Property Aspects Of Intellectual Property [1st Edition] 1107072050, 9781107072053, 1139680315, 9781139680318, 1108627730, 9781108627733

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Property Aspects Of Intellectual Property [1st Edition]
 1107072050, 9781107072053, 1139680315, 9781139680318, 1108627730, 9781108627733

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property aspects of intellectual property For many years, there have been discussions about whether intellectual property (IP) is really property. The property concept, particularly when used in transnational and international concepts, remains somewhat elusive. In this volume, Ole-Andreas Rognstad comprehensively discusses the use of the property metaphor in relation to IP in a transnational perspective. Rognstad gives an overview of the main aspects of the IP/property interface, notably the justification and the structuring of the rights and intellectual property rights as assets. Moreover, he highlights the importance of distinguishing between these aspects, even though they are closely linked to each other. The book takes a transnational approach, dealing with recent developments in European human/fundamental rights law and international investment law, helping readers understand the practical implications of the IP/property interface. This will be valuable reading for academics, practitioners, and policymakers working in the area of IP, and lawyers and philosophers interested in the property debate. Ole-Andreas Rognstad is a professor in the Department of Private Law at the University of Oslo, Norway.

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CAMBRIDGE INTELLECTUAL PROPERTY AND INFORMATION LAW As its economic potential has rapidly expanded, intellectual property has become a subject of front-rank legal importance. Cambridge Intellectual Property and Information Law is a series of monograph studies of major current issues in intellectual property. Each volume contains a mix of international, European, comparative and national law, making this a highly significant series for practitioners, judges and academic researchers in many countries. Series Editors Lionel Bently Herchel Smith Professor of Intellectual Property Law, University of Cambridge Graeme Dinwoodie Professor of Intellectual Property and Information Technology Law, University of Oxford Advisory Editors William R. Cornish, Emeritus Herchel Smith Professor of Intellectual Property Law, University of Cambridge Franc¸ois Dessemontet, Professor of Law, University of Lausanne Jane C. Ginsburg, Morton L. Janklow Professor of Literary and Artistic Property Law, Columbia Law School Paul Goldstein, Professor of Law, Stanford University The Rt Hon. Sir Robin Jacob, Hugh Laddie Professor of Intellectual Property, University College London Ansgar Ohly, Professor of Intellectual Property Law, Ludwig-Maximilian University of Munich, Germany Brad Sherman and Lionel Bently The Making of Modern Intellectual Property Law Irini A. Stamatoudi Copyright and Multimedia Products: A Comparative Analysis Pascal Kamina Film Copyright in the European Union Huw Beverly-Smith The Commercial Appropriation of Personality

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Mark J. Davison The Legal Protection of Databases Robert Burrell and Allison Coleman Copyright Exceptions: The Digital Impact Huw Beverly-Smith, Ansgar Ohly, and Agne`s Lucas-Schloetter Privacy, Property and Personality: Civil Law Perspectives on Commercial Appropriation Catherine Seville The Internationalisation of Copyright Law: Books, Buccaneers and the Black Flag in the Nineteenth Century Philip Leith Software and Patents in Europe Edited by Geertrui van Overwalle Gene Patents and Collaborative Licensing Models: Patent Clearinghouses, Open Source Models and Liability Regimes

Pools,

Edited by Lionel Bently, Jennifer Davis, and Jane C. Ginsburg Trade Marks and Brands: An Interdisciplinary Critique Jonathan Curci The Protection of Biodiversity and Traditional Knowledge in International Law of Intellectual Property Edited by Lionel Bently, Jennifer Davis, and Jane C. Ginsburg Copyright and Piracy: An Interdisciplinary Critique Megan Richardson and Julian Thomas Fashioning Intellectual Property: Exhibition, Advertising and the Press, 1789–1918 Dev Gangjee Relocating the Law of Geographical Indications Edited by Andrew T. Kenyon, Megan Richardson, and Wee-Loon Ng-Loy The Law of Reputation and Brands in the Asia Pacific Edson Beas Rodrigues, Jr The General Exceptions Clauses of the TRIPS Agreements: Promoting Sustainable Development Edited by Annabelle Lever New Frontiers in the Philosophy of Intellectual Property

