​23 May 2014, CDIP/​13/​SUMMARY (WIPO 2014). Also see (n 2) and (n 94). 179  Summary: Prepared by the Secretariat, CDIP Fifth Session, 26–​30 April 2010, CDIP/​5/​10 (WIPO 2010). 180  See accessed 1 September 2014. Also see Coordination Mechanisms and Monitoring, Assessing and Reporting Modalities: Annex II of the Report of the CDIP, WO/​GA/​39/​7 (WIPO 2010). 181  It also called on the General Assembly to forward the reports to the CDIP for discussion under the first substantive item of its Agenda and to request the relevant WIPO bodies to provide it with any information or clarification on the report that may be required. 182 See Decision on the Committee on Development and IP (CDIP) Matters: Document prepared by the Secretariat, WIPO General Assembly 46th Session, 22–​30 September 2014, WO/​GA/​46/​10 (WIPO 2014). For discussion on this matter at the Assemblies, see Draft Report: WIPO General Assembly, 46th Session, 22–​30 September 2014, WO/​GA/​46/​12 Prov (WIPO 2014). 183  As of 2014, the IGC, SCP, SCT, SCCR, and the ACE each include an account of their activities relevant to the implementation of Development Agenda recommendations in their reports to the General Assembly. See Description of the Contribution of the Relevant WIPO Bodies to the Implementation

826   Carolyn Deere Birkbeck

5.  Development and A2K in a Complex Global IP System The contemporary global IP system comprises an expanding web of multilateral, regional, bilateral, and plurilateral rules, organizations, and decision-​making processes, as well as “soft law” instruments, such as inter-​governmental declarations.184 At the multilateral level, the WTO’s TRIPS Agreement is joined by over 25 other multilateral treaties on IP (covering topics from patents, trademarks, and geographical indications to industrial designs), which are administered by WIPO. Legal instruments on issues as diverse as food security, human rights, culture, the environment, and trade include provisions relevant to IP governance.185 At the same time, smaller “club” trade agreements—​regional, bilateral, and plurilateral—​ with powerful provisions relevant to IP governance are on the rise,186 and over 60 countries belong to regional inter-​governmental arrangements on IP. Further, alongside established multilateral venues for negotiations on IP, such as the WTO and WIPO, numerous processes and fora have emerged, such as WHO working groups on IP, innovation, and R&D.187 Across the international arena, policymakers stumble when it comes to matters of the public interest and development in IP law and policy. A crucial part of the challenge is that debates on IP law have far broader implications and touch policies and laws on matters as vast as indigenous rights, cultural diversity, and agricultural policy. Equipped with distinctive mandates from Member States, IOs have varying institutional priorities. Whereas organizations such as WIPO advance the protection of IP as it’s highest priority, organizations such as the WHO, the Human Rights Council, and the UN’s Food and Agriculture Organization (FAO) put emphasis on the need to prioritize public interests related to public health, human rights, and food security. Since the adoption of the 2007 WIPO Development Agenda, proponents of greater attention to the public interest and development in the global IP system have mounted several successful campaigns. In 2012, widespread public concern spurred the European Parliament to reject the plurilateral Agreement on Counterfeit Trade (ACTA), which was assailed by critics for nontransparent negotiations and for having excessive provisions to

of the Respective Development Agenda Recommendations: Document by the Secretariat, WO/​GA/​46/​4 (WIPO 2014). 184  K Raustiala, “Density and Conflict in International Intellectual Property Law” (2007) 40 University of California Davis Law Review 1021; K Raustiala and D Victor, “The Regime Complex for Plant Genetic Resources” (2004) 58 International Organization 277. 185  P Drahos, “BITS and BIPS: Bilateralism in Intellectual Property” (2001) 4 Journal of World Intellectual Property 791. 186  See P Roffe, “Intellectual Property Chapters in Free Trade Agreements: Their Significance and Systemic Implications” in J Drexl, H Grosse Ruse-​Khan, and S Nadde-​Phlix (eds), EU Bilateral Trade Agreements and Intellectual Property: For Better or Worse? (Springer-​Verlag 2014). 187  See, for instance, WHO (2014), “World Health Organisation: Intergovernmental Working Group on Public Health, Innovation and Intellectual Property (IGWG).” Retrieved from ​ accessed 18 March 2015.

Intellectual Property, Development, and Access to Knowledge    827 combat counterfeiting and piracy.188 At the national level, public resistance similarly forced the US Congress in 2012 to shelve a proposed Stop Online Piracy Act (SOPA).189 And as observed above, civil society groups and developing countries also secured the Marrakesh Treaty and extensions to the LDC deadline for TRIPS implementation. However, the industries that are the core proponents of stronger IP rules and more effective enforcement of IP rights have not relented. Negotiations for two mega-​regional agreements—​the Transatlantic Trade and Investment Partnership (TTIP)190 and the Trans-​ Pacific Partnership (TPP)191—​underscored the ongoing push for stronger levels of IP protection and enforcement in developed and developing countries. While some countries have negotiated deals that include public interest provisions and safeguards, civil society groups forcefully argue that the IP provisions of the TPP, and the now shelved TTIP trade deal, are excessively tilted in favor of IP right holders, without adequate consideration of public interest and development concerns. Meanwhile, continuing debates on the implementation and future of the WIPO Development Agenda highlight that the quest to improve attention to development considerations in the global IP system remain plagued by debates on evidence, divergent interests, and geopolitical concerns. The ongoing rise of China in the global economy has, for instance, reinforced concerns about competitiveness in major developed countries and their determination to strengthen the protection of IP rights. Meanwhile, most developing countries and their stakeholders continue to face challenges in terms of effective representation in the multiple international fora where IP issues arise and of translating development considerations into action on the ground. At present, numerous efforts are underway to compile evidence on the relationship between IP and development, and to devise and implement approaches to IP law and policy emerging that prioritize development and public interest concerns. Some emerging developing countries, such as India, Brazil, and China, are making greater use of stronger IP laws to support national innovators and creators, and there is growing emphasis among 188  See P Roffe and X Seuba, The ACTA and the Plurilateral Enforcement Agenda: Genesis and Aftermath (CUP 2015). For the public resistance that prompted the European Parliament’s rejection of the Agreement on Counterfeit Trade (ACTA), see “Activists Rally to Give ACTA the Cold Shoulder” Euronews, 11 February 2012. Retrieved from accessed 18 March 2015. 189  J Weisman, “After an Online Firestorm, Congress Shelves Antipiracy Bills” The New York Times, 20 January 2012. Retrieved from accessed 18 March 2015. On the way SOPA’s rejection changed international public discourse, see C Yoder, “A Post-​SOPA Shift in International Intellectual Property Norm Creation” (2012) 15 The Journal of World Intellectual Property 379. 190  European Commission (2014), “What is the Transatlantic Trade and Investment Partnership (TTIP)?” European Commission. Retrieved from  accessed 18 March 2015. For a discussion, see G Felbermayr and M Larch, “The Transatlantic Trade and Investment Partnership (TTIP): Potentials, Problems and Perspectives” (2013) 14 CESifo Forum, Ifo Institute for Economic Research at the University of Munich 49. 191  USTR (2014). “Trans-​Pacific Partnership (TPP).” Retrieved from accessed 18 March 2015. For a critical view, refer to M Lewis, “Trans-​Pacific Partnership: New Paradigm of Wolf in Sheep's Clothing” (2011) 34 Boston College International & Comparative Law Review 27. See also “Mega-​regional Trade Agreements: Game-​Changers or Costly Distractions for the World Trading System?” World Economic Forum, July 2014, available at .

828   Carolyn Deere Birkbeck developing countries on harnessing the IP system for development purposes. At the same time, most developing countries express interest in modernizing and using their IP systems in ways that might advance domestic innovation, boost technological capacity, and encourage FDI. Further, many developing countries acknowledge that, as their level of development rises, their interests in IP protection may grow. Some stakeholders, for instance, believe that stronger IP protections will provide incentives to domestic R&D firms and help local companies to secure investment, licensing arrangements and sub-​contracts with foreign companies in ways that will spur national R&D and manufacturing capacity. There are also coalitions of  SMEs, musicians, authors, and artists that hope to use stronger copyright and trademark protection to derive higher economic returns for their efforts. Many developing countries have also long been keen to explore how expressions of folklore might be better protected and many are pushing for stronger systems of protection for traditional knowledge and genetic resources, seeking to draw on a variety of legal instruments, from IP laws to customary laws. Meanwhile, beyond the major emerging developing economies, the global  IP system remains poorly tailored and poorly harnessed to respond to development challenges in most developing countries. In such cases, it primarily enables foreign actors to secure IP rights, albeit with varying prospects of effective enforcement. Further, despite the growth of research and development (R&D) industries in a number of key emerging developing countries, most notably China and South  Korea, the overarching disparity between developed and developing countries in the generation and ownership of technology persists.

Chapter 29

Workers in th e “ G rov e s of Acade me ” The Claim of Academics to Copyright and Patents Michael Spence * 1. Introduction Who, if anyone, should own the fruits of university research? The answer depends upon our approach to two highly contested concepts, that of property in intangibles, and that of the nature of academic employment in the modern university. The intellectual property (IP) protection of works and inventions created by university academics has been fiercely contested for at least 30 years. It may be that this reflects a growing awareness of the importance of, and sometimes skepticism about, intellectual property rights (IPRs) in the community more generally. But it also reflects a shift, not only in perceptions about the importance of IP, but in the dominant conception of the university as an institution. In their fondness for asserting rights over the works and inventions of academics, universities are said to be in danger of abandoning “the groves of Academe . . . in favour of a competitive and calculating Technopolis.”1 Would-​be defenders of “Academe” tend to adopt one of two (rather difficult to reconcile) positions about the IP claims of universities and individual academics. On the one hand, some claim that works and inventions created in the course of university employment, produced as they usually are at public expense and as a part of the open tradition of public discourse, should presumptively be free from almost all constraints of IP protection, and certainly from claims to protection advanced by university administrators. The assertion is that the public has usually already paid for the development of works and inventions developed in universities in its funding of the university and its research, and to charge subsequent users of that subject matter the premium that IP protection usually entails is a sort of double *  Michael Spence has asserted his moral right to be identified as the author of this Contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  WR Cornish, “Rights in University Innovations: The Herchel Smith Lecture 1991” [1992] EIPR 13, 14.

830   Michael Spence taxation. On the other hand, some claim that university works and inventions should indeed be protected by the IP regimes, but that presumptive ownership of the relevant copyright or patent should reside in individual academics, and not in the universities that employ them. In either case, the assumption is that it is the university’s claim to protection that must be justified, and it is usually found wanting. For their part, governments and universities often take a rather different view. While denying that they want to transform the university into a “competitive and calculating Technopolis,” they argue that university funding for research has been steadily declining and that it is only reasonable to look to the exploitation of works and inventions produced as a part of the university’s work to fund ongoing research work. Far from “double taxation,” they see income derived from commercialization as a kind of return to the public of the benefit that public funding has produced. Moreover, they see IP protection of university innovation as essential to guaranteeing that the university delivers benefit to the public by providing incentives that might be needed for the private sector to invest in the ongoing development and manufacture of the products of that innovation. This type of thinking received epitomic expression in §200 of the Patents and Trademark Act Amendments of 19802 (the “Bayh-​Dole Act”): It is the policy and objective of the Congress to use the patent system to promote the utilization of inventions arising from federally supported research or development; to encourage maximum participation of small business firms in federally supported research and development efforts; to promote collaboration between commercial concerns and nonprofit organizations, including universities; to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery; to promote the commercialization and public availability of inventions made in the United States by United States industry and labor; to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions; and to minimize the costs of administering policies in this area.

The Bayh-​Dole act requires inventions that are conceived or reduced to practice in the performance of federally funded research to be disclosed to the funding agency; the university or other body then has the opportunity to elect to patent the invention and must make efforts to commercialize it; if they elect not to do so, then the federal government can receive title to the invention and can grant it to the inventor. University commercialization has not proved the boon to universities for which some in the 1980s had hoped, but the case for university ownership of works and inventions produced during the course of university teaching and research has been often rehearsed. Importantly, it is not only academic literature in which these disputes over the ownership of works and inventions between academics and the universities that employ them play out. Recent decades have seen litigation in many different jurisdictions around precisely these topics; litigation that has attracted considerable comment from all sides of the argument. For example, in the United Kingdom in Greater Glasgow Health Board’s Application a surgeon in a clinic jointly run by Glasgow University and the Greater Glasgow Health Board, though wholly paid by the Health Board, devised a surgical device useful to his employer 2 

35 USC §§200–​212 (1980).

Workers in the “Groves of Academe”     831 while engaged in private study at home. The Health Board was held not to be entitled to the invention, even though his letter of appointment included “a somewhat informal invitation for him to become involved in the University side” of the clinic, expressed as an obligation to “avail himself ” of its research facilities.3 In the United States in Madey v. Duke University4 a university professor who had obtained patents for technology developed at Stanford moved to Duke. When after a disagreement with Duke he moved to a third university, the laboratory that he had directed at Duke continued to use his patented technology relying upon a so-​called “experimental use” exception to infringement liability. The Federal Circuit held that the status of Duke as a non-​profit institution did not mean that the experimental use provision applied. Rather, it would only apply if the use was “solely for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry.” Because the use was considered “in keeping with [Duke’s ] legitimate business” as a research institute, the exception was held inapplicable, thus rendering it nugatory for university research.5 In Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., a restrictive reading of an academic’s contract of employment meant that he had not assigned his rights in a procedure for measuring levels of HIV in blood to Stanford University, and the Supreme Court held that the Bayh-​Dole Act did not displace the usual rules as to the first vesting of ownership.6 Finally, in Australia in University of Western Australia v. Gray a surgeon was employed by the University of Western Australia on a full-​time basis, among other things “to undertake research, to organize research and generally to stimulate research among staff and students.”7 He was found not to have a term implied at law in his contract that inventions created in the course of his employment were owned by the University when he developed inventions involving “the production and use of microparticles . . . for the targeted treatment of cancerous tumours in humans.”8 Moreover, the court in obiter distinguished between the Professor’s duty to research and a duty to invent,9 though it envisaged that a contract between a researcher and a university could sometimes include such a duty.10 It is not the purpose of this chapter to consider in any depth the rules as to the ownership of IP produced by academics in any particular jurisdiction. Nor is it the purpose of this chapter to consider whether works produced in the course of university research and teaching should be altogether free from any form of IP protection. Rather, this chapter considers whether an academic’s claim to control the use of the works and inventions that she produces during the course of her work at the university can, in principle, be justified. It is usually taken as axiomatic that the academic does have such claim, and that it is up to the universities to displace the normal presumption of author or inventor ownership. Yet it must be that an academic does indeed owe her community some explanation of her entitlement to control such works and inventions for, in doing so, she affects “what [other people] may do, how they may speak, and how they may earn a living.”11 In most of the literature it is merely assumed that the academic creator has a justification easily to hand. In considering such a claim, I put to one side the difficult issue of whether academics are employed to invent. This has been an important question in the cases because the courts have 3 

4  307 F3d 1351 (Federal Circuit 2002). 5  307 F3d 1363. [1996] RPC 207, 221–​222. 7  [2009] FCAFC 116, [3]‌. 8  [2009] FCAFC 116, [4]‌. 563 US 776 (2011). 9  [2009] FCAFC 116, [194], [195]. 10  [2009] FCAFC 116, [178]. 11  J Waldron, “From Authors to Copiers: Individual Rights and Social Values in Intellectual Property” (1993) 68 Chicago-​Kent L Rev 841, 887. 6 

832   Michael Spence usually been trying to adjudicate disputes between an academic and her university under the usual legislative provisions, and to determine the extent to which university research resembles research in the R&D department of a commercial undertaking. But I am taking as axiomatic the situation in which an academic produces an invention as a part of a program of researcher-​directed enquiry, a program that may or may not have been directed at something that might be considered an invention, and ask whether the researcher ought to be entitled to control the use of that invention by others as a matter of first principle. Whether or not her university ought to be able to claim such control is a separate question. Similarly, I am also putting to one side the question of whether, if a university does indeed profit from the exploitation of a work or invention, the academic responsible should have some contractual entitlement to a share in those profits. That is a detailed question as to the nature of academic employment that is outside the scope of this chapter. Rather, I am looking at the claim of the academic herself, as against the rest of the community, to control over the work or invention. It is the contention of this chapter that while an academic has a strong claim to prima facie ownership of copyright in works produced in the course of her university teaching and research (albeit a form of copyright potentially limited in one important respect), her claim to the ownership of patent rights, and to copyright in computer programs, is very much weaker. In order to support this claim, it is necessary briefly to consider the usual justifications for the IPRs and the assumption that they should vest in the author or creator.

2.  Justifying Intellectual Property Protection The standard justifications for the IP claims have often been rehearsed and focus, in broad terms, on one or more of three things: the need of the community for a constant supply of works and inventions (the so-​called “economic” arguments); the claim of the author or inventor to some special connection with the work or invention that the law should recognize (the arguments from creation, desert, personhood, and autonomy); or the wrong that is allegedly done by an unauthorized user of the work (the arguments from harm, misrepresentation, and unjust enrichment).12 We shall draw upon these rationales at various points in this chapter and they ought, therefore, briefly to be summarized. First, the community-​centered (or “economic”) argument is that granting the creators of works or inventions IPRs is essential to correct the market failure caused by an inability to exclude non-​purchasers from their use because of their essential character as “public goods.” Because of that market failure, works will not be created, disseminated, or efficiently exploited without the incentives provided by the IP regimes. The creation thereby of a market for works and inventions will ensure that they are ultimately within the control of the user who values them the most highly, absent wealth effects. This is thought to be a more efficient manner of correcting this market failure than, for example, taxation and patronage, because 12  For an outline and critique of these various arguments see M Spence, Intellectual Property (Clarendon Press 2007) ch 2.

Workers in the “Groves of Academe”     833 it trusts the market to determine which works or inventions will be created, disseminated, and exploited. This argument can often be relied upon to justify the IP regimes, although it will only apply where the relevant incentive is in fact necessary, and where the scope of the control over the work or invention afforded by the relevant IP regime is that which is necessary to provide the requisite incentives, and no more. Second, the creator-​centered arguments focus on the relationship between a creator and her works or inventions and claims that she should be afforded control over their use because, but for her, the work or invention would not exist and she should own what she creates; she deserves such control on the basis of her efforts in producing it or the contribution that she has thereby made to the common weal; such control is crucial to the protection of her personhood; or such control is a corollary of recognizing her autonomy generally, or her expressive autonomy in particular. None of these arguments is wholly convincing. In particular, each has difficulty describing precisely what it is about the relationship between a creator and her works or inventions that means that she should be afforded control over their use by others. Nevertheless, the argument from expressive autonomy may have something to offer in the context of claims by academics to the control of the works that they create in the course of their employment. In particular, the argument from expressive autonomy may in this context operate in a manner complementary to a more specific argument from academic freedom. We shall return to each of these arguments later on. Finally, the user-​centered arguments focus on the wrong that is committed by an unauthorized user. They are that an unauthorized user thereby does the creator of a work or invention harm; that she thereby makes a misrepresentation as to the part that she has played in the creation of the work or invention; or that she is thereby unjustly enriched. These arguments are far less frequently relied upon by those who would justify patent and copyright regimes. The argument from harm must operate with an extremely extenuated concept of harm, because the public goods character of works and inventions generally leads to the assumption that use by one person does not thereby harm another. The argument from misrepresentation will only apply where it is not possible for the user to exploit the work or invention without making such a misrepresentation, which is something that will rarely be the case in the context of works or inventions. In the case of the argument from unjust enrichment, none of those authors who draw upon it have yet offered clear criteria for when enrichment by use of the works or inventions created by others, something that we all do all the time, is “unjust.” These arguments may safely be put to one side in our consideration of the claims by academics to control over the use of the works or inventions that they create in the course of their employment. The important thing to recognize about these different types of argument for the justification of IPRs is their diversity. Perhaps surprisingly, they are often taken to justify rights of a single type (rights to control the use of the work or invention in various statutorily defined ways), and in the normal case to justify the allocation of those rights to a single person (the creator of the work or invention). But they are not necessarily so interchangeable. Different arguments will apply with greater or lesser force in relation to different types of claim, over different types of subject matter, and by different types of creator. Thus, while most IPRs have at least sometimes been justified on the basis of the second and third types of argument outlined in the preceding paragraphs,13 these arguments often 13 

For example, these arguments were arguably important in the development of the Agreement

834   Michael Spence seem most tenuous in the context of rights over inventions. Patent is usually regarded as a tool of economic policy and the majority of the academic literature seeking to justify, and to shape, the award of patent rights focuses on what I have called the community-​centered arguments. But the economic arguments differ from the other arguments for IP in several ways. Take, for example, the extent to which they offer justification of the first vesting of the relevant rights in the author or inventor. If the justification of the IPRs offered by the economic arguments is that they ensure a ready supply of useful intangibles to a particular market, then the rights ought to vest in whichever party must be offered incentives for that to happen. The strength of the assumption that a primary incentive needs to be given for initial invention leads to an assumption that it is the inventor in whom patent rights should initially vest, but that assumption may not always be justified. Interestingly, patent rights have historically been granted to the importers of new technologies as well as their inventors. Similarly, the strongest justification for the right to assign or license the use of a work or invention also comes from the community-​centered arguments.14 The relevant market failure will only be corrected if the creator of the work or invention can be compensated for her pains in innovating: if she can license or assign the right to use the relevant subject matter to the party who will extract most value from it by ensuring its widest and most efficient possible uses. The other justifications for the IPRs, particularly those grounded in the connection between a creator and her work or invention, arguably support a right to prevent unauthorized use, but do not necessarily support a right to license or assign that right. This is because each in some way depends upon the ability of the author or inventor to preserve her relationship with the work or invention, and not to profit from it. Not surprisingly, therefore, the so-​called “moral” rights of authors (the paternity right, the right against false attribution, and the integrity right) cannot be assigned under UK law.15 Moreover, while they can be waived, and waived for a fee, there is no provision for their licensing.16 It is those moral rights that are usually regarded as most clearly justified by the arguments for protection grounded in the connection between a creator and her work.17 Where this type of justification for protection can be supported, but the economic arguments do not apply, it may be that a full right to assign or license use is not justified. The challenge in thinking through the claims of academic authors and inventors to control over their works and inventions therefore depends upon the careful consideration of precisely the type of rights that are being claimed, the subject matter over which they are claimed, and the context of the creation, development, and dissemination of the work or invention. Parsing the problem of justifying the claims of academic authors and inventors in this way, it is worth considering first the issue of their claim to control of works produced in the context of research and teaching, and then separately addressing their claim to control of inventions. on Trade Related Aspects of Intellectual Property 1994. See M Spence, “Which Intellectual Property Rights are Trade Related?” in F Francioni (ed), Environment, Human Rights and Intellectual Property (Hart 2001). 14 

For situations in which they do not, see Francioni (n 13) 66–​73. Copyright, Designs and Patents Act 1988 (hereafter CDPA) s 94. These rights can, however, be devised (CDPA s 95), which can be justified on the basis that a creator’s heirs are the best guardians of her connection with the work. 16 CDPA, s 87. 17  For alternative justifications for these rights see Spence (n 12) 132–​134. 15 

Workers in the “Groves of Academe”     835

3.  Works Produced as a Part of University Research and Teaching I shall put to one side the particular issue of computer programs and return to it later in this chapter. Although copyright is firmly established as the standard system of protection for computer programs, the extent to which it is well equipped to fulfil that function remains open to doubt. I shall focus here on material more paradigmatic of the category of “literary works” such as academic articles, books, and lectures. In doing so, I shall assume that a university academic normally has a contractual duty to engage in teaching and research, which activity might be expected to give rise to written lectures and to outputs such as articles and books. In this context, the usual intuitions of the courts and commentators are with the academic, who it is assumed ought to enjoy some type of copyright over her academic works. Those intuitions were given their classic legal expression by Lord Evershed M.R. in Stevenson Jordan & Harrison Ltd v. MacDonald & Evans:  . . . prima facie I should have thought that a man, engaged on terms which include that he is called upon to compose and deliver public lectures or lectures to some specified class of persons, would in the absence of clear terms in the contract of employment to the contrary be entitled to the copyright in those lectures. That seems to me both just and commonsense. The obvious case to which much reference has been made in the course of the argument is to the academic professions. Lectures delivered, for example, by Professor Maitland to students have since become classical in the law. It is inconceivable that because Professor Maitland was in the service at the time of the University of Cambridge that anybody but himself, one would have thought, could have claimed copyright in those lectures.18

While these intuitions seem almost universal, it is important to find a basis for them, as that basis may well affect the shape of the appropriate protection.

3.1 The Community-​Centered Arguments In advancing the claim of an individual academic to copyright in this material, let us consider first the utility of the community-​centered arguments. This argument is always difficult to assess because it depends upon empirical data that are not easily assembled. But there is at least a plausible case that, on the basis of this argument, a right akin to copyright ought to protect academic works, and that the right ought first to vest in an academic author. This may, at first, seem surprising. After all, academic works are normally created as a necessary part of an academic’s employment: her continued employment and professional advancement depend upon it. Indeed, while academic books attract (usually modest) royalties, in many countries journal articles are licensed to publishers at no fee. There can therefore be little argument that an incentive is required for the initial creation of this material by an academic. Indeed, it may be that considerations of potential profit from royalties could 18 

(1952) 69 RPC 10, 18.

836   Michael Spence distort an academic’s research or teaching agenda, by shifting her attention from the potentially important to the potentially lucrative. More plausible, however, is the claim that the community-​centered arguments can justify copyright in academic works on the basis of the need for incentives for its dissemination and efficient exploitation. Whether copyright is required to ensure the dissemination and efficient exploitation of academic works undoubtedly depends upon the changing structure of academic publishing. The desirability of existing publishing models is increasingly questioned by many commentators. Conley and Wooders write: Thus, our experience . . . has led us to this question regarding commercial publishers: What have you done for us lately? We think the answer has to be “Not much.” The academy produces the research, edits and certifies the research, and ultimately consumes the research. It is hard to understand why we should continue to give the research away to commercial publishers and then buy it back at an enormous price. It is even more mysterious why we continue to tolerate the closed-​access business models of commercial publishers. It results in interested colleagues being denied access to our research, which hurts both our intellectual mission and our personal professional advancement. In the papyrocentric era, publishers provided services essential to the distribution of new research. In the electronic era, commercial publishers only impede distribution and add insult to injury by charging huge fees for their trouble.19

But the existing publishing models with their coordinated processes of peer review and editorial selection continue to meet a need for the certification of quality. Indeed, in some countries the place of established journals has arguably become more entrenched in recent years as a result of public research evaluation exercises such as the British Research Excellence Framework and, even more so, the Australian Excellence in Research for Australia Initiative. So-​called university “ranking” systems have a similar effect. It is unlikely that the traditional academic publishing industry will disappear in the near future. Assuming this to be the case, there is little doubt that the publishing industry is dependent upon the existence of some system at least akin to the current copyright regime for its continued survival (though the question of whether the current scope of the copyright rights is greater than might be justified to ensure the dissemination and efficient exploitation of academic works is a question of fact that I shall put to one side). The commercial value of an academic article or book is undoubtedly in its first, and generally exclusive, publication. While academic authors may not need the financial incentives provided by copyright, academic publishers arguably do. Moreover, there is good reason to believe that the person best placed to identify the place and nature of first publication of an academic work is the academic author. She will have strong interests which flow from her interest in the development of her own career and reputation as an academic to ensure that the work is disseminated as widely as possible, and disseminated in a way that is consistent with her academic purposes. She is certainly better placed to do so than the university administrators who often claim ownership of her work. Indeed, Dreyfuss has argued powerfully that placing control over the dissemination of academic work in the hands of the academic, rather than her university, even if it does not ensure the maximum financial return on the work, will protect “interests beyond those that are purely financial—​interests in the quality and integrity of the scholarly 19 

JP Conley and M Woods, “But what have you done for me lately? Commercial Publishing, Scholarly Communication and Open-​Access” (2009) 39 Economic Analysis and Policy 71, 76.

Workers in the “Groves of Academe”     837 works.”20 These depend upon the importance of her control over the conceptualization, fruition, dissemination, and use of the work.21 Whether limits ought to be put on her ability to deal with that copyright, particularly by way of assignment, is an issue that is addressed later. Thus, while this prima facie argument begs many important empirical questions, often difficult questions to address in a time of rapidly changing practice, it does seem to provide at least limited support for an academic’s claim to copyright in the works that she produces as a part of her employment.

3.2 The Creator-​Centered Arguments Perhaps clearer support for an academic’s claim to at least some type of control over her work may be found in the creator-​centered arguments, and particularly the arguments from expressive autonomy. These arguments, at least if strengthened by arguments from the principle of academic freedom with which they overlap, provide strong support for ownership of works produced during the course of an academic’s employment.22 Broadly speaking, the right to freedom of speech is often seen as consisting in four aspects. Centrally, it consists in freedom from speech restraint that is not justified. More contentiously, however, it may also consist in: a right to be heard; a right against the compelled expression of a message with which the speaker does not wish to be associated; and a right against the compelled subsidy of such a message. Relying on the third of these aspects of the right to expressive autonomy, it could be argued that a work or mark involves “the author’s fixed expression [being] . . . communicated anew to each successive viewer or listener [as an] . . . ongoing presentation of the author’s discourse to the public,”23 and that to permit someone other than an author to use that “fixed expression” is to compel her to speak, perhaps in a context or at a time in which she would prefer to remain silent. Relying on the fourth of these aspects of the right to expressive autonomy, it could be argued that allowing the use of a work by someone other than its author “compels that author/​speaker to subsidize, with raw material, the speech of the second user.”24 It must be admitted that the difficulties with each of these arguments for copyright protection are manifold. First, there is no consensus as to the extent to which the protection of expressive autonomy really does require protection from compelled speech and from the compelled subsidy of the user’s speech. Second, in situations in which the second use of the speech is not “transformative” (that is, it does not alter the meaning but simply entails the reproduction of the speech), it is unclear whether the second use involves either compelled expression, or the compelled subsidy of expression. Moreover, third, where the use made of 20  R Dreyfuss, “The Creative Employee and the Copyright Act of 1976” (1987) 64 University of Chicago L Rev 590, 593. 21  Dreyfuss (n 20) 606ff. 22  On the merits of arguments from expressive autonomy as justification for certain IP claims see Spence (n 12) 55–​58 and KL Trieger Bar-​Am and M Spence, “The Mark as Expression/​The Mark as Property” (2005) Current Legal Problems 491. 23  N Netanel, “Copyright Alienability Restrictions and the Enhancement of Author Autonomy: A Normative Evaluation” (1992) 24 Rutgers LJ 347, 403. 24  RP Bezanson, “Speaking Through Others’ Voices: Authorship, Originality, and Free Speech” (2003) 38 Wake Forest L Rev 983, 1104.

838   Michael Spence the work is indeed “transformative,” the user will arguably often have a competing expressive autonomy claim of her own for the use of the work, at least in situations in which the use of the work is necessary to achieve her own expressive purpose (such as where she is commenting on the work itself or its author, or where it has become a cipher for a range of cultural meanings for which no adequate substitute can be found). These arguments from expressive autonomy may therefore seem a weak basis for justifying a copyright claim. However, these arguments are stronger than they would normally be in the specific context of works created by an academic. In this context, the protection not only of her expressive autonomy is at stake, but also of her academic freedom. These are distinct but related concepts. They have each been justified on very similar grounds, both consequentialist and non-​consequentialist.25 They arguably together “form important parts of a system of ideas and institutions that creates a culture of individual intellectual responsibility and that protects it from disintegrating into a culture of intellectual conformity.”26 And it is together that they form the strongest justification for an academic’s claim to copyright in works produced as a part of her employment. It is important to acknowledge that if the extent to which expressive autonomy ought to be protected is contested, the extent to which academic freedom ought to be protected is even more so. It has been said that there is “no clear and widely accepted definition or justification of academic freedom and no settled account of the way in which claims of violation may be assessed.”27 Perhaps the most widely cited statement of academic freedom, the 1940 Statement of Principles on Academic Freedom and Tenure,28 offers no straightforward definition of the term, but something of a mish-​mash of associated norms and ideas. Barendt has pointed out that most statements of academic freedom involve ideas about the freedom of individual researchers; ideas about institutional autonomy; and ideas about academic participation in institutional governance. But he goes on to admit that “[i]‌t is not particularly helpful to attempt a single definition of academic freedom” and that “[d]oubts are expressed not only in respect of borderline claims [of academic freedom], as with freedom of speech of personal privacy, but with regard to its central meaning.”29 Nevertheless, most descriptions of academic freedom have at their core a commitment to the “personal liberty [of the individual academic] to pursue the investigation, research, teaching, and publication of any subject matter of professional interest without vocational jeopardy or threat of other sanctions, save only upon adequate demonstration of an inexcusable breach of professional ethics in the exercise of that freedom.”30 What links the concepts of expressive autonomy and of academic freedom has been identified by Dworkin as a commitment to the ideal of “ethical individualism” which 25  For useful surveys of frequently offered justifications see L Andreescu, “Foundations of Academic Freedom: Making Some Sense of Aging Arguments” (2009) 28 Studies in Philosophy and Education 499; and E Barendt, Academic Freedom and the Law: A Comparative Study (Hart 2010) ch 3. 26  R Dworkin, “A New Interpretation of Academic Freedom” in L Menand (ed), The Future of Academic Freedom (University of Chicago Press) 1996. 27  EL Pincoffs, “Introduction” in EL Pincoffs (ed), The Concept of Academic Freedom (University of Texas Press 1975) i, vii. 28 . 29  Barendt (n 25) 16. 30  W van Alstyne, “The Specific Theory of Academic Freedom and the General Issue of Civil Liberty” in Pincoffs (n 27) 59, 71.

Workers in the “Groves of Academe”     839 “insists . . . that we each have a responsibility for making as much of a success of our lives as we can, and that this responsibility is personal, in the sense that we must each make up our own mind as a matter of felt personal conviction, about what a successful life would be.”31 He claims that this ideal is central to “institutions and attitudes of political liberalism”32 and that it entails a “responsibility not to profess what one believes to be false” and a “duty to speak out for what one believes to be true.”33 He argues that this responsibility and this duty are particularly incumbent upon academics because “[i]‌n no other occupation is it so plainly and evidently the responsibility of professionals to find and tell and teach the truth as they see it.”34 The function of the university, as an institution, is to “creat[e] a theater in which personal conviction about truth and value is all that matters, and . . . [to train] scholars and students alike in the skills and attitudes essential to a culture of independence.”35 In short, it is at least arguable that for everyone expression is sufficiently core to their capacity to develop and form “a conviction of the successful life,” and that the right to expressive autonomy ought to give them some degree of control over their “fixed expression” in the form of a right to prevent others from using it without their consent (a right such as a copyright); but it is even more plausible that this is particularly true of academics because of their particular vocation in a liberal society. An academic must have the right to control the place, time, and manner in which her expression—​whatever form it might take—​is disseminated. That is ancillary upon her general responsibility for the ethical individualism that the university exists to promote in a liberal society. In some circumstances, particularly involving transformative use, her right may need to give way to the competing rights of a user. But the presumption should be that control over place, time, and manner of dissemination is hers. Copyright is one of the legal vehicles that currently give expression to that control, and her claim to copyright in her work can be justified on that basis. I believe that this is the intuition behind the claim, not infrequently made, but rarely justified, that “[i]‌t would be incompatible with individual academic freedom to allow the university to claim copyright, for that would give it the right to determine when and where academic work is published, or indeed to prevent publication altogether.”36 Interestingly, it is at least arguable that this justification for the claim to copyright protection by an individual academic would lead to a right narrower than the existing right in at least one sense. The community-​centered justification for that right requires that an academic can grant a license, even a relatively broad and exclusive license, for the publication of her work, and the creator-​centered justification for which I have argued based in the right to expressive autonomy and academic freedom is not incompatible with that power. But it would be incompatible with a power on the part of the academic to assign her copyright. An assignment would arguably be an abdication of her responsibility to exercise control over the use and development of her expression, by allowing use by third parties of whom she may have no knowledge, or who may use the work in ways of which she has not, and would not, approve. In this sense, there is an argument for a copyright unable to be assigned in academic work, a copyright in this sense much more like moral rights such as the right of paternity or integrity, or the right against false attribution. These rights are often justified on a similar basis and cannot be assigned.37 31 

Dworkin (n 26) 187. Dworkin (n 26) 190. 37 CDPA, s 94. 34 

32 

Dworkin (n 26) 187. Dworkin (n 26).

35 

36 

33 

Dworkin (n 26) 188. Barendt (n 25) 216–​217.

840   Michael Spence

4.  Inventions and Computer Programs Produced as a Part of University Research and Teaching We turn now from works produced as part of university research and teaching to inventions and computer programs. These two types of subject matter are, of course, potentially protected by different legal regimes, the former by the patent system, and the latter by copyright. But I deal with them separately because in each case it might be said that the value of the subject matter protected arises not because it is expressive, but because it is functional. Whatever approach may have been taken to the legal protection of this functional subject matter, this difference clearly impacts the justifications for the protection: A discussion of the reasons for protecting an invention is more likely to resemble a discussion of the reasons for protecting a computer program, than the latter is to resemble a discussion of the reasons for protecting a lecture or a journal article. This section focuses on inventions, rather than computer programs, on the assumption that similar considerations pertain.38

4.1 The Community-​Centered Arguments As is the case for works, it is at least arguable that no incentive is required for an academic to create inventions as a part of her research and teaching. However, it is also arguable that an incentive is required for academics to direct their research to outcomes that are likely to produce inventions, as opposed to other types of research outcomes, and to undertake the process of registration and protection. Whether or not the patent system ought to be used in this way is a contentious matter of public policy and depends in part on the function of a university in the ecology of innovation. It is at least arguable that in the context of the increasingly high costs of research, academics have a responsibility to ensure not only the quality, but also the utility, of their work, and that incentives to invent are therefore desirable. However, providing academics with incentives to produce inventions rather than other types of research outcome could have the negative effect which has been alluded to earlier; that of distorting a research or teaching agenda towards the potentially lucrative and away from the academically most interesting or important. Governments are increasingly attempting to demonstrate the impact of university research and have schemes to direct research funding to work of a more applied nature. That is perfectly appropriate as a matter of public policy. But university research is most fruitful when academics are free to pursue truth wherever it may lead; and much of the distinctive value of university research lies at the basic, as opposed to the highly applied, end of the innovation spectrum. Moreover, to offer personal pecuniary incentives of 38  An interesting intermediate case, which I shall not treat in this paper, concerns copyright in teaching materials. These may be thought to fall somewhere between the purely expressive and the purely functional. Given, however, that they inevitably entail the expression of a particular conception of a discipline or topic, they are arguably treated most appropriately as expressive works and for that reason they are not included in this section.

Workers in the “Groves of Academe”     841 the type that the IP regimes afford only to that group of staff whose work naturally, or by design, might lead to some sort of functional output, is arguably incompatible with the nature of a university, as a place committed to the pursuit of truth in all its forms. In the case of expressive works, I argued that IP protection was nevertheless necessary for the dissemination of academic work, and to support the academic publishing industry. I also argued that the academic herself was the person best placed to determine the highest value use of the academic work, particularly if that value is conceived of as including the maximum quality and integrity of the work. Interestingly, there have been those who have argued that this is not the case in relation to inventions, and that it is universities, rather than individual academics, with whom the right to apply for a patent should rest. In his widely cited Herchel Smith Lecture, Cornish argues that this is because “the patent system, by requiring a timely application for grant, involves a strategic financial outlay of a not inconsiderable order, particularly if foreign coverage is to be obtained as well.”39 Cornish goes on to suggest that if the university fails to obtain protection, the right to apply for a patent should revert to the individual academic.40 This is essentially an argument that the normal assumption, that an inventor is best placed to identify the highest value use of her invention, is not appropriate in the context of university academics, who ought to be getting on with their research while university technology transfer offices undertake the significant transaction costs associated, not only with registration, but also with identifying and negotiating with those who have the industrial skill and capital to deliver the invention to market. This argument that the university is in most cases likely to be better placed to exploit an invention may well be compelling, particularly if, as employer of the inventor, it can secure her advice as to its technical potential. What it overlooks, however, is the question as to whether, in much the same way as Dreyfuss argued in relation to copyright in works, there is an additional interest in ensuring the quality and integrity of an invention, and whether this is better secured by vesting the right to apply in the academic herself. Whether the public dissemination of high-​quality inventions is best served by placing control of registration in the hands of the party most able to register for patent protection and promote the invention (presumptively the university), or the party who knows the technology best and has most interest in its quality and integrity (presumptively the inventor), is a finely balanced, and ultimately empirical, question. One respect in which inventions differ from works, however, is that the knowledge that an author has of her work, as an act of expression, must be more unique, and less able to be substituted, than the knowledge that an inventor can have of her invention once it has been disclosed to another person skilled in the relevant field. An acknowledgment that this is the case seems to be implied in the distinction between the copyright test of “originality” and the patent test of “novelty”: an author stands in a particularly unique relationship to her works of expression, different from the relationship of an inventor to her invention. Moreover, an invention is unable to be registered until it has reached a point at which it can satisfy an examiner that it is sufficiently mature as a concept to satisfy the tests for registration. The university will also have an interest in the quality and integrity of an invention, not least because it will maximize its financial and reputational potential, and it is not implausible that expertise other than that of the original inventor can assist it in that task. 39 

Cornish (n 1) 16. See also Barendt (n 25) 220.

40 

Cornish (n 1) 17.

842   Michael Spence On the basis of community-​centered arguments alone an individual academic arguably has only a weak claim to the inventions for which she is responsible, and certainly not a claim as strong as she has to rights over her works of expression.

4.2 The Creator-​Centered Arguments We turn, then, to consider whether the creator-​centered arguments that we considered earlier, and in particular the argument from academic freedom, might be used to bolster the claim of an academic inventor to have control of her inventions. It has been argued that an academic’s claim to control over her inventions, just as much as her works of expression, can be grounded in her claim to academic freedom. Pila has written: “To treat universities in the manner of regular employers, so as to support their ownership of employee inventions and copyright, would undermine principles of academic freedom, and the ethic which constitutes universities as such.”41 This claim reflects the conception of academic freedom, and the function of universities, upon which I relied in advancing the claim of an academic to control over her works of expression. But the question arises whether respect for the autonomy of the academic inventor, or for her academic freedom, requires that she be given control over the use that others make of her invention. In addressing this question, I shall take as paradigmatic the situation of the lone academic inventor, and one whose work is genuinely a breakthrough, although that situation is, of course, increasingly rare.42 As with any inventor, it may be open to an academic in such a situation to rely upon one of the general personhood or autonomy arguments for IP.43 In each of these families of argument the act of creation is said to give rise to so strong a bond between the invention and its inventor that to recognize that bond in giving her exclusive use of the invention is necessary either to protect her very personhood, or to afford her the dominion necessary to exercise her will as an autonomous subject. The difficulty with each type of argument is identifying precisely what it is about the act of invention that creates such a bond, and why excluding others from the use of the invention should be necessary to protect it. At this point the concept of academic freedom might again be thought to bolster a more general autonomy claim. If Dworkin is right that the responsibility of an academic is to develop her own conception of the truth, then she surely must be able to use at least her own inventions in the development of her own ideas. The logic is that the bond between the inventor and the invention is a bond created by a responsibility to develop the ideas that emerge in a program of academic work as an exercise in ethical individualism. If someone else were to have the right first to apply for a patent, then the academic may be prevented from following her preferred line of research, even where that line of research arises out of work for which she is individually responsible. The difficulty with this argument is, of course, 41 

J Pila, “Who Owns the Intellectual Property Rights in Academic Work?” [2010] EIPR 609, 612. See Y Hyejin, LMA Bettencourt, D Strumsky, and J Lobo, “Invention as a Combinatorial Process: Evidence from U.S. Patents” Institute for New Economic Thinking at the Oxford Martin School, Working Paper available at . 43  See Spence (n 12) 52–​58. 42 

Workers in the “Groves of Academe”     843 that it would justify a right to continued use on the part of the inventor, but not necessarily a right to prevent others from using the invention. In order to be able to maintain such a claim on the academic freedom basis that we found compelling in relation to expressive works (a claim to control the use of an invention by others) the academic would need to establish that the right to control the time, manner, and place of the use of a particular invention is important to the development of her conception of a successful life and to the execution of her duty to communicate that conception to others. She would have to be able to say that it is essential to her membership of a community “constituted in part by its ethical commitment to the pursuit of truth,”44 or a corollary of her “undiluted responsibility to the truth.”45 I would argue that, while giving her control over expression about invention is an important part of protecting her responsibility to the truth (and the disclosure rules of patent raise some troubling issues in that regard), the right to prevent others from merely using the invention is not. Imagine even the situation in which an academic may feel most aggrieved at the use of her invention; for example, the use in chemical warfare of a compound developed as cure for a chronic disease. That use by another does not hinder the ability of the researcher to pursue her own conception of the truth, nor to argue for it vigorously. Indeed, the facts of the infamous Madey litigation are instructive. When a researcher sought to prevent laboratories in his former university from exploiting his patented technology without payment, it was his actions, rather than those of the university, which were often seen as threatening academic freedom in the context of widespread support for the notion of an experimental use exemption. Thus, the argument for academic ownership of rights to inventions on the basis of the creator-​centered justifications, even bolstered by a commitment to academic freedom, seems weaker than the argument for academic ownership of rights to expressive works. While the protection of academic freedom supports, and even requires, the latter, it does not obviously require the former. When this is combined with the relative strength of the consequentialist arguments for academic ownership of rights in expression, as opposed to the far more ambivalent evidence of the need for academic ownership of rights in invention, the claim of the individual academic to rights in invention seems rather weak.

5. Conclusion Sometimes beginning with a different question to that which is usually asked reveals interesting insights into a particular problem. Almost all the academic literature on the ownership of works and inventions created during university employment takes it as axiomatic that, if the relevant material should be protected at all, it is the author or inventor who has the strongest prima facie claim to its control. The university claim is always seen as derivative of the primary claim of the individual academic. But we have seen that the claim of the individual academic is rather different to that of the ordinary author or inventor. That this is the case must surely be important in balancing her claim with that of both the university 44 

Pila (n 41) 612.   

45 

Dworkin (n 26) 189.

844   Michael Spence community of which she is a part, and the community that it serves more generally. Of course, the copyright and patent systems already take account of some of the peculiarities of university work. For example, in most jurisdictions there exist exemptions for research and study, and special licensing arrangements for educational institutions. But remembering the particular basis of an academic’s claim to control her work may well lead to even more distinctive rules both as to the ownership and the scope of protection of work created as a part of university research and teaching.

Chapter 30

In tellectual Prope rt y Meets the I nt e rnet Pamela Samuelson * 1. Introduction The Internet was designed without consideration of how it would affect intellectual property (IP) rights.1 It became a network of networks through adoption of a common protocol that would allow people located at different nodes of inter-​networked environments to communicate and exchange information,2 architected so there would be no central authority “in charge.” Owing to the Internet’s rigorous adherence to the end-​to-​end principle at the core of its design, the network has been unaware of and wholly indifferent to the kinds of information that flows through it, including whether the information sent and received is lawful or unlawful, infringing (or not) on someone’s IP rights.3 In the early days of the Internet, its users were largely scientists, researchers, and government officials who found it useful for exchanging information. In that era, shared norms existed about uses of the Internet that were and were not acceptable. Those who violated those norms would be rebuked, shamed, or shunned. When Tim Berners-​Lee developed the core technology constituting the World Wide Web (now just known as “the web”), he was a scientist who wanted to develop a protocol through which scientists could exchange data and other information more readily and link to documents that were relevant to a project. In the early days of the Internet and the web, a significant amount of user-​generated content was created and disseminated, but it was not part of the commercial ecosystem. Copyright was not what those users were thinking or worried about.4 By the mid-​1990s, however, the *  Pamela Samuelson hereby has asserted her moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  I thank Kathryn Hashimoto for excellent research and editing in support of this chapter, and Rochelle C. Dreyfuss, Jessica Litman, and Justine Pila for comments on an earlier draft. 2  See generally Barbara van Schewick, Internet Architecture and Innovation (MIT Press 2010). 3 ibid ch 2. 4  What is now called the Internet began as government-​funded computer networking efforts centered on academic research. Until the early 1990s, the National Science Foundation’s acceptable use policy prohibited commercial traffic on NSFNET, the Internet’s forerunner. See, eg, Nifty 50: The Internet,

846   Pamela Samuelson Internet became a platform for commercial as well as non-​commercial activities, and IP issues became central to the public policy debates on a global basis. The Internet has had transformative impacts on all forms of IP. This chapter mainly focuses on copyright developments because the transformative IP impacts are most noticeable in that field, but it first briefly reviews impacts on other forms of IP. Although it concentrates on developments in United States (US) law, this chapter also considers notable developments in European and international laws. For the most part, the IP rules under US and other national laws, as applied to the Internet, produce the same or substantially similar results.

2.  The Internet and Intellectual Property Rights Let us start with trademarks. Through legislation, a new tort of “cybersquatting” was created to outlaw bad faith registration of trademarks as domain names by registrants who intended to profit from reselling the names to owners of the marks.5 To address trademark/​domain name disputes at an international level, a new mandatory private law tribunal and dispute resolution process were established.6 This novel governance mechanism has enabled world-​ wide harmonization of trademark rules in relation to domain names because the Internet Corporation for Assigned Names and Numbers (ICANN), the entity that authorizes domain name registrars to operate, imposes on each an obligation to include in their contracts with customers a provision that requires disputes to be adjudicated by this tribunal.7 Another Internet-​related development that affected the evolution of trademark law was the use of trademarked terms (eg, Cadillac) as keywords so that search engines would link to websites not controlled by the trademark’s owner (eg, a Cadillac repair garage). Through common law adjudication, trademark law initially recognized initial interest confusion as a basis for liability in some Internet cases involving keywords, although more recent decisions have cast doubt on the doctrine.8 Trademark owners have also sought to hold online intermediaries, such as auction sites, responsible for infringing conduct of their users. Courts have generally rejected direct trademark infringement claims brought against search engines

National Science Foundation, available at . 5  Anticybersquatting Consumer Protection Act, Title III of the Intellectual Property and Communications Omnibus Reform Act of 1999, Pub L No 106–​113, § 3002, 113 Stat 1501 app I, at 1501A-​ 545 to -​548 (1999) (codified as amended at 15 USC § 1125(d) (2012)). 6  See Uniform Domain Name Dispute Resolution Policy (24 October 1999), . See, eg, Zohar Efroni, “The Anticybersquatting Consumer Protection Act and the Uniform Dispute Resolution Policy: New Opportunities for International Forum Shopping?” (2003) 26 Columbia Journal of Law and the Arts 335. 7  See, eg, Jonathan Weinberg, “ICANN and the Problem of Legitimacy” (2000) 50 Duke Law Journal 187, 216–​217. 8  See, eg, 1-​800 Contacts, Inc v Lens.com, Inc, 722 F3d 1229 (10th Cir 2013); Network Automation, Inc v Advanced Sys Concepts, Inc, 638 F3d 1137 (9th Cir 2011).

Intellectual Property Meets the Internet    847 based on uses of trademarks for keyword advertising purposes.9 However, courts in the US and European Union (EU) have been more receptive to secondary trademark infringement claims brought against online auction sites on which counterfeit goods have been sold.10 The vulnerability of trade secrets to Internet misappropriations contributed to a Congressional decision in 1996 to enact a law establishing criminal penalties for theft of trade secrets.11 This vulnerability more recently fueled a successful drive for Congress to adopt a trade secrecy law that provides civil remedies in federal cases to supplement state law protections.12 The EU is similarly moving forward with a directive to harmonize trade secrecy protections among its Member States.13 In the online environment, enforcement of trade secret rights has become much more difficult because once a secret has been posted on the Internet, it is likely to lose its status as a secret.14 Patent law has arguably been less affected by the Internet than other IP laws. However, it was an Internet-​related patent case involving online auction claims that produced a Supreme Court ruling that courts have discretion to withhold injunctive relief in patent infringement cases.15 The patentability of Internet business methods and other online activities has proven highly controversial.16 Recent Supreme Court decisions call many of the Internet-​related patents issued in the 1990s and early 2000s into question, as the Court revived significant limitations on the kinds of innovations that can be patented.17 Another 9 

See, eg, Joined Cases C-​236/​08‒C-​238/​08, Google France SARL v Louis Vuitton Malletier SA, 2010 ECR I-​2417. In the US, primary infringement claims against search engines have largely failed due to lack of a showing of actionable confusion. See, eg, Graeme Dinwoodie, “Secondary Liability for Online Trademark Infringement: The International Landscape” (2014) 37 Columbia Journal of Law and the Arts 463, 475 n 70. 10  See, eg, Tiffany (NJ) Inc v eBay Inc, 600 F3d 93 (2d Cir 2010); Case C-​324/​09, L’Oreal SA v eBay Int’l AG, 2011 ECR I-​6011. For a discussion of secondary liability in the copyright law context, see Section 4. 11  Economic Espionage Act of 1996, Pub L No 104–​294, Title I, 110 Stat 3488 (codified at 18 USC §§ 1831–​1839) (2012)). See, eg, Chris Carr, Jack Morton, and Jerry Furniss, “The Economic Espionage Act: Bear Trap or Mousetrap?” (2000) 8 Texas Intellectual Property Law Journal 159, 164–​165 (noting that Internet misappropriation was of concern). 12  Defend Trade Secrets Act of 2016, Pub L No 114–​153, 130 Stat 376 (to be codified as amended at 18 USC § 1836(b)). 13  A summary of the proposed directive and an update on the state of play can be found at . 14  See, eg, DVD Copy Control Ass’n, Inc v Bunner, 116 Cal App 4th 241, 10 Cal Rptr 3d 185 (Cal Ct App 2004) (trade secrets no longer protectable after source code containing the secrets were posted on the Internet). 15  eBay, Inc v MercExchange, LLC, 547 US 388 (2006) (online auction patents infringed). 16  See, eg, John R Allison and Emerson H Tiller, “Internet Business Method Patents” in Wesley M Cohen and Stephen A Merrill (eds), National Research Council, Patents in the Knowledge-​Based Economy (National Academies Press 2003), 259–​261. Controversies over Internet-​related patents contributed to some patent law reform measures, such as the Leahy-​Smith America Invents Act, Pub L No 112–​129, 126 Stat 294 (2011) (codified in scattered sections of 35 USC), which are a response in part to the wave of these business method patents as well as litigation activity by non-​practicing entities, commonly referred to as “patent trolls,” who sometimes hold Internet-​related patents. 17  Alice Corp v CLS Bank Int’l, 134 S Ct 2347 (2014) (computerized method and system for managing settlement risks held unpatentable); Bilski v Kappos, 561 US 593 (2010) (method of hedging risk of price fluctuations of commodities held too abstract to be patentable). See also CyberSource Corp v Retail Decisions, Inc, 654 F3d 1366 (Fed Cir 2011) (striking down Internet-​related method patent, in keeping with Bilski).

