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Predictions 2009: Intellectual Property Law

Intellectual property (IP) law protects future things and processes using copyright, trade mark, patent, design, confidential information and other IP laws. This is usually in combination with IP licences and contracts.

To excel in IP law, particularly the commercialisation of IP and IP contract drafting, it helps to be a good futurist. Decisions are needed for drafting IP contracts, eg for setting royalties and scoping the IP rights granted. If either is set too high, or too low, the inappropriate decision has very concrete consequences, winners and loser.

Wisdom helps improve IP decision making. Wisdom comes with experience and is the result of practical rather than theoretical learning. That's what sets wisdom apart from knowledge, information and data.

Plenty of wisdom for IP futurists can be drawn from Intelletual Property, a 2007 book by Prof. Paul Goldstein. Goldstein's positions discussed here are broadly confirmed by the literature on IP trends generally. Here are our six predictions on where IP law is heading, with evidence and arguments drawn from Goldstein's book.

goldstein_paul1.  International IP law harmonisation will continue

 

The role and significance of IP law continues to grow in national and global economies.

With the World Trade Organisation's Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement adopted in 1994 more countries than ever agreed to adopt common minimum standards for the protection of intellectual property. Under the trade law approach of TRIPs, if a World Trade Organisation panel finds a violation of a TRIPs standard then the successful country can impose economic sanctions against the offending country.

Goldstein says that with TRIPs there is "...a receding [international] frontier of lawlessness and the emergence of comparatively stable markets that more or less honour and enforce intellectual property rights."[1] TRIPs has helped reduce dissonance between the IP laws of different countries (eg the US first to invent patent law principle verses the first to register principle in operation elsewhere) and regions (eg developed and developing regions). Multinational pharmaceutical companies particularly benefited from TRIPs.

2.  Economics will shape the politics of IP law changes

The economics of comparative advantage shape the politics of IP law changes. Take the US as an illustration of that principle.

In the 19th century when the US was a net importer of intellectual property (mostly from Europe) its movers and shakers resisted expansion of intellectual laws.

In the 20th century the US became a net exporter of IP and shifted to support expansion of intellectual property laws, both in the US and internationally. This resulted in its use from the 1980s onwards of the big stick of trade sanctions against countries which did not comply in their laws or enforcement practices with US norms for IP.

Recent numbers are interesting. The "core [US] copyright industries - book publishing, recorded music, newspapers, magazines, motion pictures, broadcasting, software - added US$626.2 billion, or 6%, to the US economy in 2002. ... Core copyright industries employed 5,484,000 workers, and all copyright industries employed 11,476,000 workers, roughly equal to employment in the leisure and hospitality business."[2] Further, major US copyright industries revenues from foreign sales increased on average 9.45% annually between 1991 and 2002.[3] Book publishing however had far lower export growth. These numbers translate into power which is exercised in courts and Congress.

Looking ahead, Golstein makes a cogent argument that the US may shift back again to being resistant to expansion of IP laws if and when the US in the decades ahead becomes a net importer of IP.

3.  R&D will continue to feed IP registrations and trade

Conducting more research - artistic, creative, technical, engineering and scientific - leads to more IP registrations (eg trade mark, patent and design registrations) and this helps grow trade in IP.

4.  IP legal rights will expand and shrink

IP rights granted by IP law have been on an expansion trail in the last decade or so. However as Goldstein notes: "Each form of intellectual property expands and shrinks at its own pace."[4]

Over longer periods measured in several decades: "[T]he history of intellectual property reveals... an uneven expansion of subject matter and rights, albeit one that is different for each form of intellectual property." "Form" is Goldstein's term for areas of IP law, eg copyright, trade mark, patent, and trade secrets.

As a copyright scholar, Goldstein writes: "New technologies create pressures not only for the expansion of rights, but also for the expansion of copyright subject matter."[5] Mickey Mouse is the often targeted dart board (not pin up boy). As is often observed, a remarkable coincidence is that the duration of rights of copyright under US law have been extended a number of times when the Walt Disney Company's Mickey Mouse films have been due to come into the public domain (ie be free of copyright protection). Currently copyright protects the films to 2023.

Focusing on copyright law to illustrate the notion of expansion being "uneven", Goldstein senses the safe harbour principle (introduced by the 1998 Digital Millenium Copyright Act) is a major shift empowering users and intermediaries [eg ISPs, portal sites (eg Yahoo), search engines, auction sites (eg eBay)] against IP owners. He correctly notes these intermediaries have operations which inevitably "entangle them in copyright's liability net".[6]

Copyright old timers like Goldstein are in a position to observe and even regret that a casualty of the copyright wars in the US has been that "[t]he judiciary, which has historically supplied copyright's conserving force, has since the 1990s substantially enlarged the inroads on copyright."[7] Observed over a time span measured in decades, perhaps even over the last century, copyright law is on the defensive if not in retreat. Goldstein's prediction is, "[t]he Internet will doubtless prove to be the most important force in determining how long copyright's current contraction lasts and how deep its effects will be."[8]

Critical here is the shift in balance achieved by safe harbour laws. Where once copyright compelled users to first seek and obtain permission before any use, now copyright law in some circumstances in effect permits copyright assets to be used without prior permission unless the asset's owner specifically issues a take down notice. The sting is gone. In the analog copyright world an IP infringement notice and demand to pulp unauthorised books or CDs is a major financial threat, potentially wiping out all sunk costs. In the digital copyright environment a take down notice can require a few mouse clicks and a dramatically lower level of financial threat as a result. It's not possible to remove several photos from a print run of say 10,000 books, whereas removing infringing photos from a website is relatively painless. Less sting, less threat.