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Sigrid Sterckx and Julian Cockbain Exclusions from Patentability: How Far Has the European Patent Office Eroded Boundaries? Sebastian Haunss Conflicts in the Knowledge Society: The Contentious Politics of Intellectual Property Edited by Helena R. Howe in consultation with Jonathon Griffiths Concepts of Property in Intellectual Property Law Edited by Rochelle Cooper Dreyfuss and Jane C. Ginsburg Intellectual Property at the Edge: The Contested Contours of IP Edited by Normann Witzleb, David Lindsay, Moira Paterson and Sharon Rodrick Emerging Challenges in Privacy Law: Comparative Perspectives Paul Bernal Internet Privacy Rights: Rights to Protect Autonomy Peter Drahos Intellectual Property, Indigenous People and Their Knowledge Edited by Susy Frankel and Daniel Gervais The Evolution and Equilibrium of Copyright in the Digital Age Edited by Kathy Bowrey and Michael Handler Law and Creativity in the Age of the Entertainment Franchise Sean Bottomley The British Patent System and the Industrial Revolution 1700–1852: From Privilege to Property Susy Frankel Test Tubes for Global Intellectual Property Issues: Small Market Economies Jan Oster Media Freedom as a Fundamental Right Sara Bannerman International Copyright and Access to Knowledge Edited by Andrew T. Kenyon Comparative Defamation and Privacy Law

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Pascal Kamina Film Copyright in the European Union (second edition) Tim W. Dornis Trademark and Unfair Competition Conflicts: Historical-Comparative, Doctrinal, and Economic Perspectives Ge Chen Copyright and International Negotiations: An Engine of Free Expression in China? David Tan The Commercial Appropriation of Fame: A Cultural Analysis of the Right of Publicity and Passing Off Jay Sanderson Plants, People and Practices: The Nature and History of the UPOV Convention Daniel Benoliel Patent Intensity and Economic Growth Jeffrey A. Maine and Xuan-Thao Nguyen The Intellectual Property Holding Company: Tax Use and Abuse from Victoria’s Secret to Apple Megan Richardson The Right to Privacy: Origins and Influence of a Nineteenth-Century Idea Martin Husovec Injunctions against Intermediaries in the European Union: Accountable but Not Liable? Edited by Estelle Derclaye The Copyright/Design Interface: Past, Present and Future Magdalena Kolas Trade Secrets and Employee Mobility: In Search of an Equilibrium Pe´ter Mezei Copyright Exhaustion: Law and Policy in the United States and the European Union Graham Greenleaf and David Lindsay Public Rights: Copyright’s Public Domains Ole-Andreas Rognstad Property Aspects of Intellectual Property

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Elena Cooper Art and Modern Copyright: The Contested Image Paul Berna The Internet, Warts and All: Free Speech, Privacy and Truth

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Property Aspects of Intellectual Property OLE-ANDREAS ROGNSTAD University of Oslo

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University Printing House, Cambridge cb2 8bs, United Kingdom One Liberty Plaza, 20th Floor, New York, ny 10006, USA 477 Williamstown Road, Port Melbourne, vic 3207, Australia 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India 79 Anson Road, #06–04/06, Singapore 079906 Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781107072053 doi: 10.1017/9781139680318 © Ole-Andreas Rognstad 2018 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2018 Printed in the United kingdom by Clays, St Ives plc A catalogue record for this publication is available from the British Library. Library of Congress Cataloging-in-Publication Data Names: Rognstad, Ole-Andreas, author. Title: Property aspects of intellectual property / Ole-Andreas Rognstad, University of Oslo. Description: Cambridge [UK] ; New York : Cambridge University Press, 2018. | Series: Cambridge intellectual property and information law Identifiers: lccn 2017055512 | isbn 9781107072053 Subjects: lcsh: Intellectual property. | Property. Classification: LCC K1401 .R64 2018 | ddc 346.04/8–dc23 LC record available at https://lccn.loc.gov/2017055512 isbn 978-1-107-07205-3 Hardback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. The author has received funding for this publication from the Norwegian Non-Fiction Writers and Translators Organization.

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To Astrid, Helena, and Jakob

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Contents

page xv

Preface List of Abbreviations

xvi

Table of Cited Cases

xvii

1

2

3

Introduction

1

part i three property aspects of ip law

11

Property in Justifying Rights Introduction A Utilitarian Justification Grounds 1 The Tragedy of the Commons v. the Tragedy of the Free Rider 2 Trademarks and Trade Secrets 3 Costs v. Benefits 4 The Doctrine of Property v. Liability (and Inalienability) Rules 5 The Notion of Modularity in Property Law B The Labor Idea 1 Locke and the Notion of “Moral Desert” 2 Alternative Readings of Locke 3 The Labor Idea as a Justification for Modern IP C Personality and Personhood Ideas D Other Ideas