848   Pamela Samuelson important Internet-​related patent issue addressed in the case law has been whether Internet transmissions of digital data into the US that might constitute or contribute to patent infringement can be blocked by the International Trade Commission.18 Far fewer Internet-​ related patents have issued in the EU, as compared with the US.19 Copyright law has been more transformed than other IP laws by the Internet. The rest of this chapter discusses four types of impacts.20 First, copyright now applies to virtually everyone and to virtually everything people do on the Internet. Second, because it is difficult to control individual users’ conduct on the Internet, copyright enforcement efforts have largely focused on Internet service providers (ISPs), such as search engines and hosting services.21 Third, application of copyright law to Internet-​based activities has given rise to many novel questions and some adaptations of existing doctrines. Fourth, copyright owners have come to rely on technical protection measures (TPMs) to control access to their works and to impede user infringements on the Internet. Furthermore, anti-​circumvention laws prohibit not only bypassing TPMs, but also making and disseminating technologies designed to bypass the TPMs. These rules have extended copyright protections beyond traditional bounds.

3.  Copyright in the Digital Age In the analog world, ordinary people rarely had occasion to think about copyright as they went about their daily lives. They typically played recorded music they’d purchased, borrowed books from the library, recited poetry in classrooms, sang hymns in church, went to dramatic plays or to rock concerts, and took photographs of billboards in Times Square, blissfully ignorant of copyright. These kinds of common activities generally did not implicate copyrights for various reasons. Some activities, such as playing music in the privacy of one’s home or car, were outside the reach of copyright’s exclusive rights.22 Other activities, such as borrowing books from libraries, singing hymns in church, and reciting poems in classrooms, were sheltered through copyright exceptions or limitations.23 Often, copyright was invisible to consumers because someone else (eg, a radio station, a band, or a concert hall) paid license

18  The Federal Circuit averted one very substantial doctrinal change to patent law in ClearCorrect Operating, LLC v International Trade Commission, No 2014-​1527 (Fed Cir 10 November 2015), rejecting ITC’s claim of authority to block Internet transmission of digital data that implicated patents. 19  Lawrence M Rausch, International Patenting of Internet Business Methods, Info Brief, NSF 03-​314 (2003), . 20  See generally National Research Council, The Digital Dilemma: Intellectual Property in the Information Age (National Academies Press 1999). 21  Secondary liability for Internet intermediaries has also manifested itself in the trademark context. See (n 10) and accompanying text. 22  Only public performances and displays of copyrighted works implicate authorial exclusive rights. 17 USC §§ 106(4), 106(5) (2012). 23  17 USC §§ 109(a), 110(1), 110(3) (2012). Taking personal photographs of billboards in Times Square would likely be covered by the fair use doctrine. 17 USC § 107 (2012).

Intellectual Property Meets the Internet    849 fees to copyright owners.24 In this world, only copyright industry professionals needed to know about copyright law, but not the rest of us. The “bad guys” in this era were mainly counterfeiters who could be tracked and shut down relatively easily. In the digital age, copyright has, for the first time, become a ubiquitous regulation affecting the lives of ordinary people.25 Every time someone writes an email, comments on a news development on a listserv, uploads a photograph to Facebook, or posts a video to YouTube, she is creating or disseminating a copyrighted work.26 Ordinary people also now routinely make copies of copyrighted works in digital form well beyond the copying they typically did in the pre-​digital age. This includes forwarding news stories to friends, tweeting a link to a cartoon, ripping music from a CD for an iPhone, and downloading photos from Flickr. When works are in digital form, ordinary acts such as reading, viewing, or playing a digital copy inevitably involve making multiple copies of copyrighted content.27 The Copyright Act of 1976 (1976 Act) provides authors with an exclusive right “to reproduce the copyrighted work in copies.”28 This right is arguably implicated every time one loads a digital copy onto a computer to read or uploads a digital copy to a site on the Internet to share it with others. When one Internet user sends a document or other digital file to another Internet user, multiple copies of the work are made in the computers through which the digital transmissions pass. The Internet itself can accurately be conceived of as a giant copying machine. The 1976 Act defines the term “copies” as “material objects . . . in which a work is fixed” and defines “fixed” as occurring when the “embodiment in a copy . . . is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”29 Read together, these provisions seem to indicate that some copies are too temporary to infringe the US reproduction right. Yet, the ubiquity of copies made when using computers and the Internet has led some to assert that every reproduction of copyrighted works in digital form, however temporary it might be in the random-​access memory (RAM) of a computer, implicates copyright’s reproduction right.30 Because copyright law is often said to be a strict liability regime, this suggested to some that every copy made of in-​copyright works on the Internet constituted a prima facie infringement.31 Support for the RAM copy infringement theory could be found in one notable appellate court ruling, MAI Systems Corp. v Peak Computer, Inc.32 MAI sued Peak for copyright infringement because the latter turned on its customers’ computers, thereby booting up and 24

  See, eg, Stanley M Besen and Leo J Raskind, “An Introduction to the Law and Economics of Intellectual Property” (1991) 5 Journal of Economic Perspectives 1, 15 (describing blanket licensing arrangements through rights organizations such as the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Incorporated (BMI) for use of the organization members’ copyrighted works). 25   See, eg, John Tehranian, Infringement Nation (OUP 2011), xv–​xvi. 26   Copyright attaches to original works of authorship from the moment of first fixation in a tangible form. 17 USC § 102(a) (2012). 27   See, eg, Jessica Litman, “The Exclusive Right to Read” (1994) 13 Cardozo Arts and Entertainment Law Journal 29, 40 [hereafter Litman, “Right to Read”]. 28  17 USC § 106(1) (2012). 29  17 USC § 101 (2012). 30  See notes 32–​36 and accompanying text. 31  See, eg, Jessica Litman, “Revising Copyright Law for the Information Age” (1996) 75 Oregon Law Review 19, 21–​22 [hereafter Litman, “Copyright for the Information Age”]. 32  991 F2d 511 (9th Cir 1993).

850   Pamela Samuelson making RAM copies of MAI software. Peak did so to provide a competitive alternative to MAI’s services in maintaining and repairing those customers’ systems. Peak’s main defense was that the RAM copies were not fixed enough to infringe MAI copyrights. However, the court found that the RAM copies made by Peak existed for more than a transitory duration and hence were fixed enough to be “copies” within the reach of the reproduction right.33 Although Congress later amended US copyright law so that copies of software made in the course of maintaining and repairing a computer are not infringing,34 the MAI interpretation of the reproduction right has not been overruled, and remains controversial.35 The Clinton Administration’s Information Infrastructure Task Force (IITF) published a white paper on “Intellectual Property and the National Information Infrastructure” (NII) in 1995 that endorsed the all-​RAM-​copies-​infringe interpretation of copyright, relying in part on MAI v Peak.36 In an effort to universalize this norm, the Clinton Administration also proposed that the World Intellectual Property Organization (WIPO) convene a diplomatic conference to consider a draft treaty containing a provision that temporary as well as permanent copies of copyrighted works were within the exclusive reproduction right of copyright owners.37 The WIPO diplomatic conference held in 1996 concluded with the adoption of the WIPO Copyright Treaty (WCT).38 That treaty harmonized copyright norms to affirm that the exclusive rights of reproduction, distribution of copies, and communication of works to the public would apply in the digital environment.39 However, the temporary copy issue proved 33 

ibid 518–​519. Computer Maintenance Competition Assurance Act of 1998, Title III of the Digital Millennium Copyright Act, Pub L No 105–​304, 112 Stat 2860, 2886 (codified at 17 USC § 117(c) (2012)). 35  See, eg, Aaron Perzanowski, “Fixing RAM Copies” (2010) 104 Northwestern University Law Review 1067, 1075–​1080, (n 47). 36  Information Infrastructure Task Force, Intellectual Property and the National Information Infrastructure: The Report of the Working Group on Intellectual Property Rights (Office of Legislative and International Affairs 1995), 64–​66 [hereafter NII White Paper]. The Clinton Administration formed the IITF in 1993 to recommend policies and programs addressing issues involving IP law and advancing technology. ibid at 1. The resulting reports issued by the IITF’s Working Group drew considerable criticism from scholars and commentators. See, eg, Litman, “Right to Read” (n 27); Litman, “Copyright for the Information Age” (n 31); Pamela Samuelson, “The Copyright Grab” (1996) 4.01 WIRED 100, available at . Along similar lines, the European Commission in the 1990s issued a series of studies and reports on information society issues, including copyright. See, eg, “Commission White Paper on Growth, Competitiveness, Employment: The Challenges and Ways Forward into the 21st Century” (“Delors White Paper”), Official Journal of the European Union, Supp No 6/​93 (Publications Office of the European Union 1993); Bangemann Group, “Europe and the Global Information Society: Recommendations of the High-​Level Group on the Information Society to the Corfu European Council” (“Bangemann Report”), Official Journal of the European Union Supp No 2/​94 (Publications Office of the European Union 1994). 37  See, eg, Pamela Samuelson, “The U.S. Digital Agenda at WIPO” (1996) 37 Virginia Journal of International Law 369, 372–​374. 38  World Intellectual Property Organization Copyright Treaty, 20 December 1996, S Treaty Doc No 105–​117, 36 ILM 65 (1997) [hereafter WCT]. The treaty (along with a companion treaty on performances and phonograms) was implemented in the United States in 1998. WIPO Copyright and Performances and Phonograms Treaties Implementation Act of 1998, Title I of the Digital Millennium Copyright Act, Pub L No 105–​304, 112 Stat 2860 (1998). 39  WCT (n 38), arts 1, 6, and 8. 34 

Intellectual Property Meets the Internet    851 to be so controversial among the delegates that the final treaty omitted a provision requiring Member States to adopt a rule that temporary copies were within the reach of the reproduction right.40 In the aftermath of the WCT, the EU decided to require its Member States to grant authors exclusive rights to control temporary as well as permanent copies of copyrighted works.41 The US has, however, not adopted a general right to control the making of temporary copies, although MAI v Peak suggests that at least some temporary copies do come within the reproduction right. There is, however, some lack of clarity in US law about just how transitory copies must be to avoid triggering the reproduction right. One appellate court ruled that 1.2 seconds was too fleeting to be within the reproduction right.42 The multiple copies made in the course of reading, viewing, and listening to copyrighted works online may be longer-​lived than this, but in the years since the NII White Paper, such acts have not been the target of copyright enforcement activities.43 Much of what users do online with copyrighted material, such as backing up their music collection in the cloud, space-​or format-​shifting music to listen to it on a mobile device, tweeting images they like, downloading stories found on the open web, and sharing news articles on listservs, would probably, if tested, be deemed fair uses.44 These types of activities typically involve private noncommercial copies of copyrighted works that do not pose a meaningful likelihood of harm to the market for the copyrighted works. Under the Supreme Court’s decision in Sony Corp. of America v Universal City Studios, Inc. these types of activities should be presumed to be fair use, such as were the time-​shift copies of broadcast television programs to watch at a later time in the Sony case.45 Enforcement proceedings against individual Internet users have focused on those who have engaged in peer-​to-​peer file-​sharing of copyrighted sound recordings and movies. The most publicized of these lawsuits were those brought against Jammie Thomas-​Rasset and Joel Tenenbaum, which resulted in jury awards as high as $1.92 million and $675,000 respectively for their file-​sharing activities.46 The entertainment industry has also sent letters 40 

See Samuelson (n 37), 382–​390. Directive 2001/​29/​EC of the European Parliament and of the Council of 22 May 2001 on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society art 2, 2001 OJ (L 167) 10, 16 [hereafter InfoSoc Directive]. The Directive also includes a mandatory exemption for transient or incidental copies that are “an integral and essential part of a technological process.” ibid, art 5 at 16. 42  Cartoon Network LP v CSC Holdings, Inc, 536 F3d 121, 129–​130 (2d Cir 2008). 43  But see Intellectual Reserve, Inc v Utah Lighthouse Ministry, Inc, 75 F Supp 2d 1290, 1294 (D Utah 1999) (finding likelihood of defendant’s contributory liability for posting a link to an infringing site that once users followed, even if only to browse, resulted in a temporary, infringing copy of plaintiff ’s work on their computers). The outcomes of very few lawsuits, however, have turned on the temporary vs permanent copy issue, and none of these have involved individual Internet users. But see MAI Sys Corp v Peak Computer, Inc, 991 F2d 511 (9th Cir 1993) (upholding grant of summary judgment and permanent injunction against computer repair company for servicing client’s computers running plaintiff ’s software). 44  See, eg, Jessica Litman, “Lawful Personal Use” (2007) 85 Texas Law Review 1871. 45  Sony Corp of Am v Universal City Studios, Inc, 464 US 417, 454–​455 (1984). 46  Both cases involved a series of civil jury trials concluding that defendants had engaged in infringing file-​sharing activity but varying in damages awards. Regarding Thomas-​Rasset, the appellate court ultimately agreed to plaintiffs’ requested damages totaling $222,000. Capitol Records, Inc v 41 

852   Pamela Samuelson to approximately 30,000 people they believed to be illegal file-​sharers, informing them that their file-​sharing activity had been detected and offering to settle claims for infringement for payments that were generally in the $3,000 to $5,000 range.47 Courts have sometimes entered default judgments against defendants in file-​sharing cases.48 Yet, given the astoundingly high number of estimated user infringements of copyright online,49 the number of lawsuits against individual users has been remarkably low.

4.  Internet Intermediaries: Bearing the Brunt of Copyright Enforcement Measures Copyright industry firms have recognized the futility of trying to stop illegal peer-​to-​peer file-​sharing by suing individuals who up-​or download infringing copies of copyrighted works in the online environment. This is simply not a cost-​effective measure. Lawsuits are expensive, and the money damages that copyright owners could expect to be awarded (and realistically collect) for small-​scale individual infringements would likely be dwarfed by the costs of litigation. In addition, such lawsuits engender public relations problems for the industry. Since the early 1990s, copyright owners have sought to thwart infringement on the Internet principally by suing Internet intermediaries, such as ISPs, based on the infringing acts of their users. An early example was Playboy Enterprises, Inc. v Frena.50 Frena operated a bulletin board service (BBS) that encouraged paying subscribers to up-​and download images of naked or scantily clad women on the site. Among the images that could be found on Frena’s site were digital copies of photographs from Playboy magazine. The court ruled that Frena was directly liable for copyright infringement of Playboy photographs because his BBS publicly displayed and distributed copies of infringing images.51 The NII White Paper relied on the Playboy decision as supporting its theory that ISPs and telecommunications providers were and should be directly and strictly liable for all

Thomas-​Rasset, 692 F3d 899 (8th Cir 2012). In Tenenbaum, an appellate court upheld the lower court’s award of $675,000. Sony BMG Music Entm’t v Tenenbaum, 719 F3d 67 (1st Cir 2013). France adopted, but ultimately dropped, a controversial “three strikes” law to regulate individuals who engaged in illegal file-​sharing by denying them Internet access if they were found to have engaged in multiple instances of file-​sharing. See, eg, Sirij Datoo, “France Drops Controversial ‘Hadopi Law’ After Spending Millions,” Guardian, 9 July 2013, available at . 47

  See, eg, Jeff Leeds, “Labels Win Suit Against Song Sharer,” New York Times, 5 October 2007, at C1. See, eg, Brian T Yeh, R41415, Statutory Damage Awards in Peer-​to-​Peer File Sharing Cases Involving Copyrighted Sound Recordings: Recent Legal Developments (Congressional Research Service 2010). 49  See, eg, Richard Verrier, “Online Piracy of Entertainment Content Keeps Soaring,” Los Angeles Times, 17 September 2013, available at (citing a 2013 study commissioned by a US media and entertainment company). 50  839 F Supp 1552 (MD Fla 1993). 51  ibid 1556–​1557. 48 

Intellectual Property Meets the Internet    853 infringing acts of their users.52 This, in the White Paper’s view, even extended to the temporary RAM copies made as information was transmitted through these providers’ computers. While the NII White Paper was under active consideration, a lawsuit tested the assertion that temporary copies made in the course of Internet communications infringed copyrights. Religious Technology Center (RTC), owner of copyrights in Church of Scientology texts, sued Netcom On-​Line Communications Services, Inc., an ISP, because Netcom’s computers had made copies of infringing postings of RTC’s works through a customer’s bulletin board service.53 The court regarded RTC’s theory as untenable, in part because it would lead to “unreasonable liability,” because, carried to its logical conclusion, it would “result in liability for every single Usenet server in the worldwide link of computers transmitting [the infringing user’s] message to every other computer.”54 The court recognized that copyright liability should depend on volitional acts of copying, not automatic copying done in the course of transmitting data for users. Netcom had only made the latter kinds of copies. It was, consequently, not a direct infringer of RTC’s copyrights.55 However, the court in Netcom did not accept the ISP’s argument that it had no responsibility to address infringing postings on its servers. Once RTC informed Netcom’s employees about the existence and location of infringing materials, the court decided that Netcom had a duty to investigate the claim of infringement and to take the material down if the claim had merit.56 Failure to act responsibly in this manner could give rise to contributory infringement liability.57 The Netcom decision provided a framework for the creation of four safe harbors for ISPs enacted as part of the Digital Millennium Copyright Act (DMCA).58 A first safe harbor, which affects transitory digital network communications, such as Netcom’s transmission of copies of Usenet postings, is now codified as § 512(a). A second safe harbor, codified as § 512(b), protects system caching by ISPs of frequently accessed content so that ISPs could serve it more quickly. A  third safe harbor established as §  512(c) protects ISPs for their storage of digital materials at the direction of users. Section 512(d) is a fourth DMCA safe harbor for information-​locating tools, such as search engines. The system caching, hosting, and information locating safe harbors are available as long as the ISPs act promptly to investigate claims of infringement when given specific notice by copyright owners and to take down infringing materials.59

52  NII White Paper (n 36), 114–​124 (citing Playboy Enters, Inc v Frena, 839 F Supp 1552 (MD Fla 1993) and Sega Enters Ltd v MAPHIA, 857 F Supp 679 (ND Cal 1994)). In Sega, the court issued a preliminary injunction against a bulletin board service (BBS) operator whose users shared video game programs, finding a likelihood of success in plaintiff ’s case of direct and contributory infringement against the BBS operator. Sega, 857 F Supp at 686. 53  Religious Tech Ctr v Netcom On-​Line Comm’ns Servs, Inc, 907 F Supp 1361 (ND Cal 1995). 54 ibid 1369. 55 56 57 ibid.  ibid 1370.   ibid 1373–​1375. 58  Online Copyright Infringement Liability Limitation Act, Title II of the Digital Millennium Copyright Act, Pub L No 105–​304, 112 Stat 2860, 2877 (1998) (codified as amended at 17 USC § 512 (2012)). 59  The safe harbors are contingent on the ISP complying with registration of a designated agent to receive notices of copyright claims and adopting a policy to terminate repeat infringers. 17 USC § 512(i) (2012). The Copyright Act also allows a user to contest the takedown by submitting a counter-​ notification to the ISP. 17 USC § 512(g) (2012).

854   Pamela Samuelson The Netcom volitional conduct requirement and the DMCA safe harbors have substantially limited the scope of copyright liability to which ISPs, search engines, and other Internet intermediaries are subject. Direct infringement claims against Internet intermediaries for infringing acts of users or other third parties have generally not succeeded, making the Playboy decision an outlier in the case law. Most lawsuits against Internet intermediaries have involved secondary liability claims of contributory infringement, active inducement of infringement, and vicarious infringement. A&M Records, Inc. v Napster, Inc. is an example of a lawsuit against an Internet intermediary for contributory infringement. Napster developed a peer-​to-​peer file-​sharing system through which users who downloaded client-​side software could connect to Napster servers to search for music stored on other Napster users’ computers and then directly download the music to their computers.60 The Ninth Circuit upheld the grant of a preliminary injunction, ruling that the plaintiffs had shown a likelihood of success on their claim that Napster was a contributory infringer because it had notice of specific files of copyrighted sound recordings that were being exchanged through the Napster system. Moreover, Napster had contributed to that infringement by not taking action to stop infringing files of which it was aware.61 Metro-​Goldwyn-​Mayer Studios, Inc. v Grokster, Ltd. is an example of a lawsuit against an Internet intermediary for active inducement of infringement.62 Grokster and its fellow defendant StreamCast developed peer-​to-​peer file-​sharing software that did not rely upon a central server, as Napster had done, but rather on distributed nodes on the Internet over which Grokster and StreamCast had no centralized ability to control infringement. Because these firms lacked notice of specific infringements and could not control the infringing acts of their users, Grokster and StreamCast thought this would insulate them from contributory infringement liability. Although the Ninth Circuit Court of Appeals affirmed a lower court ruling to this effect, the US Supreme Court reversed because in its view, Grokster and StreamCast had actively induced infringing acts of its users. The Court noted that “well over 100 million copies of the software in question are known to have been downloaded, and billions of files are shared” over the networks that Grokster and StreamCast had enabled.63 Although the Court characterized active inducement as a subset of contributory infringement,64 inducement is better understood as a different species of secondary infringement liability because it requires evidence of active steps to induce infringement with the specific intent to induce unlawful conduct. Contributory infringement, by contrast, requires a showing that the defendant materially contributed to infringing acts of others with knowledge that the acts constituting the material contribution would bring about those infringements.65 Perfect 10, Inc. v Cybernet Ventures, Inc. is an example of an Internet intermediary charged with vicarious copyright infringement.66 CVI’s business was providing Adult Verification Services to websites that provided their users with access to images of nude women. Because 60 

61  ibid 1020–​1021. 62  545 US 913 (2005). 239 F3d 1004, 1011 (9th Cir 2001). 64  ibid 930, 936–​937. 65  See, eg, Fonovisa, Inc v Cherry Auction, Inc, 76 F3d 259, 264 (9th Cir 1996) (finding material contribution where swap meet operator provided support, including utilities, parking, and advertising, for a swap meet at which infringing products were sold). 66  213 F Supp 2d 1146 (CD Cal 2002). 63 ibid 923.

Intellectual Property Meets the Internet    855 CVI had developed a monitoring program under which user websites received “detailed instructions regard[ing] issues of layout, appearance, and content” and had forbidden the use of certain types of content, the court found that plaintiffs were likely to succeed on their claim that CVI had the right and ability to supervise and control infringements on those websites and was financially benefiting from infringements of Perfect 10 images on those sites.67 Secondary liability claims have also been lodged against search engines. In Perfect 10, Inc. v Amazon.com, Inc., for instance, the copyright owner of images of nude women sued Google for vicarious and contributory infringement for providing links to infringing images on third-​party websites.68 The Ninth Circuit affirmed a lower court ruling rejecting the vicarious infringement claim because “Perfect 10 has not shown that Google has contracts with third-​party websites that empower Google to stop or limit them from reproducing, displaying, and distributing infringing copies of Perfect 10’s images on the Internet.”69 It consequently lacked “the practical ability to police the third-​party websites’ infringing conduct.”70 The Ninth Circuit, however, remanded the dismissal of a contributory infringement claim because of a factual dispute about “whether [Perfect 10’s] notices gave Amazon.com actual knowledge of specific infringing activities available using its system, and whether Amazon.com could have taken reasonable and feasible steps to refrain from providing access to such images.”71 Perfect 10 also sued Visa and MasterCard for vicarious and contributory infringement because they processed credit card charges that enabled off-​shore infringing websites to make money from customers to whom the sites provided access to infringing images. In Perfect 10, Inc. v Visa International Service Ass’n, the Ninth Circuit ruled, over Judge Alex Kozinski’s vigorous dissent, that Visa and MasterCard were neither vicarious nor contributory infringers. Perfect 10’s vicarious argument was that Visa and MasterCard had the right to supervise and control infringement because these firms had promulgated rules under which member banks were required to cut off services to merchants who engaged in illegal activities and to investigate merchants suspected of illegal activities and terminate services if those suspicions were well-​founded. Perfect 10 asserted that the payment providers also financially benefited from infringements because they charged fees for processing transactions with the sites. The Ninth Circuit held that Visa and MasterCard did not, however, have the requisite right and ability to control infringing activities on third-​party sites.72 The court also ruled that, because Visa and MasterCard lacked any connection to the infringing acts, the material contribution element of contributory infringement was also not satisfied.73 Among the most contentious secondary liability issues has been whether or to what extent Internet hosting services should be liable for uploads of infringing materials if they have general, but not specific, knowledge about the presence of infringing materials on their sites. In Viacom International, Inc. v YouTube, Inc., for instance, the plaintiff argued that YouTube executives were either willfully blind to or had “red flag” knowledge of 63,497 infringing clips of Viacom movies and television programs that users had uploaded to that video hosting service’s site.74 Under § 512(c)(1)(A), an ISP is not liable for infringement if it lacks “actual knowledge that the material . . . is infringing” or “is not aware of facts and 67 

ibid 1173–​1174.

73 

ibid 799–​800.

70 ibid 1174.

68 

69 ibid 1173. 508 F3d 1146 (9th Cir 2007). 72  494 F3d 788, 802–​805 (9th Cir 2007). 74  676 F3d 19, 29, 32, 34 (2d Cir 2012).

71 ibid 1176.

856   Pamela Samuelson circumstances from which infringing activity is apparent.”75 The court noted that “the nature of the removal obligation itself contemplates knowledge or awareness of specific infringing material, because expeditious removal is possible only if the service provider knows with particularity which items to remove.”76 Viacom introduced evidence showing that one of YouTube’s founders had written a report identifying episodes and clips of specific television programs and characterized them as “blatantly illegal.”77 The Second Circuit decided that a reasonable jury could conclude based on such evidence that YouTube had sufficient specific knowledge of infringement to be outside the § 512(c) safe harbor. Although § 512(m) ensures that ISPs have no duty to monitor the contents of their sites for infringing materials posted by users, this does not mean that an ISP can be willfully blind to infringement.78 The Second Circuit sent the case back for further fact-​finding on whether there was sufficient evidence that YouTube was willfully blind to infringing materials based on facts and circumstances other than its statutorily protected unwillingness to monitor for infringements.79 On remand, the trial court found insufficient evidence of knowledge of infringement to support a ruling in Viacom’s favor.80 A recent study has shown that in the years since adoption of the DMCA safe harbors, ISPs have complied with many millions of takedown requests after receiving adequate notice of the presence of infringing materials.81 ISPs have taken three main types of approaches to complying with their DMCA safe harbor and takedown obligations.82 Smaller ISPs that receive relatively few takedown notices have generally followed the takedown practices contemplated by the DMCA. Some larger ISPs have developed systems to process automated takedown notices from content industry agents and systems to deal with those sent by trusted senders.83 Still other ISPs have developed what might be called “DMCA Plus” approaches, such as adopting “filtering systems, direct takedown procedures for trusted rights holders, hash-​matching based ‘stay down’ systems, and contractual agreements with certain rights holders that set forth additional protections and obligations for both parties.”84 However, this study cautioned that a higher than expected percentage of automated takedown notices were of questionable validity, raising serious accuracy and due process concerns.85 In early 2016, the US Copyright Office commenced a study of the impact and effectiveness of the § 512(c) safe harbor and notice-​and-​takedown rules.86 Professor Tim Wu has suggested that the notice-​and-​takedown regime established by the DMCA has become a new kind of formality in copyright law.87 If a copyright owner detects 75 

76 ibid. 77 ibid 30 (quoting 17 USC § 512(c)(1)(A)).  ibid 33. 79   ibid 35 (citing 17 USC § 512(m)).  ibid. 80  Viacom Int’l, Inc v YouTube, Inc, 940 F Supp 2d 110, 117 (SDNY 2013). 81  Jennifer M Urban, Joe Karaganis, and Brianna L Schofield, “Notice and Takedown in Everyday Practice,” University of California, Berkeley, Public Law Research Paper No. 2755628 (2016). 82 ibid 2. 83 84 85 ibid.  ibid 4.  ibid 2. 86  See Library of Congress, US Copyright Office, “Section 512 Study: Notice and Request for Public Comment,” 80 Fed Reg 81862 (31 December 2015) [hereafter “Section 512 Study”]. The Copyright Office website for this study is at . Copyright industry groups have worked with some of the larger ISPs and telecommunications providers to adopt policies to provide notices to users that their infringing activities have been detected and to take steps to address these infringements. See, eg, Annemarie Bridy, “Graduated Response American Style: Six Strikes Measured Against Five Norms” (2012) 23 Fordham Intellectual Property, Media, and Entertainment Law Journal 1 (describing graduated response policies in the EU and a similar Copyright Alert System in the US). 87  Tim Wu, “Tolerated Use” (2008) 31 Columbia Journal of Law and the Arts 617, 623. 78

Intellectual Property Meets the Internet    857 an infringing file and sends a notice to the file-​sharer’s ISP, that notice, which must contain very specific information, including the exact location of the infringing file, is a kind of formality. Copyright owners may sometimes detect a file online that they believe, but are not certain, is an infringement. When they decide not to send a takedown notice to the ISP because of this uncertainty, this is, in effect, a decision to tolerate the use. Some tolerated uses might, if tested, have been deemed fair uses, but even if not, tolerated uses have become a new normal for many copyright owners. There is no international consensus about secondary liability rules for copyright infringement. The WCT treaty is silent on ISP liability issues, although an agreed-​upon statement that accompanied the WCT affirmed that merely providing the facilities for enabling or making a communication does not amount to a “communication to the public” within the meaning of that treaty.88 This provision was meant to ensure that ISPs and telecommunications companies would not be directly liable for user infringements. The EU has adopted a directive to Member States that provides DMCA-​like safe harbors for ISPs for network communications, system caching, and hosting services, but not for information-​ locating tools, such as search engines.89 Like the DMCA, the EU safe harbors rely on notice-​ and-​takedown rules.90 Even if an ISP is not directly or secondarily liable for user infringements, courts have power in the EU to issue injunctive relief against intermediaries whose services are used for copyright infringements.91 This places a higher burden, including compliance costs, on lawfully behaving intermediaries. Courts have made clear, though, that such relief should be proportional and take into account intermediary and user interests such as freedom to conduct a business and freedom of information.92

5.  Copyright and Online Activities: New Legal Questions The RAM copy and ISP liability issues discussed in Sections 3 and 4 are far from the only novel questions presented in the copyright cases involving online activities. Perhaps the most 88 

Agreed Statements Concerning the WIPO Copyright Treaty, adopted 20 December 1996, World Intellectual Property Organization, Concerning Article 8. 89  Directive No 2000/​31/​EC of the European Parliament and of the Council on 8 June 2000 on Certain Legal Aspects of Information Society Services, in Particular Electronic Commerce, in the Internal Market, 2000 OJ (L 178). 90  ibid arts 12–​15 at 12–​13. 91  See InfoSoc Directive (n 41), art 8(3) at 18. See generally Martin Husovec, “Accountable, Not Liable: Injunctions Against Intermediaries,” available at (analyzing the efficacy of injunctions against non-​infringing intermediaries). Under US law, Section 512 has a far narrower provision concerning issuance of injunctive relief against ISPs. See 17 USC § 512(j). Art 11 of the EU Enforcement Directive extends the availability of injunctive relief to other IP regimes. See Directive 2004/​48/​EC of the European Parliament and of the Council of 29 April 2004 on the Enforcement of Intellectual Property Rights art 11, 2004 OJ (L 195) 23. 92  See, eg, Case C-​314/​12, UPC Telekabel Wien GmbH v Constantin Film Verleih GmbH, available at (27 March 2014).

858   Pamela Samuelson controversial issue has been whether making a digital file of infringing content available to third parties, even if no one downloads the content, constitutes an infringing distribution of a copy. Also, cases in which courts have tried to draw distinctions among the exclusive reproduction, distribution, public performance, and public display rights as applied to online activities have been contentious and confusing. Several cases have posed challenging derivative work or adaptation right issues. Fair use has played a significant role in cases involving search engines in the US. Courts and commentators have also puzzled over whether or to what extent users have rights to resell digital goods. Capitol Records, Inc. v Thomas addressed whether an Internet user, such as Thomas, who made copies of illegally downloaded songs available to other Internet users through a peer-​ to-​peer file-​sharing network by putting the copies in a “share” folder, had infringed the exclusive right that copyright law gives to rights holders to control distributions of copies of protected works to the public.93 The court relied principally on the plain meaning of the pertinent statutory language in deciding that such acts of making available did not infringe the distribution right.94 Section 106(3) of the 1976 Act provides rights holders with an exclusive right to “distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.”95 Making a digital file available through a digital network does not involve the types of transfer or possession that the statute contemplates. The court ruled that Thomas did not distribute the files to the public within the meaning of § 106(3).96 A subsequent US Copyright Office study of the “making available” issue has concluded that the Thomas decision was wrong in asserting that making available is not a distribution of copies to the public.97 The Office regards the WCT treaty as imposing obligations on Member States to grant copyright owners exclusive rights to control communication of their works to the public, including “the making available to the public of their works in such a way that members of the public may access these works from a place and at a time chosen by them.”98 The Copyright Office relied on this treaty obligation, official assertions that the US adheres to this norm through the distribution and public performance rights, and two appellate court decisions not involving the Internet that interpreted the distribution right as extending to making available acts.99 When users upload infringing digital files to an ISP hosting service or email such files to numerous other people, such acts more easily fall within the scope of the distribution right, 93

  579 F Supp 2d 1210 (D Minn 2008). See also BMG Canada Inc v John Doe, 2004 FC 488 (placing file in share folder was not a distribution within the Canadian copyright law). 94 95  17 USC § 106(3) (2012).   Thomas, 579 F Supp 2d at 1216–​1219. 96  Thomas, 579 F Supp 2d at 1217. Nevertheless, as discussed above in Section 3, a series of jury trials found Thomas liable for willful copyright infringement, with varying damages awards. See (n 46) and accompanying text. 97  US Copyright Office, The Making Available Right in the United States (2016) 28, available at [hereafter Making Available Report]. 98  WCT (n 38), art 8. 99  Making Available Report (n 97), 3–​5, citing Diversey v Schmidly, 738 F3d 1196, 1203 (10th Cir 2013) (“The essence of distribution in the library lending context is the work’s availability ‘to the borrowing or browsing public.’ ”) (citation omitted); Hotaling v Church of Jesus Christ of Latter‐Day Saints, 118 F3d 199, 203 (4th Cir 1997) (“When a public library adds a work to its collection, lists the work in its index or catalog system, and makes the work available to the borrowing or browsing public, it has completed all the steps necessary for distribution to the public.”)

Intellectual Property Meets the Internet    859 although these transfers are not among the conventional transfers that § 106 recognizes.100 These distributions, however, also involve making copies of protected works, so the reproduction and distribution rights seemingly overlap in the online environment.101 Similarly overlapping are the reproduction and public display rights as to infringing materials posted on the Internet.102 Online streaming of videos also would seem to be both reproductions and public performances that might infringe both exclusive rights.103 One court has held that online streaming implicates both the public display and public performance rights.104 Although sound recordings in the US have until recently not enjoyed public performance rights, Congress amended US copyright law in 1995 to create a public performance right in digital audio transmissions that enable the music industry to be compensated for uses of music via Internet radio and streaming services such as Spotify.105 The US Supreme Court made an important ruling on Internet transmissions of copyrighted content as violations of the owners’ public performance rights in American Broadcasting Co. v Aereo, Inc.106 Aereo provided a service to paying customers by which they could select broadcast television programming that they wanted to watch on their mobile devices. Aereo argued that its users were engaged in private performances of the programs they chose to watch, which, if true, would have been non-​infringing. The Court decided that Aereo had transmitted ABC’s programs to members of the public because it operated in much the same way as cable companies transmit programs to the public. Because Congress had decided to extend the public performance right in 1976 to cover cable transmissions, the Court regarded Aereo’s transmissions as public performances as well.107 Online linking, framing, and pop-​up ads have sometimes been challenged, mostly without success, as infringements of the right to prepare derivative works.108 In Futuredontics, Inc. v Applied Anagramics, Inc., for instance, the plaintiff charged the defendant with infringing the derivative work right by creating a link that framed the plaintiff ’s webpage and thereby displayed ads for which the defendant had been paid.109 The court denied the plaintiff ’s motion for a preliminary injunction to stop the framing, but regarded its claim to be plausible 100  But what if someone emails an infringing file to one other person? That might be an infringing reproduction, but is a distribution of one copy to one person a distribution “to the public”? 101  See, eg, Mark A Lemley, “Dealing with Overlapping Copyrights on the Internet” (1997) 32 Dayton Law Review 547. 102  See, eg, Macrobie-​FL, Inc v Nat’l Ass’n of Fire & Equip Distribs, 983 F Supp 1167, 1173 n4 (ND Ill 1997). 103  But see United States v ASCAP, 485 F Supp 2d 438 (SDNY 2008) (downloading sound recordings treated as reproductions, but not as public performances). 104 See Video Pipeline Inc v Buena Vista Home Entm’t, Inc, 192 F Supp 2d 321, 332 (DNJ 2002), aff ’d, 342 F3d 191 (3d Cir 2003). 105  Digital Performance Right in Sound Recordings Act of 1995, Pub L No 104–​139, 109 Stat 336 (1995) (codified at 17 USC § 106(6)). For a detailed discussion of digital music copyright issues and the complex licensing regimes that regulate this industry, see Peter DiCola, “Copyright Equality: Free Speech, Efficiency, and Regulatory Parity” (2013) 93 Boston University Law Review 1837. 106  134 S Ct 2498 (2014). Justice Scalia dissented. ibid 2511. 107  ibid 2511. See 17 USC § 101 (definitions of “perform” and “publicly”) (2012). 108  See, eg, Maureen A O’Rourke, “Fencing Cyberspace: Drawing Borders in a Virtual World” (1998) 82 Minnesota Law Review 609 (arguing that framing, linking, and pop-​ups should not infringe the derivative work right). 109  45 USPQ 2d (BNA) 2005 (CD Cal 1997, 1998) (Order Re: Plaintiff Futuredontics, Inc’s Motion for Preliminary Injunction and Order Re: Defendants’ Motion to Dismiss), aff ’d, 152 F3d 925 (9th Cir

860   Pamela Samuelson enough to justify denying the defendant’s motion to dismiss.110 That litigation later settled.111 Courts have rejected pop-​up ads as infringements of the derivative work right, even though pop-​up ads may overlay the contents of a webpage and change the visual appearance of the page.112 Unauthorized hyperlinking has rarely been challenged as copyright infringement in the US. However, in the EU, some cases have challenged this act as an infringement of the communication to the public right.113 The major case was Svensson v Retriever Sverige AB, in which Swedish journalists sued an online service for copyright infringement because its website provided hyperlinks to newspaper articles written by plaintiffs that had lawfully been posted on the newspaper publisher’s website.114 The Court of Justice of the European Union (CJEU) considered whether this hyperlinking infringed the plaintiffs’ exclusive right to control communications of their works to the public. The CJEU concluded that the hyperlinks were, indeed, “communications” because they made copyrighted articles available to Internet users. However, the online service provider’s linking did not infringe copyright because the links merely allowed users to navigate to articles that had been lawfully posted with the plaintiffs’ consent and were, therefore, not communications to a “new public.”115 Fair use has come to play an important role in resolving Internet-​related copyright disputes in the US. The 1976 Act directs courts to consider four factors in making determinations about whether uses are fair or unfair: the purpose of the challenged use, the nature of the 1998). See also William F Patry, Patry on Copyright (Thomson Reuters 2008), Section 12.18 (criticizing the plaintiff ’s derivative work theory). 110 

Futuredontics, 45 USPQ 2d (BNA) at 2006-​2007, 2010. See also Joshua Masur, “Links, Liability and the Law: The Strange Case of Ticketmaster v Microsoft” (2000) 23 Columbia Journal of Law and the Arts 419. 111  Julie E Cohen, Lydia P Loren, Ruth L Okediji, and Maureen A O’Rourke,  Copyright in a Global Information Economy (3rd edn, Aspen 2010), 391. 112  See, eg, Wells Fargo & Co v WhenU.com, Inc, 293 F Supp 2d 734, 770 (ED Mich 2003). 113  This issue has been quite contentious in the EU. Compare, eg, European Copyright Society, “Opinion on The Reference to the CJEU in Case C-​466/​12 Svensson,” Research Paper No. 6/​2013 (2013), available at (arguing that hyperlinking in general is an activity that should not be covered by the right to communicate the work to the public), with Assoc. Litteraire et Artistique Int’l (ALAI), “Report and Opinion on the Making Available and Communication to the Public in the Internet Environment” (2013), available at (arguing that the right applies irrespective of the technical means used). 114  Case C-​466/​12, Nils Svensson v Retriever Sverige AB, (13 February 2014). 115  ibid paras 19–​24. The CJEU in Svensson did not address whether linking to unauthorized content would infringe the communication right, a question posed in a currently pending case. See Case C-​160/​15, GS Media BV v Sanoma Media Netherlands BV, (7 April 2015). The Advocate General Wathelet has submitted a report to the CJEU in this case arguing that hyperlinks should not be considered a communication when the works are already freely accessible on another website and the links merely facilitate the finding of those works. He suggested instead that there be a necessary “intervention” on the part of the hyperlinker to establish an act of communication. See Case C-​160/​15, GS Media BV v Sanoma Media Netherlands BV, Opinion of Advocate General, paras 54–​57, (7 April 2016).

Intellectual Property Meets the Internet    861 copyrighted work, the amount and substantiality of the taking, and harm to markets for the work.116 Of particular importance in the fair use case law is whether the challenged use is “transformative,” that is, whether it “adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.”117 A parody, for instance, transforms expression from the work it makes fun of in order to convey a different message than the original did.118 Using another’s work for a different purpose than the original author had in mind has sometimes also been considered transformative in the case law,119 including some cases involving Internet search engines. Among the lawsuits challenging search engine copying of digital content on the open Internet as infringement was Perfect 10, Inc. v Amazon, Inc.120 The plaintiff, which owned rights in numerous photographs, sued Google for copyright infringement because Google’s software had made and publicly displayed thumbnail-​sized copies of Perfect 10 images to serve up in response to Internet users’ search queries.121 The Ninth Circuit upheld Google’s fair use defense. It regarded Google’s use as “highly transformative” because Google displayed image thumbnails for a very different purpose than Perfect 10. Google’s purpose was to inform Internet users about where images they sought could be found.122 The court noted that this “provides a social benefit by incorporating an original work into a new work, namely, an electronic reference tool.”123 The purpose factor, thus, favored Google’s defense. The creative nature of the images tilted somewhat in favor of Perfect 10’s claim.124 The amount factor did not favor either party because although thumbnails displayed a complete copy of the images, this display was necessary so that Internet users could get accurate information about the images.125 The Ninth Circuit was not persuaded that the thumbnails harmed the markets for Perfect 10’s works, characterizing the claimed displacement of a market for thumbnail images for cell phones as “hypothetical.”126 Weighing all the factors together, the court held that Google’s fair use defense should prevail.127 Two other significant Internet search engine fair use cases were those brought by the Authors Guild, first against Google, and later against the HathiTrust digital library and several universities whose research libraries supplied Google with books to scan for the Google Book Search (GBS) digitization project.128 Fair use defenses prevailed in both 116 

17 USC § 107 (2012). Campbell v Acuff-​Rose Music, Inc, 510 US 569, 579 (1994) (citing to Pierre Leval, “Toward a Fair Use Standard” (1990) 103 Harvard Law Review 1105). 118  Campbell involved a rap parody of Roy Orbison’s song “Pretty Woman.” The Supreme Court considered this to be a transformative use. Campbell, 510 US at 579. 119  See Pamela Samuelson, “Possible Futures of Fair Use” (2015) 90 Washington Law Review 815, 845–​ 850 (discussing the cases). 120  508 F3d 1146 (9th Cir 2007). 121  ibid 1155–​1157. 122 ibid 1165. 123 ibid. 124 125 126  ibid 1167.   ibid 1167–​1168.  ibid 1168. 127  ibid. Although copyright law in the EU does not recognize fair use as a defense, a German court rejected an artist’s claim of infringement against Google for serving up thumbnails of her work. See, eg, Birgit Clark, “BGH: Google’s Image Search Is No Copyright Infringement” IPKat, 29 April 2010, available at . Scholars have argued for the need to introduce enhanced flexibility into European copyright law. See, eg, P Bernt Hugenholtz and Martin RF Senftleben, “Fair Use in Europe: In Search of Flexibilities” (2011), 10–​12, available at (describing examples of national courts seeking flexibility in resolving various copyright law disputes). 128  Authors Guild, Inc v Google Inc, 804 F3d 202 (2d Cir 2015); Authors Guild, Inc v HathiTrust, 755 F3d 87 (2d Cir 2014). HathiTrust settled after the Second Circuit remanded the case for further 117 

862   Pamela Samuelson cases.129 The Guild’s principal claim in both cases was that digitizing and making copies of digitized in-​copyright books was infringement. The Guild also claimed that Google infringed by serving up snippets from books in the GBS corpus that were relevant to user search queries.130 The HathiTrust digital library, by contrast, served up only data about the books that mention the topic for which a HathiTrust researcher is looking.131 Google and HathiTrust were seemingly more difficult fair use cases than Perfect 10 because Google, not third parties, had made the allegedly infringing copies; moreover, the books’ rights holders had not voluntarily digitized the books and posted them on the open Internet. Google relied heavily on the Perfect 10 decision, insisting that its use of the digitized books was, as in Perfect 10, highly transformative because it helped researchers find relevant materials. It compared the snippets of text served up in response to search queries in Google to the thumbnails held to be fair use in Perfect 10.132 Because the Second Circuit had not decided any search engine cases prior to the two Authors Guild cases, the Guild was hoping that the Second Circuit would perceive the purpose of Google’s mass digitization as non-​ transformative, which would have undercut its fair use defense.133 However, in both Google and HathiTrust, the Second Circuit ruled that the defendants’ search-​related purposes were, as in Perfect 10, highly transformative.134 The Second Circuit recognized that all types of books had been digitized, but this did not cut for or against the fair use defense. The amount factor was given little weight because it was necessary to copy the contents of books in their entirety in order to index their contents to develop a full-​text searchable database.135 Despite the Authors Guild’s claim that it wanted to license these uses, the evidence of market harm was, in the Second Circuit’s view, merely speculative.136 After weighing the factors together, the court upheld the fair use defenses.

proceedings on one issue. See, eg, Krista Cox, “Authors Guild v HathiTrust Litigation Ends in Victory for Fair Use” Association of Research Libraries, 8 January 2015, available at .VQ2Qr-​ Fmppk The Authors Guild asked the Supreme Court to hear its appeal in the Google case, but the Court denied its petition for certiorari. Google, 804 F3d 202, cert denied, 84 USLW 3357 (US 18 April 2016) (No 15-​849). 129 

Google, 804 F3d at 207; HathiTrust, 755 F3d at 105. Google, 804 F3d at 209. The Second Circuit found that the Google Books use of snippets is a fair use. Google, 804 F3d at 225. In the EU, the CJEU interpreted art 2 of the InfoSoc Directive (n 41) to conclude that the use of 11-​word snippets by a Danish online media monitoring service could qualify as original, protectable expression. See Case C-​5/​08, Infopaq Int’l A/​S v Danske Dagblades Forening, paras 47–​51, available at (16 July 2009). 131  HathiTrust, 755 F3d at 91. HathiTrust also allows print-​disabled persons to get access to the contents of the digitized books. ibid. Another difference was that Google was a class action against a commercial entity, whereas HathiTrust was an associational action against nonprofit academic institutions. 132  Brief for Appellee at 30–​32, Authors Guild, Inc v Google, 804 F3d 202 (2d Cir 2015) (No 13-​4829-​cv). 133  Brief and Special Appendix for Plaintiffs-​Appellants at 31–​40, Authors Guild, Inc v Google, 804 F3d 202 (2d Cir 2015) (No 13-​4829-​cv). 134  Google, 804 F3d at 216–​217; HathiTrust, 755 F3d at 97. 135  Google, 804 F3d at 221–​223; HathiTrust, 755 F3d at 98–​99. 136  Google, 804 F3d at 224; HathiTrust, 755 F3d at 99–​100. 130 

Intellectual Property Meets the Internet    863 Mass digitization of books and other artifacts of cultural heritage has been a topic of considerable interest and concern in the past decade. Numerous cultural heritage institutions, such as national libraries, research libraries, and museums, have undertaken mass digitization projects for books, manuscripts, and other documents in their collections, most of which focus on works that are no longer encumbered by copyrights.137 To overcome copyright obstacles to making the contents of digitized books available to the public, some nations have adopted extended collective licensing regimes.138 Many nations have collective management organizations (CMOs) that represent large numbers of authors or other owners of copyrighted works and that grant blanket licenses for third party uses of the CMO’s members’ works. What makes a collective license “extended” is a statutory authorization for CMOs to issue a license for all in-​copyright works of a certain kind, not just the CMOs’ members’ works. Norway’s national library has, for instance, undertaken an initiative to digitize all of the books and newspapers written in Norwegian and make them available for free to the Norwegian public.139 A collecting society, Kopinor, receives funds from the library for permission to grant this access to the public and pays rights holders for usages of their works.140 The US Copyright Office has proposed a pilot program to enable nonprofit libraries in the US to get extended collective licenses to provide online access to the contents of in-​copyright works.141 An extended collective license, however, may not always be necessary to justify library digitization.142 Some organizations, such as the non-​profit digital library known as the Internet Archive, provide free public access to digitized collections of in-​copyright works, such as books, audio, video, music, software, and other materials.143 In keeping with the Google and HathiTrust decisions, the Internet Archive believes its digitization of books to be fair use, as long as it has lawfully acquired a physical copy of the books. The Archive considers the digital copies it makes to be justified as format-​shifting. The Archive engages in e-​lending for two-​week periods of technically protected digital copies of books that may

137 

For a discussion and examples of mass digitization projects, see, eg, Mass Digitization, ​; “Commentary and Controversy on the Mass Digitization of Books,” ; Bayerische Staatsbibliothek, . 138  See, eg, Pamela Samuelson, “Extended Collective Licensing to Enable Mass Digitisation: A Critique of the US Copyright Office Proposal” (2016) 38 European Intellectual Property Review 75. 139  See, eg, ibid 81; see also Adrianne Jeffries, “Norway Is Digitizing All Its Books and Making Them Free to Read Online” The Verge, 11 December 2013, available at . 140  Samuelson, (n 138), 81. 141  US Copyright Office, Orphan Works and Mass Digitization (2015), 72. The report and public comments submitted in response to the Office’s notice of inquiry can be found on the Copyright Office website at ​. 142  A library’s digitization of in-​copyright books from its collections was unsuccessfully challenged as copyright infringement in Germany. See Case C-​117/​13, Technische Universitat Darmstadt v Eugen Ulmer, KG (CJEU September 2014), available at .The German courts upheld TUD’s claim. See, eg, Eleanora Rosati, “German Federal Court Says that Libraries Have a Right to Digitise Their Collections,” IPKat, 24 April 2015, available at . 143  See Internet Archive, .

864   Pamela Samuelson be in-​copyright but are no longer commercially active.144 This is, in its view, equivalent to the conventional acts of book lending that libraries have traditionally done.145 In general, the owner of a copy of a copyrighted work, such as a book, has the right to resell, lend, or otherwise transfer that copy to third parties. Copyright law considers the first authorized sale of a copy of a protected work to “exhaust” the copyright owner’s right to control distributions of that copy to the public.146 Whether this “first sale” or “exhaustion of rights” doctrine applies to digital copies, such as ebooks, is a hotly debated question.147 The Internet Archive’s ebook lending project assumes that it does. Yet, lending or reselling a digital copy of a protected work, unlike the lending or reselling of a physical copy, inevitably requires making copies of the work, which arguably runs afoul of the exclusive right to reproduce protected works in copies.148 Although the Internet Archive has not been sued for its ebook lending practices, Capitol Records sued ReDigi for infringement because it operated a technology platform to enable its customers to resell digital copies of their music.149 ReDigi designed its platform so that when a customer identified a digital file of music she wanted to sell, the copy on the customer’s computer would be erased as the file was transferred to ReDigi’s servers to avoid the duplication of copies problem that had stoked copyright industry fears about recognition of a digital exhaustion doctrine. When customers purchased a copy of the music from ReDigi, the same transfer techniques ensured that ReDigi would no longer have possession of a copy of that music when the file was transferred to the purchaser’s computer. ReDigi relied on the exhaustion of rights doctrine and on fair use to excuse the incidental copies made in the process of transferring the files. The District Court rejected both defenses.150 No appellate court has yet reviewed a digital exhaustion case. Complicating the digital exhaustion issue—​not just as to digital music and digital books, but also as to computer software and other digital works—​is the frequent assertion by vendors of digital content that they have “licensed” uses of purchased copies of digital works, not “sold” the copies to customers.151 The nature of the transaction matters because only “owners” of copies are entitled to the benefits of statutory exhaustion rules, such as having 144  See Digital Lending Library at the Internet Archive, 28 June, 2010, available at . 145   However, not everyone agrees that this is lawful as a matter of copyright law. See, eg, Chris Meadows, “The Internet Archive’s Open Library Is Violating Authors’ Copyrights,” Teleread, 10 July 2013, available at . 146   The US first sale rule is codified at 17 USC § 109 (2012). The US Supreme Court gave US copyright first sale doctrine a global scope in Kirtsaeng v John Wiley & Sons, Inc, 133 S Ct 1351 (2013), allowing the importation into the United States of physical copies of books, lawfully made and acquired abroad, without the US copyright owner’s consent. Exhaustion doctrine also exists in the patent and trademark law regimes. Nations vary in the scope they give to the exhaustion right. In the EU, the exhaustion of IP rights applies throughout the European Union, but not beyond EU borders. Some countries have international exhaustion of rights rules. See generally Shubha Ghosh, “The Implementation of Exhaustion Policies: Lessons from National Experiences,” International Centre for Trade and Sustainable Development, Issue Paper No. 40 (2013), available at . 147  See, eg, US Copyright Office, DMCA Section 104 Report (2001) [hereafter DMCA Section 104 Report]; Aaron Perzanowski and Jason Schultz, “Digital Exhaustion” (2011) 58 UCLA Law Review 889. 148  17 USC § 106(1) (2012). See, eg, Perzanowski and Schultz (n 147), 904. 149  Capitol Records, LLC v ReDigi, Inc, 934 F Supp 2d 640 (SDNY 2013). 150 ibid 654, 656. 151  See, eg, Perzanowski and Schultz (n 147), 901–​902.

