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THE FUTURE OF INTELLECTUAL PROPERTY RIGHTS – AN END TO MONOPOLY?

Lokesh Vyas[1] & Umang Sethi[2],

Introduction

If creativity is a field, copyright is the fence.[3]

Oswald’s aphorism makes sense when read in light of the recent trend of abolishing monopoly from Intellectual Property (IP) rights. Here, monopoly signifies the exclusive rights given to the creators. The advent of social media and the internet has started revolutionising the IP domain. On the one hand, it has obliterated all the political and social barriers and improved the accessibility of IP.[4] Conversely, it has facilitated IP infringement by tempting infringers into acts of piracy and counterfeiting.[5] On such cyber platforms, monopoly often becomes a charade for the IP owners and a revenue generator for the infringers. The enforcement of IP rights and identification of infringers has become a herculean task on cyber platforms, diluting the monopoly of the IP holder. Given this situation, there is a question as to whether the monopoly is an inherent part of the IP domain.

In this article, the authors examine the jurisprudence of IP rights and theories of state to present a cogent account of IP rights. Additionally, we attempt to show the relevance of monopoly in the IP domain and its nexus with societal growth. The authors explore the double trust dilemma to present an economic justification of IP law. The first part of the article discusses Hohfeld’s framework of rights and duties to demonstrate IP as the centre of relationships and examine the role of state in protecting IP rights. The second part argues for monopoly as an ineliminable aspect of IP, relying on Lockean and fairness justifications of IP. The final part examines the economic justification of IP and the double trust dilemma to further bolster the argument of the inseparability of the monopoly from IP.

IP: A Fulcrum of Relationships?

In legal positivists’ popular argument/proposition that law is a command of the sovereign backed by sanction, the term ‘command’ does not only signify the vertical relationship between the State and its people but also highlights the horizontal relationship between people. Both these relationships may be subject to certain sanctions. In a vertical relationship, citizens are bound to follow state law, whereas, in a horizontal relationship, citizens are obligated to respect each other’s rights. For instance, a person is not only prohibited from evading tax (vertical relationship) but also legally obligated not to steal from other persons (horizontal relationship). In society, these relationships are contextualised by a framework of rights and duties. Without this framework, society would be more like Hobbes’ state of nature, wherein self-preservation acts as the supreme law.

The IP Right is one such right given to the individual for their intellectual creation. There are several arguments for the justification of IP rights – for example as a reward for one’s labour, as an expression of one’s personality,[6] or as an instrument of social progression. Nevertheless, in every situation, IP remains a fulcrum of various relationships. For Hegel, a personality theorist, IP defines the relationships between the creator and the world. Conversely, for Locke, IP is a reward for labour which enhances common stock thus benefiting society. In the former, IP decides the relationship between people, whereas in the latter, it acts as a bridge between the society and the creator. In both situations, it has a corresponding duty. On the one hand, the state has to recognise and protect IP rights because ultimately, the creation of a state represents the will of people. On the other hand, it is the duty of the people not to interfere with the rights of IP holders. Notably, these IP rights are exclusive and are called negative rights as they enable the creator to limit interference by other people.[7]

It is clear that these rights grant a time-specific monopoly to the creator and restrict exploitation by others. This monopoly cannot be analogised with the monopoly of competition law wherein a dominant player holds an unfettered power to control the market.[8] It is worth noting that competition law monopoly suggests a “market-centric approach” which aims to capitalise market economy. In contrast, the IP monopoly is a work-specific concept which aims to protect an author on moral and economic grounds.

There are ‘pros’ and ‘cons’ of such a monopoly. On the positive side, this monopoly assists a creator to privatise knowledge and commodify an idea. Conversely, this monopoly has a utilitarian effect and benefits society in the long run. Given this reasoning, the debate concerning IP monopoly cannot be straitjacketed but must be calibrated. 

Monopoly: An Ineluctable Aspect of IP?

The monopoly or exclusivity of IP rights is an inevitable aspect of IP law as it not only enables a creator (patentee/author/registered proprietor) to use its work but also empowers him/her to restrict others from using it. Illustratively, Section 14 of India’s Copyright Act, 1957 defines copyright as an exclusive right and bestows certain rights to an author. The exercise of these rights by others attract legal sanctions and leads to copyright infringement liability. Similarly, Section 2 of the Copyright, Designs, and Patents Act 1988 provides exclusive rights to the author. Therefore, exclusivity should not be removed altogether. Hence, expunging monopoly from IP would likely to impede the growth of the society and intellectuality for which the system is primarily created.

The following example illustrates these drawbacks: –

B made a movie on Aliens by exerting his skills and labour. He incurs both economic and physical cost in the finality of the work. This work, even if not adding value directly, would unlock a pool of ideas to be worked upon. Appositely, propertisation of such idea causes two benefits:

Firstly, it incentivises B to create more work so he can recover his economic cost. If he cannot recover the cost, then he need have no regret because it was his choice to create such work. Secondly, this was important for the fulfilment of B’s social and psychological needs, which is an ideal objective of any State. If the work is not protected and kept in a public domain, then it would add the same value as the protected work. However, B would not be necessarily motivated to create further work. Thus, this value addition would be only limited and not perpetual. It also fails to satisfy the mental and psychological needs of B, which signifies the failure of the state to realise its primary objective.