13 13 15

24 26 28 28 33 35 35 39

Property in the Structuring of Rights Introduction A The Role of Thingness in Property B The Notion of IP as Intangibles 1 General Remarks

42 42 43 46 46

15 21 23

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xii

Contents

Revealing the Nature of Intangible IP: The Scandinavian Post–WWII Discussion and Beyond C The Structural Particularities of Various IP Rights D The Object Function in IP Law: Distinction between Concrete Object and Legal Object (Rights in Rem) E IP as Monopolies? F The Concepts of Resource and Information in Relation to IP 1 The Concept of Resource in Relation to IP 2 The Concept of Information in Relation to IP G Exclusive Rights and Remuneration Rights in IP Law H Conclusion: On Property in the Structuring of Rights 2

4

47 51 55 60 61 61 62 63 66

Property as Assets

68

part ii implications of the three aspects of property

73

5

Conclusions to Be Drawn from the Justification of Rights Introduction A Conclusions Drawn from Common Grounds of Justification 1 Utilitarian Grounds 2 Labor Idea 3 Personality Ideas B Problems with Different Justification Grounds C Justifying IP in the International Context D Conclusion

75 75 76 76 80 84 86 87 93

6

Conclusions to Be Drawn from the Structure of Rights Introduction A The Relation between Justification and Structure B IP Boundaries C Abstraction Levels in IP Law 1 General Remarks 2 Abstraction Levels in Copyright 3 Abstraction Levels in Patent Law 4 Abstraction Levels in Trademark/Trade Names Law D The Concept of Use/Exploitation of IP Law – in Particular in Relation to Copyright 1 Outline 2 Problems Relating to Exploitation Rights in Copyright

94 94 95 95 100 100 101 106 109 111 111 114

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Contents

E 7

8

3 Conclusion Conclusions on IP as Objects

Conclusions to Be Drawn from IPRs as Assets Introduction A Alienability v. Inalienability of IPRs B Transfers and Securitazation of IPRs: The Impact of the Nature of the Legal Object C The Interface between the Transfer of IPRs and the Transfer of Copies of IP-Protected Subject Matter D Takings/Expropriation of IPRs 1 Introduction 2 IPRs as Protected Subject Matter under Expropriation/ Takings Rules 3 What Rights Are Protected against Expropriation/ Takings? The Right to Exclude or Also the Right (Privilege) to Use? 4 What Constitutes an (Unlawful) Expropriation/Taking of IPRs 5 Conclusions E IPRs as Property in Assets v. Other Fundamental Rights 1 Introduction 2 CJEU Case Law on IP as Property v. Other Fundamental Rights 3 ECtHR on the “Balancing Paradigm” 4 Discussion F Conclusions on IPRs as Assets Final Conclusions

xiii

121 123 126 126 127 131 138 141 141 142

161 167 180 182 182 184 189 192 197 200

Bibliography

202

Index

219

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Preface

Deciding to write a book on intellectual property (IP) and property is perhaps not the wisest thing to do given the complexity of the topic. Still, that was what I did a few years ago and here is the result. The discussions in legal scholarship and elsewhere on the “propertization” of intellectual property, the increasing importance of intellectual property rights (IPRs) in European human and fundamental rights contexts, and the rejection of the usefulness of “property talk” related to IP in Scandinavian law were among the factors that motivated the decision. This should be clear from the problems that are discussed in this book. The broadness of the topic as such could easily imply that this would be a book of 2,000 pages. That was never the intention, and the book’s closing remarks reflect what has been the purpose of the project from the start. The book project was initiated during my time as a guest researcher at the University of San Diego (USD) in the academic year 2012–2013. I give special thanks to my sponsor at the USD, Professor Lisa P. Ramsey, for all her support. A revisit in the summer of 2015 was made possible with funds from the Norwegian Non-Fiction Writers and Translators Organization, for which I am grateful. I also thank Professors Alexander Peukert and Nari Lee as well as PhD fellow Henrique Carvalho and my colleagues at the Department of Private Law, University of Oslo, for inspiring discussions at a workshop on topics related to the book, hosted by the research group Market Innovation and Competition in October 2016. Special thanks to Professor Ka˚re Lilleholt for valuable input on certain aspects that are discussed in the book. The book is dedicated to my dearest.