Intellectual Property Meets the Internet    865 the right to lend, give away, or resell their copies of protected works.152 When a product is mass-​marketed at a standard price in stores and online marketplaces and consumers are encouraged to “buy now,” the characterization of the transaction as a sale would seem to have some merit.153 While the issue is not entirely settled, some courts have enforced mass-​ market license restrictions on uses and resales of digital goods.154 The embedding of software in hardware systems, such as cars, toasters, and heating devices, as well as the impending Internet of Things,155 may, however, make it difficult to draw firm distinctions between licenses and sales of products. A US Department of Commerce Internet Policy Task Force has recently recognized that the license versus sale issue for digital goods is an important and somewhat unsettled issue. It expressed confidence that the marketplace would be able to work out better solutions than the government could.156 To address consumer confusion about the nature of transactions in digital goods, the Task Force recommended the development of best practice guidelines so that consumers would be presented with more comprehensible and standardized information in licenses and sales contracts.157 The report expressed some concern over the plight of libraries in the digital age. It concluded that “if over time, it becomes apparent that libraries have been unable to appropriately serve their patrons due to overly restrictive terms imposed by publishers, further action may be advisable.”158 However, the Task Force concluded that no legislation or other policy intervention was necessary at this time.159

6.  Technical Protections and Anti-​ Circumvention Rules: Extending Copyright The Clinton Administration’s 1995 NII White Paper observed that growth of online marketplaces in digital content was being inhibited by copyright industry fears that selling 152 

17 USC §§ 109(a), 117(b) (2012).   See, eg, Brian W Carver, “Why License Agreements Do Not Control Copy Ownership: First Sales and Essential Copies” (2010) 25 Berkeley Technology Law Journal 1887. See also Aaron Perzanowski and Chris Jay Hoofnagle, “What We Buy When We ‘Buy Now’ ” (2017) 165 University of Pennsylvania Law Review (forthcoming), available at (explaining consumer confusion about their rights in purchased digital content). 154   See, eg, Vernor v Autodesk, Inc, 621 F3d 1102 (9th Cir 2010) (enforcing license restriction on resales of software on eBay); ProCD, Inc v Zeidenberg, 86 F3d 1447 (7th Cir 1996) (posting telephone numbers from plaintiff ’s database online breached license restriction). But see Case C-​128/​11, UsedSoft GMBH v Oracle Int’l, Inc, (CJEU 2012) (exhaustion applied to software downloaded from the Internet). 155   The “Internet of Things” (IoT) has been defined as “[t]‌he interconnection via the Internet of computing devices embedded in everyday objects, enabling them to send and receive data,” Oxford English Dictionary, available at . See also Nicole Kobie, “What Is the Internet of Things?” Guardian, 6 May 2015, available at . 156  Internet Policy Task Force, White Paper on Remixes, First Sale, and Statutory Damages (US Department of Commerce, January 2016), 4. 157 ibid 5. 158 ibid 4. 159 ibid. 153

866   Pamela Samuelson digital copies of works online would lead to massive infringement because it was so cheap and easy for infringing copies to be widely distributed in digital networked environments.160 To avert this harm, rights holders were starting to use technical protection measures (TPMs) to control access to and unauthorized copying of digital works. However, TPMs alone would not provide much protection to copyright owners unless it became illegal to make and offer to the public software tools designed to bypass or circumvent the TPMs. The NII White Paper recommended new legislation to protect copyright owners from the damage to their markets that use of circumvention tools would bring about.161 The draft treaty considered at the 1996 diplomatic conference convened by WIPO to harmonize international norms on digital copyright issues contained a provision that was substantially the same as the NII White Paper’s proposed anti-​circumvention rule.162 However, this proposal proved to be highly controversial at the conference because of concerns about its potential impacts on the public domain, copyright exceptions and limitations, and on innovation and competition.163 In the end, the WCT adopted a more general provision in respect of circumvention of TPMs. It obliged Member States to “provide adequate legal protection and effective remedies against the circumvention of effective technological measures that are used by authors in connection with exercise of their rights  . . .  and that restrict acts . . . which are not authorized by the authors concerned or the law.”164 The US implemented this norm in the same title of the US Code under the 1976 Act as part of the DMCA. Section 1201(a)(1)(A) outlaws circumvention of any TPM that “effectively controls access to a work protected under this title.”165 Sections 1201(a)(2) and (b)(1) make it illegal to “manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof ” that is “primarily designed or produced for the purpose of circumventing” TPMs.166 Remedies for civil violations of the anti-​circumvention rules include injunctive relief and actual and statutory damages.167 Criminal sanctions are authorized for those who violate § 1201 “willfully and for purposes of commercial advantage or private financial gain.”168 Because libraries, civil liberties groups, software developers, and computer security researchers, among others, identified numerous circumstances under which circumvention of TPMs could be justified, such as bypassing TPMs to develop interoperable software, the US anti-​circumvention rules are subject to numerous exceptions.169 The first criminal anti-​circumvention case was brought against a Russian programmer named Dmitry Sklyarov and his Russian employer ElcomSoft for developing and selling a program called the “Advanced eBook Processor,” which enabled users to bypass the TPMs 160 

161 NII White Paper (n 36), 10.   ibid, 230–​231.   See, eg, Samuelson (n 37), 409–​415. 163   See, eg, Pamela Samuelson, “Big Media Beaten Back” (1997) 5.03 WIRED 64. 164 165   WCT (n 38), art 11.   17 USC § 1201(a)(1)(A) (2012). 166   17 USC §§ 1201(a)(2), (b)(1) (2012). The difference between the two provisions is that (a)(2) addresses technologies that circumvent access controls and (b)(2) concerns tools that circumvent other TPMs. The US has pressed other nations to adopt anti-​circumvention rules modeled on § 1201. See, eg, Cohen, Loren, Okediji, and O’Rourke (n 111), 678–​679. 167  17 USC § 1203 (2012). 168  17 USC § 1204(a) (2012). 169  17 USC § 1201(d)–​(j) (2012). See Pamela Samuelson, “Intellectual Property and the Digital Economy: Why the Anti-​Circumvention Regulations Need to Be Revised” (1999) 14 Berkeley Technology Law Journal 519 (criticizing the narrowness of many of these exceptions). 162

Intellectual Property Meets the Internet    867 embedded in Adobe System’s eBook Reader software.170 Sklyarov was arrested for violating § 1201(b)(1), while attending a technology conference in Nevada. His firm ElcomSoft was indicted on the same charge. After protests about the charges against Sklyarov, the government dropped those charges. However, the criminal case against ElcomSoft went to trial, where the government lost because the jury was not persuaded that the firm had willfully violated § 1201.171 Universal City Studios, Inc. v Reimerdes was the first notable civil anti-​circumvention case and the first § 1201 case to be reviewed by an appellate court.172 Universal and seven other motion picture studios sued Eric Corley and two others for violating § 1201(a)(2) by posting on his online magazine website the source and object code of a program designed to bypass the TPMs that the studios used to protect DVD movies from infringement.173 Corley offered statutory and constitutional arguments against the § 1201 claims. He was, after all, a journalist, and a young Norwegian programmer’s development of software that bypassed TPMs protecting DVD movies was, in his view, a newsworthy event. The text of the software was, Corley thought, part of the story. His main constitutional challenge was that § 1201 was unconstitutionally broad because it was inhibiting lawful uses of technically protected works as well as unlawful uses.174 Corley also raised a freedom of speech argument, contending that the software was, itself, speech protected under the First Amendment to the US Constitution, which he and others were entitled to utter by posting it on the Internet.175 His main statutory argument was that this software was necessary to enable the development of a Linux-​based computing platform on which DVD movies could be played, relying on the reverse engineering exception of § 1201(f).176 Both the District Court and the Second Circuit rejected these defenses and held Corley liable for violating § 1201(a)(2). They noted that Congress had considered the impact of § 1201 on fair uses and decided to adopt this rule without a fair use exception. Moreover, even if the code was First Amendment-protected speech, that did not mean its functionality was irrelevant to whether a ban on circumvention software was unconstitutional.177 The District Court pointed to limitations in the reverse engineering provision as precluding the § 1201(f) defense because Corley himself had not engaged in any reverse engineering.178 Soon after the Reimerdes decision, the Recording Industry Association of America (RIAA) challenged the impending publication and presentation of a paper written by Professor Edward Felten and collaborators that revealed information about how to bypass TPMs that RIAA firms were intending to use to protect digital music from unauthorized uses. RIAA argued that the paper was a circumvention tool that violated § 1201. Felten initially withdrew 170

  Cohen, Loren, Okediji, and O’Rourke (n 111), 675–​676.   ibid. A court rejected ElcomSoft’s motion to dismiss the charges. United States v ElcomSoft Ltd, 203 F Supp 2d 1111 (ND Cal 2002). 172   111 F Supp 2d 294 (SDNY 2000), aff ’d sub nom, Universal City Studios, Inc v Corley, 273 F3d 429 (2d Cir 2001). 173   Reimerdes, 111 F Supp 2d at 303. Reimerdes and another defendant settled before the trial that resulted in Corley being found liable for violating § 1201(a)(2). 174 ibid 304. 175 ibid. 176  ibid 311, 319. See note 169 and accompanying text. 177  Reimerdes, 111 F Supp 2d at 322, 328; Corley, 273 F3d at 444, 446. 178  Reimerdes, 111 F Supp 2d at 320. Various expressions of the same technique to bypass the DVD TPMs as was at issue in Reimerdes can be found at the Gallery of CSS Descramblers, available at ​. 171

868   Pamela Samuelson the paper from the conference at which it was scheduled to be presented, but later filed a declaratory judgment action asserting both that the paper did not violate § 1201 and that he had a First Amendment right to present and publish it at a research conference. After Felten presented the paper at another conference, RIAA moved to dismiss the lawsuit as moot, and the court granted the motion.179 In neither Reimerdes nor the Felten case was there any evidence that the alleged violation of § 1201 had resulted in any copyright infringements. Courts have disagreed about whether §  1201 claimants must show the existence of a nexus between the claimed violation and copyright infringement. In Reimerdes, the court said that it was irrelevant whether Corley’s posting of the software code had caused copyright infringement.180 In MDY Industries, LLC v Blizzard Entertainment, Inc., the Ninth Circuit agreed with Reimerdes that a § 1201 violation can be found without a showing of actual or likely infringement.181 MDY had developed a software program that allowed users of Blizzard’s World of Warcraft multi-​player online game to use MDY’s software to automate the play of early levels of the game. When Blizzard developed a program to detect and prevent the use of “bots,” such as MDY’s software, MDY developed further software to avoid detection of the operation of its bot. Blizzard successfully claimed this software was a circumvention tool that violated § 1201. However, in Chamberlain Group, Inc. v Skylink Technology, Inc., the Federal Circuit ruled that Skylink had not violated § 1201 by developing a garage door opener (GDO) that bypassed an authentication mechanism built into the software in Chamberlain’s GDO because Skylink’s technology did not pose a risk of any copyright infringement.182 The US Congress created a triennial rule-​making procedure by which those who have been thwarted by TPMs from making lawful uses of copyrighted content can request an exemption from liability under §  1201(a)(1)(A).183 Exemptions granted generally last for three years. For an exemption to be renewed, new evidence must be proffered to show that TPMs would thwart lawful uses. As of 2016, there have been six triennial rulemaking proceedings to consider possible exemptions from § 1201(a)(1)(A) liability.184 Among the potpourri of exemptions granted in the 2015 proceeding were one for those who want to develop technologies to assist print-​disabled persons in gaining access to digital content, several for those who want to “unlock” or “jailbreak” certain devices so they could use other networks or install software not authorized by the device-​maker, and one for film studies instructors who need to bypass TPMs to make clips of DVD movies as instructional materials.185 Computer security researchers also succeeded in gaining recognition that § 1201 has inhibited good faith investigations of security flaws in software-​enabled technologies.186 In 2016, the Copyright Office commenced a study to assess § 1201, including the triennial rulemaking process.187 179 

See, eg, Cohen, Loren, Okediji, and O’Rourke (n 111), 671–​672. 181 Reimerdes, 111 F Supp 2d at 322–​324, 331–​333.   629 F3d 928, 945 (9th Cir 2011). 182 183   381 F3d 1178, 1193–​1200 (Fed Cir 2004).   17 USC §§ 1201(a)(1)(C)-​(D) (2012). 184   See Library of Congress, US Copyright Office, “Exemptions to Prohibitions of Circumvention of Copyright Protection Systems for Access Control Technologies,” 80 Fed Reg 65944, 65944 (28 October 2015). 185  ibid 65947–​65960. 186 ibid 65956. 187  See Library of Congress, US Copyright Office, “Section 1201 Study: Notice and Request for Public Comment,” 80 Fed Reg 81369 (29 December 2015) [hereafter “Section 1201 Study”]. The Copyright Office website for this study is at ​. 180 

Intellectual Property Meets the Internet    869

7. Conclusion The Internet has unquestionably had significant impacts on the development of IP laws, especially copyright. This chapter has primarily focused on four copyright-​related transformations: the relevance of copyright to activities of ordinary people; the regulation of Internet intermediaries that arguably contribute to or induce user infringements; expanding interpretations of exclusive rights and copyright limitations to Internet-​enabled acts; and legal reinforcement of technical protection measures that copyright owners use to protect digital copies of works from infringing, and sometimes from non-​infringing, uses. Courts have had to grapple with many legally and technologically challenging questions and have had to adapt conventional doctrines or develop new doctrines to answer them. Copyright industry groups have frequently called upon legislators to enact new laws to regulate Internet-​related activities. Some of these laws, such as the enactment of a digital audio performance right for sound recordings, have gained general acceptance in the communities they regulate. Other laws, such as the ISP safe harbors and the anti-​circumvention rules, have continued to be contentious, and further efforts to change these rules are to be expected.188 The entertainment and information technology industries have been the most significant players in what we might call the digital copyright wars. These industry groups have radically different views on the desirability of changing these rules. The political economy of copyright policy-​making has become more complicated because the Internet has enabled tech-​savvy users who perceive themselves as having a stake in copyright policy-​making to band together to thwart what they perceive to be overreaching regulation, such as the Stop Online Piracy Act (SOPA) in 2011.189 SOPA would have imposed new obligations on ISPs, payment providers, and advertisers to aid the enforcement of copyrights. Although SOPA, which was introduced in the US House of Representatives, and its counterpart in the Senate, the Protect IP Act (PIPA), initially had significant bipartisan Congressional support, the legislation failed following a massive public protest, including more than 8 million contacts by members of the public to their Congressional representatives and over 7 million signatures on an online petition opposing the bills.190

188  The US Copyright Office, for instance, has undertaken studies about both the safe harbor and anti-​circumvention regulations. See Section 512 Study (n 86); Section 1201 Study (n 187). The EU also continues to review EU copyright rules, for example, conducting a public consultation in 2013–​2014 on the digital single market. The report on the responses to the public consultation is available at . 189  Stop Online Piracy Act, HR 3261, 112th Cong (2011). The Senate introduced a corresponding bill, called the PROTECT IP Act, or PIPA. See Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011, S 968, 112th Cong (2011). See also Jonathan Weisman, “In Fight Over Piracy Bills, New Economy Rises Against Old,” New York Times, 18 January 2012, available at . 190  See, eg, Timothy B Lee, “SOPA Protest by the Numbers: 162M Pageviews, 7 Million Signatures,” Ars Technica, 19 January 2012, available at ; Deborah Netburn, “Wikipedia: SOPA Protest Led 8 Million to Look Up Reps in Congress,” Los Angeles Times, 19 January 2012, available at

870   Pamela Samuelson At the international level, a multilateral treaty, known as the Anti-​Counterfeiting Trade Agreement (ACTA), which would have required Member States to clamp down on online copyright rules, similarly faltered in the face of significant public opposition.191 Formal legal rules are not the only governance mechanism that has achieved some success in regulating online activities implicating copyrights. Various types of private initiatives have mitigated copyright-​related tensions, including the adoption of best practices guidelines for online video remixes and mashups,192 Creative Commons licenses that enable some authors to signal their desire for their works to be shared widely,193 and agreements between copyright industry groups and ISPs to alert file-​sharers that their infringing uses have been detected.194 Advances in information technologies and the ability to share digital information via global networks have heightened the perception among copyright owners that strengthening online copyright rules is necessary. Despite these assertions, this chapter has shown that copyright rules affecting Internet activities are being interpreted, and sometimes adapted, to apply flexibly and in a balanced way. Courts have come to recognize the legitimate interests of Internet users who are expanding the horizons of knowledge through creative reuses of existing works and sharing the resulting works and knowledge with others. In the US, some of this balancing of interests is based on a commitment to First Amendment guarantees to free speech.195 In the EU, there is an increasing awareness of principles of fundamental human rights that have a bearing on IP law and jurisprudence.196

. 191  See, eg, Maira Sutton, “ACTA’s Defeat in Europe and What Lies Ahead,” Electronic Frontier Foundation, 12 July 2012, . 192 See Code of Best Practices in Fair Use for Online Video (2008), available at . Other codes of best practices can be found at the Center for Media & Social Impact website, . 193  See Creative Commons, State of the Commons (2015), available at (annual report detailing scope of CC-​licensed works). As of 2015, over one billion works are licensed under CC licenses throughout the world. ibid 2. 194  For example, copyright industry associations and major ISPs entered into an agreement to establish the Copyright Alert System, a graduated-​response copyright enforcement program. For a description of that system, see, for example, Center for Copyright Information, Copyright Alert System FAQs, ​. 195  See, eg, Eldred v Ashcroft, 537 US 186, 219–​221 (2003) (discussing the interplay between copyright law and free speech safeguards). 196  For example, the Council of the European Union adopted the “EU Human Rights Guidelines on Freedom of Expression Online and Offline” in Brussels on 12 May 2014, available at , which includes “the right to seek and receive information” and “the right to impart information and ideas of all kinds through any media and regardless of frontiers.” See also Krisjanis Buss, “Copyright and Free Speech: The Human Rights Perspective” (2015) 8 Baltic Journal of Law and Politics 182, available at ; Alain Strowel, “When Solving Copyright Cases Requires to Balance Fundamental Rights,” IPdigIT, 30 September 2014, available at ​. See generally Christophe Geiger (ed), Research Handbook on Human Rights & Intellectual Property (Edward Elgar 2015).

Intellectual Property Meets the Internet    871 Despite the many grave concerns that copyright industry groups have raised about the availability of massive amounts of infringing materials on the Internet, the Internet has also made it possible for many authors and publishers to reach new audiences, to expand into new markets, and to develop new business models.197 Copyright industry markets have been thriving in the digital era, not only in the US, but in other major countries as well.198 IP laws will, it seems, survive the Internet after all.

197  See, eg, Michael Masnick and Michael Ho, The Sky Is Rising! (January 2012), available at . 198  See, eg, Michael Masnick and Michael Ho, The Sky Is Rising: Regional Studies (2013), available at (reporting on copyright industry revenues in Germany, France, the UK, Italy, Russia, and Spain).

Chapter 31

Intellectua l Prope rt y and C ompet i t i on L aw C. Scott Hemphill * 1. Introduction Competition law promotes rivalry as a means of organizing economic behavior. The main substantive provisions of competition law—​or antitrust law, as it is known in the United States (US)—​prohibit certain agreements in restraint of trade, conduct to maintain or acquire monopoly power, and mergers. This chapter surveys the intersection of antitrust law with intellectual property (IP). Government enforcers and private plaintiffs have advanced a wide range of antitrust claims against IP rights holders. These include, among others, the alleged abuse of a standard setting process by a patentee, joint price setting by means of a blanket license for copyrighted musical works, and anticompetitive settlements of patent litigation. These examples arise distinctively in the context of IP. They can be viewed as a kind of special-​purpose antitrust law, although the principles applied are more general. In other cases against rights holders, the IP overlay adds nothing distinctive. This chapter examines two types of antitrust claims. Collusion claims challenge forms of cooperation that reduce competition, often by softening competition among the cooperating firms. Exclusion claims challenge the improper preservation of incumbency through self-​ entrenching conduct. The categories overlap because firms can collude in order to exclude. The treatment here is necessarily selective.1 In the interest of space, mergers are largely ignored.2 The focus is patent law and copyright law, where most cases arise, at the expense of trademark and other forms of IP. The examples are *  C Scott Hemphill has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  H Hovenkamp, MD Janis, MA Lemley, CR Leslie, and MA Carrier, IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law (2nd edn, Wolters Kluwer 2016) is a comprehensive two-​volume treatise. 2  Nor do I devote separate attention to vertical licenses. A further omission is the use of compulsory IP licenses as a remedy following a successful antitrust challenge.

Intellectual Property and Competition Law    873 drawn mainly from the US, with some discussion of European developments. Cases that are particularly important or revealing about the interaction of IP with antitrust law are emphasized. The case selections serve a second goal, which is to uncover whether and how IP rights alter the substantive scope of antitrust law. At first blush, the conflict between IP and antitrust is obvious. IP is a temporary monopoly intended to suppress rivalry. Antitrust law, by contrast, prohibits certain conduct that tends to improperly create or preserve a monopoly or achieve a similar effect through contract. Moreover, the point of IP is to enable high prices as an inducement to innovate, while a major antitrust goal is to keep prices down close to cost. IP places significant limits on antitrust law. The assertion of a valid, infringed patent against a rival is legal, even if the resulting exclusion raises prices and reduces output. Beyond this core exclusionary right, questions arise about how far the privilege extends. A broader privilege increases the size of the innovator’s reward, potentially at the expense of economic values protected by antitrust law. One message of this chapter is that, beyond the core, IP restricts antitrust law less than one might expect. This message is broadly in keeping with the IP Guidelines issued by US regulators, which proceed from the proposition that “standard antitrust analysis applies to [IP].”3 Moreover, the restrictions that do exist are sometimes subtle. Section 2 of this chapter describes two pathways by which IP limits antitrust law. First, IP limits the scope of antitrust by operation of statute. Some specific IP provisions arguably permit particular conduct that ordinarily violates antitrust law. For example, US patent law grants a right to refuse to deal, which might immunize certain refusals that otherwise violate antitrust law. Second, IP might limit antitrust law as a matter of policy. At its core, antitrust law is governed by economic analysis. The economic basis for IP—​most prominently, that temporary monopoly provides an ex ante inducement to innovate—​might factor within antitrust’s cost-​benefit calculus. The result, again, could be to permit conduct that is ordinarily prohibited. Section 3 analyzes collusion claims against IP rights holders, including market division, settlements of patent litigation, price-​restricted licenses, blanket licenses, and patent pools. Section 4 addresses exclusion by means of sham litigation, fraudulent acquisition of IP rights, assertion of IP rights to weaken competition in a second market, refusals to deal, product design, manipulation of a standard setting organization, and collective exclusion. Sections 5 and 6 turn to the reciprocal question of how competition principles limit the exercise of IP rights. Section 5 discusses misuse, a limitation on IP exploitation that mirrors antitrust law in important respects. The chapter concludes with a brief assessment of how antitrust law limits the exercise of IP rights by reinforcing limitations on the scope and duration of the right.

3 

US Department of Justice and Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property (1995) .

874   C. Scott Hemphill

2.  How Intellectual Property Limits Competition Law Whether and how IP alters antitrust law are questions that have attracted significant commentary.4 As noted in the Introduction, IP may alter the operation of ordinary antitrust law either by operation of statute or as a matter of economic policy. This section considers these pathways in turn.

2.1 Statutory Limits IP law and antitrust law overlap in their coverage, and in some instances IP displaces antitrust law by operation of statute. As the US Supreme Court remarked, “[t]‌he patent laws which give a . . . monopoly on ‘making, using, or selling the invention’ are in pari materia with the antitrust laws and modify them pro tanto.”5 This displacement is unsurprising. Limited exemptions from antitrust law are fairly common to effectuate (for example) the policies behind legalized export cartels, labor law, and agricultural policy. The same is true for IP. The strongest case for a limitation comes from a specific IP provision directed to particular conduct. For example, the US Patent Act grants an exclusive right to “mak[e]‌, us[e], . . . or sel[l]” the patented invention.6 Copyright law similarly grants an exclusive right to distribute a copyrighted work.7 These provisions are the source of the core limitation discussed in the Introduction, the assertion of a valid right against a rival infringer that secures the rival’s exclusion. Other IP provisions might similarly be read as particularized limitations on antitrust law. Taken together, the statutory provisions define an “exclusionary scope” to the IP right.8 Applying the scope-​of-​the-​right concept beyond the core case, however, is not straightforward. Three issues arise. First, a particular IP entitlement may not include the privilege to act anticompetitively. By way of analogy, owning a hammer grants certain exclusive benefits in the use of the hammer, but not the right to break storefront windows.9 Consider the following Patent Act provisions and their debated connection to antitrust law: • Territorial restrictions: A “patentee . . . may . . . grant and convey an exclusive right . . . to the whole or any specified part of the United States.”10 Patent holders read the provision 4  Analyses include H Hovenkamp, “Antitrust and the Patent System: A Reexamination” (2015) 76 Ohio State LJ 467; H First, “Microsoft and the Evolution of the Intellectual Property Concept” (2006) 2006 Wisconsin L Rev 1369; MA Carrier, “Unraveling the Patent-​Antitrust Paradox” (2002) 150 University of Pennsylvania L Rev 761; L Kaplow, “The Patent-​Antitrust Intersection: A Reappraisal” (1984) 97 Harvard L Rev 1815. 5  Simpson v Union Oil Co 377 US 13 (1964). 6  35 USC § 154(a)(1). 7  17 USC § 106(3). 8  For an influential discussion of exclusionary scope, see WS Bowman, Patent and Antitrust Law: A Legal and Economic Appraisal (University of Chicago Press 1973) 8–​9. 9  United States v Microsoft Corp 253 F 3d 34, 63 (US Court of Appeals (District of Columbia Circuit) 2001) (the assertion of an “absolute and unfettered right to use its intellectual property as it wishes . . . is no more correct than the proposition that use of one’s personal property, such as a baseball bat, cannot give rise to tort liability”). 10  35 USC § 261.

Intellectual Property and Competition Law    875 to exempt territorial restrictions—​for example, permission to sell a patented invention in the state of New York but nowhere else. Antitrust plaintiffs counter that the provision has nothing to do with competition.11 • Presumption of validity: A patent enjoys a presumption of validity.12 Patent holders read the provision to allow payments to a rival to abandon litigation challenging the patent’s validity. Antitrust plaintiffs counter that the presumption is merely a starting point for allocating burdens of proof in a patent infringement proceeding. • Refusals to license: A patentee is exempt from a finding of “misuse or illegal extension of the patent right . . . by reason of having . . . refused to license or use any rights to the patent.”13 Patent holders read the provision to permit refusals that foreclose competition in a second market. Antitrust plaintiffs counter that the provision merely avoids a finding of patent misuse, not antitrust liability. Second, the conduct may offend an explicit statutory limit on the IP right. For example, IP rights are limited in time. Conduct that extends a right beyond its expiration date is a poor candidate for avoiding ordinary antitrust law. A third complication arises when conduct expressly covered by an IP provision is paired with conduct that is not. For example, a patentee might not merely refuse to sell a patented product, but also condition the sale on purchase of a second product. Is this conduct within the scope of the patent? Closely related, does the “greater” right to refuse to license entirely include the “lesser” right to license only on particular conditions, or to some customers but not others? The overall effect of these qualifications is to give a question-​begging cast to determinations that particular conduct either is or is not within the scope of the IP right.

2.2 Policy Limits Beyond specific provisions, the very existence of a conflicting statutory scheme might argue in favor of narrower antitrust liability. In particular, IP policy might be an input into the cost-​ benefit analysis that underpins antitrust law, thereby altering the antitrust result as a matter of economic policy. This is a second pathway by which IP might alter the ordinary operation of antitrust law. To see how this might work, we must take a closer look at those policies. The touchstone of antitrust law is “consumer welfare.”14 The definition of that phrase, however, is contested. One working definition is the net benefit that consumers derive from the products and services they consume. An important source of consumer welfare is low prices. Lower prices imply a higher net benefit—​higher “consumer surplus,” in the jargon. Thus, one account of antitrust emphasizes low prices as the central goal of antitrust law. On this view, the prohibition of (say) cartels is justified because cartels raise prices, which reduces consumer surplus. 11  WF Baxter, “Legal Restrictions on Exploitation of the Patent Monopoly: An Economic Analysis” (1966) 76 Yale LJ 267, 349–​352, concludes that § 261 is a mere “demarcation of the dividing line between interests sufficiently extensive to be transferred by assignment and those which are to be transferred by license.” 12  35 USC § 282. 13  35 USC § 271(d)(4). 14  An early appearance of the phrase is in Reiter v Sonotone Corp 442 US 330 (1979).

876   C. Scott Hemphill The consumer welfare approach was applied in Federal Trade Commission v Actavis, where the Supreme Court considered the antitrust treatment of certain settlements of patent litigation.15 The Court explained that the harm from such conduct arises when a firm “maintain[s]‌ and . . . share[s] patent-​generated monopoly profits,” because when this happens, “the consumer loses.” This consumer loss—​higher prices—​is the cognizable harm. Part of the consumer loss takes the form of revenue transferred to producers as extra profit. Additional loss takes the form of “deadweight loss” wherein consumers, who value the good more than its marginal cost of production, are deflected instead to less desirable alternatives. These harms are depicted in Figure 31.1. Suppose particular conduct—​a cartel of vitamin producers, for example—​shifts the price and quantity from point O to point X.  After the conduct, consumer surplus is reduced by the sum of Areas A  and B.  Area A  is the deadweight loss resulting from the conduct. Area B represents the transfer from consumers to producers. An alternative goal for antitrust law is total welfare. Total welfare is the sum of consumer benefit and producer profits. A total welfare standard credits producer profits as an offset to consumer harms. (Unfortunately, the phrase “consumer welfare” sometimes refers to total welfare, a confusing and misleading usage.) Thus, a transfer from consumers to producers—​ considered a harm in the consumer welfare analysis—​is merely neutral on a total welfare view, whereas the deadweight loss counts as a harm. Disregarding transfers narrows the scope of antitrust liability, compared to a consumer welfare standard.16 For example, in Figure 31.1, the relevant harm is limited to Area A. The analysis thus far focuses on the price and cost of existing goods. In addition to these static effects, conduct may have a dynamic effect on the development of new or improved products and services. Reduced innovation has greater long-​term significance for the Price

Demand

X

P2 B

A O

P1 Q2

Q1

Quantity

Figure 31.1   Effects of Market Power 15 

FTC v Actavis, Inc 133 S Ct 2223 (2013) (hereafter Actavis). A further difference arises when conduct increases efficiency to the benefit of producers. For example, a merger may cut costs, with the savings kept by the merging parties rather than being passed onto consumers. Such retained producer benefits count, on a total welfare view, in favor of the conduct. 16 

Intellectual Property and Competition Law    877 economy than high prices.17 New products and services drive economic growth, and economic analysis suggests that technological change ultimately dominates price effects in its long-​run contribution to welfare.18 Thus, the dynamic benefits and costs of particular conduct are of significant concern to competition policy. Taking dynamic effects into account might argue in favor of a measure of latitude to the innovator in some cases, thereby undercutting the static analysis. The prospect of higher prices is an ex ante inducement to innovate. As the Supreme Court stated in Verizon v Trinko: The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-​market system. The opportunity to charge monopoly prices—​at least for a short period—​is what attracts “business acumen” in the first place; it induces risk taking that produces innovation and economic growth.19

Monopoly is not only an inducement but also potentially a platform for further innovation. Joseph Schumpeter argued that monopolists are first-​rate innovators.20 They possess advantages in capacity such as superior personnel, greater financial resources (particularly if capital markets are imperfect and hence future innovations are funded out of current cash flows), and the freedom to make long-​term plans. Moreover, they are particularly well positioned (and hence incentivized) to capture the profits from further improvements. We have now reached the point where the economics of competition policy and the economics of IP intersect. An award of IP is often justified as a means to induce innovation. IP might also be justified as a platform for further innovation by granting a territory, a “prospect,” within which the rights holder can invest in further exploitation without fear of being undercut.21 If monopoly is indeed an inducement or platform for innovation—​with or without IP—​area B appears in a different light. Before, the transferred profits were treated as either a static harm or neutral transfer. In the dynamic frame, they are also a source of benefit. Area B is a valuable inducement, for which we accept the deadweight loss in area A as a necessary evil. The pro-​monopoly perspective on innovation, as reinforced by IP policy, might be taken to alter the internal cost-​benefit calculus of antitrust law. In particular, the dynamic benefits of innovation, to the extent they require protected profits, might furnish an argument for narrowing the scope of antitrust law. The result is to permit a shift from point O to point X that would otherwise be prohibited. As one implementation of this idea, we might selectively permit those practices that have a sufficiently high ratio of increased innovation compared to the reduction in static welfare.22 Implementing such a calibrated approach would be extremely challenging in practice. After all, selective permission brings no benefit where the 17 

For further discussion, see CS Hemphill and T Wu, “Parallel Exclusion” (2013) 122 Yale LJ 1182. JF Brodley, “The Economic Goals of Antitrust: Efficiency, Consumer Welfare, and Technological Progress” (1987) 62 New York University L Rev 1020; RM Solow, “Technical Change and the Aggregate Production Function” (1957) 39 Review of Economics and Statistics 312. 19  Verizon Communications Inc v Law Offices of Curtis v Trinko LLP 540 US 398 (2004) (hereafter Trinko). 20  JA Schumpeter, Capitalism, Socialism, and Democracy (3rd edn, Harper & Row 1950) 63–​120. For a further discussion, see CS Hemphill, “Disruptive Monopolists” (working paper 2016 on file with the author). 21  EW Kitch, “The Nature and Function of the Patent System” (1977) 20 Journal of Law and Economics 265. 22  This is the approach taken in Kaplow (n 4). 18 

878   C. Scott Hemphill innovation would be elicited without the additional reward.23 Isolating the effect of selective permission is also difficult given the multiple sources of private reward, including IP, first-​ mover advantages, economies of scale, and network effects.24 The celebration of monopoly as a source of innovation, moreover, is undercut by important counterarguments. For example, new entrants in a particular market are an important source of innovation—​perhaps more important than innovation by incumbents. A  substantial literature supports this conclusion. As demonstrated in an influential article by Kenneth Arrow, the incumbent’s incentive to innovate is dimmed when the innovation cannibalizes an existing product, compared to the incentive of an outsider with no stake in the status quo.25 An incumbent also may be hamstrung by its own earlier success. It may prefer to continue selling a high-​end product, ignoring down-​market demand for a stripped-​down offering.26 Finally, as Judge Learned Hand memorably explained in United States v Aluminum Co of America (Alcoa), monopoly may prove to be a “narcotic”: Many people believe that possession of unchallenged economic power deadens initiative, discourages thrift and depresses energy; that immunity from competition is a narcotic, and rivalry is a stimulant, to industrial progress; that the spur of constant stress is necessary to counteract an inevitable disposition to let well enough alone.27

Reconciling the pro-​ monopoly and pro-​ competition perspectives on innovation is a challenge. One proposed reconciliation is that innovation is maximized at intermediate levels of concentration—​that innovation as a function of concentration is an “inverted U.”28 Arguments that competition benefits innovation reinforce the static approach, supplying an additional reason for vigorous antitrust enforcement. These arguments apply whether or not IP is at stake. They might apply most powerfully, however, to certain settings where IP is important. In settings where innovation is to a great degree cumulative, broad rights to early innovators tend to inhibit the development of improvements. This argument, typically presented as a basis for weakening or narrowing IP rights to early innovators, might also suggest a strengthening of antitrust on the margin as applied to incumbents in industries where innovation is cumulative. This comparison of IP and competition principles has purchase when the defendant has market power, that is, the ability to charge a price higher than the competitive price.29 In many 23  Or, for that matter, any reward. For a discussion of circumstances where a financial reward is unnecessary, see CJ Sprigman, “The Intersection of Patent and Antitrust Law” in ER Elhauge (ed), Research Handbook on the Economics of Antitrust Law (Edward Elgar 2012) 353 n 12. 24  A network effect is a demand-​side economy of scale, wherein a user’s benefit increases with the number of other users. The telephone network and Facebook are examples. 25  KJ Arrow, “Economic Welfare and the Allocation of Resources for Innovation” in R Nelson (ed), The Rate and Direction of Economic Activities: Economic and Social Factors (Princeton Legacy Library 1962) 609. 26  CM Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Harvard Business School Press 1997). 27  United States v Aluminum Co of America 148 F 2d 416 (US Court of Appeals (2nd Circuit) 1945). 28  FM Scherer, “Market Structure and the Employment of Scientists and Engineers” (1967) 57 American Economic Rev 524; P Aghion, N Bloom, R Blundell, R Griffith, and P Howitt, “Competition and Innovation: An Inverted-​U Relationship” (2005) 120 Quarterly Journal of Economics 701. 29  For a detailed and critical discussion, see L Kaplow, “On the Relevance of Market Power” (2017) 130 Harvard L Rev 1303.

Intellectual Property and Competition Law    879 antitrust matters, market power is a key element of the plaintiff ’s case. IP is one potential source of market power. A patent might impede other firms’ entry into a particular market. Copyrights and trademarks can serve as barriers to entry as well. However, most IP rights fail to confer market power. The legal power to exclude does not necessarily imply the ability to exclude rivals in any economically meaningful sense, any more than the exclusive possession of real property necessarily implies any meaningful market power. This might seem an obvious point, but US courts had adopted a shortcut by which market power was presumed from the possession of a patent or copyright. This presumption varied in its strength, either furnishing an inference of market power that defendants could rebut with other evidence, such as the demonstrated availability of close substitutes, or else allowing a plaintiff to dispense with a market power showing entirely.30 In any event, both versions of the presumption were squarely rejected in the 2006 Independent Ink case.31

3. Collusion Antitrust challenges against IP rights holders can be divided along the traditional collusion/​ exclusion dichotomy of antitrust law. Collusion is considered here; exclusion is the subject of Section 4. The discussion of collusion focuses on cooperation by rightsholders and their rivals that reduces competition among them.32 Examples include cartels, market division arrangements, collusive licenses, and joint ventures.

3.1 Market Division At the core of antitrust law is a set of prohibitions that exist without any case-​specific inquiry into the economic effect of the conduct. For example, cartels that agree on price or quantity, bid rigging, and market division by geography are deemed illegal “per se.” These forms of collusion are condemned, notwithstanding the argument that price fixing, if permitted, would induce more innovation in a particular industry. Such an argument is off the table. Per se liability reflects a judgment, often left unstated, that the offset is rare, small where it exists, difficult to reliably determine, and subject to frequent and costly error. The main alternative regime to per se liability, the so-​called “rule of reason,” requires plaintiffs to show anticompetitive effect and affords defendants the opportunity to offer procompetitive justifications for the conduct. Many “horizontal” agreements between rivals

30 

An example of the stronger view, stated in dicta, is Jefferson Parish Hospital District No 2 v Hyde 466 US 2 (1984). 31  Illinois Tool Works, Inc v Independent Ink, Inc 547 US 28 (2006). The presumption and its rejection arose in the particular context of tying cases, a type of antitrust claim discussed below, but the point is general. 32  Competitors also may agree to exclude outsiders, instead of (or in addition to) softening competition among themselves. Discussion of cases of that sort is deferred to Section 4.

880   C. Scott Hemphill are considered under the rule of reason, whether or not IP is at issue. So are most “vertical” agreements between sellers and buyers, or IP licensors and licensees. A recurring issue in IP licensing transactions is a market division by geography or field of use. For example, in Palmer v BRG of Georgia, Inc,33 the Supreme Court considered an agreement reached between BRG and Bar/​Bri, two providers of written materials and lectures to prepare new lawyers for the bar exam. Bar/​Bri agreed not to compete in the state of Georgia. BRG took an IP license and agreed not to compete outside of Georgia.34 The Court condemned this naked market division as a per se antitrust violation. The anticompetitive effect was clear: removal of an existing competitor from the market, with the consequence of higher prices and reduced output. There was no special dispensation for—​or indeed significant attention to—​the IP license at the heart of the case. In a naked market division such as Palmer, the IP overlay makes no difference. Not all horizontal agreements, of course, are merely an opportunity to suppress output. Horizontal agreements can have a variety of procompetitive effects. For example, suppose a patentee produces for one set of end-​users and licenses production for a second set of end-​users to another firm. Rather than taking a competitor off the market (the situation in Palmer), this field-​of-​use license likely expands output. The agreement is effectively vertical, and vertical IP licensing arrangements are generally procompetitive, encouraging exploitation of a seller’s products or IP. This procompetitive effect is emphasized by the IP Guidelines35 and reflected in case law.36 One difference between geographical and field of use divisions is statutory. Courts have read a Patent Act provision to expressly permit territorial divisions,37 notwithstanding the critique discussed in Section 2. There is reason to doubt that this extra statutory protection makes an important practical difference, however, as a naked territorial division among competing patentees likely would be condemned nevertheless.38

3.2 Settlements of Patent Litigation An unusual form of market division is presented by certain settlements of patent litigation. Rather than dividing the market by geography or customer, the division is by time. As the Supreme Court has explained the fact pattern: Company A sues Company B for patent infringement. The two companies settle under terms that require (1) Company B, the claimed infringer, not to produce the patented product until

33 

Palmer v BRG of Georgia, Inc 498 US 46 (1990) (per curiam). The Bar/​Bri name was protected by trademark; the materials were presumably copyrighted, although the opinion does not discuss this. 35  US Department of Justice and Federal Trade Commission (n 3) § 2.3. 36 Cf General Talking Pictures Corp v West Electric Co 304 US 175 (1938) (permitting field of use licensing that arguably expanded the market) with Hartford-​Empire Co v United States 323 US 386 (1945) (condemning complex cross-​licensing by field of use that orchestrated an industry-​wide market allocation). 37  35 USC § 261. DS Chisum, Chisum on Patents (LexisNexis 2015) § 19.04[h]‌, describes this reading as the judicial consensus, though “actual holdings are rare.” 38  US v National Lead Co 332 US 319 (1947). 34 

Intellectual Property and Competition Law    881 the patent’s term expires, and (2) Company A, the patentee, to pay B many millions of dollars. Because the settlement requires the patentee to pay the alleged infringer, rather than the other way around, this kind of settlement agreement is often called a ‘reverse payment’ settlement agreement.39

The two core elements of the reverse payment claim are (1) a large payment, in some form, from the patentee to the alleged infringer, and (2) a requirement that the alleged infringer refrain from competing. For example, a patentee might pay a competitor several hundred million dollars to abandon its proposed market entry and stay out of the market until patent expiration. Reverse payment cases have arisen mainly in the pharmaceutical industry, where a competing, low-​price generic drug maker frequently seeks entry prior to the expiration of one or more patents. A reason for its prevalence there is that, to be successful, the reverse payment strategy must overcome an important practical challenge. Where there exist numerous, similarly situated rivals, it is less effective to make payments to just one of them, because the others will enter anyway or demand payments of their own. In pharmaceuticals, competitive entry is costly and often requires specialized knowledge. In the US, an industry-​specific regulatory scheme set up by the Hatch–​Waxman Act makes settlement with reverse payment more tempting, because generic challengers are unequally positioned to challenge the patent. First challengers—​so-​called first filers—​have a special incentive to challenge the patent because they are potentially eligible for 180 days of generic exclusivity before other generics can come in. Meanwhile, later challengers are often practically unable to challenge the patent due to a regulatory bottleneck that inhibits approval while the first-​filer’s exclusivity is pending. Later filers are also discouraged by “acceleration clauses” contained in first filer settlements, which permit the first filer to enter early if the later filer somehow gets to market. These features reduce the incentive of later filers to pursue early entry. In the US, antitrust challenges by the FTC and private plaintiffs have been filed against reverse payment settlements as to more than 20 drugs.40 The settlements are not limited to the US, however. The European Commission and UK competition authority have taken action against reverse payment settlements as well.41 In Actavis, the US Supreme Court held that reverse payment settlements are illegal under the rule of reason if the patent holder is paying to avoid competition. Note that an ordinary patent settlement that contains a compromise on entry dates does not include a payment and does not raise concern under antitrust law. In an ordinary patent settlement, late entry dates delay the consumer benefits of entry, but they are bad for the alleged infringer, too. The infringer therefore can be expected to fight for an earlier entry date. The effect is different when the settlement does not rest solely on the strength of the patent—​that is, whatever delayed entry the patentee could secure based on its probability of winning the infringement suit. Instead, the patentee makes an additional payment to sweeten the deal. The payment secures 39 

Actavis, 2227. Many of these challenges are discussed in CS Hemphill, “An Aggregate Approach to Antitrust: Using New Data and Rulemaking to Preserve Competition” (2009) 109 Columbia L Rev 629, and CS Hemphill, “Unjustified Delays in Generic Drug Competition,” OECD Expert Paper (6 June 2014) 3. 41  As of June 2016, settlements as to four drugs. 40 

882   C. Scott Hemphill less competition than the patentee could expect by asserting the patent alone in litigation or settlement. The payment, in other words, is for additional generic delay, compared to what is legitimately achieved by the patent alone. The logic applies not only to “weak” patents in which the challenger has a high probability of success, but also to patents where the patentee was likely (albeit not certain) to win the patent litigation.42 In reaching its result, the Court rejected statutory and policy arguments favoring patent exceptionalism. Defendants had advanced a distinctive version of the statutory scope-​ of-​the-​patent argument—​that a patentee’s conduct is privileged within its nominal scope. Nominal scope refers to whatever competition that would be displaced by a patent that is valid and infringed. For example, entry by Company B one day before patent expiration is within the nominal scope; entry one day after is not. The idea was that, unless and until the patent is adjudicated to be invalid or not infringed, the patentee is free to reach market division agreements that replicate the patent’s nominal scope. One of the key policy arguments was the ex-​ante inducement account discussed in Section 2. Preserving the patentee’s profits through a payment, rather than risking loss in an infringement action, increases the patentee’s profits, thereby increasing the ex ante incentive to innovate. An innovator might argue that the additional profits induce enough incremental innovation to make the practice beneficial overall. In its opinion rejecting these arguments, the Court drew two principles from previous cases. The first was the need for a specific IP provision that limits competition in this particular context. The Court perceived no such provision, effectively rejecting the defendant’s argument that the patentee’s exclusive right to make, use, and sell the invention provided an adequate legal hook. The statutory presumption of validity43 did not provide such a hook, either. Indeed, the Court noted a patent law policy that pointed the other way—​that invalid patents should be challenged wherever possible, “so the public will not continually be required to pay tribute to would-​be monopolists without need or justification.”44 The second principle was whether “competition is impeded to a greater degree” compared to previously approved restraints, essentially an inquiry into economic policy.45 Here, the Court saw the restraint as quite unlike previously approved restraints, and hence more suspect. On this point, the Court might have added that permitting a settlement with payment would be a relatively ineffective way to confer an additional incentive to innovate. In exchange for receiving a reprieve from competition, the patentee must make a sizable payment. This payment reduces the patentee’s profits and thus reduces whatever incremental incentive might be achieved through the settlement.

3.3 Price-​Restricted Licenses Other patentees have had greater success in avoiding antitrust liability by invoking the Patent Act. The most controversial example is United States v General Electric (GE).46 GE licensed 42  AS Edlin, CS Hemphill, HJ Hovenkamp, and C Shapiro, “The Actavis Inference: Theory and Practice” (2015) 67 Rutgers University L Rev 585. 43  35 USC § 282(a). 44  Actavis, 2233, quoting Lear, Inc v Adkins 395 US 653 (1969). 45  The source of this language is United States v Line Material Co 333 US 287 (1948). 46  United States v General Electric 272 US 476 (1926).

Intellectual Property and Competition Law    883 a light bulb patent to rival Westinghouse. The license permitted GE to set Westinghouse’s resale price. The result was a cartel, as GE established the market-​wide price and quantity. Nevertheless, the Supreme Court approved the condition, concluding that the condition was within the patentee’s core right to make, use, or sell.47 The GE rule might be defended as an example of the greater including the lesser. The essential premise is that under the Patent Act, GE is entitled to earn a monopoly profit rather than a competitive profit by asserting a valid and infringed patent and thereby excluding Westinghouse. If so, then perhaps it is free to earn that same profit instead by sharing the market within a cartel set up by license.48 There might even be a social benefit from such licensing if the licensee has lower costs or superior market access. Yet the GE rule is problematic where the premise is false. For example, if the patent covers only a minor aspect of the invention, assertion of the patent will not secure monopoly profits. Instead, the licensee can be expected to insist on a low royalty or else avoid the patent at low cost. Lower royalties tend to be passed along to consumers in the form of lower prices. Similarly, if patent validity or infringement is uncertain, the royalty rate must be low, or else the licensee will litigate. Once again, the patentee is unable to achieve monopoly profits through a high royalty. By contrast, the GE rule permits a much higher cartel markup to be charged.49 GE is a high-​water mark for patent exceptionalism. Actavis effectively limited GE to an agreement between a single licensor and a single licensee.50 This dictum was unsurprising given a series of earlier cases limiting the GE rule and imposing antitrust liability.51 Moreover, even in the single licensor/​single licensee case, the GE rule may not apply when the licensee is the impetus of the restraint, for example, because the licensee seeks a price floor to protect itself from rival price-​cutters.52

3.4 Blanket Licenses and Patent Pools One common fact pattern involves blanket licenses that pool the rights of numerous competing rights holders. Songwriters have the exclusive right under copyright law to authorize radio broadcasts and other public performances.53 Thus, radio stations (among 47 

Simpson v Union Oil interprets the GE result as a “pro tanto” modification of the kind discussed in Section 2.1. 48  S Maurer and S Scotchmer, “Profit Neutrality in Licensing: The Boundary between Antitrust Law and Patent Law” (2006) 8 American Law and Economic Rev 476, defends the GE rule partly on this ground, arguing that a patentee is entitled to the reward it would earn if it were an efficient producer of the invention. 49  Hovenkamp (n 4) 525–​527. Maurer and Scotchmer offer an alternative, innocent explanation that a GE-​like condition, setting a price for the licensor and licensee alike, controls licensor opportunism. 50  Actavis, 2232. 51  For example, in the Line Material case, the Supreme Court declined to apply the GE rule to multiple cross-​licensing patentees, noting that “[n]‌othing in the patent statute specifically gives a right to fix” a licensee’s sale price—​an argument that applies to GE too. For additional limitations on the GE rule, see Hovenkamp et al (n 1) §§ 31.2–​3; American Bar Association, Intellectual Property and Antitrust Handbook (2nd ed, ABA 2015) 78–​80. 52  Interstate Circuit, Inc v United States 306 US 208 (1939). Interstate Circuit is a copyright case, and the licensor and licensee there were not competitors, but the point is general. 53  17 USC § 106(4).

884   C. Scott Hemphill many other entities) require public performance licenses to a large number of works. To handle this demand, songwriters grant licenses to an intermediary, a performing rights organization such as the American Society of Composers, Authors and Publishers (ASCAP). (ASCAP is not the only US performing rights organization, but I ignore the others for simplicity.) ASCAP pools individual licenses and repackages them as a blanket license that is made available to radio stations and other public performers. The blanket license is a valuable new good, not possible without collective action, and offers immediate and easy access to a large repertoire of songs. ASCAP sets the price for the blanket license. At the same time, the decision to collectively offer and price the works raises an antitrust claim of horizontal price fixing among the rights holders. The blanket license reduces price competition among the songwriters. The concern is that ASCAP might set a higher price to (say) broadcasters than if each songwriter set its price independently. Note that this concern is avoided if each rights holder sets its own price, and the organization simply administers the collection of fees. An example of this alternative approach is the Copyright Clearance Center, which administers copyrights for academic journals in the US. Due to the risk of collusion, ASCAP has operated within the restrictions of an antitrust consent decree since 1941. In the early years of ASCAP’s operations, the collusion problem was particularly severe. Songwriters granted exclusive public performance licenses to ASCAP, which eliminated price competition among the songwriters entirely. Under pressure from the Justice Department, ASCAP shifted to nonexclusive licenses, thereby permitting songwriters to negotiate individually with music users.54 Enforcing nonexclusivity has been the subject of subsequent action by the Justice Department.55 Even without exclusivity, the blanket license makes price competition less valuable to and hence less vigorous among songwriters. The availability of a blanket license dampens, though it does not prohibit, price competition among songwriters for per-​song, per-​use negotiations with users. One important antitrust question frequently presented under the rule of reason is whether an alternative arrangement exists that achieves the benefits of centralized administration without suppressing price competition among songwriters. For example, could ASCAP offer a per-​song, per-​use option to music users that preferred the à la carte approach, and if so, should antitrust require that? In a series of cases in the 1970s, courts declined to require performing rights organizations to offer a per-​use option, in part because it was too difficult at the time to monitor compliance with per-​use licenses.56 Given subsequent changes in the 54  US v ASCAP, 1940–​1943 Trade Cases (CCH) ¶ 56,104 (US District Court (Southern District of New York) 1941). 55  Nonexclusivity was reinforced in Sections IV(A) and IV(B) of the 1950 Amended Final Judgment, United States v American Society of Composers, Authors & Publishers, No 13–​95, 1950 US Dist LEXIS 1900, *3–​4 (US District Court (Southern District of New York)). In 2016, ASCAP settled a contempt claim, brought by the Justice Department, asserting that ASCAP had entered into contracts with certain songwriters and publishers granting exclusivity. Proposed Settlement Agreement and Order, United States v American Society of Composers, Authors & Publishers No 1:41-cv-​01395 (US District Court (Southern District of New York)) ECF No 749. 56  BMI v CBS, Inc 441 US 1 (1979); BMI v Moor-​Law, Inc 527 F Supp 758 (US District Court (District of Delaware) 1981).

