Conceptualizing and Justifying IP Space

IP Gold Summary 2003 Prepared by Sarita Keirouz

Conceptualizing and Justifying IP Space

Introduction

David Vever
IP is the practice of encouraging new enterprises by granting monopolies
Protection of new produce
Protection of human rights
Guarantee of quality
Modern TM law is however a product of the industrial revolution, when judges decided to protect business names and symbpols.
Without protection, people would not have the incentive to invent, because they could not have the benefit of their ideas ( fear of competition)
Paris Convention for the protection of industrial property (covers patents, TM, Designs, unfair competition etc..)
Berne convention for the protection of literary and artistic works (covers authors rights)
No protection for indigenous rights.
Why intellectual property?
Ownership of everyting that can be turned into cash
Borrowing IP is not actually theft, since it is not property: its owner is still left with possession after the taking.
IP is classified as personal property, and is bought, sold; forms part of the matrimonial assets (may form part of the estate). It can be changed, taxed, and become subject to a trust. It cannot be expropriated without compensation.
Justifying IP property
Morally, a person may be said to have a natural right to the product of her brain
Society should reward people who have produced something useful for society
Much inventiveness is kept secret, and the law rigorously protects that decision
Economical: Utalitarian : without protection, there would be no money and no interest in research.
Protection is limited in time and space

Roderick A. MacDonald “The Suisse Army Knife of Governance” (2002)

Choice of governing instruments:
SAKnife is an instantiation of the logic of plural modes and multiple sites of governance.
The gadgets of the knife are hypotheses of action
Two hypothesis:
Finding an appropriate mean to an end: I have to regulate the right of inventors, writers and image, how do I do that? The end constrains the choice of means.
Finding an appropriate end attainable by the means available: I have an IP regime, what can I do with it? The mean constrains the choice of end.
Problems:
1- Too many tools. “What should I use?”
There isn’t necessarily a best tool in any given situation.
Moreover, different users might have preferences for one or another tool.
Sometimes, less obvious solutions might actually prove to be more effective.
2- Over-inclusiveness. “I just want a knife. Can’t I get a model without all the other stuff?”
Although a tool is flexible and highly varied, sometimes, a certain problem requires a totally specialised and different tool.
Conceptualising the problem at the outset is important, with a specific end in mind. Clears out what type of means to use.
3- Wrong tool. Some problems require a totally different tool altogether. None of the available ones are intended to solve this issue.
4- Intended use, Unforeseen problems. Collateral damage from poorly-designed regulatory solutions.
5- Creative Use, Unforeseen Problems. Don’t expect too much from your instrument. Don’t use the Tax Act for something more.
6- Design Redundancies: Couldn’t we merge a few steps together in order to have a more effective IP system?
7- Specific-Use tools. Micro-regulation tends to sell people short, by denying the creative role that citizens can have in solving their own problems.
8- Design Tradeoffs: sometimes, a liability rule might be most suited for the task.
The criterion used to evaluate the regulatory solution is important
9- Cultural Limits: Some countries don’t consider copying an infringement on CR. Cultural predispositions limit at the outset the possible range or character of regulatory solutions available.
10- Preconceptions of use: Patents are used to solutions certain problems, and CR others; but couldn’t we switch around?
Issues to be considered when deciding on what tool to use:
Primary v. Secondary characteristics: the end helps decide which characteristics are primary, and mandatory in picking the type of tool.
Relations between uses: sometimes, by the force of habit, it is difficult to make a tool adapt to another problem: like patents on life.
Political Ideology helps
Administrative cost-benefit analysis: new technologies require more sophistication in order to deploy them properly.
Multiple regulatory sites: sometimes, if you can get certification in USA, it does not guarantee a certification in CAD. Different criteria in Europe and North America.

Class notes:

Swiss Army knife: Is IP the right tool to be used? Or should a liability rule be used instead?
To what extent does IP considers efficiency in its allocation of rights?

Theory of utilitarianism: Notion of efficiency = justification of the regime

Is that an appropriate descrition of IP or should we let Moral Rights play a larger role?

Compulsory licensing for medication to generic companies might be one way of including moral rights….but, NAFTA and TRIPS consider that this approach would limit research, and therefore place pressure to limit this practice.

Compulsory licensing still used in Europe, as it carries historical values

Political Ideology:

What is the ideology behind each scheme?

Which theory justifies IP?

Cost Benefit Analysis:

How about pressure to use the tool because of tradition? Conviction vs. Convention.

How about practical difficulties with the system? Are people overusing the system?