The above illustration highlights two major reasons for not abolishing monopoly:

  1. Utilitarian theory justification

Every society has common stock and ideas, which do not belong to a single person, and everybody has a right to exploit them. IP owners expend their labour and skills on unique ideas and make them beneficial for society. For utilitarians, it is the value addition that makes the common stock beneficial for society and gives impetus for the protection of IP rights.[9] In this way, IP results in the greatest good for the greatest number of people, and is therefore justified. Essentially, the creation of IP is aimed to eradicate existing gaps and attain ‘something better’ which we could call ‘X’, where X is variable and keeps on changing. For instance, the invention of 2G internet helped remove the ‘gap’ of slower communication. Today society is working towards 5G internet to provide an even better user interface.

The removal of gaps develops and improves society. In such a situation, recognition of labour through granting exclusive rights not only develops society but also acts as an impetus for the creator to indulge in such activity. For example, the creation of a fuel engine removed the power gap and improved transportation. The creation of the bullet train further improved the situation by bringing time-effectiveness. This way IP becomes an essential aspect of every society, creating a demand-supply chain. Removal of the exclusivity or monopoly would disturb this chain impeding the growth of society.

Article 27(1) of the Universal Declaration of Human Rights states that “everyone has the right to freely participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits.” Thus, it recognises the participatory rights of individuals in society. Such culture, arts and science signify the presence of IP in society. Similarly, Article 49, a Directive principle of state policy (DPSP) of the Indian Constitution requires the state to protect artistic objects of national interest. Whilst it is a non-justiciable provision of the Indian Constitution and the State cannot be obligated to abide by it, there have been cases where the Courts placed reliance on the Directive principle of state policy (DPSP), and highlighted the positive obligation to fulfil DPSP’s.[10] Interestingly, the corresponding duty of such rights falls on the state to make such culture and arts available to people. Removal of monopoly would make the fulfilment of the duty. Furthermore, Article 27(2) protects the moral and material interest of an author in their work and obliges the State to protect it.

Even if the value addition does not apply to every creation (because not every creation gives an instant benefit) it would still not harm the people. Moreover, if the creation of property is not possible without giving property rights then such rights should be given because of their inherent ability to incentivise creators. Additionally, it is noteworthy that such monopoly rights would better the status of the creator and harm nobody, allowing others to exercise their labour and intellect to create.

There might be situations where the monopoly is counter to the principle of public welfare and the creator uses the monopoly exploitatively (e.g. charging high prices).  Copyright activists might consider this monopoly to be anti-creativity as it enables IP-owning corporations to censor people from expressing creativity and ideas similar to that of their own works.

These are important and strong arguments, but instead of abolishing monopoly in toto they call for a calibrated IP framework wherein rights of creators and users are balanced. They justify monopoly as long as it doesn’t interfere with the creativity and freedom of expression of others.

In situations where the creators use monopoly against the people, the State has the power to control such creators by other statutory arrangements such as compulsory licensing. The Lockean justification of placing the common stock on a higher pedestal also discounts complete abolition of monopoly. Here, common stock signifies the pre-existing resources or the resources which are available to everyone in a society.[11]  Thus, even if a creation is not made public, people can still use the common stock as the creator did, since their ability to do so remains undamaged. Further, even if the creation does not add value to the society directly, it should still be protected as it does not take anything out of society. Rather, it betters off society by giving it something which was previously unavailable. Therefore, the abolition of the monopoly is not a sound rationale to promote public good.

      2. Fairness theory justification

The fairness theory of IP is based on the principle that people should get what they deserve, and the law should facilitate this. The creator should enjoy and retain control over the fruits of his intellect labour. In Twentieth Century Music Corp. v. Aiken, Justice Pottar Stewart said “the immediate effect of our copyright law is to stimulate a fair return for an author’s creative labour”.[12] Through a Hegelian justification of IP rights, IP is an expression of one’s personality because a person has autonomy over his body.[13] Thus, the application of intellect to create something is an extension of the creator’s personality and deserves protection on moral grounds. Further, as per the no-harm principle, the individual is unharmed. In terms of IP, it can be understood in two ways: firstly, the creation by one person should not interfere with or harm others’ ability to create. Secondly, given IP as an extension of its creator’s personality, monopoly enables the creator to control its exploitation and restricts others from interfering with IP in any manner not acceptable to the creator.

It is often contended that IP centralises the control of creation to certain individuals, thus causing harm to the society in emergencies. However, this overlooks the practicality of the IP domain wherein the government can dilute IP rights in exceptional cases, thus balancing private rights and public rights. For instance, in Patent Law, there are provisions for compulsory license (Article 37 of TRIPS, Section 84 of patent act, 1970). In copyright, fair use and licensing provisions are incorporated to protect the interest of the public (Article 13 of TRIPS, Section 52 of Copyright Act, 1957). Similarly, the principle of acquiescing disenables a trademark owner from claiming rights over the unused marks (Section 33 trademark act 1999, Article 61 REGULATION (EU) 2017/1001 on the European Union trademark).