Intellectual Property and Competition Law    885 frontier of practicality, an open question is whether an antitrust challenge, if pursued today, might yield a different result.57 Music users’ demand for access to a large catalog of songs affects the antitrust treatment of music copyrights in a second way. A typical piece of recorded music is covered not only by a copyright in the composition, discussed earlier, but also a copyright in the sound recording. In the US, sound recordings enjoy a limited public performance right, restricted to digital distribution. Thus, digital distribution platforms, unlike radio stations, must secure a license to the sound recording.58 The ownership of sound recordings has become more concentrated over time. Today, the most valuable sound recordings are held principally by three “major” music labels: Universal, Sony, and Warner. An important antitrust question is whether the mergers producing this degree of consolidation should have been permitted, given concerns about higher prices charged to licensees. A further concern is the enhanced ability to act as “kingmaker,” potentially suppressing innovative business models. In response, music labels have argued that although they are competitors for some purposes, they are offering complementary products when it comes to digital distribution through an interactive service. A distributor’s access to one label’s music makes access to the others more valuable. In fact, each is effectively a must-​have, because a user of an interactive service expects music from all three labels. When complements are separately owned, each firm charges a higher price, failing to fully take into account the prices charged by the other firms.59 The result is higher prices and inefficiency. A standard result in antitrust economics is that common ownership of complements is beneficial to remove this effect. Thus, a merger of two major labels might be viewed, seemingly paradoxically, as good news in this respect. An argument of this kind appears to have supported the FTC’s decision not to challenge a merger that reduced the number of major labels from four to three. As the FTC explained, both merging labels were already must-​haves for interactive streaming services, so consolidation would not make matters worse (and indeed, in theory, might help).60 Complementarity is also a crucial starting point for understanding patent pools. Patent pools bring together multiple technologies in a single convenient package. Where the patents are complementary—​for example, both patents are necessary to the implementation of a technology—​their joint provision is highly procompetitive. Inclusion of a substitute patent, by contrast, raises serious concerns by suppressing competition between rival technologies. Patent pools may also exclude would-​be licensors (from inclusion in a standard) and licensees (from use of the technology), issues taken up in the next section.

57  For further discussion, see CS Hemphill, “Less Restrictive Alternatives in Antitrust Law” (2016) 116 Columbia L Rev 927. 58  The discussion in text applies primarily to interactive streaming services (such as Spotify) that must negotiate for these rights. Other services are subject to a compulsory license or are exempt. 59  For a discussion of this “double marginalization” issue in the context of IP rights, see C Shapiro, “Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting” in AB Jaffe, J Lerner and S Stern (eds), Innovation Policy and the Economy 1 (MIT Press 2000) 119. 60  RA Feinstein, Director, Federal Trade Commission, Bureau of Competition, Statement in the Matter of Vivendi, SA and EMI Recorded Music (12 September 2012) .

886   C. Scott Hemphill

4. Exclusion This section considers exclusion claims, the other major branch of antitrust law. The plaintiff asserts that an IP right holder has engaged in improper self-​entrenching conduct. The bounds of propriety, however, are often unclear. After all, the ordinary successful assertion of a patent or copyright excludes would-​be competitors. It would eviscerate IP law if such assertions frequently triggered an antitrust violation. Some cases avoid the dilemma. For example, the antitrust defendant might lack a valid and infringed IP right in the first place, yet press a nonmeritorious IP claim. Or an IP rightsholder with a valid right might overreach, suppressing competition as to a second product not covered by the IP right. This section reviews these scenarios before turning to cases that present the dilemma in a sharper fashion.

4.1 No Valid Intellectual Property Claim One set of exclusion claims asserts that an IP holder has suppressed competition by falsely asserting an IP claim, either by pursuing “sham litigation” or in its acquisition of the IP right. For example, in Professional Real Estate Investors v Columbia Pictures Industries,61 the defendant rented videodiscs of copyrighted movies to hotel guests to watch in their rooms. Motion picture studios held the copyrights, which they had licensed to a pay-​per-​view cable system that competed with the rental scheme. The studios filed suit for copyright infringement, asserting a violation of their public performance rights. Courts eventually rejected the copyright claim. The defendant counterclaimed in antitrust, asserting that the copyright suit was designed to exclude its competing rental operation. The Supreme Court denied antitrust liability, insisting that the suit must be not only subjectively motivated by exclusion of a competitor, but also “objectively baseless.” Simply losing the copyright suit was not enough for objective baselessness. The case reflects a concern, rooted in the constitutional right to petition, for ensuring that rights holders have an adequate opportunity for redress. Turning to IP acquisition, the Walker Process case holds that if the patent (or, in rare cases, a copyright) was acquired by fraud, its subsequent assertion to exclude rivals can be the premise for an antitrust claim.62 Sometimes Walker Process claims are paired with sham litigation, because the patentee’s assertion against a rival takes the form of a lawsuit. But not all Walker Process cases involve litigation, and in any event the technical focus is different—​the bad conduct is in the acquisition of the patent, rather than the conduct of the litigation. Also required in these cases is a demonstration that the conduct was actually capable of harming competition, a showing of market power.

61 

Professional Real Estate Investors v Columbia Pictures Industries 508 US 49 (1993). Walker Process Equipment, Inc v Food Machinery & Chemical Corp 382 US 172 (1965). For a discussion in the copyright context, see Knickerbocker Toy Co v Winterbrook Corp 554 F Supp 1309, 1321 (US District Court (District of New Hampshire) 1982). 62 

Intellectual Property and Competition Law    887 Walker Process claims pose an unusual risk to a patentee. They allow a plaintiff to challenge the validity or enforceability of a patent, even if the plaintiff lacks standing to bring such a challenge under patent law. For example, a direct purchaser of a patented good lacks standing to challenge the patent under patent law. By contrast, antitrust law confers standing on direct purchasers, including in Walker Process cases.63

4.2 Leverage and Foreclosure A second set of exclusion cases involves leverage—​the worry that an IP holder can use an IP-​protected monopoly in one market to gain an improper advantage and weaken competition in a second market. The classic fact pattern involves tying, wherein a firm conditions the purchase of one product or service on the purchase of another. The condition may be accomplished through agreement: “if you want my patented product A, you must also take my product B.” A similar effect may be achieved by offering the product only in a package, including by inseparably fusing them together. A famous example of tying is International Salt Co. v United States.64 International Salt leased a patented machine called the Saltomat used in the canning process to inject salt into the canned product. The company required a customer, as a condition of leasing the Saltomat, to buy all its salt tablets from International Salt as well. The Supreme Court condemned this arrangement as an illegal tie. Although International Salt was permitted to restrain others from making, vending, or using the patented machines, . . . the patents confer no right to restrain use of, or trade in, unpatented salt. By contracting to close this market for salt against competition, International has engaged in a restraint of trade for which its patents afford no immunity from the antitrust laws.

In the Court’s view, the impact on a second market took the conduct outside the scope of the patent. Under somewhat dated judicial precedents, tying is subject to condemnation without full rule of reason evaluation, provided several technical conditions are met. However, tying is often beneficial, resulting in net efficiencies through cost savings or quality improvement. Meanwhile, concerns about leverage and resulting foreclosure are often overblown. Given the frequent presence of procompetitive justifications and frequent absence of any motive to gain an advantage in a second market, commentators have suggested that tying should receive more lenient treatment. The so-​called “one monopoly profit” result dispels some of the concerns about leverage.65 For example, suppose that the competitive price for a one-​year lease on a Saltomat machine and a year’s worth of salt is $200 each, and a profit-​maximizing firm selling both machines and salt would charge $1,000 for the combination. The total profits for the monopolist are $600. Meanwhile, if the salt market is competitive, a Saltomat monopolist could simply 63 

Ritz Camera & Image, LLC v Sandisk Corp 700 F 3d 503 (US Court of Appeals (Federal Circuit) 2012). 64  International Salt Co v United States 332 US 392 (1947). 65  WS Bowman, “Tying Arrangements and the Leverage Problem” (1957) 67 Yale LJ 19.

888   C. Scott Hemphill charge $800 for the machine, again earning $600. In this example, the Saltomat monopolist earns nothing by selling salt as well. There is no reason to tie, because the monopolist earns a single monopoly profit either way. One motivation for tying is price discrimination. Customers vary in their intensity of use. One Saltomat user might do a lot more canning than another. Alternatively, users might be uncertain about their intensity of use, and prefer to “pay as they go” through metered pricing. Often, the producer sells the tying product at cost, thus promoting adoption and earning all its profits from the tied product. The welfare effects of price discrimination are complex; depending on the facts, permitting discrimination can either increase or decrease output. The one monopoly profit result does not always hold. For example, leverage can result in foreclosure where there is independent demand for the tied good without the tying good, and some prospect of increasing market power in the tied good market by depriving sales to a rival.66 To return to the Saltomat example, there is clearly separate demand for salt not used in conjunction with a Saltomat. The foreclosure story founders, though, on International Salt’s inability to deprive rival salt sellers of economies of scale by retaining “captive” salt customers who need the Saltomat. Control of the second market is also a form of defense. The incumbent is not seeking extra profits in the second market, but instead seeks to make entry in the first market more difficult by forcing a rival to enter into both at the same time. One variant of tying cases arises uniquely in the IP context: when both products are IP rights, and the rights are only offered together in a package. Examples include ASCAP’s blanket license and package licenses of patents. Such contracts may produce important efficiencies. For example, licensing all the rights may be cheaper than licensing just a few if piecemeal monitoring is expensive. These arrangements have generally received lenient treatment.67 An exception is the “block booking” of a slate of copyrighted films licensed by a movie studio to an exhibitor, which has been prohibited per se on concerns about leverage, despite procompetitive explanations offered by commentators such as economies of scale in selling the package.68

4.3 Refusals to Deal A third category of exclusion takes the form of a refusal to deal with a rival—​either a refusal to license IP or a refusal to sell a product or service containing the IP. A rights holder’s refusal is, in economic terms, closely related to a tie. For example, suppose a machine manufacturer refuses to sell a patented replacement part to an independent servicer of the machines, and as a consequence the servicer is unable to service the machines. The concern is that the manufacturer has used its patent on the part to gain an advantage for its own servicing business. Both the prospect of foreclosure and the various responses—​the one monopoly 66 

MD Whinston, “Tying, Foreclosure, and Exclusion” (1990) 80 American Economic Rev 837. For an argument that blanket licenses can suppress competitive entry into the provision of intermediary services, see RC Picker, “Unbundling Scope-​of-​Permission Goods: When Should We Invest in Reducing Entry Barriers?” (2005) 72 University of Chicago L Rev 189. 68  FA Hanssen, “The Block Booking of Films Reexamined” (2000) 43 Journal of Law and Economics 395. 67 

Intellectual Property and Competition Law    889 profit critique, efficiencies, and opportunity for price discrimination—​mirror the discussion of tying in Section 4.2. Despite these similarities, antitrust law is more lenient toward refusals. Under the Trinko case, a refusal to deal is not generally actionable.69 Monopoly is not a status offense. A monopolist must engage in affirmative anticompetitive conduct to be liable for an antitrust violation. Trinko also cast a skeptical eye toward essential facilities claims, an antitrust doctrine requiring access to the withheld facility under certain circumstances, stating that the Supreme Court had never recognized such an antitrust claim. The reason for leniency is reflected in the quotation from the Trinko case discussed in Section 2—​that the prospect of monopoly attracts risk-​taking and “business acumen.” As Judge Hand explained in Alcoa—​shortly after decrying monopoly as a narcotic—​monopoly is justified as a reward for “skill, foresight and industry” in order to induce innovation. This justification tolerates some loss of static consumer welfare:  “the successful competitor, having been urged to compete, must not be turned upon when he wins.” This result thus reflects the attention to dynamic effects and ex ante incentives discussed in Section 2. This safe harbor for incumbents is not limited to IP. A significant exception arises from selective refusals, in which the incumbent sells a good or service to some customers but not others.70 In particular, an incumbent might decide to make profitable sales to ordinary customers that are not competing with it, yet withhold the otherwise generally available product from a competitor. Such selective withholding is evidence of a profit sacrifice—​that is, that dealing would be profitable aside from the tendency to foreclose—​and liability is possible if other elements of an antitrust claim are met. However, under the Xerox case, patent law arguably expands the incumbent’s insulation from antitrust attack.71 Copier maker Xerox refused to sell patented parts to independent servicers, which prevented them from competing with Xerox’s own servicing business. The Federal Circuit acknowledged the possible advantage gained in the service market due to this conduct, but nevertheless denied liability. In support of its conclusion, the court noted the Patent Act provision exempting refusals to license from a finding of “misuse or illegal extension of the patent right.” The court reached the same conclusion as to copyrighted software, pointing to the copyright holder’s exclusive right to distribute copyrighted works.72 Xerox’s refusal was selective, as it continued to sell parts to end-​users while refusing to sell to independent servicers. Given that selective refusals to deal are not ordinarily privileged, Xerox arguably adds selective refusals to the set of permissible conduct for IP holders. This is a significant expansion of the incumbent’s opportunity to use an IP right to gain an advantage in a second market. It bears emphasis that Xerox is a lower-​court case that may conflict with other opinions more inclined toward liability.73 It is unclear how the Supreme Court might ultimately resolve the tension.

69

70  Otter Tail Power Co v United States 410 US 366 (1973).   Trinko, 407–​411. Independent Service Organizations Antitrust Litigation 203 F 3d 1322 (US Court of Appeals (Federal Circuit) 2000). 72  17 USC § 106(3). 73  Image Technical Services Inc v Eastman Kodak Co 125 F 3d 1995 (US Court of Appeals (9th Circuit) 1997) and Data General v Grumman Systems Support 36 F 3d 1147 (US Court of Appeals (1st Circuit) 1994) suggest a rebuttable presumption of legality. 71 

890   C. Scott Hemphill This result creates a difference between a conditional refusal by an IP holder, as in a tying case, and a selective refusal. The right to refuse does not imply a right to conditionally refuse, because such an argument “fail[s]‌to distinguish between the rights which are given to the inventor by the patent law and which he may assert against all the world through an infringement proceeding and rights which he may create for himself by private contract which, however, are subject to the rules of general, as distinguished from those of the patent, law.”74 The restrictive private contract, an important hook for antitrust enforcement, is missing from a selective refusal, opening the path to argue that selective refusals constitute a lesser included statutory right. Beyond selective refusals, there is an argument that Xerox goes further. The court expressly acknowledged a patentee’s potential antitrust liability for sham litigation and fraud on the patent office (discussed earlier in Section 4.1). The court also recognized a further category of liability, associated with the Supreme Court’s statement in another case that “power gained through some natural and legal advantage such as a patent, can give rise to liability if a seller exploits his dominant position in one market to expand his empire into the next.”75 That statement might be read as a restatement of the “Leverage and Foreclosure” category discussed in Section 4.2. However, Xerox hinted that this type of claim might be limited to tying,76 which leaves out leverage and foreclosure accomplished by other means, such as exclusive dealing.77 Overall, however, such a drastic contraction of antitrust liability seems unlikely.78 In Europe, by contrast, a refusal to license IP may be subject to liability under certain circumstances, even if the refusal is unconditional and non-​selective. For example, in the Magill case, Magill sought to develop a new television guide that integrated the copyrighted listings of all three major Irish TV networks.79 The networks refused to license the listings. The European Court of Justice affirmed the Commission’s determination that, under “exceptional circumstances,” a refusal is an abuse of a dominant position under European competition law. Later cases such as IMS and Microsoft help specify what counts as exceptional circumstances: an unjustified refusal that blocks the entrant’s development of a new product or “technical development” that is feasible only with a license.80 The focus is on innovations, not just copycats of the goods of the IP rights holder. Recall the arguments canvassed in Section 2, that outsiders are a potent source of innovation, as a basis for expansive 74 

Motion Picture Patents Co v Universal Film Manufacturing Co 243 US 502 (1917) 514. Eastman Kodak Co v Image Technical Services Inc 504 US 451 (1992) (internal quotation omitted). 76  For example, the court emphasized that the quotation came from a tying case (also involving copiers), and at another point restated the categories of liability as sham litigation, fraud on the patent office, and tying. 77  For example, a seller might engage in exclusive dealing by contractually requiring that the buyer purchase no products from the seller’s rival. 78  Among other problems, the rule would fall afoul of the Clayton Act, which imposes liability for exclusive dealing, even as to patented goods: see 15 USC § 14. 79  Joined Cases C-241/​91P and C-242/​91P Radio Telefis Eireann and Independent Television Publications, Ltd v Commission [1995] ECR I-743. 80  Case C-​418/​01 IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG [2004] ECR I-​5039; Case T-​201/​04 Microsoft v Commission [2007] OJ C 269/​45. Microsoft emphasizes (at para 647) that the innovation need not be a new product; impeded “technical development” in the language of art 102 will suffice. 75 

Intellectual Property and Competition Law    891 competition-​law enforcement and narrower IP rights. The emphasis on innovative outsiders, as a premise for the incumbent’s liability under IMS and Microsoft, is an implementation of the Arrovian perspective. At the same time, there may be space under European law to balance that effect against the potential negative effect on the incumbent’s innovation incentive. In Microsoft, the European Commission acknowledged the possibility that negative effects on the ex ante incentive to innovate might justify the conduct and thereby furnish a sufficient basis to withhold liability. The Commission’s approach thus took the form of a “balancing incentives” approach, weighing and comparing the incentives furnished to each.81 The Court of First Instance avoided considering this approach by recharacterizing what the Commission had done.82 Thus, although Microsoft has received attention primarily as an expansion of liability, it contains the seeds for the Commission to refrain from challenging conduct on appropriate facts.

4.4 Product Design A fourth category of exclusion cases features a newly designed product that is incompatible with a rival’s product, thereby excluding the rival from the market. The simplest case is the introduction of a new and improved product. For example, consider the antitrust case brought against Tyco, a manufacturer of medical monitors used in combination with sensors.83 Tyco introduced a new monitor and sensor design, in which part of the functionality was shifted from the monitor to the sensor. The plaintiff manufactured generic sensors that were compatible with the old design but not the new one. An appeals court rejected antitrust liability, concluding that merely introducing an improved product raises no antitrust issue even if it excludes rivals. This conclusion is not specific to patents. It applies to any genuine new product innovation, though a patent might be evidence that a genuine improvement exists. A more complex case is presented when the introduction of the improved product is accompanied by additional conduct that induces or even forces consumers to accept the new product. Discontinuation or withdrawal of the old product is a common fact pattern. In the medical monitor case, Tyco withdrew the old technology when it introduced the new monitor and sensor technology. The court concluded that Tyco had not “effectively force[d]‌” consumers to take the new product, because it faced substantial competition from other monitor makers, and hence was not liable. These issues have repeatedly arisen in the pharmaceutical industry. Branded drug makers frequently develop or acquire new versions of an existing drug, such as a tablet instead of a capsule. They may also develop (or acquire) alternative therapies in the same therapeutic 81 

Case C-​3/​37.792 Microsoft (Commission Decision 2007/​53/​EC) [2004] OJ L32/​23, paras 712 (noting the need to compare incentives), 725 (discussing both incentives), 783 (concluding that benefits for innovation overall outweigh harm to Microsoft’s incentives). 82  AI Gavil and H First, The Microsoft Antitrust Cases: Competition Policy for the Twenty-​First Century (The MIT Press 2014) 221–​222. 83  Allied Orthopedic Appliances, Inc v Tyco Health Care Grp LP 592 F 3d 991 (US Court of Appeals (9th Circuit) 2010).

892   C. Scott Hemphill class. Where the new product has stronger or longer‐lived exclusivity, the branded firm has an incentive to shift patients and doctors from the old product to the new one, rather than face competition from generic drug makers on the old product. A key element of competitive entry is the ability of the generic firm, under US drug regulatory law, to “piggyback” on the branded firm’s new drug approval. Moreover, state law requires or permits substitution of the generic drug, and substitution is further encouraged by private payors. A “product switch” or “product hop” by the brand can be accomplished in various ways. One strategy is to withdraw the old product from the market entirely, and can include withdrawing regulatory approval or repurchase of inventory of the old product. One “softer” strategy is to heavily promote the new product, through marketing and detailing visits to doctor’s offices, while keeping the old product on the market. Or a firm might set a high price for the old drug, relative to the new one, to encourage a switch. A successful hop leaves the generic drug with relatively few customers. Product hops are most effective when they occur prior to regulatory approval of the generic version of the old drug. In that case, there is no foothold for automatic substitution to take place with a pre-​existing base of consumers. A recent example concerns an Alzheimer’s drug called Namenda. The branded drug maker sought to switch patients and doctors from a twice-​a-​day version of Namenda, which faced imminent generic entry, to a once-​a-​day extended release version. At first the drug maker encouraged adoption of the new drug through “soft” promotional efforts, but when that strategy failed, it announced an effective withdrawal of the old drug. A US appeals court concluded that the hard switch, even to an improved product, constituted illegal exclusion. The key issue for the court was consumer coercion that resulted from withdrawing the old product. According to the facts found, the withdrawal was profitable only by virtue of preventing generic competition, which revealed bad intent on the drug maker’s part.84 What about the Patent Act? The defendant invoked both the patentee’s exclusive right to “mak[e]‌, us[e],  . . .  or sel[l]” and the refusal-​to-​license provision successfully relied upon in Xerox. The court rejected this argument. The court concluded that the defendant was not only exercising a patent right, but combining it with conduct outside the patent grant, namely new product introduction. Hence the combination was outside the patent’s scope. A second problem was that the combined effect of the conduct was to achieve a temporal extension of the patent, thereby evading a key limitation of the patent right.

4.5 Manipulation of a Standard-​Setting Organization A final area of unilateral exclusion arises in the context of standard-​setting organizations (SSOs). An SSO is an industry group that sets the technical specification for a product or service, such as mobile wireless service. The existence of an SSO is generally procompetitive by promoting interoperability. Interoperability gives rise to network effects from common usage, economies of scale, and competitive markets for components. At the same time, certain conduct by SSO members raises antitrust concerns. One prominent allegation is that a technology contributor manipulates the standard-​setting process by misrepresenting the existence or licensing terms of pertinent IP rights. For example, a 84 

New York v Actavis PLC 787 F 3d 638 (US Court of Appeals (2nd Circuit) 2015).

Intellectual Property and Competition Law    893 rights holder might fail to disclose that a patent covers a technology proposed for inclusion in the standard. Or the rights holder might falsely represent its willingness to license the patented technology on “fair, reasonable, and nondiscriminatory” (FRAND) or “reasonable and nondiscriminatory” (RAND) terms. Once the technology is adopted, the rights holder is able to “hold up” technology users and thereby extract a higher price. Where deception or misrepresentation is alleged, the clearest case for an antitrust claim arises when the SSO would have chosen a different technology, but for the misrepresentation. A recurring question is whether a more limited effect suffices to state a claim—​that the firm extracts a higher price than contemplated during the standard-​setting process, even though the technology would have been adopted in any event. US courts appear to be split on the question of whether a different choice of technology is an essential element of the claim.85 Even if a mere extraction of a high price falls short of an antitrust claim, it may be actionable as a form of fraud or breach of contract. The availability of these alternative claims depends upon, inter alia, the nature of the IP holder’s representations to the standard-​setting process and the specificity of required representations as set out in the SSO’s rules. One common fact pattern has arisen repeatedly in the smartphone industry, particularly in the ongoing patent war between Android and Apple. A  patent holder agrees to FRAND terms and has its technology incorporated into the standard. Despite the FRAND commitment associated with the “essential” patent, royalty negotiations with a user of the technology break down, and the patent holder seeks an injunction or exclusion order. The patent holder’s ultimate goal is to extract a higher royalty86 or, potentially, to foreclose a rival. Seeking an injunction might be regarded as a form of deception (because the rights holder misled the SSO as to its willingness to license), or else as a breach of the FRAND commitment and hence a form of ex post opportunism. In the Huawei case, the European Court of Justice concluded that seeking an injunction against a willing licensee can constitute an abuse of dominance and identified circumstances where such conduct could be improper.87 In the Motorola Mobility matter, the FTC secured an SEP holder’s commitment not to pursue injunctive relief.88 Both Huawei and Motorola Mobility look to neutral third parties to set the license terms if the parties cannot agree, rather than seeking an injunction. Meanwhile, commentators have offered proposals to alter the terms of SSOs to limit the pursuit of injunctions.89

85  Rambus Inc v FTC 522 F 3d 456 (US Court of Appeals (District of Columbia Circuit) 2008) answers yes, whereas Broadcom Corp v Qualcomm Inc 501 F 3d 297 (US Court of Appeals (3rd Circuit) 2007) does not appear to insist that the choice of a different standard was essential. On the other hand, the Broadcom allegations satisfied the Rambus causation standard, because plaintiff alleged that the SSO would not have adopted the technology, absent the deception. 86  J Ratliff and DL Rubinfeld, “The Use and Threat of Injunctions in the RAND Context” (2013) 9 Journal of Competition Law and Economics 1. 87  Case C-​170/​13 Huawei Technologies Co Ltd v ZTE Corp EU:C:2015:477. 88  Agreement Containing Consent Order, Motorola Mobility LLC, No 121-​0120 (FTC 3 January 2013). 89  MA Lemley and C Shapiro, “A Simple Approach to Setting Reasonable Royalties for Standard-​ Essential Patents” (2013) 28 Berkeley Tech LJ 1135, proposes final offer (“baseball-​style”) arbitration; J Lerner and J Tirole, “Standard-​Essential Patents” (2015) 123 Journal of Political Economy 547, proposes ex ante price commitments by rights holders, while concluding that regulation is necessary to induce the commitments.

894   C. Scott Hemphill

4.6 Collective Exclusion All of the exclusion claims so far have focused on exclusion by a dominant firm. But exclusion can instead be accomplished by multiple non-​dominant firms acting in concert. For example, the members of an SSO can manipulate the standard-​setting process to choose one standard over another. In Allied Tube, steel conduit makers faced a sharp challenge from an alternative, plastic polyvinyl chloride (PVC) conduit, which was superior in important respects. PVC makers sought incorporation into a widely used building standard. When the matter reached a vote, steel interests packed the meeting with new members to vote against the inclusion of PVC. Here, the anticompetitive intent and effect were clear. In other cases, it is difficult to determine whether the choice was made for a valid technical reason or instead to preserve incumbency.90 A second form of collective exclusion is boycott. Consider, for example, the Fashion Originators’ Guild of America (FOGA) case.91 In the 1930s, US fashion designers were afflicted by “style pirates,” who copied and sold versions of original designs at a much lower price. These designs were not protectable under copyright. To make up for the lack of protection, the designers set up a private IP system. Designers registered their creations with the Guild, which monitored some 12,000 cooperating retailers who had agreed not to buy knockoffs. The Guild developed a sophisticated process for identifying violations, and offending retailers were boycotted by Guild members. The Supreme Court condemned the arrangement as an illegal restraint of trade.92 The Court refused to consider the Guild’s argument that the scheme was necessary to make up for the lack of IP protection. In the FOGA case, the agreement was explicit. Consider, by contrast, several excluders acting in parallel without explicit or provable agreement among them. No single firm is dominant, as is generally the case for monopolization or abuse of dominance liability. An agreement among the excluders, an important premise for restraint of trade cases, is also missing.93 A potential gap in enforcement is therefore presented by parallel exclusion by multiple non-​dominant firms.94 European law recognizes liability for “collective dominance,” but collective dominance is only seldom applied to collective exclusion.95 Instead, 90  SSOs pose other potential harms as well. [1]‌Rather than excluding certain technologies, the SSO might exclude certain types of licensees. Hence a major focus of competition policy toward SSOs is that they license all would-​be licensees. [2] SSO rules prohibiting the assertion of IP rights might themselves be exclusionary. [3] Beyond collective exclusion, the existence of the SSO poses some risk of cartelization, while curbing the risk of monopolization. For a detailed account of SSO competition claims, see MA Lemley, “Intellectual Property Rights and Standard-​Setting Organizations” (2002) 90 California L Rev 1889. 91  CS Hemphill and J Suk, “The Fashion Originators’ Guild of America: Self-​Help at the Edge of IP and Antitrust” in RC Dreyfuss and J Ginsburg (eds), Intellectual Property at the Edge: The Contested Contours of IP (CUP 2014) 159. 92  Fashion Originators’ Guild of America v FTC 312 US 457 (1941). A Korean design registration system for kitchenware was permitted in Metro Industries v Sammi Corp 82 F 3d 839 (US Court of Appeals (9th Circuit) 1996) on the ground that plaintiff failed to demonstrate any anticompetitive effect. 93  In some instances, a contract between the excluder and a customer or supplier satisfies the legal requirement of agreement. 94  For an extended discussion of collective, parallel exclusion, see Hemphill and Wu (n 17). 95  Many cases of collective dominance are merely about softened competition among insiders, not exclusion.

Intellectual Property and Competition Law    895 each firm is treated as individually dominant. Magill is an apt example. The Commission took the view that each of the networks had a dominant position, instead of sharing a jointly dominant position.96

5. Misuse The previous sections address how IP law alters the ordinary operation of antitrust law. We may also ask reciprocally how competition principles limit the exercise of IP rights. Historically, these limits have been set not only by antitrust law but also by IP law, which incorporates competition principles through the doctrine of misuse. Misuse is a defense to enforcement of an IP right where the rights holder seeks to evade the limits of the right. The consequence of a misuse finding is unenforceability of the right, without any additional liability for damages. In this sense, misuse is antitrust law “lite.” There has been a steady back-​and-​forth between antitrust law and misuse, as concepts from one are brought over into the other. Today, the two are in rough congruence and enforce similar limits on the scope and duration of the IP grant. In principle, misuse places some additional limits on the rights holder that go beyond antitrust law. This broader coverage is perhaps unsurprising given misuse’s lesser consequences.97 However, in the patent context, where misuse has received the most attention, there is significant and steady pressure to bring misuse and antitrust into even closer alignment. The most important example of the back-​and-​forth is in tying. Tying doctrine began as a form of misuse. For example, in the Motion Picture Patents case,98 a patent pool led by the Edison interests held a patent for threading film into a movie projector. The pool conditioned use of the projector upon use of Edison film. The Supreme Court held that the patent was unenforceable until the misuse was purged.99 Patent law’s internal hostility to evasions of scope has been incorporated into antitrust law. In this respect, IP law has intensified antitrust enforcement, rather than limiting it. One further aspect of the misuse cases has been to treat, as improper extension, conditional sales that serve the goal of profit extraction, rather than exclusion. For example, in Mercoid Corp v Mid-​Continent Investment Co., the patent covered a combination of unpatented elements.100 Identifying infringement by users was difficult, so the patentee sought to earn profits by controlling sales of one of the elements, a switch especially suited for use in the patented combination. Accordingly, it sued a competing switch maker for contributory infringement 96  Magill TV Guide/​ITP, BBC and RTE (Case IV/​31.851) Commission Decision 89/​205/​EEC [1989] OJ L78/​43, para 22. R Whish and D Bailey, Competition Law (5th edn, OUP 2003) 521, notes that the Commission could have used collective dominance instead. See N Petit, “The ‘Oligopoly Problem’ in EU Competition Law” in I Lianos and D Gerardin (eds), Handbook on European Competition Law (Edward Elgar 2013) 259, for a discussion of European cases. 97  For an extended treatment, see D Lim, Patent Misuse and Antitrust Law: Empirical, Doctrinal and Policy Perspectives (Edward Elgar 2013). 98  Motion Picture Patents Co v Universal Film Manufacturing Co 243 US 502 (1917). 99  To similar effect is the Carbice case, involving a tie between a patented container for carrying dry ice and the purchase of dry ice. Carbice Corp v American Patents Development Corp 283 US 27 (1931). 100  Mercoid Corp v Mid-​Continent Investment Co 320 US 661 (1944).

896   C. Scott Hemphill of the patent. The Supreme Court condemned this strategy as misuse, viewing it an improper extension of the patent to condition in this manner the use of the patent on use of an unpatented product. This extraction strategy was explicitly restored by statutory amendment. Today, selling a “nonstaple” article—​an article whose primary use infringes the patent—​ subjects the seller to contributory infringement liability, and a patentee is free to use this strategy.101 An important source of convergence between misuse and antitrust is the requirement that a patentee must have market power in the tying market to be found guilty of misuse, and the mere possession of a patent does not establish market power. The insufficiency of patent possession was established first in misuse.102 As noted in Section 2, the later Independent Ink case recognized a similar limitation in antitrust cases. Misuse is persistently broader than antitrust in its hostility to a particular form of temporal extension. Under the Brulotte rule, a patentee may not contract for royalties after patent expiration.103 The rule was originally based on competition policy concerns. The concern was that such a rule would permit an end-​run on the limited term, thereby restricting competition beyond the expiration of the patent. This scheme appeared to confer a kind of leverage from the years of the patent term into the years beyond the patent term. The Brulotte rule is misguided as a matter of policy. First, anticompetitive extension is implausible. Generally speaking, the patentee only possesses a certain amount of market power by virtue of a patent with fixed duration. A longer royalty just spreads the profits more thinly over a longer period. That arrangement, moreover, can have a procompetitive effect, by aligning incentives between licensor and licensee, reducing the initial outlay for a cash-​ strapped licensee, and in some cases reducing the total amount of deadweight loss.104 In 2015, the Supreme Court declined to overturn the Brulotte rule. The Court resisted two sorts of pressure for convergence. First, the patentee had sought antitrust-​like treatment, a case-​by-​case (“rule of reason”) approach instead of a flat ban, in accordance with the antitrust-​like basis for the rule. Second, the patentee had urged a relaxed approach to stare decisis, in accordance with antitrust cases such as Independent Ink that alter the law to better match current economic understanding. The Court responded that for patent law, unlike antitrust law, economic policy considerations had less force, and the pull of stare decisis was more powerful.

6.  Conclusion: How Competition Law Limits Intellectual Property This chapter has identified several limits that IP places on the ordinary operation of antitrust law. These limitations are fairly narrow, and largely limited to patent law. For example, under the GE rule, a patentee may specify the resale price of a single competing licensee. 101 

102  35 USC § 271(d)(5). 103  Brulotte v Thys 379 US 29 (1964). 35 USC § 271(c), (d). For an explanation of the last benefit, see I Ayres and P Klemperer, “Limiting Patentees’ Market Power Without Reducing Innovation Incentives: The Perverse Benefits of Uncertainty and Non-​ Injunctive Remedies” (1999) 97 Michigan L Rev 985. 104 

Intellectual Property and Competition Law    897 Selective refusals to license are permitted under Xerox, which goes beyond the latitude already granted to non-​selective refusals to deal. Meanwhile, antitrust law constrains the exercise of IP rights. The main effect, which antitrust law shares with misuse doctrine, is to rigorously enforce limitations on the scope of the grant. Clear, specific grants of authority are preserved against liability, but not accompanying conduct that lacks a similarly explicit endorsement. A  rights holder may not condition access to its right to gain an advantage in a second market, as in tying cases. Nor may it outstay its welcome by restraining competition temporally past its inherent force, as in the reverse payment cases. Evasion of an internal IP limit tends to favor antitrust liability, and as the development of tying doctrine suggests, may even amplify it. The inclusion of IP policy in the internal cost-​benefit calculation of antitrust law has not produced a sharply distinctive body of IP-​specific antitrust law. Instead, we see substantial harmonization. As to exclusion, antitrust has internalized the argument about ex ante incentives to innovate, an argument not unique to IP, as exemplified in Trinko; this has encouraged harmonization as to exclusion. As to collusion, substantial harmonization has been achieved by largely rejecting the application of IP exceptionalist arguments, either as a matter of statutory interpretation or economic policy.

Acknowledgments I thank Mike Carrier, Rochelle C. Dreyfuss, Harry First, Eleanor Fox, Herb Hovenkamp, and Tim Wu for helpful comments. Kyle Chow, Lee Cooper, and Mala Chatterjee provided outstanding research assistance.

Chapter 32

Intellectua l Prope rt y and Private Orde ri ng Reto M. Hilty * 1. Introduction It is a common view, and one that is even explicitly recognized in the preamble to the TRIPS Agreement1, “that intellectual property rights are private rights.” The industries concerned—​ the predominant “owners” of intellectual property (IP) rights—​appreciate this view. Since the proper functioning of our individualistic society and commercial structure doubtlessly depends on sound protection of private rights, the view that IP rights are private rights supports one of these owners’ leading arguments: legal protection of IP by its nature needs to be strong.2 However, the mere insight that IP rights are private rights does not indicate much as long as the term “IP right” remains vague. It is therefore also common to explain IP rights by comparing them with property rights in tangible goods—​for instance, buildings or cars. On the face of it, this comparison seems to provide a clearer picture of what property means in general. Nobody contests that third parties can be excluded from living in a building without the owner’s permission. And it’s obvious that the ownership of a car involves the exclusive right of the owner to drive the car when and wherever he wants—​without ignoring, of course, the fact that the use of a car in particular is subject to certain limits: The owner may not park it just anywhere, nor does his ownership exempt him from respecting speed limits. *  Reto M. Hilty has asserted his moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  Agreement on Trade-​Related Aspects of Intellectual Property Rights, 1 January 1995. 2  See, eg, Recital 11 of Directive 2001/​29/​EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society demanding a “rigorous system for the protection of copyright”; in the “Green Paper Copyright in the Knowledge Economy,” COM(2008) 466, 4, the EU Commission states that a “high level of copyright protection is crucial”; in “An Industrial Property Rights Strategy for Europe,” COM(2008) 465, 2, the EU Commission stresses that “Europe requires strong industrial property rights”; and on the website for its trade policy, the EU Commission states that the “protection and enforcement of intellectual property are crucial”: .

Intellectual Property and Private Ordering    899 Within such limits, however, it is undisputed that an owner is free to privately order any matter concerning his property. In principle, nobody—​and especially no state authority—​is entitled to dictate anything about the actual use of private property. In particular, nobody may require any use of that property at all. Third parties, in contrast, may benefit from private property with the consent of the owner only on a contractual basis. The owner may want to lend his car or rent his house—​but no law obliges him to do so, and he may also reclaim his property from a tenant. In that respect as well, certain limits may exist (immediate termination of a rental agreement for living quarters, for instance, may not be possible). Generally, however, the scope of the autonomy to privately order property—​and in particular to conclude contracts related to it—​is far-​reaching. Certainly, the comparison of IP rights with other forms of property (tangible property in particular) quite often is not made without ulterior motives. IP rights holders particularly like to use this comparison to support the argument that there is no justification for imposing statutory limitations on their rights. Such endeavors are not without success. On the contrary, it is a largely accepted view among decision-​makers that the grant of IP rights to private owners is the principle, whereas any limitation imposed on such rights has to be understood as an exception. Nothing reveals this perception clearer than the three-​step test contained in various forms in the international IP legislation, predominantly in TRIPS: All respective provisions explicitly name limitations to granted IP rights “exceptions.”3 Today, this perception is increasingly being challenged, although primarily among scholars or nongovernmental organizations (NGOs), and in particular by those defending special interests4 or interests of certain (mostly less-​developed) national economies. Their view is based on the assumption that exclusivity (in terms of IP rights) and limitations are of equal rank and that an appropriate balance of all involved interests is required.5 The consequence of this view is that the discretion of owners to privately order their IP rights is (or should at least be) substantially more limited than the private ordering of other forms of property. While policymakers still widely ignore the shortcomings of a comparison of IP rights with other forms of property, a certain reorientation in thinking, while not yet very pronounced and slow in coming, has led courts to increasingly recognize limitations and exceptions to 3 

Art 13 TRIPS (copyright), art 17 TRIPS (trademarks), art 30 TRIPS (patents); in copyright law, the double term “limitations and exceptions” is used; the delimitation of the two terms—​if ever there is one—​however, is disputed in legal doctrine. 4  One—​exceptionally successful—​example obtained particular popularity, namely, the fight of NGOs for the blind to implement a mandatory exception into international law; this concern finally was actualized by the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled, on 27 June 2013. 5  C Geiger, J Griffiths, and RM Hilty, “Declaration on a Balanced Interpretation of the ‘Three-​Step Test’ in Copyright Law” (2008) 39 International Review of Intellectual Property and Competition Law 707; C Geiger, “Implementing an International Instrument for Interpreting Copyright Limitations and Exceptions” (2009) 40 International Review of Intellectual Property and Competition Law 627; C Geiger, J Griffiths, M Senftleben, L Bently, and R Xalabarder, “Limitations and Exceptions as Key Elements of the Legal Framework for Copyright in the European Union—​Opinion of the European Copyright Society on the Judgment of the CJEU in Case C-​201/​13 Deckmyn” (2015) 46 International Review of Intellectual Property and Competition Law 93; RM Hilty, “The Role of Enforcement in Delineating the Scope of IP Rights” in: H Micklitz and A Wechsler (eds), The Transformation of Enforcement—​European Economic Law in a Global Perspective (Hart 2016), 227 et seq.

900   Reto M. Hilty IP rights.6 It slowly but steadily seems to be socially (or at any rate academically) acceptable to express and support the view that a one-​sided perspective that emphasizes the interests of only the right holders is not justifiable, and is possibly detrimental to the interests of consumers and those who would build on intellectual advances to push the frontiers of knowledge further. But ironically, just as legal practice has begun to appreciate the need to safeguard access interests, there is a new challenge which is addressed here. This new challenge is the possibility of privately ordering the use of IP, thereby supplanting the current IP regimes and, above all, overriding the limitations that have been imposed on the scope of exclusivity.7 This challenge is of particular relevance because it exists regardless of whether an IP regime is appropriately balanced. If IP right holders find ways of regaining control over the use of their subject matters of protection—​which as a matter of principle is to be welcomed—​it not only concerns third parties using IP rights without authorization. It also affects lawful users—​ whether their uses are in principle authorized by the right holder or authorized by law (eg, uses based on a statutory limitation or fair use)—​and the public interest at large, as it may lead to fewer improvements and less innovation overall. Right holders can restrain users in two ways. They can use technological protection measures (TPMs) to prohibit certain uses of the subject matter of protection or to impose a specific behavior on users,8 or they can restrain users contractually. The two mechanisms do not exclude one another.9 Rather, they can be linked effectively to supplement and reinforce one another, because both methods of private ordering ultimately have the same purpose: to permit certain use activities while prohibiting others. An online music provider, for instance, may want to allow streaming, but prohibit downloading songs; in that case, it is reasonable for him not only to prohibit this in his contract, but also to make downloads technically impossible. While private ordering by means of contracts has long been subject to discussion on the scope of contractual freedom (in particular from the perspective of antitrust law),10 TPMs have only recently become a concern—​not only, but above all, in the digital environment. 6 

 . . . [internal Reference to Rebecca Tushnet on public interests mechanism]. See also D Zimmerman, “Living Without Copyright in a Digital World” (2007) 70 Albany Law Review 1375. On the other hand, private ordering may reduce the default level of protection under law, as the copyleft philosophy or the Open Source movement have shown; see P De Filippi, Copyright Law in the Digital Environment: Private Ordering and the regulation of digital works (Lambert 2012), 75 et seq, 115. This, however, is not the subject of this paper. 8  J Rothchild, “Economic Analysis of Technological Protection Measures” (2005) 84 Oregon Law Review 489, available at ; P Akester, “The Impact of Digital Rights Management on Freedom of Expression—​the First Empirical Assessment” (2010) 41 International Review of Intellectual Property and Competition Law 31; J Rothchild, “The Social Costs of Technological Protection Measures” (2007) 34 Florida State University Law Review 1181, available at ; P Samuelson and J Schultz, “Should Copyright Owners Have to Give Notice about Their Use of Technical Protection Measures?” UC Berkeley Public Law Research Paper No. 1058561, available at . 9  N Lucchi, “Intellectual Property Rights in Digital Media: A Comparative Analysis of Legal Protection, Technological Measures and New Business Models under E.U. and U.S. Law” (2005) 53 Buffalo Law Review 51, available at . 10  See Section 3.2.3. 7 

Intellectual Property and Private Ordering    901 Their impact is twofold. First, they allow right holders to get around established statutory limitations. Thus, all efforts to achieve an appropriate balance of IP protection may be in vain; the positive effects of statutory limitations to overly exclusive IP rights can be annulled. Second—​and worse—​TPMs may be applied to subject matter that lacks IP protection. Based on that, thresholds for the grant of IP protection (requirements such as novelty, creativity, etc.) may be evaded and an expiry of protection rendered meaningless.

2.  Problems and Risks of Private Ordering If we reflect on the problems and risks connected with the previously mentioned possibilities of private ordering, we notice at the outset that three graduated levels of exclusivity exist before private ordering applies, specifically: factual exclusivity, legal exclusivity, and contractual exclusivity.11 Depending on the level on which private ordering intervenes, the extent of exclusivity may increase to a greater or lesser extent. This increase is of particular relevance on the lowest level of exclusivity, where no IP rights are involved.

2.1 Factual Exclusivity 2.1.1 Foundation of the Exclusivity On the lowest level, some kind of exclusivity can be achieved even if legal protection of the subject matter in question is lacking. Instead, exclusivity is based on particular factual circumstances. Two approaches are possible. First, exclusivity may be rooted in the fact that the subject matter—​basically any kind of knowledge—​is not generally available and in particular is not disclosed to competitors.12 This situation inevitably leads to a certain degree of autonomy of the owner of such knowledge vis-​à-​vis other market participants. His knowledge thus is of a certain value for him; it is his exclusive “intellectual property,” albeit not legally protected. This autonomy above all allows the owner of such knowledge to exploit it for his sole benefit. He may, for instance, apply particular know-​how to his own products, thus enhancing their value for consumers, as compared to substitute products from competitors. 11  On these three levels, see RM Hilty, “Lizenzverträge und Art. 5 KG” in R Zäch (ed), Das revidierte Kartellgesetz in der Praxis (Schulthess 2006); more generally on the first two levels, see L Guibault, “Wrapping Information in Contract: How Does it Affect the Public Domain?,” in L Guibault and B Hugenholtz (eds), The Future of the Public Domain (Kluwer Law International 2006), 89 et seq; C Dent, “Negotiating Control of Artefacts of Creation—​Intellectual Property, Know-​How, Confidential Information and Contracts,” (2012) 43 International Review of Intellectual Property and Competition Law 248. 12  On the “disclosure paradox” see M Burstein, “Exchanging Information Without Intellectual Property” (2012) 91 Texas Law Review 227, available at ; K J Arrow, “Economic Welfare and the Allocation of Resources for Invention,” in National Bureau Committee for Economic Research and the Committee on Economic Growth of the Social Science Research Council (eds), The Rate and Direction of Inventive Activity: Economic and Social Factors, 609, 615 (Princeton University Press 1962).

902   Reto M. Hilty Such IP is preserved as long as it remains unavailable for third parties; but its value increasingly fades with each competitor who becomes aware of the knowledge. One of the most famous—​but at the same time mysterious—​examples is the formula for Coca-​Cola;13 even if it is just a rumor that the company kept the formula secret for more than 100 years, the story is at least a brilliant marketing gimmick. Of course, it is not entirely correct to state that no legal protection applies to such IP. Most national legislation provides a certain degree of legal protection to undisclosed knowledge—​ and in particular to trade secrets,14 and international IP agreements also require some protection.15 Although various national approaches exhibit diverse characteristics, they tend to have in common that it is not the subject matter as such that is protected (in contrast to inventions, creations, or trademarks, for instance). Rather, the law prohibits others from undertaking specific actions in order to gain access to unrevealed knowledge, be it through espionage, bribery, enticing away key persons, or the like. Such rules may be embedded in criminal law, legislation against unfair competition, or specific legal acts like civil trade secrecy statutes. However, in principle, there is no legal exclusivity in the knowledge as such.16 Thus, reverse engineering or independent invention is not illegal.17 As a result, it is up to its owner to keep knowledge undisclosed in order to maintain the value of his IP. This obviously makes it particularly attractive for him to take private ordering measures to safeguard this value and ultimately secure his own market position.18 The second way to achieve factual exclusivity despite lacking legal protection is rooted in technological means, such as encryption and access controls. Even if all market participants

13  HH Perritt, Trade secrets: a practitioner’s guide (Practising Law Institute 1994), 34; RM Halligan, “Trade Secrets v. Patents: The New Calculus” (2010), 2 Landslide 10, 11. 14  For instance, in the US: Uniform Trade Secret Act (UTSA), drafted by the National Conference of Commissioners on Uniform State Laws, as amended in 1985, enacted by 47 states and the Economic Espionage Act (EEA) of 1996 (18 USC §§1831-​1839); in Germany: § 17 UWG; in Japan: art 2 of the Unfair Competition Prevention Act; see also the Directive 2016/​943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-​how and business information (trade secrets) against their unlawful acquisition, use and disclosure. For an analysis of the proposal see R Knaak, A Kur, and RM Hilty, “Comments of the Max Planck Institute for Innovation and Competition” (2014) 45 International Review of Intellectual Property and Competition Law 953; V Falce, “Trade Secrets—​Looking for (Full) Harmonization in the Innovation Union” (2015) 46 International Review of Intellectual Property and Competition Law 940; on the philosophical and economic justification of trade secret protection see M Risch, “Why Do We Have Trade Secrets?” (2007) 11 Marquette Intellectual Property Law Review 3, available at . 15  Art 39 TRIPS, art 10bis Paris Convention. 16  DJ Gifford and RT Kudrle, The Atlantic Divide in Antitrust: An Examination of US and EU Competition Policy (University of Chicago Press 2015), 162. 17  Halligan (n 13); F Schweyer, “Die rechtliche Bewertung des Reverse Engineering in Deutschland und den USA—​eine rechtsvergleichende Abgrenzung zwischen geistigem Eigentum und Gemeinfreiheit bei der Analyse von Konkurrenzprodukten” (PhD thesis, Universität Bayreuth 2011); A Ohly, “Reverse Engineering: Unfair Competition or Catalyst for Innovation?” in J Straus (ed), Patents and Technological Progress in a Globalized World: Liber Amicorum (Springer 2009), 535–​552, available at . 18  See also G Surblyte, “Enhancing TRIPS: Trade Secrets and Reverse Engineering” in H Ullrich, RM Hilty, M Lamping, and J Drexl (eds), TRIPS plus 20—​From Trade Rules to Market Principles (Springer 2016), 725–​760.

Intellectual Property and Private Ordering    903 could, in theory, exploit unprotected subject matter, TPMs create a means to bar them from physically accessing the relevant knowledge. Thus, a market player applying such TPMs may exclude whomever he wants, or he may gain control over all or particular uses of the subject matter in question. Especially striking is the fact that a market player applying TPMs does not need to create IP himself—​it is not necessarily “his” subject matter that he excludes others from using. Furthermore, secrecy is not required. Nevertheless, and most importantly, the implications of such technology-​based exclusivity are similar to those arising from the general unavailability of certain (undisclosed) subject matter. It enables the market player applying TPMs to unilaterally create exclusivity at any time and ultimately to impose specific conditions on other market participants who wish to have access to the subject matter.

2.1.2 Evaluation Whereas it seems comprehensible that the owner of IP who enjoys no specific legal protection might take measures to safeguard a factually existing exclusivity based on secrecy, it is much more difficult to accept the notion that someone can use measures to obtain control over subject matter that is not (factually) exclusive. This is particularly the case if that subject matter previously was legally protected—​and thus legal exclusivity existed—​but the related IP right has expired. In this case, private ordering allows the former right holder to extend exclusivity beyond the term of legal protection. Regarding situations of lacking specific legal protection, it needs to be recalled that one of the fundamental principles of a market economy is that all market participants have the right to take appropriate measures to safeguard their property, including their IP.19 If no legal protection is available, it is only reasonable for a market participant to rely on private ordering. Such measures not only protect his interest, but they can also further the public interest. In view of the risk of usurpation by competitors, more security for a market participant reduces otherwise prevailing disincentives to generate new knowledge.20 At the same time, however, private ordering alone leaves investing market participants in a comparatively vulnerable situation. If a competitor happens to develop the same knowledge independently, private ordering fails. Without legal exclusivity, all market players are free to use any knowledge unrestrictedly. In other words, private ordering—​in terms of taking measures to secure one’s own market position—​may or may not be useful, but it is not harmful, per se. However, private ordering can have a negative impact; the extent of this impact depends on the circumstances and also on the mechanism applied. In principle, we may assume that contracting over a subject matter that is not legally protected is a priori less problematic, whereas an application of TPMs may lead to a number of undesirable effects. Contracting from the outset presupposes that third parties have no access to a desired subject matter; that is why they are willing to agree to certain terms and conditions in order to gain access. If this unavailability of the subject matter is based on “natural” factual circumstances (like secrecy), contracting is the unavoidable consequence of disseminating the knowledge to third parties. In contrast, if (natural) factual exclusivity is lacking, and 19 See (n 1).