Focusing on patent law to illustrate the notion of expansion, there has been a rise and rise of patent law in the US since about 1980. The pro-patent trend in the judiciary and legislators in the US since about 1980 contrasts to the anti-patent circumstances in American patent law in the 20th century prior to about 1980. Evidence of the pro-patent tend includes the increasing scope of subject matter for which a patent is available under US law (it is contrast to the position in the European Union, India and other regions and countries).

5.  IP law and contracts will remain in love and marriage

The number of words written about a legal subject are often in inverse proportion to their significance. Although there are mountain ranges of words written about IP law, contract law (including contractual licences) dominantes the landscape of everyday work of non-litigation IP lawyers.

Goldstein writes: "Licenses achieve more than scalability. Business also uses them to reduce the risk of legal uncertainty."[9] On discussing movie studio litigation against broadcast television, cable television, and video cassette recorders he writes: "And in every one of these lawsuits, the studios understood that a copyright victory did not mean that they would shut down their adversaries, as one might a competitor, but rather that they would enter into a license for expanded distribution of their films."[10]

Even open source software relies on the genius of contract law as expressed in open source software licence agreements. The Linux operating system and a host of other open source software is released under the Genreal Public Licence. Being "open" does not mean there are no contractually binding elements. The contracts import notions of proprietary rights under good old copyright law principles.

6.  Timing will remain everything in IP litigation

This is true at the level of individual companies and their actions for damages. An example is the case of NTP v RIM in which US$612.5 million was secured in 2007 out of Blackberry's Research in Motion using the US patent owned by its adversary, NTP.

It's true too at the national level, in the film and music industries major cases in recent decades against Sony, Napster, Grokster and Kazza. They have either succeeded or failed as strategies in the Great Game of shaping laws, markets, technologies and public sentiment about IP. The Great Game continues in Viacom's US action against Google's YouTube and locally in the film sector's mega litigation commenced in November 2008 against the Australian internet service provider, iiNet.

The dilemma that copyright owners face when deciding whether to file a test case against a new technology is that if they file too early they run the risk that the technology will be in too primitive a state for a court to consider it a significant economic threat. "Yet to wait for the technology to mature runs the risk that it will have become so widely entrenched among users that no court would be inclined to shut it down."[11] Further, if filing a court case is late then "... after the technology has become so well-entrenched among users ... no court or legislator will dare to shut it down."

Goldstein illustrates the importance of litigation timing in discussing the legal actions by core copyright industries over the decades against waves of new technology - including radios in hotel rooms and other "public" places, community antenna systems used to retransmit television broadcasts, broadcast television, cable television, photocopiers, video cassette recorders, and peer-to-peer file sharing software.

Very interestingly, Goldstein expresses the view that the failure in litigation by the movie studios in the 1981 Sony VCR case (Universal v Sony), from the 1980s framed a vision for legal advisers for the operating system platforms of IBM, Apple, Microsoft, Digital Equipment Corp., Sega, Nintendo and others.

In the 1980s onwards this vision saw value in locked access to source codes, interface layouts and other perceived proprietary elements that could be built into operating system platforms.

Two counter-move battlefields opened, especially in the 1990s, over software/hardware systems interoperability between competitors (though the origins of this perhaps first escalated with IBM's System/360 in the 1960s) and reverse engineering.

In our current decade a broadening range of competitive manoeuvres and strategems are in the mix for use by enterprises big and small seeking to shape future directions for IP laws and practices. Looked at over long time spans the newish manoevres and strategems include:

  • political - lobbying politicians
  • organisational - adopting open source
  • public relations - like IBM did a couple of years ago, declaring that no patent action will be taken against open source good guys
  • business model - implementing open innovation
  • legal - investing more into software patents and business system patents.

Footnotes

[1] Paul Goldstein, Intellectual Property: The Tough New Realities That Could Make Or Break Your Business (New York: Portfolio (Penguin Group), 2007), page 184.

[2] Ibid, page 66-67. Goldstein cites this source: Stephen E. Swek, Copyright Industries in the US Economy 2004, a report prepared for the International Intellectual Property Alliance, available at www.iipa.com/pdf/2004_SIWEK_FULL.pdf]

[3] Ibid, page 203.

[4] Ibid, page 5.

[5] Ibid, page 71.

[6] Ibid, page 153.

[7] Ibid, page 96.

[8] Ibid, page 96.

[9] Ibid, page 22.

[10] Ibid, page 73.

[11] Ibid, page 76.

Illustrations: Book cover of Intellectual Property and photo of its author, Prof. Paul Goldstein.


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