There have been instances in the past where the Courts have intervened to dilute the monopoly of IP holder. For example, in Bayer Corporation v. Natco Pharma Ltd., Chennai), the respondent was allowed to produce medicines at a lower price when the original patent holder was selling them at a higher price. Similarly, in Entertainment Network (India) Limited v Super Cassette Industries Limited, while reaffirming the power of compulsory license to a copyright board the Court reiterated the need to balance the copyright owner’s right over the work and the public’s rights of accessibility of the work.

 

Monopoly and the Double Trust Dilemma

The economic theory of IP considers IP as a tool for the economic development of a nation. Simply, it argues that a creator incurs a fixed cost to develop an idea into an expression which the creator recoups by the dissemination of the work to the public or by licensing its use. Thus, financial reward (a monopolistic right) keeps him incentivised to create more work. At the same time, it also ensures the utilisation of the work by the public, thus maintaining the demand-supply principle of economics.[14] However, this does not work in situations where the creator with an idea lacks the capital to externalise it (e.g. cost to create an invention and get patent) or disseminate it. Thus, the investor comes into the picture and a Double Trust Dilemma may arise, where both investor and inventor (creator) lack trust in each other, so that society suffers.

The dilemma suggests a double-sided moral hazard where, the person with an idea does not wish to disclose it to the investor without security, and the investor does not want to invest without first hearing the idea. As a result, the author either finds a new trustworthy investor or forgoes the thought of expressing the idea, so that society suffers by its absence. This highlights a situation where monopoly is granted for IP, and both creator and investor have equal bargaining powers. Conversely, if the monopoly is abolished, there would be no incentive for the investor to invest in the idea of the creator because anyone can exploit such an idea without restriction. Further, even if an investor decides to invest in the idea, other investors can exploit it, depriving the creator of deserved benefit. In such a situation, a creator’s bargaining power would be zero, which will also affect his/her incentive to create.

 

Conclusion and Suggestions

Monopoly is an inherent feature of the IP domain and should always remain a part of it. The removal of monopoly from IP would paralyse the IP culture and ossify growth of society. Hence, the status quo demands a well-calibrated approach to balance the rights of the public with the right of an IP holder by keeping the monopoly intact.

 

[1] Student of  the Institute of Law, Nirma University, India.

[2] Student of  the Institute of Law, Nirma University, India.

[3] John Oswald, ‘Plunderphonics, or Audio Piracy as a Compositional Prerogative’, 1985, Musicworks, available at http://www.plunderphonics.com/xhtml/xplunder.html accessed December 17, 2020;  John Oswald ‘Bettered by the borrower’ (Revised) Whole Earth Review, http://ciufo.org/classes/114_fl11/readings/Oswald_audio_culture.pdf accessed December 17, 2020.

[4] Dan L. Burk, ‘Bridging the gender gap in intellectual property’ (WIPO, April 2018) https://www.wipo.int/wipo_magazine/en/2018/02/article_0001.html accessed 4 June 2020

[5] Office of Strategy, Policy & Plans, Combating Trafficking in Counterfeit and Pirated Goods (2020), ch 1

[6] Chidi Oguamanam, ‘Beyond Theories: Intellectual Property Dynamics in The Global Knowledge Economy’ (2009) 9 WFU J Bus Int Prop Law 105, 109

[7] Henshall J and Donegan R, ‘What Are Intellectual Property Rights?’ (Expert Guides July 19, 2017) https://www.expertguides.com/articles/what-are-intellectual-property-rights/armgzkdl accessed October 23, 2020.

[8] Chen J, ‘Understanding Antitrust Laws’ (Investopedia July 31, 2020) https://www.investopedia.com/ask/answers/09/antitrust-law.asp accessed October 23, 2020.

[9]William Fisher, ‘Theories of Intellectual Property’; Page 9,  https://cyber.harvard.edu/people/tfisher/iptheory.pdf

accessed 24 October 2020.

[10] In Re Kerala Education Bill [1959] 1 SCR 995 [12],[14]; Keshavnanda Bharati v the State of Kerala [1983] 4 SCC 225 [142], [144], [634]; Unnikrishnan vs State of Andhra Pradesh [1993] SCC (1) 645 [37]-[39], [41].

[11] Fisher (n 9) at 2.

[12] Twentieth Century Music Corp v Aiken [1975] Justia US supreme court 74 (U.S. Supreme Court) [156].

[13] Hughes, J The Philosophy of Intellectual Property 77 Geo. L.J. 287 (1988)

https://cyber.harvard.edu/IPCoop/88hugh.html accessed November 3, 2020

[14] Robert Cooter, The Falcon’s Gyre: Legal Foundations of Economic Innovation and Growth, Berkeley Law Books  (2014), page 3.1, http://scholarship.law.berkeley.edu/books/1 accessed December 17, 2020.