20  JRK Stroud, “The Tragedy of the Commons: a hybrid approach to trade secret legal theory” (2013) 12 Chicago-​Kent Journal of Intellectual Property 232, 236; Perritt (n 13), 35; Hilty (n 11), 30.

904   Reto M. Hilty therefore needs to be created based on technical means, a subject matter that in principle was available to third parties is suddenly “locked away.” It is only this “artificial” factual exclusivity that creates a basis for a contractual relationship that controls access. This distinction is particularly relevant from the standpoint of competition law. It is important to understand that (natural) factual exclusivity is not problematic per se.21 Of course it may lead to market dominance, just like exclusivity created in any other way. But as long as exclusivity is acquired through the owner’s own investments in knowledge and in secrecy, there is nothing wrong in principle. Even if third parties get involved under very restrictive conditions—​for example, if a contract is secured with penalty clauses or post-​contractual obligations, or requires specific measures (like the partitioning of knowledge amongst different employees)—​it can still be seen as the logical consequences of the unavailability of other forms of legal protection for the subject matter. Such contractual terms ultimately are aimed at safeguarding the (natural) factual exclusivity in hard-​to-​control, dynamic markets, possibly implicating a large number of cooperation partners. It is far better if the owner of unprotected IP involves third parties, thereby allowing a broader use of know-​how for the benefit of the public, than if the owner does not disclose it at all.22 But this observation does not rule out the possibility that certain conditions may be considered overly restrictive, especially if the owner of unprotected IP can leverage his negotiating position. If there are specific reasons why third parties have no choice but to accept even inappropriate terms and conditions imposed by the contract, private ordering can become problematic. A typical example might be package licenses combining different subject matters, some of them legally protected IP rights, others only factually protected (eg, undisclosed) IP. In that situation, a potential licensee might accept unreasonable terms with respect to the latter subject matters in order to get a license for the important IP rights. Examples of such restrictions might be a clause prohibiting a licensee from further developing the licensed know-​how, or an obligation of an exclusive grant-​back license related to further developments of the know-​how. In contrast to contractual private ordering, an application of technical means leverages the owner’s negotiating position in a particularly troublesome way. It enhances the potential for abuse of an (artificially) created factual exclusivity. In contrast to naturally emerging factual exclusivity, technical measures can put market players in the position of claiming exclusivity in subject matters that they have not generated themselves; instead, they may have removed them from the public domain. Thus, unique items of public interest—​eg, historical documents, undisclosed diaries, or original paintings or the like which are not (or no longer) protected under copyright law—​can be purchased as tangible property by one single market player. The purchaser may then reproduce the product digitally and make the content accessible on the Internet. In principle, this is, desirable. However, if the general public has no access to the physical items—​in contrast to their being exhibited in a museum, for 21 

In addition to monopoly power in a relevant market, impermissible exclusionary practice is required; cf. eg, H Hovenkamp, Antitrust Enterprise: Principle and Execution (Harvard University Press 2011), 16 et seq; V Korah, An Introductory Guide to EC Competition Law and Practice (Hart 2007), 106 et seq; Hilty (n 11), 30. 22  M Lemley, “The Surprising Virtues of Treating Trade Secrets as IP Rights” (2008) 61 Stanford Law Review 311, available at .

Intellectual Property and Private Ordering    905 instance—​but only online access, TPMs can facilitate the imposition of socially questionable terms and conditions.23 Of course, abuse is not necessarily the consequence. For example, price discrimination may under certain conditions be an appropriate way of differentiating among different users (eg, charging less for less extensive uses, like simple streaming instead of downloading, or even implementing content in one’s own publication).24 However, it is not desirable for content within the public domain to be ushered into exclusivity based on private ordering.25 If investments are involved in the making available of such content, it is only understandable that the investor will seek ways to cover his costs (and to earn some profit). But a total lack of control over the access conditions would be alarming. This is particularly the case if IP protection has expired: The purpose of a limited term of protection is precisely to allow unrestricted access to formerly protected content.26 It is, after all, with good reason that patents and copyrights rights are limited in time.27 Once a period of protection expires, the possibilities of freely using formerly protected subject matters lies not only in the interest of consumers (who benefit from unrestricted competition on the product level), but also of those competitors who may refine the advances without licensing, to the ultimate benefit of the public. Seeds furnish a good example. It is worrying if newly cultivated seeds are protected not only legally, but also technically, by means of genetic modifications that prevent direct reproduction. At first view, an application of this particular form of TPMs is understandable, since the right holder otherwise could not ensure that the protected seeds are actually purchased via a legal channel; rather, farmers themselves might reproduce them. There are, however, reasons why a number of states provide for a “farmer’s privilege” under certain conditions, thereby balancing contradictory interests of the breeder against the farmer’s (and the public’s) need for sustainable and reliable sources of nutrition. TPMs that render farmers’ 23 

See M Zhang, “Corbis Charges Hefty Fees for Freely Available Public Domain Photos” (2015), . In contrast, it is up to copyright legislation not to protect offline carriers against (in particular private) copying; see on this with respect to US law S Jordan, “Unlimited Times: DMCA Anticircumvention Measures on Public Domain Films” (2012) 4 Intellectual Property Brief 18. 24  JE Rothman, “Copyright’s Private Ordering and the ‘Next Great Copyright Act’ ” (2014) 29 Berkeley Technology Law Journal 1595, 1630. 25  For further reading, see Guibault and Hugenholtz (n 11). 26  Reported by MR McGurk and JW Lu, “The Intersection of Patents and Trade Secrets” (2015) 7 Hastings Science & Technology Law Journal 189, 211, is the case Wyeth v Natural Biologics, Inc, No 98-​2469, 2003 US Dist, WL 22282371. When competitors acquired the manufacturing method from Wyeth illegally, “Wyeth was able to successfully bring suit against its competitors for trade secret misappropriation even though the patent on the drug itself had expired.” Right holders’ attempts at artificially prolonging exclusivity of public domain subject matter are manifold: on the problem of misuse of trademark law in this context, see K Köklü and S Nérisson, “How Public Is the Public Domain? The Perpetual Protection of Inventions, Designs and Works by Trademarks,” in Ullrich et al (n 18), 561–​599. 27  In the nineteenth century influential German IP scholar Josef Kohler already recognized the time-​ limitation of IP rights as stemming from their very nature: see “Deutsches Patentrecht systematisch bearbeitet unter vergleichender Berücksichtigung des französischen Patentrechts” (J Bensheimer 1878) 13 et seq; “Das Autorrecht” (Fischer 1880) 45 et seq, “Handbuch des deutschen Patentrechts in rechtsvergleichender Darstellung” (J Bensheimer 1900) 58 et seq; “Lehrbuch des Patentrechts” (Rothschild 1908) 15 et seq.

906   Reto M. Hilty reproduction impossible obviously undercut these important interests. And the technical measures become even more problematic if their effects outlast the term of legal protection. The impact of that kind of TPM might only be neutralized over time if third parties independently—​and, after the expiry of the legal protection, also legally—​are able to reproduce such seeds and sell them to farmers at competitive market prices. However, as long as farmers factually are not in a position to reproduce seeds independently, they still depend on third parties. This is the case—​even long after the expiry of the legal term of protection—​as long as the genetic modification makes “normal” reproduction impossible.

2.2 Legal Exclusivity 2.2.1 Foundation of the Exclusivity On the second level, exclusivity has its root in specific legal protection imposed through IP legislation. Various approaches exist and the scope of exclusivity obviously depends on the design of the protective regime. Details about the protection provided by such legislation are not relevant. Nor do we need to discuss the rationale of IP rights in general or their appropriate scope. Let us rather stipulate that legal exclusivity may be required, in particular if factual exclusivity fails to exist or is insufficient to spur the generation of knowledge. This is particularly the case if knowledge directly or indirectly becomes disclosed by the sale of products that necessarily reveal the information. A mechanical invention, for instance, can usually be reverse engineered by the buyer of the product; likewise, a copyright-​protected text is unavoidably disclosed to the buyer of the book. There are, of course, much more complex cases where reverse engineering or revealing is not as likely. Disclosure requirements nonetheless may apply. A fundamental premise of patent law, for example, is that legal protection is denied if the invention is not disclosed in such a way that it can be reproduced by someone skilled in the art. But even if legal exclusivity is granted, it is of crucial relevance that IP protection is not just the private concern of right holders.28 Rather, IP legislation needs to be oriented towards an appropriate balance of often diverging interests between right holders (primarily optimizing their profits) and the public at large, be it interests in access to knowledge and information or the enjoyment of art and technological progress.29 It is, however, not always clear what degree of exclusivity is actually needed, and it may be the case that certain (or even most) IP rights overstep the mark in this respect. Therefore, legal protection as a matter of principle needs to be limited to a greater or lesser extent; even supporters of strong IP protection will hardly contest this principle as such, although they may have their own view regarding the required extent of protection. What is important to understand on the second level, however, is that private ordering interacts with legally provided exclusivity.30 Private ordering does not have the purpose of

28 

See already the discussion of the term “private right” under (n 1). This is particularly visible in copyright law; cf eg, J Ginsburg and R Gorman, Copyright Law (Foundation Press 2012). 30  EA Morse and V Raval, “Private Ordering in Light of the Law: Achieving Consumer Protection Through Payment Card Security Measures” (2012) 10 DePaul Business & Commercial Law Journal 213, 214 et seq. 29 

Intellectual Property and Private Ordering    907 compensating insufficient (factual) exclusivity, as may be the case on the first level.31 Rather, in the vast majority of cases right holders resort to private ordering because they seek an amplification of the exclusivity the law has granted to them.32

2.2.2. Evaluation Superimposing legal protection based on private ordering on the protection afforded by statute potentially implies an extension of the scope of exclusivity or a reduction of the limitations the legislation has granted. This may be motivated by two concerns on the part of right holders. First, legal protection—​although existing in the law—​may not be enforceable in practice (Internet users infringing copyright, for instance, often cannot be controlled without addi­ tional measures, in particular TPMs, implemented by, or on behalf of, the right holder).33 Seen from that perspective, the second level stands in sharp contrast to the first level of exclusivity. On the second level, TPMs do not deny access to subject matters formerly in the public domain. Instead, they apply to existing, legally protected exclusivity. Depending on the circumstances, TPMs therefore do not necessarily have a negative impact. Indeed, they may even be of crucial importance for the right holder to effectively enforce his exclusive rights. Most business models on the Internet, for instance, could not be carried out without TPMs. Commercial offers to use digital materials would hardly be feasible if unlimited access could not be restricted technically; neither could access as such be monetized, nor could reasonable price options—​for example, based on different types of use of the protected subject matter—​be put into effect.34 Even creative commons licenses—​although free of charge but with conditions on use (eg, an exclusion of commercial use of the contents) depend on TPMs (based on an “agree” button, for instance). Second, there may be legal protection that can be enforced adequately, but the right holder is of the opinion that the granted protection is insufficient. In that case, private ordering becomes a concern. Measures taken by the right holder may narrow (or even entirely eliminate) the leeway of third parties, in particular uses allowed through statutory limitations. Private ordering thus enables the right holder to upset a balance which was intended by and is inherent to the underlying IP legislation. In that respect, however, another differentiation is required. In the first instance, right holders may simply find ways to convince third parties to enter into contracts. Third parties may, in fact, be willing to do so, particularly in order to get permission to use protected subject matters. This is not problematic per se, but rather the normal basis for licensing agreements. At the same time, it is self-​evident that a licensor will fix terms and conditions in its own favor, thereby possibly limiting the rights of the licensee to use the subject matter of protection. Such attempts obviously imply the potential of imposing overly restrictive conditions. Given commitments to contractual freedom, only in exceptional cases might intervention be considered to protect licensees’ interests (or the public interest). But 31 

See Section 2.1. Filippi (n 7), 37; B Hazucha, HC Liu, and T Watabe, “Private ordering and consumers’ rights in copyright law” in GB Dinwoodie (ed), Intellectual Property and General Legal Principles (Edward Elgar 2015), 119–​155. 33 Filippi (n 7). 34  Rothman (n 24). 32 

908   Reto M. Hilty sometimes it should be. A licensing agreement could, for instance, prohibit legally allowed activities (such as allowable parallel importation of goods such as protected spare parts from a cheaper market). The potential for overly restrictive conditions increases if functionally unrelated IP rights are bundled. This is especially true if most of the rights are irrelevant to the licensee, whereas others are crucial, such as when substitutions are not available. The enforceability of such contracts, however, depends on the circumstances. In view of that, private ordering is primarily accomplished through the use of TPMs. TPMs have the potential to provide a higher degree of autonomy vis-​à-​vis potential contractors.35 Indeed, the more a contractor is in need of the subject matter, the more readily he will agree to financially onerous terms and conditions and to conditions that constrain or even eliminate statutorily allowed possibilities of using of the subject matter of protection.36 Contractors in mass markets are especially vulnerable to such forms of private ordering, because they cannot negotiate the terms of the license with the licensor individually. For example, right holders offering e-​books can restrict the number of times the book can be copied or printed; alternatively, they can prohibit all copying, in particular to the benefit of third persons, even if the original purchaser agrees to delete his own copy. Under such conditions it is impossible to transfer the “book” as such to another person without transferring the reading device itself. In this business model, the first-​sale doctrine (“exhaustion”) is abrogated. Known in the physical world, the first-​sale doctrine generally allows a book that is legally purchased to be passed on to any third party without infringing copyright law. And the problem is not limited to books: Also movies and music purchased from a source like iTunes can come with restrictions on the number of times they can be viewed or played. Certain academic publishers have gone even further. They have converted their publishing program to an e-​only business supply, meaning that no printed version is available for purchase. Because academic authors often grant publishers exclusive rights, the consequence may be a single-​source situation, meaning that competition is eliminated from the outset. Furthermore, TPMs control the access to a publisher’s web content, with the consequence that such publishers can continuously increase their prices.37 They can also limit use 35 

See Section 2.1. S Dusollier, “Sharing Access to Intellectual Property through Private Ordering” (2007) 82 Chicago-​ Kent Law Review 1391, 1393, et seq. 37  Also called the “Serials Crises,” ; cf. also E Priest, “Copyright and the Harvard Open Access Mandate” (2012) 10 Northwestern Journal of Technology and Intellectual Property 388, 390; RM Hilty, “Five Lessons about Copyright in the Information Society: Reaction of the Scientific Community to Over-​Protection and what Policy Makers Should Learn” (2006) 53 Journal of the Copyright Society of the USA 103–​138; JL Contreras, “Confronting the Crisis in Scientific Publishing: Latency, Licensing and Access” (2013) 53 Santa Clara Law Review 491, available at ; JH Reichman and RL Okediji, “When Copyright Law and Science Collide: Empowering Digitally Integrated Research Methods on a Global Scale” (2012) 96 Minnesota Law Review 1362, 1441 et seq, available at ; GS McGuigan, “Publishing Perils in Academe—​The Serials Crisis and the Economics of the Academic Journal Publishing Industry” (2004) 10 Journal of Business & Finance Librarianship 13; D Kingsley, “Open access publishing: a solution to the serials crisis?” (2006) 27 Australasian Science 34; E Heafey, “Public Access To Science: The New Policy of the National Institutes of Health in Light of Copyright Protections in National and International Law” (2010) 14 UCLA Journal of Law & Technology 3, available at ; U Herb, “Open 36 

Intellectual Property and Private Ordering    909 activities technically, including uses that are permissible based on statutory limitations or fair use. A currently debated example is text and data mining (TDM), an increasingly crucial search tool for researchers facing dramatically increasing volumes of data; even if modern copyright laws were to provide for a statutory license for TDM, the provision would be ineffective at promoting an automated search without physical access to the data. All in all, we may conclude that on the second level of exclusivity, private ordering is of an ambiguous nature. There is not a good basis for criticizing right holders’ attempts to push the limits of the legally provided scope of protection. Although this by itself may lead to imbalances with regard to the different interests involved, a right holder scarcely can be blamed for enforcing his lawful rights to their full extent. In that case, access problems are more likely rooted in the IP regime as such, and it would be up to the legislature to draw the boundaries of protection more appropriately. Private ordering beyond the limits of legally provided protection can, however, give rise to unintended consequences. While it may be of lesser concern if measures taken by the right holder are solely based on contracts, a combination with technical measures allows the right holder to easily impose imbalanced contractual terms and conditions. In this setting, private ordering has a frightening potential for overriding legislative attempts to balance interests in exclusivity against the public’s interest in access. At the same time, it should be made clear that the boundaries drawn by the IP regimes for the analog world are not necessarily applicable to the digital world, where there are entirely new business models.38 It should not, however, be up to the operators of the business models alone to decide on those boundaries, especially when users have no choice among different offerings or suppliers.

2.3 Contractual Exclusivity 2.3.1 Foundation of the Exclusivity The third level of exclusivity is based on contracts between cooperating market participants. In contrast to the first and the second level, this contractual form of private ordering does not have the purpose of controlling the behavior of the contractual partner; rather, the involved parties agree on a certain (common) behavior, which has an impact on third parties or the general public. A good example is a non-​attack clause in a licensing agreement. In this arrangement, the licensee agrees not to challenge the validity of the licensed subject matter (usually a patent). The harm of such a clause is that the licensee is the person most likely to recognize the inva­ lidity of the patent; he is in the field and in a position to judge whether an invention lacks novelty, for instance. Although it would be in the public interest to void such a patent, the scope

Access—​A Panacea? Science, Society, Democracy, Digital Divide” (2008) 15 First Monday, available at ; V Moscon, “Copyright, Contract and Access to Knowledge: A Comparative Analysis,” Trento Law and Technology Research Group Research Paper no. 17 (2013), available at . 38  K Hsieh, “Unlock the Music: Replacing Compulsory Music Licenses with Free Market Negotiation” (2016) 17 Cardozo Journal of Conflict Resolution 595, 614 et seq.

910   Reto M. Hilty of exclusivity will remain unchallenged. Third parties are then prohibited from free use of material that should be in the public domain.39 From a general perspective, such forms of private ordering are quite common. In many variations, they are the concern of antitrust law. In particular, if two (or more) market players together have sufficient relevance in a certain market—​meaning “market domi­nance” in terms of market share—​they can jointly affect (and possibly distort) competition on this market to their own benefit, and most likely they can achieve such benefits more easily than by working unilaterally. When the major subject matter of the agreement is IP, such contracts usually constitute one or another form of cross-​licensing. Such contractual constructions may be of particular relevance for outsiders as well as for the general public. Two scenarios are possible that mirror the first and the second level of exclusivity (namely IP without, or with, specific legal protection). In contrast to the lower levels, however, the third level is characterized by cooperation among independent market participants. In the first scenario, this property—​that is, secret knowledge—​is not legally protected by exclusive IP rights. In such a case, two or more market players might jointly aspire to gain control of a market through factual exclusivity of different components of interdependent know-​how, each under the control of a different entity. Parties acting together in this manner of cross-​licensing are especially likely to have greater impact than either one acting alone. Admittedly, as with private ordering on the first level of exclusivity, parties disposing of knowledge that is not legally protected cannot be blamed for contracting so as to jointly safeguard or strengthen their market position. Neither a single party nor two or more parties together can be obliged to share with others; if they are willing to do so, it is generally up to them to set the terms and conditions. Even if several parties combine their knowledge and commonly license the entirety or specific components of the whole, under comparatively constraining conditions, third parties are still better off than if the parties refused to license at all. Once again, TPMs can complicate the situation. Indeed, their power to remove material from the public domain is amplified as more parties jointly apply these technologies in a coordinated fashion. In the second scenario, private ordering for the purpose of jointly controlling or influencing a market involves IP rights. Initially, the situation is the same as discussed for the second level of exclusivity. On the third level, however, private ordering does not have the purpose of achieving unilateral benefits for one market participant; rather, two or more parties in one way or another mutually try to improve their market situation by jointly contributing their—​often complementary—​IP rights based on cross-​licensing. The more such IP rights are interdependent, the greater the negative impact of such mutual agreements may be to those third parties who are not involved. 39 

In view of such undesirable impacts, art 2 of EU Regulation No 316/​2014 of 21 March 2014 on the application of art 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, according to its art 5(1)(b), does not apply to non-​attack clauses, meaning that a general exemption from the application of art 101(1) TFEU does not take place. In contrast, this issue is a minor concern of the US Department of Justice and the Federal Trade Commission in the US Antitrust Guidelines for the Licensing of Intellectual Property, issued 6 April 1995; for details on the general debate on such clauses, see RC Dreyfuss, “Dethroning Lear: Licensee Estoppel and the Incentive to Innovate” (1986) 72 Virginia Law Review 677, 723 et seq; AD Miller and MS Gal, “Licensee Patent Challenges” (2015) 32 Yale Journal on Regulation 121, 127 et seq.

Intellectual Property and Private Ordering    911

2.3.2 Evaluation Similar to licensing in general,40 mutual licensing or cross-​licensing may, at first, be evaluated positively, because market players contractually can combine and reciprocally use different IP rights.41 Also, independent parties may be included in a plurality of legally granted exclusivities. Multilateral agreements tend to have even more advantages than bilateral licensing because licensees may combine possibly interdependent subject matters of protection and give the parties access to the rights of different market players. At the same time, everything depends on the terms and conditions. First and foremost, worries arise from the fact that cooperating market participants do not necessarily cross-​ license IP, as the example of a non-​attack clause illustrates. But even if they do, the question is to what extent third parties may get involved. For example, may parties who are not involved in a bi-​or multilateral agreement acquire a license? The exclusion of outsiders is a frequently discussed concern in the case of patent pools, for instance.42 A further issue is whether all licensees are treated equally under comparable circumstances. If that is not the case, competition—​and ultimately the general interest—​may be impaired.43 This issue of non-​discrimination is one of the predominant matters in the case of technical standards protected by patent rights (standard-​essential patents). Standard setting and standard setting organizations (SSOs) were created because producers of complex products, particularly in the information technology field,44 understood that they would need common standards in order to ensure that their products would work with each other.45 Such standards are chosen to create efficiencies, but when the standards chosen are patented, the SSOs recognized, the chosen standards give the patent holders the power to charge the rest of the industry excessively high prices. To avoid such problems, the SSOs require the 40 

See Sections 2.1 and 2.2. JD Nelson and VM Pond, “Developments in Antitrust Law That Impact Intellectual Property Licensing Transactions” (2011) 78 Defense Counsel Journel 274, 282; cf also JP Choi, “Patent Pools and Cross-​Licensing in the Shadow of Patent Litigation” (2003) CESifo Working Paper Series No. 1070, 6; cf also SC Carlson, “Patent Pools and the Antitrust Dilemma” (1999) 16 Yale Journal on Regulation 359, 369. 42  M Königs, Patentpools—​ökonomische und kartellrechtliche Untersuchung von Vertragsklauseln (Nomos 2014); K-C Liu, “A More Economic and Cross-​Jurisdiction Study on Patent Pools” (2012) 7 National Taiwan University Law Review 49, available at ; D Crane, “Patent Pools, RAND Commitments, and the Problematics of Price Discrimination” (2008) Cardozo Legal Studies Research Paper No. 232, available at . 43  Carlson (n 41); the licensor might add terms to the arrangement which are designed to suppress competition; EW Kintner, An Antitrust Primer (Macmillan and Co. 1973), 84 et seq. 44  Cf the leading cases before the high court, eg, CJEU, Huawei Technologies, C-​170/​13; Ericsson v D-​ Link Sys, No 13–1625 (Fed Cir 2014); Apple v Motorola, No 12–​1548 (Fed Cir 2014). 45  On SSOs, see J Drexl, AJ Padilla, and J Killick, “Standard setting organizations and processes: Challenges and opportunities for competition and innovation” (2015) 3 Revue Concurrences, New Frontiers of Antitrust, 15 June 2015, Paris; J Randakevičiǔtė, The Role of Standard-​Setting Organizations with Regard to Balancing the Rights Between the Owners and the Users of Standard-​ Essential Patents (Nomos 2015); MA Lemley, “Intellectual Property Rights and Standard-​Setting Organizations” (2002) 90 California Law Review 1892; UC Berkeley Public Law Research Paper No 84, available at ; from a critical point of view, J Tsai and JD Wright, “Standard Setting, Intellectual Property Rights, and the Role of Antitrust in Regulating Incomplete Contracts” (2015) 80 Antitrust Law Journal 157, available at . 41 

912   Reto M. Hilty holder of the patent chosen for the standard to agree to license it on fair, reasonable, and nondiscriminatory (FRAND) terms. These FRAND licenses have become a cornerstone of the recent debate.46 Standard setting, however, has certain side effects with regard to competition. According to § 3.2 of the Antitrust Guidelines for the Licensing of Intellectual Property, issued by the US Department of Justice and the Federal Trade Commission on 6 April 1995,47 as well as the European Regulation No 316/​2014 of 21 March 2014, on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements,48 licensing agreements may affect three disparate markets differently: product markets,49 technology markets,50 and innovation markets.51 Standards, on the one hand, primarily take effect on the technology market, where competition unavoidably becomes suppressed if the market participants concerned agree on the application of one common technology. On the other hand, positive impacts can be expected on the product market since interoperability is the precondition that allows different market participants to sell substitutable products and enter into competition with each other (think Samsung, Apple, Lenovo, Huawei, and the like).52 At the same time these rivals must be able to operate under comparable conditions,53 for which reason FRAND declarations can be 46  T Körber, “SEPs, FRAND Commitments and Competition Law,” (2013) 205 et seq; cf RM Hilty and P Slowinski, “Standardessentielle Patente –​Perspektiven außerhalb des Kartellrechts” (2015), 64 GRUR Int 781; P Picht, Strategisches Verhalten bei der Nutzung von Patenten im Standardisierungsverfahren aus der Sicht des europäischen Kartellrechts (Springer 2013); P Picht, “The ECJ Rules on Standard-​Essential Patents: Thoughts and Issues Post-​Huawei” (2016) 37 European Competition Law Review 365; P Picht, “From Transfer of Technology to Innovation Through Access,” in Ullrich et al (n 18), 509–​527; A García-​ López, What is fair and reasonable? Determining frand royalties—​the difficult tasks of courts and arbiters in the smartphone patent war. An arbitration proposal (Munich Intellectual Property Law Center 2014); A Jones, “Standard-​Essential Patents: FRAND Commitments, Injunctions and the Smartphone Wars,” 10 European Competition Journal 1–​36, King's College London Law School Research Paper 2014–​19, available at ; TA Väisänen, Enforcement of FRAND commitments under article 102 TFEU (Munich Intellectual Property Law Center 2011); A Layne-​Farrar, AJ Padilla, and R Schmalensee, “Pricing Patents for Licensing in Standard-​Setting Organizations: Making Sense of FRAND Commitments” (2007) 74 Antitrust Law Journal 671; M Mariniello, “Fair, Reasonable and Non-​Discriminatory (FRAND) Terms: A Challenge for Competition Authorities” (2011) 7 Journal of Competition Law & Economics 523, available at ; FS Kieff and A Layne-​Farrar, “Incentive Effects from Different Approaches to Holdup Mitigation Surrounding Patent Remedies and Standard-​Setting Organizations” (2013) GWU Legal Studies Research Paper No. 2013-​116; GWU Law School Public Law Research Paper No. 2013-​116, available at . 47  See . 48  Official Journal 93/​1 of 28 March 2014; this Regulation replaced the previous Regulation 772/​2004 of 27 April 2004. 49  § 3.2.1 US Guidelines (using the term “good markets”); art 1 (1) j EU-​Regulation 316/​2014. 50  § 3.2.2 US Guidelines; art 1 (1) k EU-​Regulation 316/​2014. 51  § 3.2.3 US Guidelines (“Research and development”); not explicitly mentioned in the EU-​ Regulation, but in the corresponding Technology Transfer Guidelines, Nr 26. 52  Hilty and Slowinski (n 46), 781, 782. 53  And thus compete on the basis of other characteristics such as size, battery life, screen resolution, or design, cf LB Greenfield, H Schneider, and PA Lange, “Standard-​Essential Patents and US Antitrust Law,” in D Alves Guimaraes, F Cugia di Sant’Orsola, and R Noormohamed (eds), Communications and Competition Law: Key Issues in the Telecoms, Media and Technology Sectors (Wolters Kluwer 2015), 181.

Intellectual Property and Private Ordering    913 of crucial relevance for functioning competition on the product market. As to innovation markets, standards do not necessarily have negative impacts, particularly in markets where the life cycles of products are short. Precisely because standards are primarily prevalent in dynamic industries,54 their applicability is limited in time. It is not the standard as such that is a decisive factor in highly dynamic markets, but rather the possibility that the competitor will become the frontrunner in a new technology, ultimately developing new standards. In short, standards may suppress competition on the technology markets; however, standards potentially increase competitive pressure on innovation markets.55 This framework of private ordering in connection with standard setting in the field of information technology is quite exceptional; the establishment of SSOs is one of the rare cases where the hazards of private ordering were anticipated and a solution achieved—​although practical problems illustrated by lawsuits all over the world on what FRAND actually means may not be ignored.56 In “normal” market constellations, in contrast, we hardly find any attempts of comparable self-​regulation in order to avoid the undesirable effects of private ordering. Instead, transparency is missing, with the consequence that private ordering on a bi-​or multilateral contractual level has a high potential for overriding legislative attempts to limit the scope of exclusivity in the interest of balancing all the interests involved. This potential to provoke imbalances within IP rights regimes is further heightened if TPMs come into play. The higher the number of market players cumulatively applying comparable TPMs becomes, the fewer alternatives will be available and the fewer choices consumers will have. Coordinated practices are a general concern of competition law, and as long as such coordination is based on contractual agreements, competition authorities can intervene to minimize their negative effects. In contrast, the effects of TPMs applied on a broad scale are of unknown significance. The more such TPMs evolve into “standards” among independent market players, the easier it becomes for right holders to indirectly coordinate and impose inappropriate terms and conditions, thereby overriding balancing mechanisms inherent to IP rights regimes.

3. Remedies 3.1 General Stocktaking Certainly, contractual freedom is one of the most esteemed maxims of a market economy.57 This guiding tenet does not mean, however, that any and all contract content must be tolerated. The more contractual private ordering has the purpose of narrowing—​or even

54

 ibid 183. Which is visible for the most rapidly growing mobile communications industry that has gone through several generations of highly relevant standards (eg, GSM, WCDMA, LTE); cf D Geradin, “Moving away from high-​level theories: A market driven analysis of FRAND” (2014) 59 Antitrust Bulletin 327, 330; different: MA Lemley and C Shapiro, “Patent Holdup and Royalty Stacking” (2007), 85 Texas Law Review 1991, 1991. 56  See also Section 3.5. 57 See (n 1). 55 

914   Reto M. Hilty eliminating—​legally imposed limitations to exclusivity, the more legitimate it is for courts and legislatures to intervene and confine contractual freedom. While the need for intervention is undisputed as such, the scope of justifiable intervention into the private autonomy of contracting parties is the subject of considerable debate. Legal tools for such intervention in contractual private ordering are, however, available in principle. Thus, it is not inherently challenging to cabin contractual freedom within a politically acceptable range. Technical means, in contrast, were, for a long time, a less common tool of private ordering. Only recently—​and most prominently in the digital world—​have TPMs evolved. As a result, the legal framework is less prepared to assume the task of providing countermeasures to deal with the unwanted implications of this form of private ordering.58 There are other complications. Today, both methods of private ordering take place in highly complex and dynamic market conditions with growing autonomy of different actors. The more certain market participants may operate independently from each other from an antitrust perspective,59 the easier it is for them to create or extend exclusivity based on private ordering, thus affecting an indefinite number of others. The higher the complexity of a market, the less predictable unilateral attempts of private ordering prove to be. In this situation, traditional state regulation threatens to be far too inflexible and ultimately incapable of intervening appropriately. Instead, this environment may provide the breeding ground for self-​regulation among the concerned parties. Self-​regulation creates the flexibility necessary to react to changing conditions and allows for a dynamic interaction among the actors. But self-​regulation also increases the risk of undermining functional competition, primarily to the disadvantage of external, uninvolved market participants, and ultimately to the detriment of the public interest. In view of such challenges, the search for remedies for undesirable forms of private ordering needs to go beyond traditional legal tools. Rather than explaining the functionality of generally known legal instruments in detail, it is sufficient in the following to briefly hint at potential shortcomings with regard to their ability to curb undesirable private ordering on the three levels of exclusivity effectively. The main focus, however, is a discussion of the legislative challenges to incentivize self-​regulation in a meaningful, generally welfare-​enhancing manner.

3.2 Confinement of Freedom of Contract 3.2.1 Contract Law and Special Legislation It goes without saying that private ordering based on contracts is subject to generally existing limits on the freedom to contract; the scope of such limits depends on the applicable legislation.60 In many legal systems, a majority of statutory restrictions to private autonomy aim at the protection of consumers or other systemically weaker parties (like laborers or tenants), 58  This is at least true if one does not perceive TPMs as one-​sided contractual terms, with the effect that they could be evaluated by the requirements of general terms and conditions; in this sense M Mackenrodt, Technologie statt Vertrag? (Siebeck 2015), 283. 59  Market participants may operate independently if changes in their market behavior do not impact the demand side due to lacking alternatives on the supply side. 60  Mackenrodt (n 58), 15 et seq.

Intellectual Property and Private Ordering    915 rather than at protecting the public order or moral obligations. For that reason, these laws are most effective at the first and second levels of exclusivity, where they protect the specific interests of contractual partners, for example, end-​users when they are considered the weaker party. Thus, there is often special legislation applicable to mass market contracts.61 The more liberal a legal regime, however, the less it will generally interfere with agreements among individuals and, in particular, among commercial players operating within a market. Therefore, licensing agreements as such—​be they related to factual or legally protected exclusivity—​are rarely subject to legal control in general or mandatory rules in particular. Imbalances triggered by a licensor’s overly strong bargaining power can therefore escape correction as a matter of contract legislation. This is also true regarding the third level of exclusivity in which two or more market players contractually coordinate their market position or activities with a view to restraining third parties. Even a contract law that imposes a comparatively high standard of moral obligations, for instance, will generally not focus on contracts potentially affecting competitors. Instead, antitrust law comes into play at the third level of exclusivity.62 In addition, third parties, like consumers or other market participants, may benefit from specialized legislation, such as unfair competition law (eg, protecting outsiders against coordinated behavior of cooperating competitors on the third level of exclusivity). In this respect, legal remedies for the purpose of setting limits to freedom of contract to prevent unwanted forms of private ordering may exist—​or could be established63—​in most jurisdictions.

3.2.2 Intellectual Property Legislation If we limit our perspective to the second level of exclusivity, in which IP rights (particularly copyright) are involved, one important aspect is the extent to which contracts that conflict with legally permitted uses are valid and enforceable.64 In fact, contractually prohibiting such uses—​ for example, the use of works for scientific purposes—​is one of the typical ways in which right holders try to extend exclusivity beyond the scope intended by the relevant IP legislation.65 Providing an answer to the question whether or not—​and if so to what degree—​it is fea­ sible to contract out of legal exceptions is not easy, and the answer is different in different jurisdictions and with respect to different forms of IP legislation.66 The major concern is, of course, that exceptions are pointless if they are mandatory, but overridden by contract. IP 61  Subjected to general terms and conditions, such as in the EU, where art 7(1) Directive 93/​13/​EEC states that “Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers.” 62  See Section 3.2.3. 63  See, eg, the proposals of N Elkin-​Koren, “A Public-​Regarding Approach to Contracting Over Copyrights,” in RC Dreyfuss, DL Zimmerman, and H First (eds), Expanding the Boundaries of Intellectual Property: Innovation Policy for the Knowledge Society (OUP 2001), 217. 64  E Winston, “Why Sell What You Can License? Contracting Around Statutory Protection of Intellectual Property” (2006) 14 George Mason Law Review, available at . 65  Hazucha, Liu, and Watabe (n 32), 134. 66  For details, see the country reports in RM Hilty and S Nérisson, Balancing Copyright–​A Survey of National Approaches (Springer 2012). The question is particularly disputed in German copyright literature; see, eg, M Stieper, Rechtfertigung, Rechtsnatur und Disponibilität der Schranken des Urheberrechts (Siebeck 2009); to date, the German Federal Supreme Court has left the question unanswered, cf T Dreier

916   Reto M. Hilty legislation, however, and especially copyright legislation, quite often does not provide clear direction as to whether an exception is mandatory (or in US terminology, preemptive of contractual freedom).67 Rather, the approaches and, not surprisingly, the doctrinal views vary. EU legislation does, however, provide an answer regarding TPMs. Thus, Article 6(4) of Directive 2001/​29, the Information Society Directive,68 lists certain exceptions which Member States must make sure that their beneficiaries can enjoy, even if TPMs apply.69 By extension, these exceptions arguably should also be considered mandatory from a contractual perspective as well. Nevertheless, even then the picture within the EU remains an unconvincing patchwork. While those exceptions may well be deemed mandatory, the Directive only allows Member States to implement them,70 but does not require their adoption.71 If they do not, it is meaningless to consider the listed exceptions mandatory. and L Specht, in Hilty and Nérisson (n 66), 448; cf also T Dreier and M Leistner, “Urheberrecht im Internet: die Forschungsherausforderungen” (2014) 13 GRUR-​Beilage 20, 23; J Gräbig, Abdingbarkeit und vertragliche Beschränkungen urheberrechtlicher Schranken (Nomos 2011), 67 et seq; H Zech, “Vertragliche Disposition über Schranken des geistigen Eigentums,” in S Leible, A Ohly, and H Zech (eds), Wissen—​ Märkte—​Geistiges Eigentum (Siebeck 2001), 192 et seq; for other jurisdictions, see L Di Valentino, “Conflict between Contract Law and Copyright Law in Canada: Do Licence Agreements Trump Users’ Rights?” (2014) FIMS Working Papers 1, available at ; HL MacQueen, “Appropriate for the Digital Age? Copyright and the Internet” Edinburgh School of Law Research Paper No. 2014/​24, 28 et seq, available at ; C Bohannan, “Copyright Preemption of Contracts,” University of Iowa Legal Studies Research Paper No. 08-​24, (2008) 67 Maryland Law Review 616, available at ; K Olson, “Preserving the Copyright Balance: Statutory and Constitutional Preemption of Contract Based Claims” (2006) 11 Communication Law and Policy 83, available at ; J De Werra, “Moving Beyond the Conflict between Freedom of Contract and Copyright Policies: In Search of a New Global Policy for On-​Line Information Licensing Transactions” (2003) 25 Columbia Journal of Law & the Arts, available at ; L Guibault, Copyright Limitations and Contracts—​an Analysis of the Contractual Overridability of Limitations on Copyright (Kluwer Law International 2002); L Guibault, in Guibault and Hugenholtz (n 11), 97 et seq. 67  For respective harmonization proposals de lege ferenda, see Commission Communication COM (2015) 626 final “Towards a modern, more European copyright framework,” 8, available at ; RM Hilty and K Köklü, “Limitations and Exceptions to Copyright in the Digital Age. Four Cornerstones for a Future-​Proof Legal Framework in the EU,” in I Stamatoudi (ed), New Developments in EU and International Copyright Law (Wolters Kluwer 2016), 283–​298; RL Okediji, “The International Copyright System: Limitations, Exceptions and Public Interest Considerations for Developing Countries, UNCTA—​ICTSD Project on IPRs and Sustainable Development” (2006), 20, available at . 68  Directive 2001/​29/​EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society. 69  The scope of this provision, however, is overly narrow; see Section 3.3. See also S Dusollier, “Exceptions and Technological Measures in the European Copyright Directive of 2001—​An Empty Promise” (2003) International Review of Intellectual Property and Competition Law 62, 72; JH Reichman, GB Dinwoodie, and P Samuelson, “A Reverse Notice and Takedown Regime to Enable Public Interest Uses of Technically Protected Copyrighted Works,” UC Berkeley Public Law Research Paper No. 1007817; Duke Science, Technology & Innovation Paper No. 24, 47 et seq, available at . 70  Recital 32 of the Directive: “This Directive provides for an exhaustive enumeration of exceptions and limitations to the reproduction right and the right of communication to the public.” 71  In relation to software, in contrast, art 5(2) of Computer Program Directive clearly states that “the making of a back-​up copy by a person having a right to use the computer program may not be prevented by contract in so far as it is necessary for that use.”

Intellectual Property and Private Ordering    917

3.2.3 Antitrust Law Antitrust law does not have the purpose of a general market regulation. However it is implemented in national legislation, its focus is on the functioning of competition in general, but not (or at least not in the first instance) on the protection of individual competitors. Instead, antitrust law serves the public interest at large and consumer interests in particular;72 it is not a tool for the benefit of a single party. Therefore, as far as antitrust law applies to contractual agreements between two or more market participants (in terms of Article 101 of the Treaty on the Functioning of the European Union (TFEU),73 for instance, or of Sec. 1 of the US Sherman Act74), there is only a small scope for limiting private ordering. To invalidate an agreement, a challenger must, essentially, show that the parties to the agreement possess sufficient market dominance to potentially influence—​and possibly impair—​the market concerned. At the first and the second level of exclusivity, where contracts serve primarily to provide goods or services to individual parties, antitrust law, in the sense of a control of agreements among market players, does not apply. This is true irrespective of whether IP rights are involved, and whether the parties on the receiving end are end-​consumers or commercial market participants. However, antitrust law may apply to unilateral conduct under the condition that a supplier enjoys a dominant market position.75 In contrast, the third level of exclusivity is characterized precisely by the fact that two or more market players intend to contractually coordinate their market positions or activities. On this level, therefore, antitrust law may be an effective tool to control private ordering, provided the parties involved have sufficient potential to impair the functioning of competition in related markets. Legislation in major jurisdictions, such as the EU and the US, pay particular attention to IP contracts. Although licensing agreements involving IP potentially have the positive effect of creating access to exclusive subject matter, weighing the pro-​and anti-​competitive effects is difficult. Specialized legislation and administrative guidelines are therefore provided to enhance legal certainty.76

3.3 Confinement of Unilateral Conduct Apart from contracts, which ultimately require the agreement of another party, TPMs are the major means for unilateral private ordering. In contrast to contracts, TPMs only exceptionally are subject to legal control. To the extent that legal regulation of TPMs exists

72   Cf eg T Lettl, Kartellrecht (Beck 2013), 2. According to Posner, promoting economic welfare, understood in terms of the economist’s concept of efficiency, is the only goal of antitrust law; see R Posner, Antitrust Law (2nd edn, University of Chicago Press 2001), ix, 2, 29. 73   Art 101 para 1 TFEU (Treaty on the Functioning of the European Union, consolidated version, 2012/​ C 326/​01): “The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market.” 74  Section 1 of Sherman Act 1890 (Sherman Antitrust Act, 26 Stat 209, 15 USC §§ 1–​7): “every contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” 75  See Section 3.3. 76  See already (n 42).

918   Reto M. Hilty at all, it primarily focuses on the opposite of the present concern: not on preventing unwanted extensions of a scope of exclusivity, but rather on prohibiting the circumvention of these measures. This is particularly the case in copyright law, where international legislation obliges Member States to “provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures.”77 Beyond that, criminal law, and possibly also other specialized legislation, may protect TPMs. The effect of such general legal settings is particularly far-​reaching if the legal protection of TPMs against circumvention applies irrespective of whether the content is protected by IP rights. If, for instance, criminal law unconditionally protects TMPs, the ultimate consequence is that IP rights become obsolete.78 The law on the inverse situation, where TPMs are used to override public-​regarding limitations, is underdeveloped. Indeed, in copyright, certain uses may be exempt from the anti-​circumvention legislation.79 Thus, the European Information Society Directive, in Article 6(4), requires of market players applying TPMs that they take appropriate measures to ensure that uses of certain mandatory exceptions are possible.80 However, viewed up close, this provision is far from convincing, in particular because subparagraph 4 of the Article excludes the application of this principle to online business models, that is, to precisely the cases in which TPMs are most relevant. Furthermore, because Member States are free to choose the way they implement that rule, the beneficiaries of the law are left in the lurch in cross-​border situations. As a result, an application of TPMs, for whatever purpose, including the prevention of parallel importation, is barely hindered by current legislative approaches. The only constraint is antitrust law, but then only if a market player applies TPMs in a way that abuses a dominant market position. For example, Article 102(a) TFEU prohibits “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions.”81 It is, however, highly unlikely that a single market participant on the first or the second level—​ in competition with others (eg, scientific publishers)—​will be deemed to have a dominant po­sition in the relevant market. Only on the third level of exclusivity, characterized by players’ coordination of market positions or activities, is it imaginable that a parallel application of comparable TPMs with similar effects on third parties could lead to a (common) dominant market position. From a practical perspective, however, it is unlikely that antitrust law would ultimately prohibit TPMs related to business models whose very design is based on technical means to prohibit unauthorized access. In the final analysis, the current legislative framework does not offer effective means for limiting private ordering based on TPMs, irrespective of the potential of such technical means to override limits to exclusivity. Even if the freedom to use a subject matter covered by technical protection is legally imposed, TPMs are, apparently, immune. This is even more true for

77 

Art 11 WCT and art 18 WPPT; see also Mackenrodt (n 58), 18. DL Burk calls this a “Paracopyright”: see “Anticircumvention Misuse” (2002) 50 UCLA Law Review 1095, 1096. 79  See, eg, Library of Congress, Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies of 28 October 2015, . 80  See Section 3.2.2. 81  Similar in the US s 2 Clayton Act; cf generally RS Markovits, Economics and the Interpretation and Application of U.S. and E.U. Antitrust Law (Springer 2014), 345. 78 

Intellectual Property and Private Ordering    919 measures taken at the first level of exclusivity, for example, for the purpose of extending exclusivity beyond the (expired) term of protection, or of bringing freely available subject matters back under exclusivity. Here, TPMs may be applied without any restriction since this level is characterized by a total lack of legal regulation. At the same time, if no legal protection is provided to TPMs in these circumstances, they may, of course, be circumvented to the extent a user is able to physically do so.

3.4 New Regulatory Approaches The desire to confine unwanted forms of private ordering calls for more efficient regulatory approaches, if not a paradigm shift, in the jurisprudence of private ordering in the IP context.82 Whether or not the political will exists to undertake steps in that direction is one question; the other is whether an appropriate legal solution is imaginable at all. The first question does not need to be answered at present; the answer to a large degree depends on the political realities, in particular, the power of the industries concerned vis-​à-​vis legislative willingness to protect third-​party interests, particularly those of consumers or small-​or medium-​sized businesses that form the major targets of private ordering. The primary concern of dysfunctional, and therefore undesirable, forms of private ordering are TPMs.83 Whereas overly restrictive contractual terms and conditions may, in principle, be confined based on current or possibly amended legislation, it is not easy to imagine how a regulation of TPMs would look, or where it should be located within a traditional judicial system. In any case, it seems rather unrealistic that a “law against illegitimate technical protection measures” could be enacted. Such an effort might end up as a confusing patchwork of unrelated, scarcely cohesive provisions in permanent need of adaptation to new business models. But three approaches based on current law on TPMs can be considered, and applied in combination with contractual private ordering. The most obvious one addresses the second level of exclusivity: IP legislation itself. As discussed earlier, some rudiments of control can be found in current copyright legislation.84 It seems a not unrealistic option to pursue that path more consistently.85 The purpose would be not only to define the uses of protected subject matter that should be allowed without the consent of the right holder, but to explicitly relate such provisions or rulings to anticipated impediments stemming from private ordering.

82 

An assessment of the current legislative framework as basically sufficient is, in contrast, voiced by R Burrell and A Coleman, Copyright Exceptions—​the Digital Impact (CUP 2009), 70, et seq, 75. 83  See also N Elkin-​Koren, “A Public-​Regarding Approach to Contracting Over Copyrights,” in Dreyfuss et al (n 63), 192 et seq. 84  See Section 3.2.2. 85  More critically with respect to the fair-​use approach DL Burk and JE Cohen, “Fair Use Infrastructure for Rights Management Systems” (2001) 15 Harvard Journal of Law & Technology 41, 61: “A judicially-​administered procedure, however, does not seem well calculated to cure cost, spontaneity, or anonymity objections. Any procedure requiring an ex ante judicial evaluation of fairness

920   Reto M. Hilty The most drastic approach would be the establishment of a “right to hack,” meaning that the circumvention of the technical measure would legally be allowed.86 The downside of that approach is that it would blur the distinction between “reasonable” TPMs—​necessary for the enforcement of a fair business model—​and abusive implementations. A more sophisticated, albeit more complex, alternative would be a “key escrow system.”87 Picking up the example of TDM mentioned earlier,88 a statutory license could prohibit right holders from applying TPMs in ways that hamper efficient automated data searches, or require them to take measures to allow third parties the access to technically required data. Other legal techniques are imaginable as well, for example, a general rule imposing specific duties on right holders applying TPMs, perhaps in combination with sanctions in case of non-​compliance. A second approach could apply to all three levels of exclusivity. The essential idea is to facilitate interventions in situations where the conditions to invoke antitrust law, in particular, sufficient market dominance, are not fulfilled. In contrast to antitrust law, which focuses on the functionality of the market as a whole, this approach could target the specific concerns of single market participants or groups of them. At its core, this intervention could be a part of unfair competition legislation, but other regimes could also be used. In any case, the rules would focus on particular ways in which competition can be distorted. The approach would have to be periodically adapted to deal with newly emerging forms of technology and market conduct. A crucial characteristic of this approach is its capacity to intervene in dealings between businesses and to eliminate the detrimental effect of private ordering on third parties (commercial or not). The third approach targets private or commercial end users who typically may not avoid certain consequences of TPMs. They either forego a transaction as a whole, or they must accept imposed terms and conditions or factual constraints. The consumers in mass markets—​ mostly related to copyright-​ protected subject matter—​ in particular are increasingly faced with business models ignoring the legally provided (limited) scope of exclusivity. This, of course, links back to the first approach, focusing on obligations of right holders applying TPMs under IP law. However, it is not only unrealistic to impose specific obligations—​like a “key escrow system”—​whenever mass markets are concerned; the fact is that IP legislation, and especially copyright law, is becoming increasingly overburdened with extraneous functions. It is also not the task of copyright law to sort out desirable and undesirable business models. If right holders harm the interest of consumers (or end users in general), this is a primary concern of consumer protection law, in whatever arrangement such concerns can be addressed.89 This third approach typically focuses on the second level of exclusivity, although it may be useful on the other levels as well. would dramatically raise the cost of fair use and would essentially transform the fair use right from a liability rule to a property rule.” 86   L Lessig, Code and other Laws of Cyberspace (Basic 1999), 139; JE Cohen, “Copyright and The Jurisprudence of Self-​Help” (1998) 13 Berkeley Technology Law Journal 1089, 1141; see in this sense, for instance, art 39a(4) of the Swiss Copyright Act, albeit limited to the direct beneficiary of a statutory limitation, thus excluding a corresponding right for independent services; as to the practical difficulties; also, S Bechtold, Vom Urheber-​zum Informationsrecht: Implikationen des Digital Rights Management (Beck 2002), 412 et seq; M Stieper, Rechtfertigung, Rechtsnatur und Disponibilität der Schranken des Urheberrechts (Siebeck 2009), 437. 87  S Bechtold (n 86), 412 et seq. 88  See Section 2.2.2. 89  See, particularly for business models in the digital environment overriding users’ latitude to make use of works based on traditional forms of “exhaustion,” RM Hilty, “Exhaustion in the Digital Age” in

Intellectual Property and Private Ordering    921

3.5 Regulating Self-​regulation 3.5.1 Motivations and Conditions for Self-​regulation The three mentioned regulatory approaches will be particularly useful if specific forms of private ordering show predictable tendencies to extend exclusivity beyond a desirable scope. Certain developments, however, are not predictable. As indicated, some markets function under highly complex conditions; they are characterized by varying interdependencies of market players, high dynamics, possibly short life cycles of related products, and great volatility. In such an environment, legislatures will likely lack the information they need to legislate effectively. Such information is often held piecewise and unsystematically by different market players, none of whom may understand the functioning of a market on its own. However, the likelihood of reasonable governance increases with the number of actors motivated to coordinate their undertakings. If they are able to agree on common rules, taking account of diverging needs, but have certain common targets in mind (in particular, the goal of keeping the market functioning and dynamic), they may ultimately be the best regulators. Such forms of self-​regulation90, however, only evolve under certain conditions, including, most importantly, when a majority of the actors understand that they will all benefit more from coordinated actions than from solo efforts. In the case of standard setting, for instance, everyone is better off with the standard because of the necessity of interoperability. Further, in the case of different competing technologies, the factual emergence of a standard may be time-​consuming and inefficient, in particular because many market participants may become stranded with their own technology. Beyond that, self-​regulation is most promising under conditions under which state regulation might fail due to a lack of information, thus possibly intervening too selectively and narrowly—​or on the contrary too generally and broadly. Instead, it might be more promising to regularize certain—​possibly even strict—​benchmarks, but to leave the market players sufficient room to determine for themselves how those targets will be met. In other words, the legislative focus might best be directed toward efforts to frame appropriate regulatory guidelines, leaving it to the actors to self-​regulate within that framework. Such guidelines would need to be supported with sanctions for non-​compliance. As a fallback position, the door must be left open to direct intervention beyond self-​regulation in order to protect the interests of disregarded outsiders or other third parties.

I Calboli and E Lee (eds), Research Handbook on Intellectual Property Exhaustion and Parallel Imports (Edward Elgar 2016); Max Planck Institute for Innovation & Competition Research Paper No. 15-​09, available at . For consumer protection options de lege ferenda, see Guibault (n 66), 304. 90  The attractiveness of “voluntary” concepts is in line with and evidenced by the current popularity of alternative dispute resolution mechanisms; see on this N Gardner, “Mediation and its relevance to intellectual property disputes” (2014) 9 Journal of Intellectual Property Law & Practice 565; S De, “The Use of Dispute Resolution to Resolve Intellectual Property Conflicts—​A Survey of Emerging Trends and Practices” (2012) available at ; JL Contreras and DL Newman, “Developing a Framework for Arbitrating Standard-​Essential Patent Disputes” (2014) 1 Journal of Dispute Resolution 23, American University, WCL Research Paper 2014-​20, available at .