Patent offices, whom do they represent? A ghost in the machine, with a quota to allow a certain number to pass and others not to? You can get a faster read in the US if you pay more. Does that create a conflict of interest? Does it matter that they are not neutral?

Is the system flexible enough to adapt to new technology? (patenting life-mice). Who is going to make the changes? The legislative? Regulatory agencies? Judge-made law?

Question is: who should regulate our lives? Votes? IQ? Market? Spiritual Power? The Lottery?

How about the need for stability?

Property and its Limits

Just because the final product is protected by an IP right doesn’t mean that there are no other rights to consider. Similarly, a proprietary right may not extend to IP rights ( Moore).
You’ll see that the courts prefer to read down common or civil law property in order to ensure that there aren’t too many rights. As the IP schemes grow, the courts tend to limit the common and civil law rights.

Property

Moore v. The Regents of the University of CaliforniaU.S. (1990)

Facts:
Doctor develops a patentable cell line by stealing the spleen cells of his patient.
Issue:
Does the patient retain a property right over cells or other parts of his body once these parts have been medically removed? No
Assuming one has a property right in one’s body. Does it give one a property right to a patent? No
Ratio:
(remoteness) I can’t get a patent on an improvement you make on my invention. You get a patent on the improvement.
However, a patent does not negate a prior right: you can only get an improvement on the improvement.
Different in this case, because I don’t retain a right in the cells after they leave my body.
Dissent:
I have a proprietary right over my body: right to transfer, right to use, right to alienate, right to abuse
Do I have a moral right? My body should not be comodified.
However, in this case, Moore is asking for his body to be comodified, he is asking for a share in his body.
Doctrine of exhaustion: when someone buys something, he should be able to do what ever he wants with it, and I can’t prevent him.

Gould Estate v. Stoddart Publishing, (1996) OR

Facts:
Respondent Stoddart publishes a book without the consent or compensation of the Gould estate.
Material (pictures and taped –fixed-oral conversation) collected in 1956. Interview.
Issue:
Did Gould have any proprietary rights in his image, likeness or personality which have been appropriated by the publication of the photographs in the book? Yes
Held:
There is a public interest in knowing more about Gould (renown); as such, the book falls into the protected category.
Ratio: Lederman J.
The scope of the right of publicity should be measured or balanced against societal interests in free expression.
For a CR to subside in a work, it must be expressed in a material form, having a more or less permanent endurance.
Thus, a person’s oral statements in a speech, interview or conversation are not recognized in that form as literary creations and do not attract copyright protection.
The nature of the interview here was intended to be casual and to catch the spontaneity of Gould.
The Copyright Act does not protect spontaneous conversation
Note:
Lederman was trying not to comodify personality: p. 60 he distinguishes between the fact that right of personality exists in sales, but not with respect to the subject.

Gould Estate v. Stoddart Publishing (1998) CA

Issue:
Whether the respondent Carroll was entitled, for his own exclusive benefit , to later exploit commercially the photos he took of Gould in 1956 and to use his notes and tapes of his interviews at that time to write other articles on Gould notwithstanding that such later use of the photos and interviews had never been discussed with or agreed to by Gould or his successors or assigns
Addresses the IP rights of each
Held:
Carroll, as the author of the text and captions in the book, was the owner of the unrestricted copyright in written material, and the only person entitled to publish the book.
Ratio: Finlayson J.A.
Once an artist freely consents to having the photos taken and doesn’t attach a condition to their use in the future, no action can be taken against the owner of the pictures, bc CR belongs to him.
You can attach conditions through K, something Gould did not do.
Under the CRA, s. 10 (2), CR subsides in a photograph for 50 years from the end of the year of the first making of the original negative
Carrol is the owner (having exclusive rights) to all 400 photos taken in 1956
Test: who is the owner of the negatives?
Exception: When Gould or other commissions the pictures for himself, in which case he owns the negatives.
The onus is therefore on the Gould estate to prove that he doesn’t.
Class discussion:
This is an error, just because Carrol has a CR, it only gives him a negative right to prohibit someone else from publishing and reproducing his work, it gives him a positive right to do these things himself. This right does not override the positive right to personality of Gould.
Positive rights trump over negative rights.
The issue SHOULD be: by publishing the book, did Carrol violate the right of Gould’s personality
In the end, it doesn’t matter, bc, there is a public interest in doing so.
Comparing Moore to Gould
Moore no longer has any interest in his cells, but Gould’s estate still has an interest in his image.f

Entitlements and enforcements of entitlements

Guildo Calabresi & Douglas Melamed “ Property rules, liability rules and inalienability : one view of the Cathedral”.