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Abbreviations

ACHPR ACHR BC BIT CJEU ECHR ECtHR EPC IACHR ICESCR ICSID IIA IP IPR P1–1 TPP TRIPS UDHR UNCITRAL WCT WIPO WPPT WTO

African Charter on Human and Peoples’ Rights American Convention of Human Rights The Berne Convention for the Protection of Literary and Artistic Works Bilateral investment treaties Court of Justice of the European Union European Convention on Human Rights European Court of Human Rights The European Patent Convention Inter-American Court of Human Rights International Covenant on Economic, Social and Cultural Rights International Center for Settlement of Investment Disputes International Investment Agreements Intellectual property Intellectual property rights Protocol 1 Article 1 to the European Convention on Human Rights Trans-Pacific Partnership Agreement (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights Universal Declaration of Human Rights United Nations Commissions on International Trade Law WIPO Copyright Treaty World Intellectual Property Organization WIPO Performances and Phonograms Treaty World Trade Organization

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Table of Cited Cases

European Convention of Human Rights European Commission of Human Rights Case No. 12633/87, Smith Kline, decision October 4, 1990 Case No. 24563/94, Aral, Aral and Tekin v. Turkey, decision January 4, 1990 European Court of Human Rights Application nos. 7151 and 7152/75, Sporrung and Lonnroth v. Sweden, decision September 23, 1982 Application no. 6833/74, Marckx v. Belgium, decision June 13, 1979 Application no. 33071/96, Jan Malhous v. the Czech Republic, admissibility decision December 13, 2000 (GC) Application no. 48939/99, O¨neryıldız v. Turkey (Grand Chamber), decision November 30, 2004 Application no. 58472/00, Dima v. Romania, admissibility decision May 26, 2005 Application no. 28743/03, Melnychuc v. Ukraine, admissibility decision July 5, 2005 Application no. 73049/01, Anheuser-Busch v. Portugal, Grand Chamber decision January 11, 2007 Application nos. 25379/04, 21688/05, 21722/05, and 21770/05, Paeffgen GmbH v. Germany, admissibility decision September 18, 2007 Application no. 19247/03, Balan v. Moldova, decision January 29, 2008 Application no. 562/05, SIA AKKA/LAA v. LATVIA, decision July 12, 2016 Application no. 23080/08, Malik v. United Kingdom (Grand Chamber), decision March 13, 2012 Application no. 15317/89, Loizidou v. Turkey, decision December 18, 1996 Application no. 8803/02, Dogan v. Turkey, decision June 29, 2005 Application no. 36769/08, Ashby Donald v. France, decision January 10, 2013 xvii Downloaded from https://www.cambridge.org/core. Nottingham Trent University, on 28 Aug 2019 at 15:33:55, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/9781139680318

xviii

Table of Cited Cases

Application no. 40397/12, Neij and Kolmisoppi v. Sweden, admissibility decision February 19, 2013 European Union 78/70, Deutsche Grammophon Gesellschaft mbH v. Metro-SB-Großma¨rkte GmbH & Co. KG, ECLI:EU:C:1971:59 15/74, Centrafarm BV and Adriaan de Peijper v. Sterling Drug Inc., ECLI:EU: C:1974:114 55&57/80, Musik Vertrieb membran GmbH and K-Tel International v. GEMA, ECLI:EU:C:1981:10 C-39/97, Canon Kabushiki Kaisha and Metro Goldwyn-Mayer Inc., EU: C:1998:442 C-2/00, Michael Ho¨lterhoff v. Ulrich Freiesleben, ECLI:EU:C:2002:287 C-206/01, Arsenal Football Club v. Matthew Reid plc., ECLI: EU:C.2002:651 C-245/02, Anheuser-Busch Inc. v. Bude˘jovicky´ Budvar, na´rodnı´ podnik, ECLI: EU:C:2004:717 C-479/04, Laserdisken ApS v. Kulturministeriet, ECLI:EU:C:2006:549 C-48/05, Adam Opel AG v. Autec AG, ECLI:EU:C:2007:55 C-402/05 and 415/05, Yassin Abdullah Kadi and Al Barakaat International Foundation v. Council of the European Union and Commission of the European Communities, ECLI:EU:C:2008:461 C-487/07, L’Oreal v. Bellure, ECLI:EU:C:2009:378 C-120/06 P and C-121/06 P FIAMM and Others v. Council and Commission, ECLI:EU:C:2008:476 C-275/06, Productores de mu´sica de Espan˜a v. Telefo´nica de Espan˜a SAU, ECLI:EU:C:2008:54 C-236–238/08, Google France SARL et al. v. Louis Vuitton Malletier SA et al., ECLI:EU:C:2010:159 C-379/08 and C-380/08, Raffinerie Mediterranee et al. v. Ministerio dello Sviluppo economico et al., ECLI:EU:C:2010:127. C-128/11, UsedSoft GmbH v. Oracle, ECLI:EU:C:2012:407 C-70/10, Scarlet Extended v. SABAM, ECLI:EU:C:2011:771 C-145/10, Eva Maria Painer v. Standard Verlag, ECLI:EU:C:2011:798 C-227/10, Martin Luksan v. Petrus van der Let, ECLI:EU:C:2012:65 C-360/10, SABAM v. Netlog NV, ECLI:EU:C:2012:85 C-277/11, Sky O¨sterreich GmbH v. O¨sterreichischer Rundfunk, ECLI:EU: C:2013:28 C-466/12, Nils Svensson and others v. Retriever Sverige AB, ECLI:EU:C:2014:76