922   Reto M. Hilty At the same time, self-​regulation must be subjected to certain forms of regulation because it undeniably implies the risk that interests of outsiders—​or the public at large—​ will be ignored. In the field of IP in particular, where possibilities of private ordering have reached a scope and a complexity where self-​regulation might play a more important role in the future than state regulation, it is worth reflecting on the need to channel such attempts at self-​regulation by using appropriate regulative guidelines to safeguard societal interests.91

3.5.2 Technical Standards as a Prime Example of Self-​regulation As noted, standard setting is an area where self-​regulation already plays a key role.92 Technical standards are exemplary for markets in which different players interdepend although organizationally acting autonomously. Furthermore, standards are the epitome of non-​substitutability; a market participant who does not conform to the standard can be forced out of business. Standards may be basic and of a rather static nature; but as more complex, interrelated, and dynamic standards develop, the less top-​down regulation will help, and the more self-​regulation becomes the obvious choice. Under conditions as just described, however, self-​regulation has a dangerous potential to exclude—​or at least to discriminate against—​non-​involved market participants. The determination of standards based on self-​regulation, therefore, crucially needs to occur in a transparent manner; the technology ultimately selected to be the standard must serve all interested parties best, irrespective of whether they were involved in the proceedings. Furthermore, anyone who wants to enter the respective market must have access under comparable conditions. The lively debate among academics and practitioners, as well as the increasing relevance the topic has in case law, suggest that a promising framework for self-​regulation of private ordering in IP-​related fields is about to emerge. The European discussion to a large degree seems to concentrate on competition law.93 This is not surprising given that antitrust law is one of the major competences on the EU level, whereas contractual concerns (apart from special fields like consumer protection) are primarily debated on the national level. In the US94 and other jurisdictions, in contrast, the doctrinal analysis of this issue is apparently more open. One core question, for instance, focuses on the legal qualification of a FRAND declaration (vis-​à-​vis the SSO) from the perspective of an independent seeker of a license. Furthermore, discussions of a party’s duties during the contractual negotiations go far beyond the scope of antitrust law (and do so in Europe as well, where leading cases are barely

91

92  See Section 2.3.2.   Hilty and Slowinski (n 46), 781, 790 et seq. D Gifford and R Kudrle, The Atlantic Divide in Antitrust: An Examination of US and EU Competition Policy (University of Chicago Press 2015), 21, rightly emphasize this additional complexity of the EU, where certain political issues remain at the national state level, while in competition policy most important decisions are taken in Brussels. 94  See the comparison and references in Hilty and ​Slowinski (n 46), 781, 785 et seq. See also D Lim, Patent Misuse and Antitrust Law—​Empirical, Doctrinal and Policy Perspectives (Edward Elgar 2013); TF Cotter, “The Comparative Law and Economics of Standard-​Essential Patents and FRAND Royalties” (2013) 22 Texas Intellectual Property Law Journal 311; Minnesota Legal Studies Research Paper No 13-​40, available at . 93 

Intellectual Property and Private Ordering    923 anchored in statutory EU competition law95). Examples are specified offers requested from one party or the other (right holder or seeker of the license) and duties to accept certain offers. In considering the success of self-​regulation in the standard-​setting context, it is important to keep in mind that much of the activity is in the IT sector, which is sui generis. Most technical advances are patent-​protected. This leads to thickets of hundreds of thousands of patents, most of which do not have the purpose of actually protecting innovative steps, but serve as currency, or even weapons, in the “patent wars” especially typical for the smartphone market. Under such circumstances, it is crucial to clearly delineate those patents which are truly essential for a certain technical standard (SEPs).96 Viewed from that perspective, the current debate may be too specific and non-​representative to serve as a basis for broader conclusions. Nonetheless, there is much to learn about how to regulate self-​regulation. Some aspects are naturally governed by legislation, for example, the patent-​granting procedure and antitrust law. Other rules, such as those governing FRAND declarations, are established by private organizations (in particular SSOs97), which in turn are frequently governed by market players. Rules framed by such organizations could also cover other matters otherwise left to the courts to decide, for example, procedural matters leading up to the conclusion of licensing contracts. An open question is whether, and to what extent, such forms of self-​ regulation ultimately will become success stories in the sense that complex markets are governed more efficiently than under state regulation and what forms of state regulation are necessary to protect the public interest. In any case, the currently ongoing, highly interesting learning process based on self-​ regulation in the relatively narrow field of SEPs presumably will provide useful insights beyond the specific questions. It is likely that private ordering in the field of IP will emerge even more in the future. Technology-​based business models will continue to increase control over users’ behavior and limit their freedom to operate. Thus, it is not unrealistic to worry that the public-​regarding provisions in current IP legislation will become dead letters. In parallel, the dynamics and the complexity of the markets in which transactions take place will grow, making it almost impossible for legislatures to intervene appropriately.

3.5.3 Further Existing or Potential Areas for Self-​regulation As discussed, there are different motivations determining why self-​regulation may govern attempts of private ordering. One is the prospect of these being superior to the solo efforts of individual market participants; another could be the expectation of avoiding state regulation. Viewed closely, we can see a number of other areas in which self-​regulation already

95  This became abundantly clear in the recent CJEU decision, Huawei/​ZTE C-​170/​13 = GRUR Int. 2015, 942. The CJEU ruled that the patent holder must inform the alleged patent user of his alleged infringing behavior and make an offer under FRAND terms before being allowed to file a claim for damages against him. This procedural requirement is, however, by no means found in European Antitrust Law, but was created by the CJEU; cf also T Körber (2015), . 96  Greenfield, Schneider, and Lange (n 53), 190 et seq; Picht (n 46), 219. 97  See Section 2.3.2.

924   Reto M. Hilty plays a role or might become relevant in the future. In some areas, however, it is questionable whether the potential for channeling self-​regulation through regulative guidelines is being sufficiently utilized. One such case—​distantly related to the background of standard setting—​is patent pools. Such forms of private ordering belong to the third level of exclusivity; they are characterized by the fact that different right holders own formally stand-​alone patents which are typically technically interdependent. Usually, market participants from similar technological fields are involved in a patent pool. They may utilize various modes of mutual cooperation. Subject to the legal organization, a pooling of patents ultimately leads to a form of cross licensing. Alternatively, patents may formally be assigned (or licensed) to the pool, with the effect that the pool acts as licensor for its participants. Like most forms of licensing, patent pools are likely to have up sides and down sides.98 Today, they are primarily seen as a concern of antitrust law, especially in view of the possible exclusion of outsiders.99 The possibilities of negative effects of this form of private ordering, however, may go beyond what can be addressed on the basis of antitrust law. Above all, the threshold for intervention by antitrust authorities is comparatively high, especially with regard to the market shares of the parties involved. In the first place, it can be very difficult to determine market shares in highly dynamic markets, particularly in the technology or innovation markets.100 In addition, the duration of antitrust proceedings can be excessively long and an outcome for the excluded market participant ultimately useless. Evaluated in that light, patent pools seem to have significant potential for self-​regulatory approaches. Instead of primarily relying on antitrust law, sector-​specific guidelines might safeguard general access to key technologies more efficiently, leaving room for the particularities of specific patent pools or technical fields. At the same time, a maximum of flexibility to react in rapidly changing market conditions might be provided. A completely different101 field of self-​regulation concerns the various possibilities for collective rights management (CRM) in the copyright field, again, a typical form of private ordering on the third level of exclusivity, but one that is affected to a larger degree by the legal specifications of substantive copyright law. Mostly incentivized by the fact that right holders are not in the position to individually control and license their works,102 collecting societies—​a specific form of CRM—​have a long tradition.103 This field of self-​regulation is particularly interesting because it is strongly influenced by the question of how to provide an efficient regulatory framework that will trigger reasonable governance structures 98 

See Section 3.2.3. See Commission Regulation (EU) No 316/​2014 of 21 March 2014 on the application of art 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements, particularly Recitals 14, 15, and the Antitrust Guidelines for the Licensing of Intellectual Property by the US Department of Justice and the Federal Trade Commission, particularly §3.4. 100  As to the differentiation of product, technology, and innovation markets, see Section 2.3.2. 101  On the comparability of patent pools and copyright collectives in various respects see N Gallini, “Competition Policy, Patent Pools and Copyright Collectives” (2011) 8 Review of Economic Research on Copyright Issues 3, available at ; also R Aoki and A Schiff, “Promoting Access to Intellectual Property: Patent Pools, Copyright Collectives and Clearinghouses” (2007) 38 R&D Management 189, available at . 102  RM Hilty and S Nérisson, “Collective Copyright Management: The European Experience,” in R Towse and C Handke (eds), Handbook of the Digital Creative Economy (Edward Elgar 2013), 224–​225. 103  The first CMO was the French Société des Auteurs et Compositeurs Dramatiques (SACD), founded in 1837 and still existing today; see A Schierholz, “Collective Rights Management in 99 

Intellectual Property and Private Ordering    925 within such organizations and deal with special concerns such as the preservation of cultural diversity.104 At the same time, international cooperation agreements among domestic organizations are a general concern, mostly regarded from the perspective of antitrust law.105 In view of the numerous particularities of this field of private ordering, however, it is broadly agreed that sector-​specific regulation of CRM is superior to antitrust law.106 Antitrust law may play an additional role under certain conditions, but it is reasonable to rely on the abilities of the market players to self-​regulate their business within a suitable regulatory framework. The recently agreed European Directive 2014/​26 could be seen as such a framework;107 however, it does not have a direct effect on market participants, but needs to be implemented by the Member States, who therefore may narrow the leeway of the market players based on state regulation and ultimately undermine self-​regulation. Another area where self-​regulation might become highly important is in the data-​driven economy.108 While today a primary concern seems to be the question of ownership,109 it is conceivable that the much more important issue in the long run will be access to data. In fact, one market participant may be in the position of generating or capturing specific data (eg,

Europe—​Practice and Legal Framework” in MM Walter and S von Lewinski (eds), European Copyright Law. A Commentary (OUP 2010), 1151–​1152. 104  The protection and promotion of cultural diversity is in line with the aims expressed in art 167 TFEU; see also A Dietz, “The Proposal of the EU Commission for a Directive on Collecting Societies and Cultural Diversity—​A Missed Opportunity” (2014) Auteurs & Media 90. 105  Examples of agreements between CMOs to limit competition are the Santiago and the Barcelona Agreement; see Commission Recommendation 2005/​737/​EC of 18 May 2015 on collective cross-​border management of copyright and related rights for legitimate online music service, OJ L 276/​54; see also Commission Decision of 16 July 2008 relating to a proceeding under art 81 of the EC Treaty and art 53 of the Agreement on the European Economic Area (Case COMP/​C2/​38.698—​CISAC). 106  On the advantages of sector-​specific regulation see RM Hilty and T Li, “Control Mechanisms for CRM Systems and Competition Law” in MPI Studies on Intellectual Property and Competition Law (Springer 2017), 157–​176; N Dunne, Competition Law and Economic Regulation (CUP 2015), 46. 107  Directive 2014/​26/​EU of the European Parliament and of the Council of 26 February 2014 on collective management of copyright and related rights and multi-​territorial licensing of rights in musical works for online use in the internal market; for a critical assessment of the regulatory approach undertaken see J Drexl, S Nérisson, F Trumpke, and RM Hilty (2013), “Comments of the Max Planck Institute for Intellectual Property and Competition Law on the Proposal for a Directive of the European Parliament and of the Council on Collective Management of Copyright and Related Rights and Multi-​ Territorial Licensing of Rights in Musical Works for Online Uses in the Internal Market” (2012) COM 372, (2013) 44 International Review of Intellectual Property and Competition Law 322; S Nérisson, “La directive 2014/​26/​UE du 26 février 2014 sur la gestion collective des droits d’auteur et des droits voisins: vol au-​dessus de vaches sacrées intouchables” (2014) 51 Propriétés intellectuelles 135. 108  The importance of data for today’s economy is highlighted by European Commission Communication COM (2015) 192 final, “A Digital Single Market Strategy for Europe,” according to which, in pursuance of the goal of building a “data economy,” the Commission will propose in 2016 a European “Free flow of data” initiative that tackles restrictions on the free movement of data. 109  At least in Europe; see N Purtova, Property rights in personal data—​a European perspective (Wolters Kluwer 2011); from the academic debate in Germany, see, for example, M Dorner, “Big Data und ‘Dateneigentum’,” CR 2014, 617; T Hoeren, Dateneigentum—​Versuch einer Anwendung von § 303a StGB im Zivilrecht (Multimedia und Recht 2013), 486; on the lacking necessity of exclusive rights in data both from a legal and an economic perspective see “Positionspapier des Max-​Planck-​Instituts für Innovation und Wettbewerb vom 16. August 2016 zur aktuellen Diskussion über Ausschließlichkeits-​ und Zugangsrechte an Daten auf europäischer Ebene,” at II (point 4 et seq/​2 et seq).

926   Reto M. Hilty an automobile company), whereas another is not. The latter, however, may crucially need access to such data in order to develop its own businesses (such as an independent developer and supplier of automotive components). Depending on the circumstances, access to data may be a vital interest of the public at large. We only need to think of traffic data, whose use could lead to more security on the roads or in the air, but data that is unavailable to market players who are in a position to develop appropriate devices or applications.110 It is heavily disputed whether antitrust law might be an appropriate tool to claim access to foreign data,111 but it is likely that this legal track is doomed to failure for reasons similar to those described in the case of patent pools. In view of that, it is foreseeable that state regulators will need to think about how to secure access to foreign data under reasonable conditions for legitimately interested third parties. What needs to be considered in that context, however, is the enormous variety of possible situations, and at the same time, the breathtaking dynamics in many sectors of the data-​driven economy. General legislation is unlikely to address the hazard of negatively affecting the data-​driven economic through misguided private ordering. Instead, it seems to be most promising to push market players towards self-​ regulation. It is conceivable that these players increasingly realize how much they rely on one another’s data. If such incentives fail to stimulate appropriate self-​regulation, legislatures might apply more pressure by threatening state regulation instead. Even if self-​regulation emerges in the near future, legislatures should closely observe specific developments in certain sensitive sectors of the data-​driven economy. It is likely that market players will not sufficiently take account of general interests, and that will call for some regulatory guidance of attempts at self-​regulation. A final example may sound like fantasy today, but some kind of regulation is likely to come about in the area of academic research. It can be seen as a frontrunner for the use of modern information technologies. Today, mainly natural and technical sciences rely on access to online media only; printed journals play no role for academic research. At the same time, unlimited data storage capacity has led to a dramatic increase in available information. Currently it is impossible to capture the existing knowledge simply by reading scientific articles. Hence, text and data mining (TDM) have become a competitive factor crucial to successfully carrying out further research.112 However, TDM presupposes unlimited access to the relevant sources. But these sources may only be available to those

110 

This non-​availability is primarily based in far-​reaching factual possibilities of protecting data against unauthorized access. Such possibilities do not depend on a legal protection of the data as such, which is typical for the first level of exclusivity as described earlier (see Section 2.1). 111  On the shortcomings of antitrust law see “Position Statement of the Max Planck Institute for Innovation and Competition of 16 August 2016 on the current debate on exclusive rights and access rights to data at the European level” (available at ), at VI. b) (point 32 et seq); in European law, the conditions for a claim to access according to art 102 TFEU are strict; see the European Court of Justice decisions Magill (ECJ C-​241/​91) and IMS Health (ECJ C-​418/​01) and the European General Court decision Microsoft (EGC, T-​201/​04). On the question of whether personal data can be considered an “essential facility” within the meaning of art 102 TFEU, see also D Geradin and M Kuschewsky, “Competition Law and Personal Data: Preliminary Thoughts on a Complex Issue” (2013) 2 Concurrences 13 et seq, available at or . 112  For an empirical assessment of the scale of use of TDM practices see S Filippov, Mapping text and data mining in academic and research communities in Europe (Brussels: The Lisbon Council 2014); as to

Intellectual Property and Private Ordering    927 researchers whose research institutions have subscribed to all corresponding databases.113 There are, however, important distinctions between certain activities carried out based on TDM (which per se does not allow the researcher to read the content) and accessing an individual paper. Whereas it is justifiable to charge to download a (not freely available) paper, automated search within the full volume of data should be possible without restriction. Academic publishers, however, have not yet undertaken the measures necessary to provide unrestricted access for the purpose of TDM. In this situation, one might consider specific legal interventions in terms of limitations and exceptions.114 But it is rather unclear in which direction the technical possibilities regarding TDM and the business models for academic publication will develop. Instead of constantly running to catch up—​as is often the case in copyright law—​an intervention could be limited to the definition of certain benchmarks, thereby leaving the publishers room to determine appropriate measures to meet the targets of TDM. Coordination of such efforts would, however, be unavoidable because interoperability between unrelated sources is the precondition of TDM. This can best be achieved on the basis of self-​regulation.

4. Conclusions The analysis of the different levels of exclusivity shows that the impact of private ordering depends on the circumstances under which it applies and on how the means of private ordering are implemented.115 Most importantly, the two layers of private ordering—​contracts and TMPs—​may have unequal impacts on the different levels of exclusivity.

TDM as a competitive factor see I Hargreaves, L Guibault, C Handke, P Valcke, and B Martens, Report from the expert group on standardisation in the area of innovation and technological development, notably in the field of text and data mining (Publications Office of the European Union 2014), available at . 113  An empirical study found a significant negative association between copyright protection and innovation in this field; see C Handke, L Guibault, and J Vallbé, “Is Europe Falling Behind in Data Mining? Copyright's Impact on Data Mining in Academic Research” (2015) available at . 114  On the need for a new copyright exception with respect to TDM, see M Borghi and S Karapapa, Mass Digitization and Copyright—​a cross-​jurisdictional perspective (OUP 2013), 61 et seq; F Hellwig, “Change in Copyright Law as a Market Intervention to Realize the Welfare Potential of Text Mining in Scientific Research” (2013) 61 et seq, available at ; on the European legal framework de lege lata see J-​P Triaille, “Study of the legal framework of text and data mining (TDM)” (European Commission 2014), 41 et seq, available at . On 14 September 2016, the European Commission published the proposal for a Directive on Copyright in the Digital Single Market (COM(2016)593), envisaging an exception for text and data mining. In the impact assessment (p 8) the Commission states that self-​regulation initiatives from the industry were also considered an option, but deemed inferior to the approach ultimately chosen. 115  For an economic evaluation of combined application see KJ Koelman, “The Public Domain Commodified: Technological Measures and Productive Information Use,” in Guibault and Hugenholtz (n 11), 111 et seq.

928   Reto M. Hilty Contracts are an almost indispensable instrument on the first level of only factually existing exclusivity, the level on which specialized legal protection of the subject matter of exclusivity, in particular, know-​how, is missing from the outset. Without any contractual hedge, the only way of maintaining the exclusivity would be strict non-​disclosure vis-​à-​vis third parties. In contrast, contracts allow the subject matter to be shared. Although contractual terms and conditions imposed on third parties may be unreasonable, the negotiating power of the owner of the (unprotected) IP is limited, and accordingly the likelihood of generally detrimental agreements rather low. Essentially, the negotiating position depends on the value of the subject matter to the contractual partner and in particular its degree of non-​substitutability. If contracts apply on the second level of exclusivity, where IP rights come into play, the situation changes, for the right holder has substantially more bargaining power. This is due to the fact that any unauthorized use of the subject matter of protection results in an infringement of the IP right.116 This naturally limits the negotiating power of the seeker of a license. At the same time, the right holder’s willingness to accept requests from a prospective licensee depends on his own interests in the contract. In certain technical fields where qualified licensees are not easy to find, he may be more flexible; but even in trade relations the suitability of a licensee may be of greater relevance to the licensor than the licensee’s interest in, say, representing a trademark-​protected brand. The bargaining power and therewith the likelihood of an imbalanced contractual framework substantially increases when TPMs, as the second layer of private ordering, are applied—​a major concern in the context of Internet-​based business models. This is also true for the first level of exclusivity. Without specialized legal protection of the subject matter of exclusivity, however, a circumvention of TPMs is not necessarily unlawful. On the second level of exclusivity, in contrast, and in particular if copyright applies, TPMs as such may be legally protected against circumvention. The third level of exclusivity is fundamentally based on contracts entered into with the purpose of coordinating market positions or behavior with respect to uninvolved third parties. IP rights may be, but are not necessarily, involved; if they are, it is likely that the leverage effect of such agreements, and ultimately the extent of exclusivity, increases, in particular if complementary rights of different parties to the contract are involved. TPMs may even enhance the effectiveness of coordination among market players, be it based on an explicit agreement or on tacit (parallel) behavior. The impact of technology may go beyond TPM stricto sensu. This is the case if coor­ dination among certain market participants focuses on a technology indispensable for third parties who are not allowed to use it. This is typically the case if technical interoperability among products is required.117 If third parties may not acquire a license to use it, such

116 

On the necessary delineation between “pure” breach of contract and corresponding IP infringement, see J Fairfield, “Nexus Crystals: Crystallizing Limits on Contractual Control of Virtual Worlds” (2011) 38 William Mitchell Law Review 44 and Washington & Lee Legal Studies Paper No. 2012-​6, available at ; C Cichon, “Weitergabe digital vertriebener Werkexemplare wie E-​Books im Spannungsfeld zwischen Urheber-​und Vertragsrecht” (2010) GRUR-​Prax 381. 117  P Picht (2014), GRUR Int 2014, 1, 2.

Intellectual Property and Private Ordering    929 technology functionally serves a protection measure. Exclusivity in that case largely evolves from contracts characterizing the third level. This leads to the conclusion that TPMs in the literal sense primarily are a concern on the first and on the second level of exclusivity. On the second level, they have the potential to amplify legally provided exclusivity; based on TPMs, right holders may impose imbalanced terms and conditions to (legitimate) users of IP rights or entirely prevent certain uses. Concurrently, TPMs may be an important tool to enforce IP rights to the full extent of the legally granted exclusivity. Therefore, TPMs in the hands of right holders may be positive and negative at the same time. They can constitute legitimate means for the enforcement of legally protected interests, and in this respect, they are particularly essential in the context of Internet-​based business models. However, TPMs also may turn out to be weapons with which to seize an undesirable degree of exclusivity, thus prohibiting legally permitted activities of third parties. Most alarming, however, are certain types of TPMs on the first level of protection. Admittedly, it is legitimate to implement private ordering, in particular secrecy, for the purpose of safeguarding legally unprotected subject matters. And these measures obviously include not only contracts, but also technical means that, like a lock on a door, keep third parties from obtaining undisclosed documents, for instance. At the same time, more sophisticated TPMs have the potential of bringing back exclusivity to subject matter that was once, or—​after the expiry of legal protection—​is now finally freely available, including subject matter that was not even generated by the party applying the TPM. By doing so, TPMs may trigger an exclusivity not at all intended by law. Without questioning the importance of contractual freedom as a central maxim of the market economy or challenging the possibility of making factual arrangements to protect justifiable interests, some negative effects of private ordering not only justify, but actually call for regulation. Certain legal remedies exist, at least in rudiments, already de lege lata, but they prove insufficient to adequately address the problem in its entirety. The two layers of private ordering, however, need to be distinguished. Contractual private ordering seems less problematic a priori, especially as it often goes hand in hand with the dissemination of knowledge; this is basically positive and desirable. At the same time, legal instruments for the confinement of freedom of contract are available in most jurisdictions, be they rooted in general or special contract law, IP legislation or antitrust law. In principle, such legal instruments can be regarded as basically sufficient—​the actual effectiveness of course depending on the concrete design of the respective legislation and its enforcement. The often-​unclear mandatory character of copyright exceptions and limitations, however, may serve as a prime example for remaining insufficiencies that call for clearance de lege ferenda. In contrast, TPMs have only recently evolved, especially in connection with digital business models. They have more problematic impacts from the outset as they have the potential of simply foreclosing certain parties from acceding the knowledge of others. The current legal framework is barely prepared to provide countermeasures to deal with undesirable implications of TPMs. The only constraint available is antitrust law, however, which only comes into play if a market player applies TPMs in a way that abuses a dominant market position. Apart from that, legislation concerning TPMs largely focuses on the opposite dimension: anti-​circumvention rules, strengthening the power of the right holder applying TPMs. Legal instruments restricting the scope of TPMs in view of legitimate

930   Reto M. Hilty interests of the public and third parties are missing. Due to the lacking availability of efficient countermeasures de lege lata in the latter case, the most promising and effective way to prevent undesired and excessive uses of TPMs in the short run is to be found in amendments of currently existing legislation. The areas of law that come into play here are primarily IP law, consumer protection law, and certain approaches of legislation against unfair competition (allowing actions especially in cases where the conditions for the invocation of antitrust law are not met). The concrete possibilities may range from a “right to hack” to statutory licenses, as long as such intervention is dedicated to safeguarding an appropriate balance of interests of different parties concerned. In the long run, however, traditional legislation will not be enough to fully address all challenges deriving from both forms of private ordering. This assessment results from the highly dynamic conditions under which the markets operate where private ordering thrives. Under such conditions, established legal tools are far too inflexible to allow appropriate reaction. Rather, self-​regulation promises to be a most suitable approach. Ideally, a certain framework of benchmarks provided by legislation leaves room for the actors to reach the aims set by means they consider best, based on their knowledge, interests, and experience. Even today, self-​regulation plays an important role in the area of standard-​essential patents, where SSOs define certain standards allowing interoperability of certain products. Collective rights management, a crucial element of copyright law, also furnishes an example. Most importantly, however, self-​regulation does not evolve spontaneously. Market participants—​be they competitors or players on different market levels—​will only come together if a win-​win situation can be reached. As long as unilateral private ordering promises advantages to an individual market participant—​even to the detriment of others—​incentives to enter into self-​binding commitments will not exist. In that situation, legislatures may play a crucial role in incentivizing self-​regulation. This can be achieved in an indirect manner by signaling state regulation in case of lacking consensus among the players concerned. For example, a legal framework providing benchmarks of self-​regulation may contain certain fall-​back provisions. In the future, to give just one example, this kind of indirect regulation might play an important role in the data-​driven economy, which is characterized by the fact that independently acting market participants possess data to which they may not voluntarily provide access. There is little promise to intervening against undesirable private ordering with directly applicable provisions because the market situations in different fields are highly heterogenic, and also because of the highly dynamic nature of data-​driven markets. Nevertheless, even if a few examples of successful legal guidance through self-​regulation exist and some further areas of application are imaginable, limiting state regulation to a framework that predefines aims only, without explicit, detailed codes of conduct, represents a paradigm shift. A future concentration on this regulatory approach, however, seems expedient considering that private ordering ultimately needs to be seen as a reaction of market participants against some forms of state regulation. To answer their refusal to accept certain regulatory consequences with even more state regulation risks triggering new forms of private ordering. An interruption of this vicious circle is more likely if the parties concerned may assume self-​responsibility based on a certain degree of freedom of choice.

Chapter 33

In tellectual Prope rt y and Public  H e a lt h Rebecca S. Eisenberg * 1. Introduction The phrase “public health” suggests that health is a public good that might be provided through collective action and initiatives of social planners. The phrase “intellectual property,” on the other hand, suggests a particular solution to the problem of innovation as a public good: Giving innovators rights to exclude free riders so that they can capture the value of their innovations through private market transactions. The domains of public health and of intellectual property (IP) overlap when innovation might advance public health goals, or when public health goals call for the use of recent innovations that are still under patent. Within these zones of overlap, although IP may promote advances that improve public health, the priorities and strategies of public health advocates may differ from those of IP advocates. These differences have provoked notable conflicts in recent years. Conspicuous recent battlegrounds have included negotiations over IP provisions (and related public health exceptions) in international trade agreements.1 But similar conflicts arise in debates over purely national laws. This chapter considers the relationship between IP and public health with a primary focus on US patent law and international law. Although national patent laws vary in ways that are significant for public health, US law is a useful benchmark because international trade agreements increasingly require other countries to conform their domestic laws to afford protections similar to those available under US law.2 The first part of this chapter focuses on health innovation and considers the limits of patents and other exclusionary rights as a *  Rebecca S Eisenberg has asserted her moral right to be identified as the author of this contribution. All websites were last accessed in February 2018, unless otherwise specified. 1  Panel Report, “Canada—​Patent Protection of Pharmaceutical Products” WT/​DS/​114/​R (17 March 2000); RC Dreyfuss and C Rodriguez-​Garavito, Balancing wealth and health: the battle over intellectual property and access to medicines in Latin America (OUP 2014). 2  M Kaminski, “The Capture of International Intellectual Property Law Through the U.S. Trade Regime” (2014) 87 Southern California Law Review 977.

932   Rebecca S. Eisenberg source of incentives for innovation to address certain public health priorities. The second part of this chapter considers conflicts between IP and public health arising from restrictions on access to patented technologies.

2.  Public and Private Interests in Health and the Limits of Intellectual Property Incentives Governments have good reason to take an active interest in the health of their citizens. Poor health imposes burdens not only on individuals, but also on communities. Individuals with communicable diseases expose other community members to risks of contagion. Disease and unhealthy behaviors may undermine productivity or interfere with the care of dependents, leading to poverty and aggravating other social problems. Maintenance of good health may require social infrastructure that is difficult to provide without state involvement, such as the provision of clean water and sewage disposal, or remediation of environmental contributors to disease. Public education may be necessary to change unhealthy behaviors, such as smoking, substance abuse, poor nutrition, and use of toxins. Disease outbreaks may overwhelm the resources of individuals, who turn to communities and place strain on social safety nets. Disease prevention measures, such as vaccinations, may be less costly and more effective, but difficult to implement on an effective scale without government subsidies or coercion. Effective treatment or prevention of health problems may call for research and development of new technologies.3 Governments promote health research in a variety of ways, including performing research in public institutions, paying others to perform research in the form of grants, tax breaks, or prizes, and creating incentives, in the form of patents or other exclusionary rights, for others to develop and market new inventions.4 Patents protect firms from competition for a period of time, allowing them to charge higher prices to consumers and thereby increase returns on their investments in research and development (R&D). But these higher prices exclude some consumers from access to patented products who might have used them if they were available at competitive prices. In some markets, these higher prices come directly out of the pockets of consumers, although in the case of health products the payer may be a public or private insurer, spending tax revenue or spreading the costs of treatment across the insurance pool. Either way, the effect is to dampen the price sensitivity of insured individuals and to rely more heavily on collective decision mechanisms to control the demand side of the market. Patents have been particularly popular with drug-​developing firms.5 For governments, patents offer a mechanism to provide profit incentives for innovators without significant

3  WHO Commission on Intellectual Property Rights, Innovation and Public Health, Public health innovation and intellectual property rights (2006). 4  DJ Hemel and LL Ouellette, “Beyond the Patents-​Prizes Debate” (2013) 92 Texas Law Review 303. 5  W Cohen et al, “Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (Or Not)” (2000) NBER Working Paper 7551, 2, 12.

Intellectual Property and Public Health    933 expenditures of public funds (apart from the nontrivial cost of operating a patent system). But as many commentators have noted, patents may fail to provide adequate incentives for important categories of health innovation.6 This section considers, in detail, four categories of innovation that present a mismatch between public health value and private incentives for innovation. The first example, vaccines, involves significant external benefits. The second, anti-​infectives, involves significant external costs. The third, neglected diseases, involves a mismatch between social value and profits for innovations addressed to health problems that primarily affect poor people. The fourth, nonexcludable innovations, involves innovations that cannot easily be made subject to exclusive rights.

2.1 Vaccines Vaccines are a cornerstone of many public health programs because of their cost-​ effectiveness in preventing the spread of infectious diseases.7 Individuals who are stricken by infectious diseases present a threat of infection to the larger community. Vaccines are preparations of killed or weakened pathogens (such as viruses or bacteria) that are administered to individuals to protect them against infection. Vaccines work by provoking an immune response in the individual, but without causing a full infection. Vaccines prepare the immune systems of vaccinated individuals to resist future infections in the event of exposure to a more virulent version of the same pathogen. Vaccines offer both private benefits to the individuals who receive them (by protecting them from infection) and external benefits to the larger public (by making it unlikely that vaccinated individuals will infect other community members).8 Moreover, effective vaccines may decrease the future use of anti-​infective treatments that present considerable external costs, considered in subsection 2.2. As more community members are vaccinated, disease outbreaks become less likely, and even unvaccinated individuals may benefit from the “herd immunity” of the community. Many once-​common infectious diseases have been largely eradicated by vaccines, including smallpox, yellow fever, polio, measles, and tetanus. Other infectious diseases, such as influenza, have been more challenging vaccine targets because the pathogens that cause them are constantly mutating, requiring continuous innovation as old vaccines become ineffective.9 Despite these challenges, influenza vaccines have reduced the severity of influenza outbreaks among vulnerable populations.

6 

A Kapzcynski and T Syed, “The Continuum of Excludability and the Limits of Patents” (2013) 122 Yale LJ 1900; RE Sachs, “Prizing Reimbursement: Prescription Drug Reimbursement as Innovation Incentive” (2016) 30 Harvard J. Law & Tech 153. 7  P Lydon, PL Beyai, I Chaudhri, N Cakmak, A Satoulou, and L Dumolard, “Government financing for health and specific national budget lines: The case of vaccines and immunization” (2008) 26(51) Vaccine 6727. 8  FA Sloan, “The Economics of Vaccines,” in PM Danzon and S Nicholson (eds), The Oxford Handbook of the Economics of the Biopharmaceutical Industry (OUP 2012) 524. 9  See President’s Council of Advisors on Science and Technology, “Report to the President on Reengineering the Influenza Vaccine Production Enterprise to Meet the Challenges of Pandemic Influenza” , 9–​10.

934   Rebecca S. Eisenberg International networks of public health researchers have pooled resources and samples to monitor outbreaks and to update influenza vaccines.10 Despite the considerable benefits of vaccines, some individuals choose not to be vaccinated (or not to have their children vaccinated).11 Private demand may understate social value, especially for vaccines that target infectious diseases prevalent in impoverished communities. Healthy individuals of limited means might choose not to pay for a vaccine to prevent possible future harm in the face of other more urgent needs. Even when the costs of vaccines are subsidized by the state or covered by insurance, healthy individuals may choose to rely on herd immunity to avoid the discomfort, inconvenience, and possible adverse side effects of vaccines. Herd immunity may make this choice rational for individuals, yet as more individuals make the same choice, herd immunity is compromised. In the US, diseases such as whooping cough, measles, and mumps that had largely disappeared as a result of childhood vaccinations are once again on the rise as growing numbers of parents choose not to have their children vaccinated.12 In some cases the perceived risks of vaccines may have been exaggerated by misinformation, such as repeatedly discredited but persistent reports that childhood vaccinations cause autism.13 Weak private demand for vaccines may be fortified by public health initiatives. Many states mandate vaccinations as a condition for enrollment in schools or day care centers,14 although often these laws have exceptions that limit their reach.15 Some states have passed laws authorizing more coercive measures in public health emergencies.16 In the US, the Affordable Care Act requires private insurers to provide coverage of preventive care, including some vaccines, without charging a deductible or co-​pay.17 Governments may also fortify demand by purchasing or subsidizing vaccines. In the US, the federal government purchased more than half of all childhood vaccines according to a 2003 estimate.18 But although government purchases may stabilize demand, governments may also use their 10 

A Kapczynski, “Order Without Intellectual Property Law? A Case Study in Influenza” (2017) 102 Cornell L. Rev. 1539. 11  WD Bradford and A Mandlich, “Some State Vaccination Laws Contribute to Greater Exemption Rates and Disease Outbreaks in the United States” (2015) 34(8) Health Affairs 1383. 12 ibid. 13  SK Parker, B Schwartz, J Todd, and LK Pickering, “Thimerosal-​containing vaccines and autistic spectrum disorder: a critical review of published original data” (2004) 114(3) Pediatrics 793; F DeStefano, CS Price, and ES Weintraub, “Increasing Exposure to Antibody-​Stimulating Proteins and Polysaccharides in Vaccines Is Not Associated with Risk of Autism” (2013) 163(2) Journal of Pediatrics 561. 14  W Parmet, “Pandemics, Populism and the Role of Law in the H1N1 Vaccine Campaign” (2010) 4 St. Louis University Journal of Health Law & Policy 113; JG Hodge Jr and LO Gostin, “School Vaccination Requirements: Historical, Social, and Legal Perspectives” (2001-​02) 90 Kentucky Law Journal 831. 15  The Immunization Action Coalition maintains a summary of vaccine mandates in the United States at . 16  See Parmet (n 14) 140; Network for Public Health Law (2012) . 17  Patient Protection and Affordable Care Act, Pub L 111-​148, § 1001, 124 Stat 119, 131 (codified as amended at 42 USC 300gg-​13 (2010)); see also ibid § 4104, 124 Stat 557 (extending similar benefits to Medicare beneficiaries) and ibid § 4106, 124 Stat 559-​60 (codified as amended at 42 USC § 1396d(b)) (providing additional funding to states that agree to provide similar coverage to Medicaid beneficiaries). 18  Committee on the Evaluation of Vaccine Purchase Financing in the US, Institute of Medicine, “Financing Vaccines in the 21st Century: Assuring Access and Availability 47” (2003).

Intellectual Property and Public Health    935 purchasing power to extract lower prices from suppliers, diminishing incentives to develop these products.19 Although private firms have developed a number of novel patent-​protected vaccines in recent years, including vaccines against human papillomavirus, meningitis, and influenza,20 many vaccines have had significantly lower profit margins than other pharmaceutical products.21 The number of firms producing vaccines for the US market fell from 26 in 1967 to five by 2005, leading to shortages. Lower profit margins for vaccines relative to therapeutic products may be a function of differences in demand. It may be easier to persuade sick patients to pay for treatment than it is to persuade healthy patients to pay for prevention.22 Although demand for vaccines may rise during a disease outbreak, it may subside quickly as the immediate threat of infection recedes, making it difficult to predict sales.23 It may be especially challenging to maintain demand for an effective vaccine that controls disease outbreaks.24 Vaccine mandates may paradoxically undermine public confidence and support for vaccination.25 These demand-​side factors inevitably limit the profit expectations from vaccine development. Additional factors on the supply side may make vaccine development more costly and risky than new drug development. It may take longer to complete the clinical trials that are necessary to show that a vaccine is effective in protecting healthy patients against possible future infection than it takes to show therapeutic efficacy of a drug in patients who are already sick.26 Because it would be unethical to expose research subjects to disease intentionally, researchers must wait for the occurrence of a natural disease outbreak in order to measure the difference in infection rates between treatment and control groups. Since not all research subjects will be exposed to the disease in the real-​world context of such a study, a larger study population may be necessary in order to make statistically meaningful observations. If the vaccine confers herd immunity, this possibility may further complicate the study design and perhaps require the use of controls in remote communities. Regulators may sometimes be willing to approve new vaccines on an accelerated basis based on observations of surrogate endpoints (such as antibody assays) rather than clinical endpoints (ie, actual infections), particularly if they believe they may soon face a pandemic.27 But although easing regulatory requirements may accelerate product approval and reduce R&D costs, it may also diminish consumer confidence in the product, fuel

19

  ibid 116; FA Sloan, “The Economics of Vaccines” in Danzon and Nicholson (n 8) 525.   JA Keith, LA Bigger, PA Arthur, E Maes, and R Daems, “Delivering the promise of the Decade of Vaccines: Opportunities and challenges in the development of high quality new vaccines” (2013) 31S Vaccine 184. 21   Financing Vaccines (n 18) 111–​116; PCAST Influenza Vaccine Report (n 9) 17. 22   M Kremer and CM Snyder, “Why Are Drugs More Profitable Than Vaccines?” (2003) NBER Working Paper No. 9833 . 23   Parmet (n 14) 114 (estimating that over 60 million out of 124 million doses of H1N1 vaccine that had been distributed in the United States by January 2010 in anticipation of an influenza were unused, with much of that total destined to be destroyed). 24  Kremer and Snyder (n 22). 25  Parmet (n 14). 26  RE Sachs (n 6) 14; ME Halloran, IM Longini, and CJ Struchiner, Design and Analysis of Vaccine Studies (Springer 2010). 27  See Food and Drug Administration, “Guidance for Industry: Clinical Data Needed to Support the Licensure of Pandemic Influenza Vaccines” (May 2007) . 20

936   Rebecca S. Eisenberg perceptions that vaccines are unsafe, and make it difficult for vaccine developers to get liability insurance.28 Governments have sometimes sought to shore up incentives for vaccine production by offering firms legal protection from products liability and replacing it with a government compensation scheme,29 but such measures may further undermine public confidence in both vaccine makers and the government.30 Delays in bringing a new vaccine to market not only defer profits, but also limit the time remaining between product launch and patent expiration. Patents have long been an important source of lucrative exclusivity in product markets for pharmaceutical firms, with the most valuable patents being early filed patents on the active ingredient in a new product.31 Later-​filed patents on improvements, such as new formulations, methods of treatment, or combination products, are easier for competitors to avoid infringing; they are also more vulnerable to validity challenges.32 Patents ordinarily expire 20 years after their filing dates, but patent term extensions of up to five years are available to restore some of the time lost during clinical trials and regulatory review of new drugs.33 Recent estimates of the time necessary to develop a new vaccine range from eight to 18½ years,34 diminishing the time left between product approval and patent expiration and reducing incentives to develop vaccines.35 On the other hand, in the US, even without patents, vaccine developers have a significant advantage over drug developers in forestalling generic entry. This is because US law imposes greater regulatory obstacles and delays prior to licensing competing versions of biologics (including vaccines) under the Public Health Services Act36 than it imposes prior to approval of competing versions of small molecule drugs under the Food, Drug, and Cosmetics Act.37 In the case of drugs, the Hatch–​Waxman Act of 198438 provides a streamlined pathway for approval of a generic version of a previously approved product (the reference listed drug) through the use of an abbreviated new drug application (ANDA).39 An ANDA applicant 28 

Parmet (n 14) 130–​132. JB Apolinsky and JA Van Detta, “Rethinking Liability for Vaccine Injury” (2010) Cornell Journal of Law and Public Policy 537, 546–​563; Bruesewitz v Wyeth 562 US 223 (2011). 30  Parmet (n 14) 144. 31  RS Eisenberg, “Patents and Regulatory Exclusivity” in Danzon and Nicholson (n 8) 167. 32  RS Eisenberg, “Pharma’s Nonobviousness Problem” (2008) 12 Lewis & Clark Law Review 375. 33  35 US Code § 156. The remaining patent life after extension may not exceed 14 years beyond the date of FDA approval. 35 US Code § 156(c), (g)(1)(B), (g)(6). The period of extension includes one-​half of the time spent in clinical trials and all of the time between submission and approval of the NDA, 35 US Code § 156(c)(2), reduced by any time attributable to an applicant’s lack of diligence: 35 US Code § 156(c)(1). 34  Keith et al (n 20) B187; cf M Bregu, SJ Draper, AVS Hill, and BM Greenwood, “Accelerating vaccine development and deployment: Report of a Royal Society satellite meeting” (2011) 366 Philosophical Transactions of the Royal Society B 2841 (“The development of a human vaccine from concept to licensure currently takes at least 15 years.”). 35  For empirical evidence that firms invest fewer resources in developing pharmaceutical products that require more time to develop, see E Budish, BN Roin, and H Williams, “Do Fixed Patent Terms Distort Innovation?” (2013) Chicago-​Booth Research Paper No. 13-​79 . 36  Pub L No 78-​410, 58 Stat 682 (1944), codified as amended at 42 US Code § 201 et seq. 37  Pub L No 75-​7 17, 52 Stat 1040 (1938), codified as amended at 21 US Code § 301 et seq. 38  Pub L No 98-​417, 98 Stat 1585 (1984), codified as amended at 21 US Code §§ 355, 360cc; 35 US Code §§ 156, 271. 39  21 US Code § 355(j). 29 

Intellectual Property and Public Health    937 must show that the generic product is bioequivalent to the reference listed drug, but need not include full reports of clinical trials showing safety and efficacy for the generic product.40 An ANDA may be submitted to the US Food and Drug Administration (FDA) as early as four years after the original approval date of the reference listed drug if the application includes a challenge to the validity or infringement of a patent on the drug.41 If the patent holder responds by suing for patent infringement, FDA must stay approval of the ANDA until 7½ years after the original approval date.42 The effect is to provide the reference listed drug with 7½ years of “regulatory exclusivity” before FDA will approve an ANDA even if the patent infringement action is ultimately unsuccessful.43 Prior to 2010 there was no comparable abbreviated approval pathway for competing versions of biological products such as vaccines, which are regulated under the Public Health Service Act rather than the Food, Drug, and Cosmetics Act. With the enactment of the Biologics Price Competition and Innovation Act of 2009, the US created an abbreviated approval process for products that are “biosimilar” to previously licensed biological products on somewhat different terms than those available for generic drugs under the Hatch–​Waxman Act.44 The new regulatory approval pathway permits approval of products that are “biosimilar” to and/​or “interchangeable” with previously licensed biological products, after a 12-​year period of regulatory exclusivity for the reference products. Some critics have argued that the 12-​year period of exclusivity is excessive,45 while others have argued for even longer periods.46 The Biologics Price Competition and Innovation Act does less to lower the regulatory entry barrier to follow-​on competition for biologics than the Hatch–​Waxman Act did for generic versions of small molecule drugs.47 A more extensive showing is necessary to get an agency determination that the biosimilar product is “interchangeable” with the reference product.48 Although experience with the new statute remains limited, it seems likely that the 40 

41  21 US Code § 355(j)(5)(B)(ii). 21 US Code § 355(j)(2). RS Eisenberg and DA Crane, “Patent Punting: How FDA and Antitrust Courts Undermine the Hatch-​Waxman Act to Avoid Dealing with Patents” (2015) 21 Michigan Telecommunications and Technology Law Review 197. 43  The stay of ANDA approval may be terminated sooner if a court determines that the patent is invalid or not infringed: 21 US Code § 355(j)(5)(B)(ii). 44  The Biologics Price Competition and Innovation Act of 2009, signed into law as Title VII, Subtitle A, §§ 7001-​03 of the Patient Protection and Affordable Care Act, Pub L No 111-​148 (HR 3590) (2010), permits the use of an abbreviated pathway for a biological product that is “biosimilar” to a previously licensed biological product after a 12-​year period following initial approval of the reference product. 45  AB Engelberg et al, “Balancing Innovation, Access, & Profits—​Market Exclusivity for Biologics” (2009) 361 New England Journal of Medicine 1917; Federal Trade Commission “Authorized Generics: An Interim Report” (2009) . 46  H Grabowski, “Follow-​on Biologics: Data Exclusivity and the Balance between Innovation and Competition” (2008) 7 Nature Reviews Drug Discovery 479. 47  An applicant must demonstrate that its product is “biosimilar to a reference product” based upon data derived from analytical studies, animal studies, and one or more clinical studies “that are sufficient to demonstrate safety, purity, and potency” in a use for which the reference product is licensed, unless the FDA determines that one of these elements is unnecessary. Patient Protection and Affordable Care Act (n 37) § 7002 (a)(2), codified at 42 US Code § 262(k)(2)(A)(i), (ii). 48  A determination of interchangeability requires information showing that the biosimilar product “can be expected to produce the same clinical result as the reference product in any given patient,” and for products administered more than once, that “the risk in terms of safety or diminished efficacy of alternating or switching between use of the biological product and the reference product is not greater 42 

938   Rebecca S. Eisenberg regulatory entry barrier for follow-​on biologics will remain much higher than that facing manufacturers of generic drugs, and the availability of this abbreviated approval pathway will be delayed by a much longer period of regulatory exclusivity. As a result, developers of new vaccines and other biologics may enjoy longer periods of market exclusivity than developers of new drugs. There are reasons to worry that private demand for vaccines may provide inadequate incentives for vaccine development from the perspective of a social planner who takes account of the full social value of vaccines. Even with patents and regulatory exclusivity to protect them from price-​lowering competition, vaccine developers may be unable to charge prices that reflect the full social value of these products because of weakness in private demand as a result of individual resource constraints, misinformation, avoidance of side effects, and choices to free-​ride on herd immunity. Social planners might therefore choose to promote vaccine development and utilization through other mechanisms that do not depend on private demand, such as research funding and government subsidies or mandates of vaccine purchases.

2.2 Anti-​infectives Penicillin and other antibiotics were a major success story for the pharmaceutical industry that promised to end the scourge of infectious diseases.49 Like vaccines, therapeutic interventions against infectious disease also have spillover benefits for public health. When antibiotics and antiviral medications work for individuals, they also benefit communities by making treated individuals less likely to infect others. In addition to this positive externality, use of anti-​infectives has external costs that raise public health concerns. A particular source of concern has been the development and spread of resistance. Although resistance was once thought to arise primarily from new mutations in infectious microbes, evidence suggests that resistance genes are ancient, diverse, and readily transferred between organisms.50 Human use of anti-​infective agents has accelerated the spread of resistance by giving a selection advantage to those strains within the microbiome that are resistant to those particular agents. Resistant microbes that survive treatment may spread their resistance to other microbes through gene transfer mechanisms51 and may infect others, spreading the prevalence of resistant strains in the community. From a public health perspective, resistance is an external cost of the current use of anti-​ infectives that diminishes their future effectiveness in treating other infections at a later time, threatening to deplete the arsenal of effective drugs against future disease outbreaks.52 To the than the risk of using the reference product without such alternation or switch.” ibid codified at 42 US Code § 262(k)(2)(B), (k)(4). 49 

W Kingston, “Antibiotics, Invention and Innovation” (2000) 29 Research Policy 679. GD Wright and H Poinar, “Antibiotic resistance is ancient: implications for drug discovery” (2012) 20(4) Trends in Microbiology 157; GD Wright, “Antibiotics: A New Hope” (2012) 19 Chemistry & Biology 3. 51  M Alekshun and SB Levy, “Molecular Mechanisms of Antibacterial Multidrug Resistance” (2007) 128 Cell 1037. 52  Resistance may also impose costs on the treated individual. For example, a subtherapeutic dosage of an anti-​infective agent may fail to cure the infection, leaving the patient with an infection that is more difficult to treat because the surviving microbes are resistant to the previously used treatment. Even 50 

Intellectual Property and Public Health    939 extent that resistance is more likely for older products that are available at generic prices than for newer products that are still under patent, it may disproportionately undermine cost-​effective treatments.53 Resistance traits that protect microbes against one drug may also confer cross-​resistance against other similar drugs, including drugs that may be developed in the future by other firms. Current use of anti-​infectives thus imposes significant costs on future patients, future payers, and future product developers. Infections that are resistant to multiple drugs are particularly costly to treat.54 Use of anti-​infectives may seem like a relatively cost-​effective way to treat current patients, but it has external costs that relegate future patients to rely on more expensive, and less effective, care. This framing of the problem suggests two different kinds of policy response. First, we might promote further R&D to develop new anti-​infective agents. Second, we might promote parsimonious use of existing agents in order to slow the development of resistance. These strategies could conflict: For example, restrictions on use could limit expected profits from developing new agents. Mechanisms for promoting R&D include IP protection, public funding of research and promotion of public-​private partnerships to overcome research obstacles, reducing regulatory obstacles to new product approvals, and tax incentives.55 Public health advocates have typically proposed different mechanisms to slow the spread of resistance. These mechanisms include education campaigns directed at healthcare workers and the general public to discourage excessive use of anti-​infectives; clinical guidelines to avoid inappropriate and subtherapeutic use of anti-​infectives; use of diagnostic tools to avoid ineffective use of anti-​infectives that nonetheless contributes to resistance; campaigns to reduce transmission of infections through simple measures such as hand washing, vaccination, and use of mosquito nets and condoms; and more extensive use of regulatory controls that limit inappropriate use of antibiotics through FDA restrictions.56

effective treatment of an infection may leave the individual with resistant strains of microbes in her system that could migrate to another part of her body where they cause an infection that is resistant to treatment, such as resistant E. coli causing a bladder infection. 53  K Outterson, “The Vanishing Public Domain: Antibiotic Resistance, Pharmaceutical Innovation and Intellectual Property Law” (2005) 67 University of Pittsburgh Law Review 67. 54  SE Cosgrove, “The Relationship between Antimicrobial Resistance and Patient Outcomes: Mortality, Length of Hospital Stay, and Health Care Costs” (2006) 42 (Suppl 2) Clinical Infectious Diseases S82, . 55  R Laxminarayan and A Malani, Extending the Cure: Policy responses to the growing threat of antibiotic resistance (Resources for the Future 2007); Infectious Diseases Society of America, “Bad Bugs, No Drugs” (July 2004) ; Council of the European Union, “Council Conclusions on innovative incentives for effective antibiotics” (1 December 2009) . 56  See, eg, World Health Organization, “Global Action Plan on Antimicrobial Resistance” (2015) ; US Congress, Office of Technology Assessment, “Impacts of Antibiotic-​Resistant Bacteria” OTA-​H-​629 (US Government Printing Office 1995); DL Heymann, “Resistance to Anti-​Infective Drugs and the Threat to Public Health” (2006) 124 Cell 671; C Fox, “Resisting Antibiotic Resistance: Legal Strategies to Maintain Man’s Dominion Over Microbes” (2011) 12 Houston Journal of Health Law & Policy 35.