“Entitlements”: whenever a state is presented with the conflicting interests of two or more people, or two or more groups of people, it must decide which side to favour; the fundamental thing that law does is to decide which of the conflicting parties will be entitled to prevail. Decide re the manner in which entitlements are protected and whether they may be sold or traded

I. Three types of entitlements:

1) entitlement protected by property rule: s/o who wishes to remove the entitlement from its holder must buy it from him/her in a voluntary transaction in which the value of the entitlement is agreed upon by the seller. State intervenes only to determine to whom the entitlement will go. Least amount of state intervention.

2) entitlement protected by liability rule: s/o may destroy the initial entitlement if he/she is willing to pay an objectively determined value for it. Additional stage of state intervention; value is determined by state, not by parties.

3) inalienable entitlements: transfer is not permitted between willing buyer and seller. State intervenes to determine who is entitled, the compensation if the entitlement is taken or destroyed and to forbid its sale under some or all circumstances. (Harvard Mouse Case)

Issues: (1) Under what circumstances should we grant a particular entitlement?

(2) In what circumstances should we decide to protect that entitlement by using a property,

liability or inalienability rule?

II. Entitlements are set for reasons of

(1) Economic efficiency (2) distributional preferences (3) other justice considerations.

1) Economic efficiency:

simplest reason for granting a particular entitlement: minimizing administrative costs of enforcement. Not used by itself, for this is the same as might makes right, leave the costs where they fall. Occurs when reasons are indifferent between conflicting entitlements, and one is cheaper to enforce than others.
*****Pareto optimality: economic efficiency asks that we choose the set of entitlements which would lead to that allocation of resources which could not be improved in the sense that a further change would not so improve the condition of those who lost from it and still be better off than before. Increase the benefits of a group (i.e., increase the value attached to its entitlements); no matter what the distribution is within the group; as long as those who are better off could theoretically compensate the less-favoured, then Pareto optimality has been reached****
It is argued that, if there are “no transaction costs,” i.e., perfect knowledge and the absence of any impediments or costs of negotiating (no freeloaders, etc.), then Pareto optimality – economic efficiency- will occur regardless of initial entitlement;
(Based on assumption that people are able to set a value on the good and have the money to pay for it; so: the optimal situation has been reached even if A has $0 and lives on the street, as long as B lives on top of the mountain in a mansion with lots of capital.)
But, an economically efficient situation will vary with the starting distribution of wealth
Distribution of wealth may affect a society’s choice of entitlements.
In field of accident law:

1)Econ efficiency alone dictates the entitlements that favours choices between social benefits and social costs of obtaining them, and the social costs of avoiding them;

2)When the worth of a benefit to society is in doubt, the cost of the activity should be put on the party best-located to make a cost-benefit analysis,

3)In accidents or pollution, the costs should therefore be put on the party which can most cheaply avoid them,

4)When unclear who that party is, cost should be put on the party which can act in the market to correct an error in entitlement with the lowest transaction costs, and induce the party who can avoid social costs most cheaply to do so,

5)Mkt does not work perfectly in this area; so, there are transactions costs, t/f must make decision about whether market transactions or collective fiat will be more econ efficient

2) Distributional concerns:

2 types (1) distribution of wealth and (2) distribution of (merit) goods.

all societies have wealth distribution preferences; can be based on the arbitrary or on morality or on efficiency or on worthiness or some other organizing principle.
cannot be equality for that is impossible: not enough to start everyone off with the same amount of money; other entitlements will make some richer than others (silence is preferred, so silence lovers will be richer than noise makers).
how to compensate for all the differences and the various individual valuations of various things (how much is silence worth to Mr. A? to Mr. B? tax people with brains and give to those who haven’t got?)
If perfect equality is impossible, a society must choose what entitlements it wishes to have on the basis of criteria other than perfect equality. In doing this, a society often has a choice of methods, and the method chosen will have important distributional implications. A society may force everyone to serve in the military. It could also entitle people to be free of the military and induce them to join up, or require all to serve but enable each to buy his way out.
If the choice of entitlements affects wealth distribution generally, it also affects the chances that people will obtain what have sometimes been called merit goods.
“a society which prefers people to have silence, or own property, or have bodily integrity, but which does not hold the grounds for its preference to be sufficiently strong to justify overriding contrary preferences by individuals, will give such entitlements according to the collective preference, even though it will allow them to be sold thereafter” (p. 127 cb 1, 1101)