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Table of Cited Cases

xix

C-314/12, UPC Telekabel Wien GmbH v. Constantin Film Verleih and others, ECLI:EU:C:2014:192 C-348/13, Bestwater International GmbH v. Michael Mebes & Stefan Potsch, ECLI:EU:C:2014:2315 C-580/13, Coty Germany GmbH v. Stadtsparkasse Magdeburg, ECLI:EU: C:2015:485 C-484/14, Tobias Mc Fadden v. Sony Music Entertainment Germany GmbH, ECLI:EU:C:2016:689 C-160/15, GS Media BV v. Sanoma Media Netherlands BV et al., ECLI:EU: C:2016:644 C-527/15, Stichting Brein v. Jack Frederik Wullems, ECLI:EU:C:2017:300 American Convention on Human Rights Inter-American Court of Human Rights Ivcher-Bronstein v. Peru, decision February 6, 2001 Palamara-Iribarne v. Chile, decision November 22, 2005 United States McKeever v. United States, 14 Ct. Cl. 396 (1878) Campbell v. James, 104 US 356 (1882) Pennsylvania Coal Co. v. Mahon, 260 US 393 (1922) Fox Film Corp. v. Doyal, 286 US 123, 127 (1932) United States v. General Motors Corp., 323 US 373 (1945) Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978) Kaiser Aetna v. United States, 444 US 164 (1979) PruneYard Shopping Center v. Robins, 447 US 74 (1980) Ruckelshaus v. Monsanto Co., 467 US 986 (1984) eBay Inc. v. MercExchange, L.L.C., 547 US 388 (2006) Horne et al. v. Department of Agriculture, 576 US ___ (2015), 14–275 Nichols v. Universal Pictures, 45 F.2d 119 (2d Cir. 1930) United States v. Wise, 550 F.2d 1180 (9th Cir. 1977) MAI Systems v. Peak Computer, 991 F.2d 511 (9th Cir. 1993) Triad Systems v. Southeastern Express, 64 F.3d 1330 (9th Cir. 1995) MercExchange, L.L.C. v. eBay, Inc., 275 F. Supp. 2d 695 (2003) Zoltek Corp. v. United States, 442 F.3d 1345, 1353 (Fed. Cir. 2006) Wall Data v. Los Angeles County Sheriff’s Department, 447 F.3d 769 (9th Cir. 2006) Perfect 10 Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007) London Sire Records, Inc. v. Doe 1, 542 F.Supp. 2d 153 (D. Mass. 2008)

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xx

Table of Cited Cases

Kinetic Concepts, Inc. v. Blue Sky Medical Group, Inc., 554 F.3d 1010 (Fed. Cir. 2009) Timothy S. Vernor v. Autodesk Inc. 621 F 3d 1102 (9th Cir. 2010) Germany I ZR 65/96, IIC 2000, 1050 (English trans.) (Dr. Zhivago) I ZR-112/06, GRUR 2009 (Metall auf Metall I) I ZR 182/11, GRUR 2013, 614 (Metall auf Metall II) 1 BvR 1585/13, IIC 2017, 317 (English trans.) (Metall auf Metall III) I ZR-115/16 1 June 2017 (Metall auf Metall IV) I ZR-9/15, GRUR 2016, 1157 (Bettina Z) United Kingdom Ladbroke v. William Hill, [1964] 1 All ER 465 British American Tobacco UK Ltd. et al. and The Secretary of State for Health [2016] WLR(D) 640, [2016] EWCA Civ 1182 Sweden Nytt Juridiskt Arkiv 2009 (NJA) p. 695, judgment November 4, 2009 (Dolomite) Norway HR-2016–01993-A, judgment September 22, 2016 (Pangea) WTO WTO Panel Report in Canada – Patent Protection of Pharmaceutical Products, WT/DS114/R (March 17, 2000) WTO panel in European Communities – Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, WT/ DS174/R, March 15, 2005 ISCID Apotex Inc. and Apotex Holding Inc. v. United States, ICSID Case No. ARB(AF)/12/1), award August 25, 2014 Philip Morris Brands Sa`rl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, award July 8, 2016 Eli Lilly and company v. Canada, ISCID Case No. UNCT/14/2, award March 17, 2017