940   Rebecca S. Eisenberg Although some evidence supports the effectiveness of these measures,57 it is challenging to achieve the widespread compliance that may be necessary to make a dent in the rapidly growing problem of resistance. The effects of resistance on incentives to develop new products are complex. Resistance could enhance incentives for further innovation by reducing competition from older, off-​ patent products that have become ineffective.58 On the other hand, improved understanding of resistance and cross-​resistance presumably diminishes expected profits from new anti-​ infectives by limiting the expected duration of commercial demand for these products. Moreover, the possibility of future restrictions on use to preserve effectiveness may give rise to uncertainty about future sales. A controversial argument asserts that longer patent terms for anti-​infectives could do double duty, simultaneously promoting both innovation and parsimonious use of existing antibiotics.59 Higher prices for patent-​protected anti-​infective products could discourage low-​value uses (such as the use of antibiotics in cattle feed to promote growth). Extending the patent term would prolong this effect. A longer patent term might also encourage patent holders to suppress use today in order to maximize the value of their products over a longer time horizon. Sales during the patent term are more lucrative for patent holders than sales following patent expiration, when competitors are able to enter the market and drive down prices. Patent holders can thus expect to capture more of the value of future sales that will occur during the patent term and to discount heavily the social value of deferred use of an anti-​infective after patent expiration. The longer the patent term, the longer the period that the patent holder will take into account in assessing the value of raising prices to suppress current use in order to prolong the efficacy of the product over time. This analysis invites a number of criticisms. One concern is that monopoly pricing for patent-​protected anti-​infectives may lead to price-​gouging and restrictions on access in a pandemic. Proponents of extended patent terms may argue that this is a feature rather than a bug; the prospect of extraordinary profits in a pandemic may be what makes patent holders willing to suppress current sales in order to prolong the effectiveness of their products.60 But widespread access to an effective anti-​infective may be vital during a pandemic to prevent devastating public health consequences. Governments could facilitate access through subsidies to purchasers or through public insurance programs.61 Governments could also institute price controls62 or grant compulsory licenses to lower-​cost producers,63 and might face considerable political pressure to do so in a pandemic.64 But, if these measures 57  J Avorn and DH Solomon, “Cultural and Economic Factors That (Mis)Shape Antibiotic Use: The Nonpharmacologic Basis of Therapeutics” (2000) 133 Annals of Internal Medicine 128. 58  K Outterson, “The Legal Ecology of Resistance: The Role of Antibiotic Resistance in Pharmaceutical Innovation” (2010) 31 Cardozo Law Review 613. 59  E Kades, “Preserving a Precious Resource: Rationalizing the Use of Antibiotics” (2005) 99 Northwestern University Law Review 611. 60  ibid 653–​659. 61  B Roin, “Intellectual Property versus Prizes: Reframing the Debate” (2014) 81 University of Chicago Law Review 999; AK Rai, “The Information Revolution Reaches Pharmaceuticals: Balancing Innovation Incentives, Cost and Access in the Post-​Genomics Era” (2001) University of Illinois Law Review 173. 62  B Roin (n 61) 1052–​1053. 63  TRIPS Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS) (opened for signature 15 December 1993, entered into force 1 January 1995) 1869 UNTS 299 (hereafter TRIPS) art 31. 64  Kades (n 59) 657–​658.

Intellectual Property and Public Health    941 are effective in avoiding deadweight loss, they also call into question the effectiveness of extended patent terms as a mechanism for promoting responsible stewardship over anti-​ infectives by patent holders. Another concern is that high prices might lead to subtherapeutic dosing in impoverished communities, accelerating the development of resistance.65 Others argue that reliance on IP could be counterproductive if patent holders seeking to maximize lucrative product sales accelerate the onset of resistance.66 Reimbursement policies could be redesigned to promote stewardship over anti-​infectives by uncoupling financial incentives from sales volume, rewarding drug companies and hospitals with higher payments when they take measures to preserve the efficacy of existing antibiotics rather than paying them more for using these products more extensively.67 US law has been quicker to enhance innovation incentives than it has been to enhance incentives for conservation. Quite apart from the problem of resistance, Congress has repeatedly enacted legislation to defer competitive entry in the market for pharmaceutical products, including providing patent term extension of up to five years to compensate for some of the time necessary for clinical trials and regulatory review.68 US law further shelters pharmaceutical innovators from competition by controlling the timing of regulatory entry barriers for generic competitors. These regulatory provisions function as an alternative source of exclusivity to promote certain forms of R&D, such as the development of orphan drugs to treat rare diseases, the development of new chemical entities not previously approved for sale, or the testing of approved products for new uses or for use in children. The terms of protection vary for different kinds of innovation and have been adopted in somewhat different forms in different countries.69 Sometimes regulatory exclusivity runs concurrently with patent protection (in which case it may still provide valuable insurance against a ruling of patent invalidity or noninfringement) and sometimes it extends beyond patent expiration (in which case it may prolong the period of exclusivity). As previously noted, US law provides regulatory exclusivity for periods ranging from four to seven and a half years following the first approval of a new chemical entity,70 and for 12 years following the first approval of a new biological drug,71 before generic competitors may enter the market with an abbreviated approval application for a similar product. Orphan drugs for treating rare diseases and conditions affecting fewer than 200,000 patients in the US are protected from competition for seven years after initial product approval by a prohibition against FDA approval of another application “for such drug for such disease or condition.”72 These periods of exclusivity may be prolonged by an additional six months as a reward for conducting pediatric trials of new drugs.73

65

  Outterson (n 53) 87.   AS Kesselheim and K Outterson, “Fighting Antibiotic Resistance: Marrying New Financial Incentives to Meeting Public Health Goals” (2010) 29(9) Health Affairs 1. 67   K Outterson, “New Business Models for Sustainable Antibiotics” (2014) Centre on Global Health Security Working Group Papers, Working Groups on Antimicrobial Resistance, Paper No. 1, . 68  35 US Code § 156. 69  Eisenberg (n 31). 70  21 US Code § 355(j)(5)(F)(ii). 71  42 US Code § 262(k)(7)(A), (B). 72  Orphan Drug Act of 1983, Pub L No 97-​414, 96 Stat 2049, codified as amended at 21 US Code § 527. 73  21 US Code § 355a. 66

942   Rebecca S. Eisenberg These periods of exclusivity were greatly extended for new anti-​infectives with passage of the Generating Antibiotic Incentives Now Act of 2012 (GAIN).74 This legislation extends each period of regulatory exclusivity for an additional five years for a product that FDA has designated as a “qualified infectious disease product.” The statute defines this term as “an antibacterial or antifungal drug for human use intended to treat serious or life-​threatening infections.” The statute specifically includes in this definition infections caused by a variety of resistant organisms.75 The GAIN Act also authorizes FDA to grant priority review76 and “fast track” status77 for these products, relieving innovators from some of the burden of the ordinary FDA approval process. Although it is too soon to tell what impact these extended periods of exclusivity and accelerated regulatory review will have on the development and use of new anti-​infective products, a number of new products currently in the development pipeline will qualify for these benefits.78 Perhaps prolonged exclusivity will encourage the sponsors of these products to charge higher prices in order to conserve on use of their products to prolong their effectiveness, or perhaps they will follow the more typical industry practice of setting prices to maximize current profits. Even if they recognize the social value of parsimonious use of their new products, product developers may face powerful incentives to sell these products at a brisk pace before they lose their effectiveness to the inexorable spread of resistance. A recent report from the President’s Council of Advisors for Science and Technology suggests a more balanced approach that combines incentives and subsidies for new product development with improvements in stewardship to prevent overuse of existing products.79 It may prove easier to avoid overuse by adjusting the behavior and incentives of health care providers, hospitals and insurers than it is to get product developing firms to try to sell less of their products.

2.3 Neglected Diseases Some diseases that public health social planners consider high priorities for innovation have nonetheless persistently ranked lower in the investment priorities of private drug companies because new treatments seem unlikely to be profitable. Perhaps the disease population is too small to cover the costs of R&D, or perhaps the disease primarily affects poor people without health insurance. The result may be a lack of appropriate therapies for diseases that impose a devastating burden on individuals and communities, particularly in the developing world.80 The World Health Organization (WHO) maintains a list of 17 neglected tropical 74   This legislation was enacted as Title VIII of the Food and Drug Administration Safety and Innovation Act of 2012, Pub L No 112-​144, 126 Stat 993, and is codified at 21 US Code §§ 355, 355f, 356, 360a-​1, and 360n-​1. 75 76 77 ibid § 356.   21 US Code § 355f.   ibid § 360n-​1. 78  The Pew Charitable Trusts, “GAIN: How a New Law is Stimulating the Development of Antibiotics” (2013) . 79  President’s Council of Advisors for Science and Technology, “Report to the President on Combating Antibiotic Resistance” (2014). 80  M Kremer, “Pharmaceuticals and the Developing World” (2002) 16(4) Journal of Economic Perspectives 67.

Intellectual Property and Public Health    943 diseases that mainly affect populations living in poverty.81 According to a recent estimate, on a worldwide basis one person in seven suffers from one or more of these neglected diseases.82 The diseases on the WHO list are communicable. Expenditures on prevention and treatment thus present, to some degree, the same externalities considered above for vaccines and anti-​infectives. Although concentrated in the developing world, these diseases may spread elsewhere through travel. Some of these diseases affect small numbers of patients in developed countries with the capacity (or insurance coverage) to pay high prices for new drugs, but most affected patients could afford to pay very little, limiting the value of patents and regulatory exclusivity in making these products profitable.83 Public health advocates have suggested both “push” and “pull” strategies to promote innovation for neglected diseases.84 “Push” strategies subsidize innovation inputs through mechanisms like grants, R&D tax credits, and regulatory breaks to facilitate new product development, while “pull” strategies enhance rewards for research outputs through mechanisms like prizes, patents, or regulatory exclusivity, or advance purchase commitments. Nonetheless, legislative initiatives to promote innovation for treatment and prevention of neglected diseases have focused on fortifying exclusionary mechanisms in both developed and developing nations. An early effort to address neglected diseases in developed nations was orphan drug legislation enacted in the past 35 years in the US, Japan, Australia, and the European Union.85 As noted above, the US Orphan Drug Act provides seven years of market exclusivity for products to treat rare diseases and conditions affecting fewer than 200,000 patients in the US (or otherwise offering no reasonable expectation of covering development costs from sales in the US). In addition to this “pull” mechanism, the Orphan Drug Act provides “push” benefits to make drug development less costly, such as a streamlined regulatory approval process; substantial tax credits for R&D expenses; financial assistance with clinical trials; and coordination of public and private development efforts.86 Orphan drug laws have facilitated the introduction of more than 400 drugs and biologics in the US market since 1983.87 Some of these products have been quite profitable, although in some cases profits have been enhanced by off-​label use or approval of new uses that are not for orphan indications.88 An outstanding example is erythropoietin, a product initially approved as an orphan drug for treating end-​stage renal disease that was later used to treat chemotherapy-​induced anemia and became the single biggest expenditure for the US 81 

WHO, “Neglected Tropical Diseases” (2014) . International Federation of Pharmaceutical Manufacturers & Associations, “Pharmaceutical R&D Projects to Prevent and Control Neglected Conditions” (2014) , 5. 83  M Kremer and R Glennerster, Strong Medicine: Creating Incentives for Pharmaceutical Research on Neglected Diseases (Princeton University Press 2004). 84  F Mueller-​Langer, “Neglected infectious diseases: are push and pull incentive mechanisms suitable for promoting drug development research?” (2013) 8 Health Economics, Policy and Law 185. 85  S Villa, A Compagni, and MR Reich, “Orphan drug legislation: lessons for neglected tropical diseases” (2008) 24 International Journal of Health Planning and Management 27. 86  21 US Code §§ 360aa-​360ff. For a summary of other orphan drug laws, see S Villa et al (n 85). 87  Food and Drug Administration, Office of Orphan Products Development, . 88  Villa et al (n 85) 33–​34. 82 

944   Rebecca S. Eisenberg Medicare program.89 Critics argue that the Orphan Drug Act is subject to manipulation by firms that get their products approved for narrowly defined indications while profiting from broader off-​label use. Others argue that it has distorted product development incentives by diverting resources from other conditions that affect more patients towards the development of highly lucrative products for niche markets.90 These laws might improve the profitability of products with small markets in developed nations, but they have done little to stimulate the development of new products for neglected tropical diseases that prevail in the poorest nations.91 The US Congress specifically targeted the development of drugs for treatment or prevention of neglected tropical diseases of the developing world in a more recent statutory incentive for the pharmaceutical industry: tradeable priority review vouchers.92 This new incentive mechanism, which had recently been proposed in the literature,93 was tucked into an inconspicuous “other provisions” title at the end of a 2007 bill to reauthorize expiring legislation to permit FDA to collect user fees to cover its costs and was not thoroughly vetted in the legislative process. The way it works is that the sponsor of a new drug application for a product not previously approved by FDA for use in the prevention, detection, or treatment of a listed tropical disease94 may receive a tradeable priority review voucher upon receiving FDA approval of its application. The sponsor may use this voucher for another product or sell it to another firm. The holder of the voucher is entitled to receive priority review (ie, review within six months of submitting an application to FDA) for another product upon payment of a user fee to be established annually by FDA.95 A priority review voucher is a form of prize awarded to a sponsor for obtaining FDA approval for a product that targets a neglected disease. Because they are transferable, vouchers will likely be assigned to the sponsors of the most commercially significant products that are currently seeking FDA approval, thereby accelerating the availability of products for which there is significant market demand. But there is no reason to expect the size of payments for vouchers to bear any relationship to the social value of the neglected disease products that 89 ibid 34. 90 

A Côté and B Keating, “What is Wrong with Orphan Drug Policies?” (2012) 15 Value in Health 1185; O Wellman-​Labadie and Y Zhou, “The U.S. Orphan Drug Act: Rare disease research stimulator or commercial opportunity?” (2010) 95 Health Policy 216. 91  GF Andersen, “Spurring New Research for Neglected Diseases” (2009) 28(6) Health Affairs 1750 (reporting that as of July 2002 only 12 of 238 market approvals for orphan indications in the United States were for neglected diseases). 92  This incentive was initially passed as part of the Food and Drug Administration Amendments Act of 2007, Pub L No 110-​85, 121 Stat 823, § 1102, codified as amended at 21 US Code § 360n. 93  DB Ridley, HG Grabowski, and J Moe, “Developing Drugs for Developing Countries” (2006) 25(2) Health Affairs 313. 94  The statutory list of eligible diseases includes tuberculosis, malaria, blinding trachoma, buruli ulcer, cholera, dengue/​dengue haemorrhagic fever, dracunculiasis (guinea-​worm disease), fascioliasis, human African trypanosomiasis, leishmaniasis, leprosy, lymphatic filariasis, onchocerciasis, schistosomiasis, soil transmitted helmithiasis, yaws, filoviruses [including Ebola], and any other infectious disease for which there is no significant market in developed nations and that disproportionately affects poor and marginalized populations: 21 US Code § 360n(a)(3). 95  21 US Code § 360n(c). For the 2016 fiscal year, the FDA set the fee at $2,727,000: 80 Federal Register 55121–​55123 (14 September 2015). This amount is in addition to the standard fee for nonpriority review of a new drug application requiring clinical data, which the FDA has set at $2,374,220 for the 2016 fiscal year: 80 Federal Register 46028–​46032 (3 August 2015).

Intellectual Property and Public Health    945 qualified for the vouchers. The value of the prize depends instead on the market for tradable priority review vouchers. Demand for priority review would depend on the expected duration of nonpriority review and the expected value of sales for a lucrative new product that might be made during the interval between approval dates under priority and nonpriority review. Greater backlogs and delays at FDA would thus increase demand for vouchers and increase the value of the prize. On the other hand, the supply of priority review vouchers may increase over time, because Congress has subsequently adopted the same mechanism as an incentive for the development of products for rare pediatric diseases.96 The current value of priority review vouchers is impressive. Although there is no guarantee that the result of priority review will be favorable, accelerating the date of new product approval could provide more time on the market prior to patent expiration without deferring generic entry. As of August 2015, FDA had issued six priority review vouchers and four of these had been sold for amounts ranging from $67.5 million to $350 million.97 The disconnect between the size of the prize and the value of the approved product is both a strength and a weakness of this particular prize system. The point of the system is to enhance incentives to develop products that are undervalued in commercial markets because they are targeted to meet the needs of poor people, and therefore cannot compete for the investments of pharmaceutical innovators who stand to make far greater profits from developing products for rich people. By offering innovators of these undervalued products vouchers that can be sold at a price determined by the value of other, more lucrative pharmaceutical products, the tradable voucher system takes a small step toward spreading the wealth. On the other hand, as with any prize system, there is a risk that a prize of great value could be awarded for an innovation of little value. The value of the prize does not turn in any way on the value of the tropical disease product or its success in the regions where it is needed. Indeed, the first FDA-​approved product to qualify for a tropical disease voucher was a malaria drug that had already been approved in 80 other countries.98 Although this product met the statutory requirements for the prize, it is not clear how it advanced the legislative goal of stimulating new R&D to meet the needs of patients outside the US (rather than to motivate firms to seek US approval for old drugs that are already available elsewhere). Using US regulatory approval as a trigger for the prize is especially odd given the aim of promoting the development of tropical disease products “for which there is no significant market in developed nations and that disproportionately affect [ . . . ] poor and marginalized populations.”99 A requirement of FDA approval is a costly burden to impose on a product with no significant market in developed nations. Perhaps securing US regulatory approval seemed like a reasonable marker for advancing product development to the point of being ready for clinical use, or perhaps it seemed like an easy criterion for FDA to administer. Congress may have expected developing countries with limited resources for regulating drugs to follow the decisions of agencies like FDA. On the other hand, some tropical disease products such 96  Food and Drug Administration Safety and Innovation Act of 2012 § 908, Pub L No 112-​144, 126 Stat 993, 1094–​1098, codified as amended at 21 US Code § 360ff. 97  AS Kesselheim, LR Maggs, and A Sarpatwari, “Experience with the Priority Review Voucher Program for Drug Development” (2015) 314(16) The Journal of the American Medical Association 1687. 98  T Anderson, “Novartis under fire for accepting new reward for old drug” (2009) 373 Lancet 1414. 99  21 US Code § 360n(a)(3)(R).

946   Rebecca S. Eisenberg as vaccines may present risks that are worth incurring in parts of the world where the disease is rampant, but not in the US where infection is less common.100 Problems in specifying ex ante the criteria for an award are a recurring challenge in designing prize systems.101 From the perspective of Congress, this prize system has the benefit of not requiring any outlay of government funds. The purchaser of the voucher pays the sponsor of the newly approved product whatever price they agree upon, and additional costs to the FDA for priority review of another application are covered by additional user fees. (Presumably these costs are ultimately borne by consumers of the product that gets to market sooner as a result of the priority review.) If Congress leaves the FDA underfunded, its backlog of pending new drug applications might increase, making priority review vouchers even more valuable, thus increasing the prize for obtaining approval of products for tropical diseases, rare pediatric diseases, and qualified infectious disease products. A further advantage of priority review vouchers is that they enlarge the period of exclusivity for an innovator without deferring generic entry, thus avoiding political opposition from the generic industry. The additional patent life comes at the front end as a result of earlier approval, rather than at the back end from extension of the term of exclusivity. It is too soon to tell whether tradeable priority review voucher prizes will bring about more innovation in treatments for neglected diseases. The fact that Congress has already replicated the system for rare pediatric diseases may reflect the popularity of priority review vouchers with drug developing firms more than the success of the program in advancing its purported goals. Another mechanism for promoting R&D for neglected diseases that has gained traction in recent years is advance purchase commitments (APCs) by national governments, international organizations, or private foundations to purchase a specified quantity of an as-​yet undeveloped product at a certain price.102 If the purchasers are willing to make the product available for free or at a relatively low price, APCs can simultaneously mitigate both the problem of underinvestment in R&D for neglected diseases and the problem of lack of access to these products by patients living in poverty.

2.4 Non-​excludable Innovations So far, this discussion has focused primarily on pharmaceutical innovations that might be embodied in patented products such as vaccines and drugs. It is relatively easy for innovators to use patents and regulatory exclusivity to keep competitors out of the market for such innovations, although, even without competition, it may be challenging in some circumstances (discussed earlier) for innovators to capture their full social value. But for

100 

M Kremer (n 80) 72–​73. M Kremer and H Williams, “Incentivizing Innovation: Adding to the Tool Kit” (2010) 10(1) Innovation Policy and the Economy 1. 102  O Barder, M Kremer, and H Williams, “Advance Market commitments: A Policy to Stimulate Investment in Vaccines for Neglected Diseases” (2006) Economists’ Voice . 101 

Intellectual Property and Public Health    947 many innovations with considerable social value from a public health perspective, it is not possible to design effective exclusionary rights at all.103 For example, studies might indicate that widely used drugs (such as hormone replacement therapy or non-​steroidal anti-​inflammatory drugs) have toxic side effects and should therefore be used more sparingly.104 This is valuable information that can improve health outcomes by reducing the use of these products. But it is difficult for an innovator to use IP to capture that value. Instead, the value accrues to patients who will avoid use of harmful products and to health care payers who will avoid paying for them. Other innovations with high social value for public health that is not easily appropriable through exclusionary rights include studies of the effects of lifestyle choices (such as smoking, diet, exercise, condom use, etc.) and the effects of clinical practices (such as use of checklists by caregivers to avoid errors and prevent the spread of infections). An innovation system that relies on patents and other forms of exclusionary rights will do little to reward innovators for investments in these innovations because it is difficult to design exclusionary rights that permit owners to capture their value. These innovations may nonetheless be attractive candidates for investment by public and private insurers seeking to reduce healthcare costs and improve outcomes.105 Certainly insurers stand to benefit from studies showing that expensive care is not worth paying for. They also stand to benefit from improvements in care that reduce future medical costs. The increasing use of electronic health records has facilitated large observational studies in diverse patient populations that reveal differences in treatment outcomes. These records may be used for comparative effectiveness research or for personalized medicine research to help identify the best treatments for individual patients. But the results are unlikely to be excludable. For one thing, medical records typically involve treatments that are already a part of medical practice. Discovering which of these treatments is superior does not make the better treatment patentable if it is already in the prior art. The development of new algorithms for making treatment choices is also unlikely to be eligible for patent protection under recent decisions of the US Supreme Court.106 Even if these algorithms were patentable, it would be difficult to monitor infringement and enforce rights effectively. Exclusionary rights work best when they can be used to stop commercial competitors from making infringing products. They are far less effective when they must be asserted against numerous caregivers and patients whose activities are hard to monitor. Suing customers is rarely a good way to promote goodwill, especially in the context of healthcare. Patents and other forms of exclusionary rights have been popular with pharmaceutical innovators and have been repeatedly fortified under US law and international law to 103  A Kapczynski and T Syed, “The Continuum of Excludability and the Limits of Patents” (2013) 122 Yale Law Journal 1900. 104  Writing Group for the Women’s Health Initiative Investigators, “Risks and Benefits of Estrogen Plus Progestin in Healthy Postmenopausal Women: Principal Results From the Women’s Health Initiative Randomized Controlled Trial” (2002) 288(3) The Journal of the American Medical Association 321; J Graham et al, “Risk of acute myocardial infarction and sudden cardiac death in patients treated with cyclooxygenase-​2 selective and nonselective non-​steroidal anti-​inflammatory drugs: nested case-​ control study” (2005) 365 Lancet 475. 105  RS Eisenberg and WN Price, “Promoting Healthcare Innovation on the Demand Side” (2017) 4(1) Journal of Law and the Biosciences 3. 106  Mayo Collaborative Services v Prometheus Laboratories, Inc 566 US 66​(2012).

948   Rebecca S. Eisenberg motivate firms to perform certain kinds of innovation. But reliance on exclusionary rights fails to provide adequate incentives for certain categories of innovation that are important for public health. In the case of vaccines, positive externalities raise concerns about underinvestment, while in the case of anti-​infectives, negative externalities raise concerns about overpromotion and overuse. Exclusionary rights provide inadequate incentives to address neglected diseases that primarily affect poor people, and to provide valuable information that is nonexcludable. These gaps require other strategies for promoting innovation to address important public health needs.

3.  Restricted Access to Patented Health Technologies Many public health advocates have a different criticism of patents and exclusionary rights. Even when they are effective in promoting innovation, exclusionary rights work by allowing their owners to charge higher prices, with the effect of decreasing access to lifesaving products. This is a particularly compelling version of a familiar economic criticism of patents.107 Patients and healthcare systems that would willingly pay a competitive market price sufficient to cover the marginal cost of producing a product might be unwilling or unable to pay the higher price charged by a patent holder who is protected from effective competition. From the perspective of economics, the result is dead-​weight loss that does neither innovators nor consumers any good.108 From the perspective of public health advocates, it may be a humanitarian crisis and a human rights violation.109 IP advocates point to market responses that potentially mitigate these concerns. First, in some circumstances IP might facilitate price discrimination that allows owners to sell their products at lower prices to consumers who could not otherwise afford them, while still maintaining higher prices for those with more resources and willingness to pay.110 Second, in most markets individual consumers do not pay for drugs out of their own pockets, but instead rely on public or private insurance to provide additional resources to facilitate access.111 Beyond these market mechanisms, governments might facilitate access to products through price controls and through use of their national laws to limit the rights of patent

107  JE Stiglitz, “Economic Foundations of Intellectual Property Rights” (2008) 57 Duke Law Journal 1693, 1701. 108  S Scotchmer, Innovation and Incentives (MIT Press 2004) 36–​37. 109  LR Helfer and GW Austin, Human Rights and Intellectual Property: Mapping the Global Interface (CUP 2011) 90–​170; AS Godoy, Of Medicines and Markets: Intellectual Property and Human Rights in the Free Trade Era (Stanford University Press 2013). See also the chapter by Laurence Helfer, this volume. 110  PM Danzon and A Towse, “Differential Pricing for Pharmaceuticals: Reconciling Access, R&D & Patents” (2003) 3 International Journal of Health Care Finance and Economics 183. 111  BN Roin, “Intellectual Property versus Prizes: Reframing the Debate” (2014) 61 University of Chicago Law Review 999, 1048–​1050.

Intellectual Property and Public Health    949 holders (such as by authorizing compulsory licenses or threatening to do so), although they are increasingly constrained in their ability to modify patent rights by the terms of trade agreements.

3.1 Price Discrimination Price discrimination could, in theory, allow patent holders to provide their products to a greater number of consumers at different prices that vary with willingness (or ability) to pay, benefiting low-​income consumers as well as patent holders.112 Price discrimination thus offers a mechanism to enhance incentives for innovation while expanding the beneficiaries of innovation. In practice, however, price discrimination can be quite challenging to maintain and can lead to higher prices for some consumers, with ambiguous welfare effects.113 One challenge for patent holders is figuring out the willingness to pay of different consumers to avoid giving a price break to consumers who otherwise could and would pay more. Sometimes firms offer lower prices or rebates to NGOs or to public sector programs that provide healthcare for low-​income patients, in effect relying on these purchasers to sort out which consumers are eligible for the programs.114 In the US, some pharmaceutical firms offer patient assistance programs to provide free or low-​cost drugs to patients who otherwise could not afford them.115 But often, price differences in the pharmaceutical marketplace reflect differences in bargaining power rather than differences in ability to pay, with distributive consequences that seem less benign. Large payers such as pharmacy benefits managers may get better prices than retail pharmacies and their customers,116 while uninsured patients may pay considerably more than those with insurance.117 In a global marketplace, national borders might facilitate price discrimination by providing a rough proxy for willingness to pay. Drug companies typically sell their products at higher prices in wealthier nations and at lower prices in developing nations.118 But national borders are an imperfect proxy for willingness or ability to pay. There are poor people in rich nations and rich people in poor nations. Patent holders might be reluctant to sell at low prices in countries, like South Africa, with large numbers of middle class consumers

112 

FR Lichtenberg, “Pharmaceutical Companies’ Variation of Drug Prices Within and Among Countries Can Improve Long-​Term Social Well-​Being” (2011) 30 Health Affairs 1539. 113  PM Danzon, “Price Discrimination for Pharmaceuticals: Welfare Effects in the US and the EU” (1997) 4 International Journal of the Economics of Business 301; HR Varian, “Price discrimination and social welfare” (1985) 75 American Economic Review 870. 114  A Towse, E Keuffel, HE Kettler, and DB Ridley, “Drugs and Vaccines for Developing Countries” (2012) in Danzon and Nicholson (n 8) 302. 115  Rx Assist Patient Assistance Program Center . 116  Cash & Henderson Drugs v Johnson & Johnson 799 F3d 202 (2nd Circuit 2015). 117  ER Berndt and JP Newhouse, “Pricing and Reimbursement in US Pharmaceutical Markets” in Danzon and Nicholson (n 8) 201, 220–​221. 118  Lichtenberg (n 112); European Commission, Directorate-​General for Trade, “Working Document: Tiered Pricing for Medicines Exported to Developing Countries Measures to Prevent Their Re-​Importation into the EC Market and Tariffs in Developing Countries” (22 April 2002) .

950   Rebecca S. Eisenberg who could otherwise pay higher prices, even though these markets also have many more poor people who could not pay those prices.119 Another challenge for patent holders is preventing purchasers who buy at low prices from reselling to those who would otherwise pay higher prices.120 Patent holders might hesitate to use differential pricing if they expect it will cause a loss of revenue on otherwise more lucrative sales. (Opportunities for arbitrage may also create public health problems if patients resell a portion of the drugs that are prescribed for them, retaining only a subtherapeutic dosage for themselves.) Drug companies may offer more favorable pricing for some large purchasers by paying them rebates that are not publicly disclosed, while maintaining nominally high prices for all consumers.121 Keeping these terms confidential reduces the risk that other buyers might demand the same price. Some buyers negotiate contracts that limit the prices they will pay based on the best price available to other buyers, making it more costly for drug companies to offer discounts. Under US law, drug companies must pay rebates to Medicaid for drug sales in an amount set by statute to give Medicaid at least the best price given to any other purchaser.122 The effect may be to drive prices higher in other parts of the market as drug companies refuse to give steeper discounts to other purchasers, knowing that they would have to give the same deal to Medicaid. In the global market for pharmaceuticals, differential pricing may be threatened by parallel trade that allows products purchased in low-​price nations to be sold in high-​price nations.123 Some national patent laws, including US law prior to a recent decision of the Supreme Court, treat such imports as patent infringement on the theory that sales outside the country do not exhaust the patent right arising under that country’s laws.124 National exhaustion rules that prohibit parallel trade compromise free trade in patented goods, while their effectiveness in improving access is unclear.125 The patent laws of many developing nations permit parallel trade under a rule of international exhaustion,126 a rule that now prevails under US law following the decision of the Supreme Court in Impression Products v. Lexmark International.127 Although international exhaustion may seem contrary to the interests of nations that are otherwise likely to be beneficiaries of differential pricing, nations that lack domestic drug manufacturing capacity and depend on imports for access to drugs may prefer a rule that facilitates importation.128 119

  “Hard Pills to Swallow” The Economist (New York, 4 January 2014) . 120   K Outterson, “Pharmaceutical Arbitrage: Balancing Access and Innovation in International Prescription Drug Markets” (2005) 5 Yale Journal of Health Policy, Law, and Ethics 193. 121   PM Danzon, “Pricing and Reimbursement of Biopharmaceuticals and Medical Devices in the USA” (2014) 3 Encyclopedia of Health Economics 127. 122 123  Danzon and Towse (n 110).   42 US Code § 1396r-​8(c)(1)(B)(i)(VI). 124  Lexmark International v Impression Products 816 F3d 721 (Federal Circuit 2016), reversed sub nom Impression Products v Lexmark International, 137 S Ct 1523 (2017). 125  SW Rajec, “Free Trade in Patented Goods: International Exhaustion for Patents” (2014) 29 Berkeley Technology Law Journal 317, 361–​367. 126  Nick Gallus, “The Mystery of Pharmaceutical Parallel Trade and Developing Countries” (2002) 7 The Journal of World Intellectual Property 169. 127  137 S Ct 1723 (2017). 128  DJ Hemel and LL Ouellette, “Trade and Tradeoffs: The Case of International Patent Exhaustion” (2016) 116(17) Columbia Law Review Sidebar .

Intellectual Property and Public Health    951 Apart from legal protection, some drug distribution strategies may reduce the risk of arbitrage between low-​price and high-​price markets. For example, to prevent resale in the US market of the hepatitis C drug sofosbuvir (marketed in the US under the brand name Sovaldi), patients receiving the drug in Egypt are required to open the bottle in the presence of a pharmacist, break the seal, and take the first pill.129 Even when parallel trade may be prevented, conspicuous differences in prices for the same product in different markets may highlight the substantial profit margins of pharmaceutical products and lead to resentment, creating political pressure to bring down prices in high-​ price markets. Even the US Congress, which has steadfastly resisted imposing drug price controls, has nonetheless felt political pressure to allow US consumers to import drugs from Canada, where prices are lower as result of that country’s price control policies. Congress has passed legislation asking the FDA to consider whether it should permit such imports, although FDA has so far been unwilling to approve the practice as safe.130

3.2 Public and Private Insurance The effects of insurance on access to healthcare products are complex. By subsidizing costs to consumers at the point of purchase, insurance makes consumers less sensitive to the total price of patented products, since most of the price is paid by the insurer out of the pooled premiums of all consumers.131 Insured consumers may therefore consume more patent-​ protected products than they would if they had to pay the full price themselves. On the other hand, insurance coverage allows patent holders to charge higher prices by making consumer purchasing decisions less sensitive to price.132 Insurers forced to pay higher prices for patent-​ protected products may increase the premiums they charge, leaving more consumers unable to afford insurance. As a result, although high prices for patented medical products covered by insurance may have little impact on utilization by those consumers who remain insured, by increasing the costs of insurance premiums, they may leave more consumers to pay the full costs of patent-​protected products out of pocket, with resulting deadweight loss.133 In some circumstances insurers may be able to control costs through a number of strategies.134 When clinically similar competing products are available, an insurer may bargain with manufacturers to include an advantageously priced product on a preferred formulary, perhaps in exchange for a confidential rebate. The insurer may cover formulary 129  DG McNeil Jr, “Curing Hepatitis C, in an Experiment the Size of Egypt” New York Times (New York, 16 December 2015) . 130  HHS Task Force on Drug Importation, “Report on Prescription Drug Importation” (2004) . 131  ER Berndt and JP Newhouse, “Pricing and Reimbursement in US Pharmaceutical Markets” in Danzon and Nicholson (n 8) 201. 132  PM Danzon, “Regulation of Price and Reimbursement for Pharmaceuticals” in Danzon and Nicholson (n 8) 266. 133  D Lakdawalla and N Sood, “Health insurance as a two-​part pricing contract” (2013) 102 Journal of Public Economics 1. 134  PM Danzon, “Pricing and Reimbursement of Biopharmaceuticals and Medical Devices in the USA” (2014) 3 Encyclopedia of Health Economics 127.

952   Rebecca S. Eisenberg products with a modest patient copay, while imposing higher cost-​sharing requirements on patients or burdensome prior authorization requirements on physicians before it will pay for products that are not on the formulary. The effect may be to steer physicians and patients to choose the preferred products over equivalents. These strategies are less effective at lowering prices for unique drugs without close substitutes, although elevated cost-​sharing and prior authorization requirements might nonetheless suppress utilization of expensive patented products. But suppressing utilization of healthcare products without close substitutes causes deadweight loss that is bad for public health. Public health insurance subsidies might limit the deadweight loss from underutilization, but they also allow patent holders to raise prices by suppressing the price sensitivity of consumers. These subsidies come out of the public fisc, introducing further deadweight loss from taxation.

3.3 Price Controls Outside the US, most developed nations use a combination of public health insurance to provide access to healthcare products and price control mechanisms to limit costs.135 In single payer healthcare systems, the payer may have enough market power to bargain for favorable prices without restricting access. Some systems use internal benchmarking or external referencing to set the price of a new drug at the time of product launch. Internal benchmarking compares the price of a new drug to the price of one or more other products in the same class, sometimes in combination with reference price reimbursement that limits the amount of reimbursement to the cost of a cheaper product unless a higher price is justified by cost-​effectiveness analysis. External referencing caps prices according to the price of the same drug in other markets.136 Differences in prices may reflect variations in the bargaining power of payers in different countries rather than differences in ability to pay.137 Other measures to control costs include incentives on prescribing physicians to control total expenditures. The power of government payers to insist on price breaks may be constrained by political pressure to address public health needs. Some patients and public health advocates have brought successful legal challenges to government policies that limit provision of costly treatments as violating rights to health protections under national laws or international agreements.138 Governments threatened with such lawsuits may find it challenging to

135   OECD, “Pharmaceutical Pricing Policies in a Global Market” (2008) ; US Department of Commerce’s International Trade Administration, “Pharmaceutical Price Controls in OECD Countries: Implications for U.S. Consumers, Pricing, Research and Development and Innovation” (2004) . 136  Danzon (n 131) 276–​284. 137  Danzon and Towse (n 110). 138  UNAIDS, “Courting Rights: Case Studies in Litigating the Human Rights of People Living With AIDS” (March 2006) UN Doc UNAIDS/​06.01E; S Gloppen, “Litigation as a Strategy to Hold Governments Accountable for Implementing the Right to Health” (2008) 10 Health and Human Rights 21; HV Hogerzeil et al, “Is Access to Essential Medicines as Part of the Fulfillment of the Right to Health Enforceable Through the Courts?” (2006) 368 Lancet 305.

Intellectual Property and Public Health    953 bargain hard with a patent holder for a product without clinical substitutes. When payers are required by law to provide coverage of expensive drugs, their bargaining position is weakened. Drug manufacturers may also encounter considerable political pressure to provide affordable access to their products, especially in the face of conspicuous public health crises. This became apparent in a very public battle between the South African government and the pharmaceutical industry over access to treatments for HIV during the 1990s.139 The Pharmaceutical Association of South Africa sued the South African government in an effort to block implementation of legislation authorizing parallel imports and compulsory licensing to bring down the cost of patented drugs. The pharmaceutical industry initially enjoyed the support of the US government, which threatened the South African government with trade sanctions and withdrawals of aid.140 But sustained media attention brought about a dramatic shift in the position of the Clinton administration and Congress. The litigation became a public relations disaster for the industry and was eventually settled, leading to the provision of drugs at sharply discounted prices.141 This episode revealed limits to the power of patent holders to hold out for high prices and focused the attention of the public health community on the IP provisions of international trade agreements as an obstacle to access to medications.

3.4 Restrictions on Patents Patents are national in scope, and national patent laws may differ in important ways, leaving inventions that are patentable in some countries ineligible for protection in others. Variation among national patent laws was greater prior to the 1994 TRIPS Agreement, which binds members of the World Trade Organization (WTO) to implement patent laws meeting certain minimum standards. Of particular importance to the pharmaceutical industry, the TRIPS Agreement requires that patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. . . .  patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.142

The drafting history of this provision reflects a clear goal of requiring all Member States to provide protection for pharmaceutical products as well as processes.143 Prior to that time, approximately 50 nations did not allow patents for pharmaceuticals, while some (such as India) allowed patents only on pharmaceutical manufacturing methods, but not on the drugs themselves.144

139  WW Fisher III and CP Rigamonti, “The South Africa AIDS Controversy: A Case Study in Patent Law and Policy” (2005) . 140  ibid 6–​8. 141  ibid 8–​10. 142  TRIPS art 27(1). 143  D Gervais, The TRIPS Agreement: Drafting History and Analysis (2nd edn, OUP 2003) 218–​219. 144  Helfer and Austin (n 109) 119–​120.

954   Rebecca S. Eisenberg The TRIPS Agreement initially allowed extra time for developing countries and least-​ developed countries to bring their national laws into compliance.145 The extensions for developing countries to extend patent protection to drugs expired in 2005, making new drugs eligible for patent protection in countries such as India that had previously been important exporters of generic drugs. The WTO TRIPS Council has extended the transition period for least developed countries until 2033.146 Forty-​eight countries, including 34 members of the WTO, are on the United Nations list of least developed countries.147 The TRIPS Agreement allows some latitude for members to address public health considerations within their patent laws. Notably, they may “adopt measures necessary to protect public health and nutrition . . . provided that such measures are consistent with the provisions of this Agreement.”148 In addition to applying their own laws to determine whether inventions are “new, involve an inventive step and are capable of industrial application,”149 members may exclude from patentability “diagnostic, therapeutic and surgical methods for the treatment of humans or animals,”150 they “may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties,”151 and they may choose their own rule concerning exhaustion of patent rights to permit imports of patented goods following a first sale in another country.152 They may even authorize compulsory licenses to use a patented product or process, without the patent owner’s consent, subject to a list of restrictions, including (initially) that the use be “predominantly for the supply of the domestic market of the Member authorizing such use” and subject to payment of “adequate remuneration . . . taking into account the economic value of the authorization.”153 The “domestic market” limitation was problematic for countries that did not have the capacity to manufacture pharmaceuticals domestically. Governments that sought to make use of these TRIPS flexibilities, such as South Africa, Brazil, and Thailand, faced aggressive countermeasures from the pharmaceutical industry and from industry-​ friendly governments such as the US and the EU.154 Developing nations organized effectively and successfully pushed back against the IP advocates in the 2001 WTO meeting in Doha, Qatar, leading to a ministerial declaration clarifying that the TRIPS Agreement “can and should be interpreted and implemented in a manner supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all.”155 The Doha Declaration explicitly recognized 145

  TRIPS, arts 65, 66. WTO Council for Trade-​Related Aspects of Intellectual Property Rights, “Extension of the Transition Period Under Article 66.1 of the TRIPS Agreement for Least Developed Country Members for Certain Obligations with respect to Pharmaceutical Products” (6 November 2015) . 147  United Nations Department of Economic and Social Affairs, Development Policy and Analysis Division, Committee for Development Policy, “List of Least Developed Countries” (as of 16 February 2016) . 148  TRIPS, art 8(1). 149  ibid art 27(1). 150  ibid art 27(3)(a). 151  ibid art 30. 152 ibid art 6. 153  ibid art 31(f), (h). 154  EFM ’t Hoen, The Global Politics of Pharmaceutical Monopoly Power (AMB Publishers 2009) 21–​25. 155  Doha Ministerial Declaration on the TRIPS Agreement and Public Health 20 November 2001 WT/​ MIN(01)/​DEC/​2, . 146 

Intellectual Property and Public Health    955 “that WTO members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement” and instructed the Council for TRIPS “to find an expeditious solution to this problem.”156 The TRIPS Council responded by implementing a temporary waiver of the “domestic market” limitation and proposing a new TRIPS Article 31bis as a formal amendment to the TRIPS Agreement to allow waiver of the “domestic market” limitation on compulsory licensing. The new waiver regime, which entered into force in 2017 after twothirds of the WTO members accepted it, requires that both the exporting and importing members issue compulsory licenses and requires the exporting country to pay remuneration to the patent holder.157 Despite these and other burdensome provisions, some compulsory licenses have been implemented under this process,158 although compulsory licensing activity appears to have declined in recent years.159 Countries that have used compulsory licensing have drawn sharp criticism from foreign governments as well as retaliatory measures from pharmaceutical firms.160 When Thailand used compulsory licensing to get cheaper access to Abbott’s combination lopinavir/​ritonavir antiretroviral product, Abbott withdrew seven pending applications for registration of new medicines from the Thai Food and Drug Administration, temporarily withholding these drugs from patients in Thailand.161 India and Brazil have submitted complaints to the WTO against the EU for seizing shipments of generic drugs in transit from India to other developing countries when they go through customs in European ports, allegedly on suspicion of IP infringement.162 These tactics may have discouraged developing nations from exercising their rights under TRIPS. On the other hand, Australia recently adopted legislation and regulations to authorize domestic drug manufacturers to produce generic drugs for export to countries exercising their compulsory licensing rights.163 The recent decline in compulsory licensing activity may also be due to more restrictive provisions of subsequent regional and bilateral free trade agreements, known as “TRIPS-​ plus agreements,” which impose additional requirements for IP beyond the minimum 156 ibid s 6. 157 

FM Abbott and JH Reichman, “Doha Round’s Public Health Legacy: Strategies for the Production and Diffusion of Patented Medicines Under the Amended TRIPS Provisions” (2007) Journal of International Economic Law 921, 940. 158  Helfer and Austin (n 109) 127–​134. 159  R Beall and R Kuhn, “Trends in Compulsory Licensing of Pharmaceuticals Since the Doha Round: A Database Analysis” (2012) 9(1) PLOS Medicine 1. 160  AD So and R Sachs, “Making Intellectual Property Work for Global Health” (2012) 53 Harvard International Law Journal 107, 113–​114. 161  K Alcorn, “Abbott to withhold new drugs from Thailand in retaliation for Kaletra compulsory license” (2007) . 162  WTO Dispute Settlement 408, European Union and a Member State—​Seizure of Generic Drugs in Transit (2010) ; WTO Dispute Settlement 409, European Union and a Member State—​Seizure of Generic Drugs in Transit (2010) . 163  Intellectual Property Laws Amendment Act 2015, ; Intellectual Property Legislation Amendment (TRIPS Protocol and Other Measures) Regulation 2015, .

956   Rebecca S. Eisenberg requirements of the TRIPS Agreement.164 To the extent that TRIPS-​plus agreements negotiated by the US and the EU impose requirements that undo some of the affirmative requirements for flexibility set forth in the TRIPS Agreement, they may contravene the TRIPS Agreement itself, which provides in its introductory principles that: Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement.165

This language plainly contemplates that more extensive protection might sometimes contravene the provisions of the TRIPS Agreement.166 One area in which post-​TRIPS agreements curtail the flexibilities of members to protect public health is requirements to provide protection against unfair commercial use or disclosure of confidential data submitted in support of applications for regulatory approval to sell drugs.167 While TRIPS leaves members flexibility to determine when use or disclosure is unfair, subsequent agreements restrict this flexibility and require data protection that provides an additional source of patent-​like regulatory exclusivity before competitors may get marketing approval for a generic version of the same drug. These TRIPS-​plus requirements arguably contravene the requirements of TRIPS by limiting the ability of members to use compulsory licensing to provide access to drugs to meet public health needs.168 The result is an uneven patchwork of uncertain legal protection around the globe that creates risks for countries that bypass the asserted rights of patent holders in order to promote public health. In countries where a healthcare product is not under patent or covered by regulatory exclusivity, other firms might, in theory, compete to provide it at lower prices, although it may be unclear just what rights are in effect in different countries. Even when they believe their rights are clear, developing countries may lack the political and economic resources to keep up the fight. On the other hand, there are reasons to be more optimistic about long-​term prospects for reconciling the priorities of public health advocates with the goals of IP advocates. Conspicuous controversies have led to more cooperation among the WHO, WTO, and World Intellectual Property Organization to establish priorities and shared goals.169 These collaborations have provided useful resources to help nations understand their rights and

164  CM Ho, “A New World Order for Addressing Patent Rights and Public Health” (2007) 82 Chicago-​ Kent Law Review 1469, 1495–​1505; Abbott and Reichman (n 156) 963. 165  TRIPS, art 1(1). 166  GB Dinwoodie and RC Dreyfuss, A Neofederalist Vision of TRIPS (OUP 2012) 150–​151. 167  TRIPS, art 39(3). 168  CM Correa, “Bilateralism in Intellectual Property: Defeating the WTO System for Access to Medicines” (2004) 36 Case Western Reserve Journal of International Law 79; FM Abbott, “Toward a New Era of Objective Assessment in the Field of TRIPS and Variable Geometry for the Preservation of Multilateralism” (2005) 8 Journal of International Economic Law 77, 89–​91. 169  WHO, WIPO, and WTO, “Promoting Access to Medical Technologies and Innovation: Intersections between public health, intellectual property and trade” (2012); L Pedraza-​ Farina, “Competition and Coordination in Shared Regulatory Space: WHO, WTO, and Access to Medicines Policies” (2015 draft on file with author).

Intellectual Property and Public Health    957 obligations.170 At the same time, unprecedented collaborative efforts have brought together public and private resources to pursue innovation to address the health needs of the developing world.171 These alliances offer hope for improved understanding of the relationship between IP, innovation, and public health.

4. Conclusion Innovation offers the promise of continuing improvements to public health in the face of changing and expanding needs. But innovation is costly, and public health budgets are limited. Private sector innovators have been very effective in securing requirements for provision of legal exclusionary rights for new healthcare products throughout the world in the terms of trade agreements. These exclusionary rights leave important gaps in incentives for public health innovation, requiring other measures to meet public health needs for vaccines, anti-​infectives, neglected diseases, and non-​excludable innovations. At the same time, exclusionary rights permit innovators to charge higher prices, thereby threatening to limit access to new technologies to the detriment of public health. Although patents eventually expire, permitting access to older technologies at competitive prices, the social costs of delayed access to treatments can be devastating. Public health considerations provide a powerful argument for giving governments flexibility in the implementation of exclusionary rights to new medical technologies.

170 

R Smith et al (eds), “Trade and Health: Towards building a National Strategy” (WHO 2015). RM Taylor et al, “The Role of Public-​Private Partnerships in Health Systems Strengthening: Workshop Summary” (National Academies Press 2016); WHO Department of Control of Neglected Tropical Diseases, “Accelerating Work to Overcome the Global Impact of Neglected Tropical Diseases: A Roadmap for Implementation” (WHO 2012). 171 

Chapter 34

Intellectua l Prope rt y and Climat e  C ha ng e ABBE E. L. Brown * 1. Introduction Intellectual property (IP) law confers exclusive private rights over the results of innovation and creativity. This might seem comparatively trivial when compared with the important societal goal of responding to climate change.1 Yet innovation and creativity can lead to new products and processes which can assist in responding to climate change—​ for example, new drought-​resistant crops, measurement technologies, flood defenses, and medicines to address strains of diseases arising from climate change. Indeed, there are strong arguments that the prospect of obtaining these exclusive IP rights encourages investment in, and rewards, this innovation and creativity. Yet in contrast, IP rights can be argued to stifle innovation of others, and unduly limit use of innovation and creativity during the term of the IP right—​either entirely, or through delay and the need for payment of overly high license fees.2 The interaction between laws relating to IP rights and climate change, and their impact, is receiving increasing valuable attention from both scholars and practitioners.3 This chapter introduces the political landscape and legal * 

Abbe EL Brown, University of Aberdeen, has asserted her moral right to be identified as the author of this contribution. Many thanks to James Field and to students in the Energy and Innovation LLM class at the University of Aberdeen 2014/​15. This contribution draws on a poster presented at the Society of Legal Scholars (2014) and papers given at BILETA (2014), Gikii (2014), All Energy (2015) and Learning by Doing (2015). All websites were last accessed in February 2017. 1  P Drahos, “The China-​US relationship on climate change, intellectual property and CCS: requiem for a species?” (2009) WIPO Journal 125, 131–​132. 2  Considered across both perspectives in, eg, FM Scherer, “The Innovation Lottery” in RC Dreyfuss, DL Zimmerman, and H First (eds), Expanding the Boundaries of Intellectual Property: Innovation Policy for the Knowledge Society (OUP 2001); C Greenhalgh and M Rogers, Innovation, Intellectual Property and Economic Growth (Princeton UP 2010); WR Cornish, Intellectual Property. Omnipresent, Distracting, Irrelevant (OUP 2004); KE Maskus and JH Reichman (eds), Intellectual Property Public Goods and Transfer of Technology Under a Globalized Intellectual Property Regime (CUP 2005). 3  For two different recent approaches, see M Rimmer, “Intellectual Property and Global Warming: Fossil Fuels and Climate Justice” in M Rimmer and D Halbert (eds), The Sage Handbook

Intellectual Property and Climate Change    959 frameworks relevant to each of these fields, some examples of their practical application, and their substantive and potential links. The chapter then considers the extent to which protection of IP rights assists in action against climate change or whether IP rights are in fact a problem. The chapter explores what changes could and should be made to IP rights and climate change laws, and also the possible impact of two other legal fields—​human rights and competition. In conclusion, the chapter argues that while laws relating to IP rights and to climate change have different backgrounds and justifications, and can stand alone, they also stand side by side; and that there is a need for ongoing regard to, and respect for, IP rights and climate change within each of the other’s landscapes.

2.  Boundaries and the Bigger Picture The chapter is wide ranging: it will engage with the activities of international organizations, governments, and non-​governmental organizations (NGOs); it considers some public interests (encouraging innovation and protecting the environment) and some private interests (rewarding innovators); it refers to a wide range of technologies, energy sources, and practices which could be relevant to climate change; and it considers laws and developments at international, regional, national, and individual levels. Much must, however, still be excluded. The chapter proceeds against the backdrop of a rich and deep body of literature that considers the existence and extent of climate change,4 its social implications,5 and the strong and developing link between world trade, multilateral environmental agreements, and climate change.6 Furthermore, many issues explored elsewhere in this collection are also relevant to climate change: the relationship between IP and encouraging innovation, including prizes and competitions (considered by Stephen Maurer);7 licensing (considered of Intellectual Property (SAGE Publications 2014); A Kirchner and I Kirchner-​Freis (eds), Green Innovations and IPR Management (Kluwer Law International 2013). 4  See, eg, the reports of the Intergovernmental Panel on Climate Change at and of the World Meteorological Organization at . 5  See, eg, A Grear and C Gearty (eds), Choosing a Future: the Social and Legal Aspects of Climate Change (Edward Elgar 2014). 6  See, eg, the WTO’s work on Trade and Environment (reported at http://www.wto.org/​english/​ tratop_​e/​envir_​e/​envir_​e.htm, including discussions at COP 22 in November 2016 ) and, for an older but still valuable perspective, F Macmillan, The WTO and the Environment (Sweet and Maxwell 2001); also A Amerjee and N Nayak, “A ‘Heated’ Debate: The WTO’s Climate Question” (2014) 6(1) Trade, Law and Development 1; and for ongoing projects and activism, ICTSD, “Negotiators Make Progress on ‘Wish List’ ” (2014) 18(42) BRIDGES . 7  For consideration of this issue from the climate change and environmental perspective, valuable starting points are M Rimmer, Intellectual Property and Climate Change Inventing Clean Technologies (Edward Elgar 2011) ch 9; AB Jaffe et al, “A Tale of Two Market Failures: Technology and Environmental Policy” in PS Menell and S Tran (eds), Intellectual Property, Innovation and the Environment (Edward Elgar 2013) ch 4; JH Adler, “Eyes on a Climate Prize: Rewarding Energy Innovation to Achieve Climate Stabilization” in Menell and Tran (eds), supra, ch 15; K Culver, “Low carbon futures for all? Strategic options for global availability of environmental technologies” in AEL Brown (ed), Environmental Technologies, Intellectual Property and Climate Change (Edward Elgar 2013) ch 1, and considering

960    Abbe E. L. Brown by Reto Hilty and Michael Kasdan); public/​private partnerships (considered by Michael Spence and Reto Hilty, among others);8 access to knowledge perspectives (considered by Carolyn Deere Birkbeck); local community solutions (considered by Susy Frenkel and Michael Kasdan);9 collaboration with universities (considered by Michael Spence); and also the relationship between IP and human rights (considered by Laurence Helfer), and between IP and competition (considered by Scott Hempill). Preliminary definitions may assist. In the twenty-​first century, “climate change” has come to mean increases in temperature because of human activity and increased greenhouse gas emissions, which are having a detrimental effect on the environment.10 Action against climate change has focused on mitigation (eg, using fewer fossil fuels and using less energy), adaptation (eg, developing medicines for new diseases which have emerged in the different climate),11 and gathering and sharing information and geo-​spatial data regarding levels of change. When “climate change” is used here, it means action against and in response to climate change within these contexts. Furthermore, this chapter, consistent with the spread of this collection, encompasses registered and unregistered IP rights, and trade secrets and some data control and access regimes, and the general references to IP rights cover all of these. Finally, international agreements, scholars, and policy documents refer to terms such as clean energy technologies, environmentally sustainable technologies, and green technologies; here these terms will be used interchangeably as covering technologies that have a low impact on the environment and support reduced energy use.