3) Other justice reasons:

They are reasons which would influence a society’s choice of initial entitlements that cannot be comprehended in terms of efficiency and distribution.
Example: two neighbors, one likes noise, the other silence. In case of no transaction costs, we know that Pareto Optimality- economic efficiency- will be reached regardless of whether, say, we chose an entitlement to make noise or to have silence.
From a distributional point of view, we are also indifferent as to what the initial entitlement is, because we do not know whether it will lead to greater equality or inequality.
This leaves us with 2 reasons on which to base our choice of entitlement. The first is the relative worthiness of silence lovers and noise lovers. The second is the consistency of choice, or its apparent consistency, with other entitlements in the society.

but how to choose who is worthy? Depending on how they impact 3rd parties? Is it different from econo efficiency or distribution? Not really.
Treat like cases alike? Choose silence lovers because we choose people who are not violent ?
Both come down to econo efficiency and distributional reasons. For instance, there are good distributional reasons for this; simplifies task of obedience
justice reasons are ultimately all the reasons; economic efficiency and distributional reasons are a kind of justice

III. Rules for Protecting and Regulating Entitlements

Whenever society chooses an initial entitlement, it must also determine whether to protect the entitlement with a property rule, a liability rule or an inalienability rule.

Property and liability rules:

Liability rules exist because often the cost of establishing the value of an initial entitlement by negotiation is so great that even though a transfer of the entitlement would benefit all concerned, such a transfer will not occur. If a collective determination of the value were available instead, the transfer would occur.

Ex., Guildacres. A tract of land owned by 1000 owners in 1000 parcels would benefit a neighbouring town. Each of the 100 000 citizens of the town would be willing pt pay $100 to get it. Transaction would be econ efficient if owners of land valued it at less than $1000 a tract (what they would get at above price). But even then, if some of the owners hold out for more b/c they think the buyers will pay more, they will not get it and transaction will not happen. Sellers will have an incentive to hide their true valuation and the market will not succeed in establishing it.
Or, maybe buyers cannot raise enough b/c some are freeloading, expecting others to make up for what they won’t pay. Will lie and hope others will value it more and be willing to pay more. Market will not cause people to express their true valuations again, t/f desirable results cannot be achieved.
Liability rule allows society to decide the value collectively and impose it: no more holdouts.
Also, can charge benefits tax on collective valuation of each citizen’s desire to have a park: no more freeloader.
Are also problems with liability rules: may be lying when we say what value s/t has for us. “objective” liability rules may result in over or under compensation. Benefits tax: value of an entitlement to each individual cannot be determined accurately.
Accidents: if we were to give victims a property entitlement not to be accidentally injured, we would have to require all who engage in activities that may injure individuals to negotiate with them before an accident, and to buy the right to knock off an arm etc…such pre-accident negotiations would be extremely expensive, often prohibitively so.
Nevertheless: “the most common [reason] for employing a liability rule rather than a property rule to protect an entitlement is that market valuation of the entitlement is deemed inefficient, that is, it is either unavailable or too expensive compared to a collective valuation.” (p. 131 cb 1, 1110)
Efficiency not the only reason: “may allow us to accomplish a measure of redistribution that could only be attained at a prohibitive sacrifice of efficiency if we employed a corresponding property rule.”

Inalienable entitlements:

also efficiency and distributional goals underlying use

Limitations on right to engage in transactions may serve efficiency when there would be a high cost to 3rd parties
Ex. in cases of sale of land to polluters: neighbour doesn’t want me to sell land to polluter, pays me. But if there are many neighbours, freeloader and information costs make this practically impossible. State could protect neighbours and let land be sold by letting neighbours prevent sale to polluter by employing liability rule. But costs could be high: eg. Excise tax on all sales of land to polluters equal to the estimate of the external cost to the neighbours of the sale.
Barring the sale to polluters is most efficient because it is clear that avoiding pollution is cheaper than paying its costs.
Or external costs can’t be measured in acceptable way. Such costs are called moralisms.
One person can’t be allowed to sell himself into slavery b/c of the cost to the other members of society. Can’t be valued in monetary terms.
Other reasons for forbidding sale: self paternalism and true paternalism

-Self paternalism: decision of individual (or group) not to engage in economic activity; based on notion that no one knows better than the individual what is best for him or her. May require certain conditions to exist before allowing a sale, or may explain inalienability, like invalidity of K’s entered into when drunk or under coercion.