3.  Political and Structural Landscape 3.1 Intellectual Property Since (at the latest) its inclusion in the World Trade Organization (WTO) through the Agreement on Trade Related Aspects of Intellectual Property (TRIPS) in 1994,12 IP law has micro-​innovation, A Davies, “Partnership and sharing: beyond mainstream mechanisms” ch 4 in AEL Brown (ed) Environmental Technologies, Intellectual Property and Climate Change 113 et seq. 8  See also E Morgera and K Kulovesi, “Public-​private partnerships for wider and equitable access to climate technologies” ch 5 in Brown (n 7) and KR, “Climate change, technology transfer and intellectual property rights: a modest exercise in thinking outside the box” ch 6 in Brown (n 7). 9  See also Davies (n 7); O Onazi, “Access to essential environmental technologies and poor communities: why human rights should be prioritized” ch 7 in Brown (n 7); J Brewer and EAK Warner, “Guarding against Exploitation: Protecting Indigenous Knowledge in the Age of Climate Change” (2015) . 10  See, eg, Met Office, “What is climate change?” and “Is climate change caused by human activity?” . 11  See J Gow, “Challenge for Global Health Governance in Responding to the Impacts of Climate Change on Human Health” in T Cadman (ed), Climate Change and Global Policy Regimes: Towards Institutional Legitimacy (Palgrave Macmillan 2013). 12  See the chapter by Duncan Matthews earlier in this volume; TRIPS Agreement on Trade-​Related Aspects of Intellectual Property Rights (opened for signature 15 December 1993, entered into force 1 January 1995) 1869 UNTS 299 (hereafter TRIPS).

Intellectual Property and Climate Change    961 been firmly entrenched in the international legal landscape.13 Details of these international obligations, and their relationship with other laws, are explored elsewhere in this volume, including by Rebecca Tushnet.14 Here, some points should be made regarding TRIPS’s enforcement opportunities.15 If a state considers that another state has not met its obligations to protect IP rights, then the first state can make a complaint to the WTO Dispute Settlement Body; this could lead to trade sanctions against the second state. As will be considered, there is no similar sanction regarding climate change obligations. This can be practically important. In addition to TRIPS requiring that states protect IP rights, TRIPS does permit states to impose limited exceptions on these exclusive rights,16 provided (broadly) this does not unreasonably conflict with normal exploitation of rights, and does not unreasonably prejudice the legitimate interests of the IP owner and of others; states may also require sharing of IP rights (compulsory licensing) in return for a reasonable payment, including, in the case of emergencies, without prior notice.17 Yet because of the asymmetry in enforcement, a state may be less willing to try to limit IP rights, and would not be so proactive in respect of climate change.

3.2 Climate Change There have been movements to an international consensus regarding responses to climate change. A key milestone was the United Nations’ Conference on Environment and Development (“Earth Summit”) at Rio de Janeiro in 1992 attended by governments, NGOs, and individuals.18 Three Earth Summit outputs will be explored here: the Rio Declaration on Environment and Development (“Rio Declaration”),19 Agenda 21,20 and the United Nations Framework Convention on Climate Change (UNFCCC).21 Most relevant for present purposes is the UNFCCC. The UNFCCC aims to stabilize levels of greenhouse gas emissions that warm the atmosphere, and which can have a negative impact on the environment. The UNFCCC seeks to achieve this in a time frame which would enable the ecosystem to adapt naturally to climate change.22 The UNFCCC established a differentiated system and placed more of a burden on developed countries, which are listed in Annex 1 to the UNFCCC.23 Annex 1 countries 13   See the discussions by Rochelle C. Dreyfuss and Justine Pila, and Mario Biagioli, in their chapters earlier in this volume. 14   See also AEL Brown, Intellectual Property, Competition and Human Rights Access to Essential Innovation and Technology (Edward Elgar 2012). 15   See further the chapters by Duncan Matthews and Terrence Ross earlier in this volume; TRIPS, art 64(1); Understanding on Rules and Procedures Governing the Settlement of Disputes (opened for signature 15 April 1994, entered into force 1 January 1995) 1869 UNTS 401. 16   TRIPS, arts 9, 17, 26, and 30. The WTO DSS bodies have considered several disputes as to what this might mean. 17   TRIPS, arts 31 and 31(b) regarding emergencies. 18  See . 19  See . 20  See . 21  United Nations Framework Convention on Climate Change (opened for signature 4 June 1992, entered into force 21 March 1994) 1771 UNTS 107 (hereafter UNFCCC). 22 UNFCCC, art 2. 23  UNFCCC, arts 3(1), (2), and 4(1), (2).

962    Abbe E. L. Brown are to reduce their use of substances listed in Annex A to stated levels,24 and these countries are to engage in capacity building to assist non-​Annex 1 countries in reducing their own levels of emissions.25 The UNFCCC’s dispute procedures focus on peaceful discussions, reconciliation, and agreed references to arbitration or to the International Court of Justice.26 The UNFCCC is also a base for ongoing action, across the four main themes of mitigation, adaptation, finance, and, importantly here, technology27. There are regular state meetings (Conferences of the Parties) where action and progress is reviewed. In a significant step forward for those seeking climate action, in 1997 the Kyoto Protocol to the UNFCCC28 imposed mandatory targets on its 192 parties (which do not include all WTO members)29 regarding reduction of greenhouse gas emissions between 2008 and 2012. The Kyoto Protocol has a compliance system, part facilitative (with an early warning system and expert review) and part enforcement.30 This compliance system has received significant attention from regulatory and dispute resolution scholars;31 however, for those states that are parties to both instruments, it is still far less of a deterrent to, or encouragement of, state activity32 than what is available under TRIPS. If protecting IP rights and action against climate change clash, therefore, as noted above IP laws are likely to have more practical effect. Against this backdrop and initiatives from a diverse range of other international bodies (notably the Organisation for Economic Co-​operation and Development33 and the United Nations Conference on Trade and Development),34 some significant steps have been taken to reduce emissions across the key energy use activities:  electricity, heating, and transport. Technology plays an important role. In the United Kingdom (UK), there has been a strong focus on renewable energy (for example sourced from wind, sun, and tides). The UK 24 

25  UNFCCC, art 4(3)–​(5). 26  UNFCCC, art 14. Listed in UNFCCC, Annex B. See . 28  Kyoto Protocol to the United Nations Framework Convention on Climate Change (opened for signature 11 December 1997, entered into force 16 February 2005) 2303 UNTS 162 (hereafter Kyoto Protocol). 29  Members include China and India, but Canada withdrew with effect from 2012, and the United States has signed but not ratified the Protocol; see . 30  Kyoto Protocol as added to by Marrakesh Accords 21 January 2002 FCCC/​CP/​2001/​13/​Add1, art 24. 31  M Doelle, “Compliance and Enforcement in the Climate Change Regime” (2012) ; J Brunnee, “The Kyoto Protocol: A Testing Ground for Compliance Theories?” (2003) 63(2) Zeitschrift für Ausländisches öffentliches Recht und Völkerrecht 255. 32  In respect of private and national level action see, eg, J Spier, “Injunctive Relief: Opportunities and Challenges: Thoughts about a potentially promising legal vehicle to stem the tide” in J Spier and U Magnus (eds), Climate Change Remedies: Injunctive Relief and Criminal Law Responses (Eleven International 2014); U Magnus, “Injunctive Relief against climate change” in Spier and Magnus (eds), supra. Note also the Indian National Green Tribunal, although this has not yet been active in respect of IP and technology (see and GN Gill, Environmental Justice in India: The National Green Tribunal (Routledge 2016)). 33  Eg, OECD, “Promoting Technological Innovation to Enhance Climate Change” (2011) and OECD Green Finance Investing Forum (see, eg, ). 34  UNCTAD, “UNCTAD’s role on climate change” ; UNCTAD, “Technology and Innovation report 2011” . 27 

Intellectual Property and Climate Change    963 Renewable Energy Roadmap of 201135 aimed to have 15 percent of energy consumption from renewable sources by 2020, and noted that several technologies were capable of delivering more than 90 percent of this renewable energy. Given this availability, the key issues were encouraging investment, decreasing investor risk, and driving deployment. There have also been successful uses of solar water heating in South Africa and in Tunisia, use of government financial incentives to support consumer adoption of renewable energy in South Africa, and development and use of bioenergy (drawing on organic materials) in India.36 Notwithstanding these developments, there are questions about the extent to which renewable energy can deliver energy security (often broadly termed “keeping the lights on”).37 As a result, transition technologies have been developed to limit the environmental impact of the existing energy sources: for example, storage systems for carbon dioxide emissions so they do not enter the atmosphere.38 There has also been support for energy efficiency.39 The UK 2015 Budget allocated £140million to smart technologies, with a particular focus on cities.40 These technologies ensure that energy is used most efficiently by monitoring use and responding to demand, and also by reducing energy availability when it is not required.41 Smart technologies have also seen support at European Union (EU) level;42 more generally, in 2014 the EU introduced its 2030 Energy Strategy,43 in which technology has a key role.44 35  See “UK Renewable Energy Road Map” , which is the subject of ongoing updating and review (see, eg, 2013 update and Department of Energy and Climate Change, “2010 to 2015 government policy: low carbon technologies” (Policy Paper January 2013) (updated 2015)). 36  See J Haselip et al, Diffusion of Renewable Energy Technologies. Case Studies of Enabling Frameworks in Developing Countries (UNEP 2011) 3 (Olz), 101 (Pegels) and 129 (Ravindranath). 37  “European Union energy security strategy” ; E Üsenmez, “The UK’s Energy Security” in G Gordon, J Paterson, and E Üsenmez (eds), Oil and Gas Law—​Current Practice and Emerging Trends (2nd edn, Dundee UP 2011). 38  UK Department of Energy and Climate Change, “2010 to 2015 government policy: low carbon technologies” (Policy Paper January 2013), in particular Appendix 7 ; Aberdeen City Council, “Aberdeen in transition Journey Towards 2050” . 39  Directive 2009/​72/​EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/​54/​EC [2009] OJ L211/​ 55; Culver (n 7) 47–​48, 53. 40  HM Treasury, “Budget 2015” [1.185] and see also proposals of Department for Business, Energy & Industrial Strategy (2017) . 41  E Wright and D Devlin, “Smart Cities—​Power to the Citizens?” (2015) 26(1) Computers and Law 19. 42  European Commission, “Smart Grids and Meters” . 43  See European Commission, “2030 Energy Strategy” . 44  European Commission, “Technology and innovation” ; European Commission, “Energy Topics” .

964    Abbe E. L. Brown It should be noted, however, that changes to energy sources can have other implications. In 2016, some argued for a need to ensure that the oil and gas sector, which has been for many years an important part of the economy of the UK, and in particular that of Scotland, can continue, notwithstanding the worldwide drop in the oil price that occurred in 2015.45 Somewhat ironically, the drop arose at least in part from technology, with use of an unconventional and controversial (though established) form of obtaining oil and gas: “fracking” (horizontal hydraulic fracturing), which increased production in the United States (US) and limited its imports.46 Reflecting the importance of support for oil and gas, and also immediate energy security issues, the UK innovation agency has a multifaceted energy supply plan, including new technologies, unconventional fuels, next generation, and cost cutting and transfer.47 A complete embracing of renewable energy technologies is therefore unlikely, whatever arguments could be made from the climate change perspective.48

3.3 Summary Climate change and IP rights exist in distinct spaces in the political landscape, although there is a common theme of technology—​as a solution to climate change problems and as an output of IP and IP rights. Enforcement differences mean that IP law may receive priority if the fields clash; and in any event, reducing emissions is not the only energy issue facing policymakers. The next sections explore IP rights and climate change from a legal perspective, and also other instances of their practical application.

4.  Legal Landscape: Phase 1 4.1 Intellectual Property, Secrecy, and Information—​With a Climate Change Focus 4.1.1 Intellectual Property The IP rights explored in this collection can be relevant to climate change. The exclusive rights conferred by patents (and also plant variety rights and utility models) can cover

45  See UK tax breaks afforded to the oil and gas industry in 2015: Oil and Gas UK, “Budget lays strong foundations for regeneration in the UK North Sea” (18 March 2015) via and more generally . 46  See BBC News, “Falling Oil Prices: Who are the winners and losers” (19 January 2015) ; Institute for Energy Research, “US Oil and Gas Production on the Rise Thanks to Fracking” (19 September 2014) . 47  See “Innovate UK Energy Supply Strategy” . 48  A fictional account of what might happen if oil and gas were abandoned is explored from the Norwegian perspective in the television series “Occupied” ().

Intellectual Property and Climate Change    965 technologies that enable generation of renewable energy;49 hydrogen cell devices that can power vehicles; and as noted, medicines for new illnesses that arise as a result of new climates, and new crops bred to flourish in places no longer suitable for traditional plants (including those developed through genetic modification).50 Computer software can also be relevant to efforts to protect the environment as it can be used to measure and estimate the changes in temperature and in sea level,51 and to enable power to move around the grid effectively and efficiently.52 As considered elsewhere in this collection, different patent offices, the UK, US, and also the European Patent Office (EPO) being interesting examples, have taken different approaches to patenting and computer software. Software can also be the subject of copyright,53 and copyright would also apply, together with database rights if they exist (such as in the EU),54 to lists of temperature and to data sets of changes in temperature.55 Designs, both registered or unregistered, may protect elements of technologies such as wind farm turbines.56 Trademarks can be important if a business has built a reputation as having strong environmental credentials or if there is an industry standard operating under a particular name. Trademark law may also have a role when operators use a “green” message, but their products do not in fact have these particular qualities.57 Although states need not take identical approaches to the power conferred by each of these IP rights, these TRIPS opportunities have been explored to a very limited extent in respect of climate change. The relevance of more general national provisions to climate change has been analyzed in the copyright context,58 and a small number of countries have introduced compulsory licensing provisions for environmental protection, including in 49  See EL Lane, “Legal Aspects of Green Patents” in A Kirchner and I Kirchner-​Freis (eds), Green Innovations and IPR Management (Kluwer Law International 2013) 5021. 50  C Chiarolla, Intellectual Property, Agriculture and Global Food Security: The Privatization of Crop Diversity (Edward Elgar 2011) 60–​74; “Declaration of the World Summit on Food Security” , para 28 (referring to research to mitigate and adapt to climate change). 51  See, eg, United States Environmental Protection Agency, “Models, Tools and Databases for Climate Change Research” . 52  See, eg, BINE information service, “Feeding wind power into the grid in accordance with needs” . 53  See the chapters by Jane Ginsburg and Estelle Derclaye earlier in this volume. 54  See the chapter by Huw Beverley-​Smith earlier in this volume. 55  See, eg, practical application by Infoterra/​Astrium and scholarly discussion in MW Carroll, “Intellectual property and related rights in climate data” ch 19 in JD Sarnoff (ed), Research Handbook on Intellectual Property and Climate Change (Edward Elgar 2016). 56  See, eg, UK design 4037878 registered 21 October 2014 “Impellor designed for turbine rotor shaft” by Michael French . 57  From the US perspective, see Baker Botts LLP, “Changing climate for ‘green’ trade marks” (10 October 2014) ; CTM application for 3D shape of wind turbine was rejected, see Case C-​20/​08 P Enercon v OHIM [2008] ECR I–​179; discussion in C Haight Farley, “Green marks” ch 20 in Sarnoff (n 55). 58  E Derclaye, “The role of copyright in the protection of the environment and the fight against climate change: is the current copyright system adequate?” (2014) WIPO Journal 1523—​see in particular consideration of public sector information.

966    Abbe E. L. Brown respect of emergencies, and have permitted government use regarding environmental conservation and preservation of the environment.59 TRIPS also considers technology transfer. TRIPS provides in introductory provisions that states should contribute to the promotion of innovation and transfer of technology.60 Once again, states have not introduced specific measures encouraging or requiring transfer of technology relevant to climate change. TRIPS does require that developed country states provide incentives to promote the transfer of technology to least-​developed countries, to enable them to create a sound and viable technological base; and TRIPS provides for technical and financial assistance to developing and least-​developed countries regarding IP and its enforcement, upon request and agreed terms.61 There has, however, been little provision of assistance.

4.1.2 Trade Secrets Businesses that compile climate change data sets or have relevant information in this respect may keep the information confidential and protect it under trade secrecy law—​subject to general public interest and human rights defenses. The application of these defenses to climate change is yet to be explored. A Trade Secrets Directive finalized in the EU in 201562 does make some reference to the environment in its recitals, although the exceptions provision is more general.63

4.1.3 Information Regimes As a counterweight to IP laws, there are information regimes, notably in Europe, which will in some cases require the sharing of information relating to the environment—​even if it is confidential or the subject of exclusive IP rights. Bridging information and the environment, the United Nations’ Economic Commission for Europe’s Aarhus Convention of 1998 (Aarhus)64 imposes on states obligations regarding access to justice, public 59 

Eg Poland, Republic of Korea, Bosnia and Herzegovina, and Croatia, see consideration in WIPO Standing Committee on the Law of Patents, “Exceptions and Limitations to Patent Rights: Compulsory Licenses and/​or Government Use (Part I)” (3 November 2014) SCP/​21/​4 REV, 6 (footnote 30), 15 (footnotes 102, 103, 106); and regarding government use, see consideration in WIPO Standing Committee on the Law of Patents, “Exceptions and Limitations to Patent Rights: Compulsory Licenses and/​or Government Use (Part II)” (7 November 2014) SCP/​21/​5 REV, Kenya and Portugal, 4 (footnote 23) and Thailand, 4 (footnote 24). 60 61  TRIPS, arts 66(2) and 67.  TRIPS, art 7. 62  See European Commission, “Trade Secrets” , Council of the EU, “Proposal for a Directive of the European Parliament and of the Council on the protection of undisclosed know-​how and business information (trade secrets) against their unlawful acquisition, use and disclosure—​Analysis of the final compromise text with a view to agreement” (18 December 2015) 15382/​1/​15 REV 1  (hereafter Trade Secrets Directive). 63  Trade Secrets Directive, recital 21 and art 5(d); see consideration in A Friel, “Trade Secrets Directive: Trilogues Strike an Uneasy Compromise” (26 January 2016) . 64  Convention on Access to Information, Public Participation in Decision-​Making and Access to Justice in Environmental Matters (opened for signature 25 June 1998, entered into force 10 October

Intellectual Property and Climate Change    967 participation, and, most importantly here, the provision of environmental information by public authorities. Steps have been taken at the EU65 and in individual EU Member States to put in place appropriate information access regimes.66 Aarhus and related legislation provide for exceptions to the obligation to release if information is confidential or is the subject of IP rights. This might suggest that if IP and climate change should clash directly, IP protection would prevail,67 which would reflect the international relationship suggested above. Yet the Court of Justice of the European Union (CJEU) has held, in a case involving Greenpeace and plant protection products,68 that these exceptions must cede to a general public interest in disclosure regarding emissions into the environment.69 In cases involving landfill sites70 and the location of mobile phone stations,71 the Court similarly found that arguments based on confidentiality and IP (or other arguments for non-​disclosure) must not only be balanced cumulatively against a general public interest in disclosure, but also that exceptions regarding each set of information were to be interpreted strictly. However, the outcomes of such careful balancing acts can be difficult to predict, and it may be that the prospect of the arguments being used against disclosure may lead to information seekers choosing not to pursue a claim. A second key point is that Aarhus and related instruments impose obligations only on public authorities.72 An English tribunal found that certain privatized English water and sewerage companies were not public authorities.73 However, this decision has been criticized, given the importance of information which might be in private hands, and the possibility 2001) 2161 UNTS 447 (hereafter Aarhus Convention). Note also United Nations Environmental Programme Guidelines for the development of National Legislation on Access to Information, Public Participation and Access to Justice in Environmental Matters (2010) and 2015 implementation guidelines . 65 

Regulation 1367/​2006/​EC of the European Parliament and of the Council on the application of the provisions of the Aarhus Convention to Community institutions and bodies [2006] OJ L264/​13; Directive 2003/​4/​EC of the European Parliament and of the Council on Public Access to Environmental Information [2003] OJ L41/​26 (hereafter Public Access Directive); Directive 2003/​35/​EC of the European Parliament and of the Council providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment [2003] OJ L156/​17. Note also reference to this in Trade Secrets Directive, recital 9a—​Directive not to affect the application of rules relevant to disclosure of information to public authorities. 66  UK Environmental Information Regulations 2004, SI 2004/​3391; Environmental Information (Scotland) Regulations 2004, SI 520/​2004. 67  Aarhus Convention, art 4(4)(d) and (e) and Public Access Directive, art 4(2)(d) and (e). 68  Stichtung Greenpeace Nederland v European Commission T-​545/​11 (hereafter Greenpeace) in respect of analogous legislation; see criticism in H Von Holleben, “Judgment of the General Court of the EU on access to information under substance law” (2013) 4(4) European Journal of Risk Regulation 565. 69  Regulation 1367/​2006/​EC of the European Parliament and of the Council on the application of the provisions of the Aarhus Convention to Community institutions and bodies [2006] OJ L264/​13, art 6(1); see Greenpeace, paras 34–​46. 70  Case C-​416/​10 Krizan v Slovenska, considering Public Access Directive, art 4(2)(d) and recital 16; discussion focused on confidentiality and reasons for non-​disclosure and economic interest rather than public interest in disclosure (see paras 81–​83, 91). 71  Case C-​7 1/​10 Communications v Information Commissioner [2012] 1 CMLR 7, paras 21–​32. 72  Aarhus Convention, art 2(2). 73  Smart Source Drainage v Information Commissioner Upper Tribunal Case No GI/​2458/​2010, [2011] 1 Info LR 1498 (Upper Tribunal) considering UK Environmental Information Regulations 2004, SI 2004/​ 3391 paras 4, 6, 19–​22, 27–​35, 43–​78, 93–​100, and 105–​106.

968    Abbe E. L. Brown that states have passed control of important public services to private companies.74 In another case involving water companies, the CJEU found the defining issue to be whether or not the company is controlled by a public authority: That is, does the authority exert decisive influence over the company, with the company not having genuine autonomy?75 This may be an area for further activity, yet the public/​private divide will remain relevant. More combining of information and energy law can be seen in EU energy legislation, which requires that Member States impose disclosure obligations, including on the part of private entities, regarding the efficiency of buildings.76 Information holders are entitled, however, to refrain from disclosing confidential information.77 Furthermore, there are many examples of companies refusing to disclose details of substances being used in fracking, on the basis that this information is a trade secret. As a result, the impact of elements of this controversial procedure on the environment cannot be assessed.78

4.1.4 Summary IP and trade secret regimes apply to information and technology relevant to climate change. However, IP laws do not engage directly with international technology transfer obligations of states or the Kyoto Protocol objectives of states. Laws could be passed by states to limit the exercise of IP rights and require the transfer of technology—​but this has rarely been done. This omission creates a fundamental conflict between state responsibilities in terms of reducing emissions and technology transfer and IP owners’ private right to exclude and refuse to transfer. Information regulation laws may require disclosure of secret information or information subject to IP protection (particularly if it involves the environment), although decisions on disclosure require a careful balancing act. Accordingly, although the IP and information landscape has been seen to be highly relevant to climate change, there is little law within the IP sphere where the fields actually relate. What does the climate change’s legal landscape reveal?

4.2 Climate Change, Technology, and Intellectual Property Three of the Earth Summit outputs engage with technology transfer. The UNFCCC provides that developed countries are to take all practicable steps to promote, facilitate, and transfer environmentally sound technologies and know-​ how to other parties, particularly to 74 

U Etemire, “Public access to environmental information held by private companies” (2012) 7 Environmental L Rev 9, 12–​13. 75  Fish Legal v Information Commissioner (C-​279/​12) [2014] 2 CMLR 36, paras 25, 57–​73. 76  Directive 2012/​27/​EU of the European Parliament and of the Council on energy efficiency [2012] OJ L315/​1. 77  Energy Efficiency Directive (ibid) art 7(8)(b) regarding confidentiality and art 2(14) regarding obligated parties—​energy distributor or retail energy sales company. 78  P Leggette et al, “Trade Secrets and the Regulation of Hydraulic Fracturing: Toward a Global Perspective” Part 1 (2013) 4 International Energy Law and Taxation Rev 154 and Part 2 (2013) 5 International Energy Law and Taxation Rev 204—​consideration of United States, Canada, and Australia; SK Sandeen and DS Levine, “Trade secrets and climate change: uncovering secret solutions to the problem of greenhouse gas emissions” ch 17 in Sarnoff (n 55).

Intellectual Property and Climate Change    969 developing countries.79 The UNFCCC further requires countries to share information as to steps taken.80 The Rio Declaration provides that states should cooperate to improve scientific understanding through the exchange of technological knowledge and through the development, adaptation, diffusion, and transfer of technologies.81 Finally, Agenda 21 makes several references to technology,82 to the role of patent offices in international collaboration, and to the impact of IP rights;83 most relevantly, Agenda 21 considers the transfer of environmentally sound technologies84 in detail. Thus, Agenda 21 calls for more access to, and transfer of, environmentally sound technologies, particularly to developing countries. These activities are to involve governments, the private sector, partnerships, and capacity building.85 It calls for consideration of the role of patents and IP rights and their impact on access and transfer in bringing about assured access to develop effective responses to developing countries in need—​although it does also note that much useful technological knowledge is in the public domain and is not, in fact, the subject of IP rights.86 Agenda 21 calls for international technology which is the subject of IP rights and which is commercially available to be combined with local innovations in order to generate alternative technologies and new opportunities which should be accessed, including through technology transfer.87 Agenda 21 sets an objective of promoting, facilitating, and financing the transfer of technology to developing countries on preferential and concessional terms (taking into account the need to protect IP rights as well as the special needs of developing countries).88 It also calls for development of international, regional, and national information networks, collaborative research centers, capacity building, and support for technology assessment.89 Importantly, Agenda 21 notes that these new information and capacity systems might include patent offices to assist in reporting on technology; and that if technology is privately owned, measures should be taken to enhance access to and transfer of technologies and their purchase on commercial terms for onward transfer on non-​commercial terms; this is, of course, subject to the protection of IP rights, but also the prevention of abuse of IP, including through compulsory licensing with equitable and adequate compensation.90 However, against this base, the next step from the climate change perspective91 did not come until 1997 with the Kyoto Protocol—​notwithstanding the 1992 creation of the 79

80  UNFCCC, art 12.   UNFCCC, art 4.5. Rio Declaration on Environment and Development UN Doc A/​CONF151/​26 (vol I), art 9. 82  Agenda 21: Programme of Action for Sustainable Development UN GAOR, 46th Sess, Agenda Item 21, UN Doc A/​Conf151/​26 (1992) paras 6.13 (health), 6.41 and 6.43 (pollution), 7.39 (infrastructure), 8.53 (information technology), 11.5 (forests), 14.89 (farming), ch 16 (environmentally sound management of biotechnology), 17.6 (marine areas), ch 31 (contribution of scientific and technological community), 40.14 (information for decision making). 83  Agenda 21, paras 16.7, 16.37, 26.4, 40.19. 84  Agenda 21, para 34.1, defined as “technologies which protect the environment, are less polluting, use all resources in a more sustainable manner, recycle more of their wastes and products, and handle residual wastes in a more acceptable manner than the technologies for which they were substitutes.” 85  Agenda 21, para 34.4. 86  Agenda 21, para 34.9, 34.10. 87  Agenda 21, para 34.11. 88  Agenda 21, para 34.14 (b). 89  Agenda 21, paras 34.15–​34.16. 90  Agenda 21, paras 34.15 and 34.18(e)(iii) and (iv). 91  See consideration in J De Meeus and A Strowel, “Climate Change and the Debate around Green Technology Transfer and Patent Rules: History, Prospect and Unresolved Issues” (2012) 3(2) WIPO Journal 179. 81 

970    Abbe E. L. Brown Commission on Sustainable Development to ensure delivery of the Earth Summit goals.92 The Kyoto Protocol sees technology transfer as having a key role in reducing emissions,93 and it also notes the impact of IP rights. It provides that if environmentally sound technologies and know-​how are publicly owned or in the public domain, states are to cooperate and take all practicable steps to promote, facilitate, and finance transfer of the information and access to it, particularly to developing countries. If technology does not have this public element, states are to create an “enabling environment,” for the private sector to promote and enhance the transfer of, and access to, environmentally sound technologies.94 States are also to provide financial resources to assist developing countries.95 To encourage implementation, the UNFCCC Expert Group on Technology Transfer was established in 2001,96 and technology moved closer to the center stage at the 2007 UNFCCC Conference of the Parties,97 where the Bali Action Plan was developed.98 This Plan included an enhanced mitigation program to be supported by technology99 and the provision of financial resources and investment.100 A strategic program of technology transfer was established at the Conference of the Parties in Poznan in 2008, with a focus on technology needs assessments and funding support through the (pre-​existing) Global Environmental Facility.101 By 2008, then, the importance of technology, investment, and capacity building was established; but from the IP perspective the focus was on the state creating an “enabling environment.” The lack of effort to do more may seem surprising, given the power of private IP owners to refuse to transfer technology and the recognition of this problem in the energy sector.102 Thus (or for example), the United States Clean Air Act 1970103 had long provided for mandatory patent licensing on reasonable terms when necessary to comply with standards set out under the legislation;104 and the Atomic Energy Act 1954 provided for compulsory 92 

See . 94  Kyoto Protocol, art 10(c). Kyoto Protocol, art 3.14. 95  Kyoto Protocol, art 11(2)(b). 96  See UNFCCC, “Expert Group on Technology Transfer” consideration in M Burns, “A Sustainable Framework for International Green Technology Transfer” (2012) 23 Colorado Journal of International Environmental Law and Policy 405; Morgera and Kulovesi (n 8) 130. 97   UNFCCC, “Bali Climate Change Conference—​December 2007” . 98   See “Report of Conference FCCC/​CP/​2007/​6/​Add.1*” ; for more details on the background to Bali and its impact, see De Meeus and Strowel (n 91) 185–​186. 99 100  Report of Conference, para 1(e).   Report of Conference, para 1(b)(2). 101  UNFCCC. Conference of the Parties (COP), Decision 2/​CP14 FCCC/​CP/​2008/​7/​Add1. . The Global Environmental Facility was established in 1988 by the World Bank, and since 1994 has been the finance mechanism of the UNFCCC . 102  See consideration in P Gormley, “Compulsory Patent Licenses and Environmental Protection” (1993) 7(1) Tulane Environmental LJ 131; Rimmer (n 7) 236–​239. 103  S308 42 US Code 7608. 104  On application by Attorney General the patent has to be necessary to comply with standards, has no reasonable alternative and could lead to lessening of competition or tendency to create monopoly; Massachusetts v Environmental Protection Agency 549 US 497 re application to greenhouse gases; H Osofsky, “The Future of Environmental Law and Complexities of Scale: Federalism Experiments with Climate Change under the Clean Air Act” (2010) 32 Washington University Journal of Law and Policy 79. 93 

Intellectual Property and Climate Change    971 licensing on fair and equitable terms when licensing of a patent is of primary importance to achieve objectives in the nuclear energy field.105 These measures indicate that states will act against the private power of IP rights, if they consider the objective to be sufficiently important.

4.3 Summary As within the political landscape, IP and climate change have separate places in the legal landscape. In the main, climate change laws impose obligations on states and private authorities and IP laws create private rights. The potential for the two fields to interact has been explored more from the climate change and energy side than the other way around. The fields did, however, become more intertwined in the work of policymakers, scholars, and activists prior to the UNFCCC Conference of the Parties at Copenhagen in 2009.

5.  The Proper Relationship between Intellectual Property, Technology, and Climate Change: Phase 2 5.1 Since 2008: Climate Change, Data, and Technology Copenhagen aimed to set new emissions targets for beyond 2012, the end of the period covered by the Kyoto Protocol.106 Scholars, think tanks, and delegations reviewed the place of IP rights in encouraging the development of technology—​as well as stifling its development and transfer—​including through empirical analysis of the effect of patenting on clean energy technologies.107 A key issue in this debate was the need for a declaration concerning TRIPS and climate change. This would mirror the 2001 Declaration on the TRIPS Agreement and Public Health that confirmed the power of Member States to compulsorily license IP rights,108 and would enable states to meet their obligations under climate agreements, notwithstanding the private position of the IP owner. A key issue was the extent to which action against climate change involves, like health, essential technologies (for example, use of a particular medicine); or whether more varied approaches are being taken to address it, such that a declaration was not necessary and could merely have a disincentive impact on innovators. The discussion also included the proper institutional location for any declaration. Views on

105 

42 USC 2183 s153(a) and (d)(4). Copenhagen Climate Change Conference—​December 2009 . 107  See also a review in Rimmer (n 7) 169–​174. 108  Doha Ministerial Declaration on the TRIPS Agreement and Public Health 20 November 2001 WT/​ MIN(01)/​DEC/​2. 106 

972    Abbe E. L. Brown this ranged from the WTO, UNFCCC, and the World Intellectual Property Organization (WIPO), depending in the main on the priority of those seeking action.109 Key research demonstrates the knowledge base and prevailing trends of enquiry and concern during this period. A landmark 2007 study by John Barton considered wind, solar, and related technologies and biofuels developed in Brazil, China, and India.110 The author argued that although there were differences among sectors, IP rights were not having a negative impact. Substitutable technologies were available and new companies could enter markets using advances that were not blocked by rights holders. Patents mostly covered improvements rather than underlying basic technologies. Other work came to different conclusions. Thus, a 2009 Chatham House Report found that there was increased patenting since the Kyoto Protocol, which suggested that the agreement had sent a political signal as to the importance of innovation; that there was a high level of patenting from developed countries and from large companies; and, more concerningly, that patents could be slowing the diffusion of innovation. It called for more open innovation structures such as prizes, targeted interventions, greater use of standards, databases of licenses, and more collaboration between innovators.111 In contrast again, a 2009 study prepared for the European Commission rebuts, after a detailed literature review, the suggestions by some developing countries that IP rights were creating a problem in the pricing and transfer of technology. The study noted an increase in patenting in developing countries, including by local companies, but also that there was no IP asserted on some technologies; the study found key problems to be a lack of knowledge and purchasing power, and also that subsidies from developed countries could lead to acquisition of less-​than-​effective technologies.112 Furthermore, the importance of geography (which may affect the presence of wind or sun) and the varying needs of countries can limit the practical impact of requiring licensing.113 Other studies identified negative impacts of IP rights in India and the Republic of Korea.114 Consistent with this diversity of view, several draft documents were prepared before the Copenhagen meeting. These ranged from drafts which required compulsory licensing to drafts which made no reference to IP rights.115 The prospect of requiring compulsory licensing did seem sufficiently possible for a letter to be sent by US senators to President 109  AEL Brown et al, “Towards a Holistic Approach to Technology and Climate Change: What Would Form Part of an Answer?” (2010) University of Edinburgh School of Law Working Paper No 2010/​ 32 , 10, 11, 15–​17; Onazi (n 9) 194. 110  JH Barton, “Intellectual Property and Access to Clean Energy Technologies in Developing Countries: An Analysis of Solar Photovoltaic, Biofuels and Wind Technologies” (2007) ICTSD Trade and Sustainable Energy Series Issue Paper No. 2 , x, xi. 111  B Lee et al, “Who owns our low carbon future? Intellectual Property and Energy Technologies. A Chatman House Report” (2009) , viii–x. 112  Copenhagen Economics, “Are IPR a Barrier to the Transfer of Climate Change Technology?” (January 2009) , 4–​6. 113 Culver (n 7). 114  Work from 2001 and 2006 was submitted to WIPO Standing Committee in 2014 as part of a submission by the Third World Network, and considered in the minutes of the meeting SCP/​20/​10, 6–​7. 115  Rimmer (n 7), see extracts of drafts on 55–​57; for detailed consideration of the negotiations, see 45–​54, 62, and 58–​67, and records of meeting via .

Intellectual Property and Climate Change    973 Obama that referred to the risks of weakening IP and the resulting impact on US industry;116 from an IP perspective, very little happened. Instead, the Copenhagen meeting resulted in an Accord of 114 countries, including the US, Russian Federation, India, China, Brazil, Japan, and the EU.117 The Accord set out a basis for a new discussion program for Annex 1 and non-​Annex 1 countries118 which would look beyond Kyoto. The Accord stressed the importance of the development and transfer technology;119 it does not, however, refer to IP, although other Copenhagen outputs seek to enable a wider flow of information.120 The Accord established a Copenhagen Green Climate Fund to be funded by developed countries for the benefit of developing countries,121 and importantly, agreed that there would be a Technology Mechanism, a new system through which technology, transfer, and funding support would be explored in the UNFCCC.122 Since Copenhagen, IP, technology, information, and climate change have continued to receive attention, with the development of the Technology Mechanism playing an important role. From a scholarly perspective, in 2010 the United Nations Environmental Programme, the EPO, and the International Centre for Trade and Sustainable Development combined to find that patenting of clean energy was highest in Japan, US, Germany, France, Republic of Korea, and the UK; that there were also high levels of patenting in India, China, and Brazil; that there had been significant increases in patenting levels regarding carbon capture, solar, and wind; and that although that there was limited licensing out of patents, this was through a lack of awareness. In fact, there was willingness to license to developing countries, depending on local expertise, investment, infrastructure, and market conditions.123 In 2012, scholarly work on China found that IP rights were not a significant barrier to technology transfer there.124 In terms of policymaking, there has been significant and regular UNFCCCC activity at the Conferences of the Parties. In the main, however, this has focused on funding, structures, 116 

Considered by the author in AEL Brown, “Securing Access to Climate Change Technologies: Answers and Questions” (7 June 2010). University of Edinburgh School of Law Working Paper No 2010/​21 , 15, n 69. The link to the letter is no longer live. 117  Report of the Conference of the Parties ; Copenhagen Accord 30 March 2010 FCCC/​CP/​2009/​11/​ Add1 2/​CP15, 4 and list of parties via . 118  Report of the Conference of the Parties, arts 3–​5. 119  Report of the Conference of the Parties, arts 3, 5, 8, 10. 120  COP, Systematic Climate Observations FCCC/​CP/​2009/​11/​Add1 9/​CP15, art 4; Terms of Reference of Consultative Group of Experts on National Communications from Parties not included in Annex 1 of the Convention FCCC/​CP/​2009/​11/​Add1 5/​CP15, Annex. 121 COP, art 8. 122  COP, art 11. See discussion of opportunities arising from Copenhagen in MM Azam, “Climate Change and Intellectual Property after COP15: In Search of a Workable Framework for the Transfer of ESTs” Nordisk Miljörättslig Tidskrift, 2010:2. Available at SSRN: . 123  EPO, ICTSD, UNEP, “Patents and Clean Energy: Bridging the gap between evidence and policy. Final report” (2010) , 9; see consideration in R Ghafele and B Gibert, “A changing climate: the IP landscape of clean energy technologies” (2012) 7(8) Journal of Intellectual Property Law and Practice 623. 124  K Downey, “Intellectual Property Rights and Renewable Energy Technology Transfer in China” (2012) South Carolina Journal of International Law and Business 89.

974    Abbe E. L. Brown and technology needs.125 In Cancun in 2010,126 there was agreement regarding the form of the Technology Mechanism (a Technology Executive Committee and Climate Technology Center and Network) which would replace and build upon the work of the Expert Group on Technology Transfer. Bolivia argued for engagement with IP law,127 and although this did not take place there was reference in the Cancun outputs to the provision of robust and transparent information.128 In 2011, the Durban meeting saw India joining Bolivia in calling for IP action, but once again this did not come about. Details were developed for implementation of the Technology Executive Committee129 and for technology needs assessments through the Global Environmental Facility.130 Durban also saw a second commitment period of the Kyoto Protocol to 2020 and the launch of a new platform of negotiations looking beyond 2020—​this culminated at the Paris meeting in 2015.131 In 2012 at Doha, Bolivia again argued strongly and unsuccessfully for consideration of IP law.132 In Warsaw in 2013, the Climate Technology Center and Network opened, and the capitalization of the Green Climate Fund was discussed133 and at Lima in November 2014,134 there was broad agreement regarding that Fund as well as the UNFCCC finance mechanism, particularly with respect to increasing technology transfer to developing countries. The progress of these meetings demonstrates the evolving relationship between technology and climate change135 and ongoing questioning of the place of IP law and information disclosure,136 including through a declaration on IP and climate change.137 Indeed, it 125 

See also consideration in C Gerstetter et al, “Technology transfer in the international climate negotiations—​the state of play and suggestions for the way forward” (2010) 4(1) Carbon and Climate Law Review 3; Burns (n 96) 424–​425; NS Ghaleigh, “The puzzling persistence of the intellectual property/​ climate change relationship” ch 2 in Brown (n 7) 64–​70; H Van Asselt, The Fragmentation of Global Climate Change Governance: Consequences and Management of Regime Interactions (Edward Elgar 2014) ch 6. 126  See and link to Cancun Agreements FCCC/​KP/​CMP/​2010/​12/​Add1, 1/​CMP6 and 2/​CMP6 and consideration in Rimmer (n 7) ch 1. 127  See N Buxton, “Cancun agreement stripped bare by Bolivia’s dissent” (16 December 2010) and consideration in M Khor, “Climate Change, Technology and Intellectual Property Rights: Context and Recent Negotiations” (South Centre, April 2012)  26. 128  Cancun, paras 14(h) and (i), 20(b) and (d), 41, 42, 46, 64, 120, 125. 129 ; see comments by Ghaleigh (n 125) 59 and FCCC/​CP/​2011.INF.2. See also for its present status. 130  COP, FCCC/​CP/​2011/​9/​Add2 11/​CP17. 131 . 132  Doha Climate Change Conference—​November 2012  and consideration in De Meeus and Strowel (n 91) 196–​197. 133  Warsaw Outcomes . 134  Lima Climate Change Conference December 2014  and . 135  S Chuffart, “Technology Transfer and Dissemination under the UNFCCC: Achievements and New Perspectives” (May 2013) Columbia Law School, Centre for Climate Change Law . 136  Khor (n 127) 6–​13, 14–​16, 18, 22–​25. 137  See Third World Network, “Climate Change and Technology Transfer: Addressing Intellectual Property Issues” Submission to TEC in response to calls for proposals on how to create enabling

Intellectual Property and Climate Change    975 was argued that “[w]‌e have barely seen the tip of the iceberg. IP and TT [technology transfer] must go hand in hand in the climate discussion.”138 An opportunity for this to be ensured, alongside the setting of new emissions targets, was the Paris meeting in 2015.139 An indication that this may not be so, however, came in the EU’s blueprint for the meeting, which called for a key role for technology,140 but also that it “is essential to preserve the existing intellectual property rules.”141 Draft documents also stressed the importance of technology, although there was disagreement as to whether mandatory obligations would be imposed on states; there was no reference to IP.142 The Paris meeting saw what the United Nations Framework Convention on Climate Change website describes as “[a]‌historic agreement to combat climate change and unleash actions and investment towards a low carbon, resilient and sustainable future.”143 The Paris Agreement (which entered into force on 4 November 2016) “aims to strengthen the global response to the threat of climate change . . . by holding the increase in the global average temperature to well below 2 degrees above pre-​industrial levels and to attempt to limit the increase to 1.5 degrees above pre-​industrial levels,”144 and a new non-​adversarial and non-​punitive compliance system is to be developed.145 Importantly, the Agreement also provides that the parties “share a long term vision” on the importance of technology development and transfer, that a technology framework will be established to support the Technology Mechanism,146 and that “accelerating, encouraging and enabling innovation is critical for an effective, long-​term global response to climate change.”147 There is to be an ongoing focus on technology transfer in capacity building, information is to be provided by states about the steps they have taken148 and the importance is also noted149 of non-​market approaches including through technology transfer.150 So IP, technology, and environment , 4–​12; K Zaman, “The TRIPS patent protection provisions and their effects on transferred climate change technologies to LDCs and poor developing countries: a critical appraisal” (2013) 3(1) Asian Journal of International Law 137. 138 

De Meeus and Strowel (n 91) 197. UNFCCC, “Paris Climate Change Conference—​November 2015” . 140  Communication from the Commission, The Paris Protocol—​A blueprint for tacking global climate change beyond 2020 COM (2015) 81 final , see in particular sections 4 and 7. 141  Communication, section 7.3. 142  See Draft Agreement ADP.2015.8 Informal Note Non-​Paper 5 October 2015, art 7 (technology transfer) “[shall]/​[should],” art 8 (capacity building). 143  UNFCCC 12 December 2015  and for details of ratification and status see . 144  Paris Agreement, FCCC/​CP/​2015/​L/​9/​Rev1, Annex , art 2(1)(a). 145  Paris Agreement, arts 15, 103, 104. 146  Paris Agreement, art 10(1) and (4)and see . 147  Paris Agreement, art 10(5). 148  See in particular Paris Agreement, arts 11(1), 13(9), and (10). 149  Paris Agreement, art 6(8). 150  The points discussed above in notes 150–​155 are also considered in the Decision to which the Agreement is annexed, see Paris Agreement Decision recital 12, arts 66–​7 1, 110(c), 134, 136. Discussion continues at the UNFCCC see eg November 2016 Marrakech Meeting . 139 

976    Abbe E. L. Brown climate change do not yet go hand in hand. The next section considers the need for a new relationship and how it might be built.

5.2 Building a New Relationship 5.2.1 Is there a Place for Engaging with IP? Agenda 21 noted that much important technology is in the public domain. Scholars have also demonstrated that many valuable technologies relevant to the environment have not depended on IP rights,151 and that transfers that may be most effective are of well-​established technologies.152 On this basis, there is a limited need for intervention in the power of IP owners. A similar point comes from consideration of the McKinsey carbon cost abatement curve,153 a well-​known method of evaluating options that reduce emissions, their cost effectiveness, and regulatory barriers. A  key finding is that all possible technologies and changes in practices (the “and/​and” approach) must be used. Overly limiting the power of IP protection may have an impact on the positive contribution which IP could make to developing technologies relevant to climate change,154 and to the willingness to invest and collaborate.155 Furthermore, building on points made previously regarding geography, the same technologies are not necessarily appealing to both those in the North and the South, or to both rural and urban areas;156 indeed, there are calls for more focus on South–South transfers.157 On these bases, the UNFCCC focus on the substantive goal of technology development and its transfer and on capacity building, rather than on directly limiting the power of IP rights, appears correct. Yet as will be seen, the debate continues. Stimulated by proposals by Ecuador in 2014, there has been discussion within the Council for TRIPS about the transfer of green technology. This discussion has taken place against

151  E Lane, “Clean Tech Reality Check: Nine International Green Technology Transfer Deals Unhindered by Intellectual Property Rights” in Menell and Tran (n 7). 152  Culver (n 7) 35. 153  See different curves for countries and periods, via . 154  Ghaleigh (n 125) 72–​74; J Sarnoff, “The Patent System and Climate Change” (2011) in Menell and Tran (n 7); J Santamauro, “Failure is not an option: enhancing the use of intellectual property tools to secure wider and more equitable access to climate change technologies” ch 3 in Brown (n 7) 87–​92, and 101 regarding enabling environment; see early work in M Gollin, “Using Intellectual Property to Improve Environmental Protection” (1991) in Menell and Tran (n 7) calling for greater dialogue between the two fields and more awareness of both sets of practitioners; N Derzko, “Using Intellectual Property Law and Regulatory Processes to Foster the Innovation and Diffusion of Environmental Technologies” (1996) in Menell and Tran (n 7) with a focus on the US perspectives in both fields (and also Japanese and German utility models); GN Mandel, “Promoting Environmental Innovation with Intellectual Property Innovation: A New Basis for Patent Rewards” (2005) 24(1) Temple Journal of Science, Technology and Environmental Law 51 calling for some changes to IP to encourage environmental innovation. 155  M Jones, “A view from inside the renewable energy industry” and DA McGrory, “A private institutional investment perspective,” both in Brown (n 7), ch 12 and 11. 156  S Taylor, “Where are the Green Machines? Using the Patent System to Encourage Green Innovation and Technology Transfer” (2011) 3 Georgetown International Environmental L Rev 577, in particular 591–​593; Global Innovation Index . 157  Srinivas (n 8) 156, 167–​174.

Intellectual Property and Climate Change    977 the backdrop of scholarly argument that the transfer and assistance obligations in TRIPS are not being met.158 The resulting Council minutes make it clear that countries (and also WIPO officials who have attended) continue to take a range of different positions on the contributions that IP rights make to environmental matters, and the measures which should be put in place.159 In parallel, WIPO has been considering climate change. It published two reports in 2014 that found an increase in patenting across renewable technologies and across countries, with particular references to China, Japan, Republic of Korea, UK, Germany, and the countries in the European Patent Convention.160 There was also the launch of WIPO Green, which was also considered at the TRIPS Council.161 WIPO Green is an interactive marketplace that encourages innovation and diffusion of green technologies by connecting technology, service providers, and users.162 In addition, scholars have argued that nations should not rely exclusively on existing markets and should develop IP strategies for green technologies, to assist in developing and commercializing technologies, and to facilitate access and engagement.163 Thus, IP rights—​in particular patents—​remain a positive and negative part of the development and transfer of technologies that assist in the battle against climate change. The next sections considers how the benefits of IP can be enhanced; some less-​confrontational means of bringing about a new relationship between IP and climate change without causing risk for investment; the adequacy and appropriateness of these approaches; and the contribution that could be made to a new relationship by other legal fields.

5.2.2 Acquiring patents more quickly The antithesis of limiting the power of IP is enabling rights to be obtained more quickly. Yet, in parallel with calls for compulsory licensing, there have been repeated demands to reduce the time needed to acquire patent protection. Indeed, since 2008, several pilot studies and

158 

Srinivas (n 8), 153–​157; Taylor (n 156) 594. See TRIPS Council Minutes February 2014 Addendum, paras 240–​366 and June 2014 Addendum, paras 123–​248 . Note also via this link minutes from March 2016 IP/​C/​M/​81/​Add1 paras 381–​385 and June 2016 IP/​C/​M/​82.Add1 paras 178–​250. See also important analysis of the ongoing links between IP and climate change given the Paris Agreement in JD Sarnoff, “Patents and climate change” ch 16 in ch 13 in Sarnoff (n 55). 160  S Helm, Q Tannock, I Ilievv, “The acceleration of climate change and mitigation technologies: Intellectual property trends in the renewable energy landscape” (2014) WIPO Global Challenges Brief ; S Helm et al, “Renewable Energy Technology: Evolution and Policy Implications—​Evidence from Patent Literature” (2014) WIPO Global Challenges Brief —​ note overlap of authorship with Chatham house report (n 122), noted to be building on that work. 161  See also consideration in Taylor (n 156) 594 and consideration of WIPO in Santamauro (n 154) 95–​100. 162  WIPO Green . 163  DR Cahoy, “Inverse Enclosure: Abdicating the Green Technology Landscape” (2010) 49 American Business LJ 805. 159 

978    Abbe E. L. Brown new systems have been introduced throughout the world.164 A 2013 review of so-​called “fast track” systems in Australia, Canada, Israel, Japan, Canada, the US, and the UK found that more patents are filed in countries where there is a fast track system, and also that such patents are frequently cited, suggesting that fast track may be a useful dissemination tool.165 These initiatives have focused on green technologies and those which will reduce emissions; arguably, it should extend to apply to other socially valuable innovations.166 Other examples of new engagement can be seen from the EPO’s introduction of new classification systems for climate change mitigation technologies, which build on the tripartite report referred to earlier.167 The EPO website also indicates the wide approach it takes to sustainable technologies, with sections for smart grids, energy production, energy storage, and green construction.168 There is also an argument for greater introduction and recognition of limited rights, such as petty patents, utility models, and plant variety rights. These could be obtained more quickly than patents and could also have embedded provisions regarding compulsory licenses.169 It may also be possible to take a more interventionist substantive approach: To narrow, or extend, the bases on which IP will exist and to review the power which they confer.

5.2.3 New Approaches to Existence and Reach of Intellectual Property Rights TRIPS provides that states must grant patents in respect of inventions in all fields of technology. However, flexibilities do exist within which it could be made easier, or more difficult, to obtain patents, depending, of course, on the approach a state takes to the contribution made by patents. Firstly, the TRIPS obligation comes with some relevant caveats. States may deny patents to inventions whose commercial exploitation would be contrary to ordre public and to morality (including to protect life or health or to avoid serious prejudice to the environment).170 Can this be developed to prevent patenting of, say, technologies that 164  UKIPO, “Patents fast grant” (2008, 2016) ; UKIPO, “Green Channel for Patent Applications” (2009)