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1 Introduction

Do we need another book on whether or not intellectual property (IP) is property? The answer is, probably not. Not just because of the vast quantity of publications that exists already on the topic but also because of the elusiveness of the property concept.1 The word property has different meanings in different contexts, and a discussion about whether or not IP – or even patents, copyright, and trademarks to start with – is really property is hardly meaningful.2 This is particularly so when discussing IP matters in a transnational context, which we often do since knowledge and information – which IP ultimately is about – cross country borders as much as they circulate within them, not least in our age of information. Knowing that the term property is used differently in different jurisdictions, and also that the English term property can be translated differently, depending on both the language and the jurisdiction,3 a discussion about the property status of IP is likely to create more confusion than clarification, at least unless confined to a specific context or jurisdiction. So this book does not engage in a debate about the property status of IP. Rather, it is taken for granted that in the English language, the property metaphor is used in relation to IP – this is, after all, what the “P” stands for. A decade or more ago, a popular claim used to be that the term intellectual property was a relative novelty.4 This claim has been refuted by historical 1

2

3

4

See, for example, James Harris, “The Elusiveness of Property” (2005) 48 Scandinavian Studies of Law 123–131. Compare Stephen L. Carter, “Does It Matter Whether Intellectual Property Is Property?” (1993) 68 Chicago-Kent Law Review 715–723, 715, who notes, “scholars write about whether intellectual property is property. Nobody else seems to care.” See Ali Riza C ¸ oban, Protection of Property Rights within the European Convention on Human Rights (Aldershot: Ashgate, 2004), pp. 11–14. See, for example, Siva Vaidhyanathan, Copyrights and Copywrongs: The Rise of Intellectual Property and How It Threatens Creativity (New York: New York University Press, 2001), pp. 11–12; Mark A. Lemley, “Romantic Authorship and the Rhetoric of Property” (1997) 75

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2

Property Aspects of Intellectual Property

evidence showing that the use of the term property in relation to copyright, patents, and even trademarks goes back to the seventeenth, eighteenth, and nineteenth centuries, and that there are also traces of the term intellectual property at least as early as the eighteenth century.5 Still, it should be undisputed that the property metaphor calls to mind different associations, among both laypersons and lawyers, and not least associations to property in tangible objects. The possibility that this may have a legal impact cannot be ruled out.6 Language matters, not least in law. Rather than discussing whether or not IP is property, this book will deal with possible reasons for and implications of using the term (or metaphor of) property in relation to IP, in particular in transnational or international legal contexts. As already pointed out, it is a fact that the property metaphor is used in these contexts: the term intellectual property rights (IRPs) has become the common denominator for the kinds of rights that are central to this study, both in contracts as well as negotiations and discussions across country borders and even in international conventions. The term property rights is also used when addressing IPRs in these contexts. This itself may have an impact on courts or legislators. In this book, we will discuss the impact it should have, bearing in mind the different meanings that are given to the term property in various jurisdictions. To do that, a secular Western

5

6

Texas Law Review 873–906, 895; Mark A. Lemley, “Property, Intellectual Property and Free Riding” (2005) 83 Texas Law Review 1031–1075, 1033; Lawrence Lessig, Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity (New York: Penguin Press, 2004), p. 28, fn. 7. For a review, see Justin Hughes, “Copyright and Incomplete Historiographies: Of Piracy, Propertization, and Thomas Jefferson” (2006) 79 Southern California Law Review 993–1084, 1001–1003. See Hughes, “Copyright and Incomplete Historiographies,” 1004 et seq. See also Justin Hughes, “A Short History of ‘Intellectual Property’ in Relation to Copyright” (2012) 33 Cardozo Law Review 1293–1340. For trademarks specifically, see Lionel Bently, “Communication to Thing: Historical Aspects to the Conceptualisation of Trade Marks as Property” (2007) 7 University of Iowa Legal Studies Research Paper 1–48. On the situation in Germany, but with attention paid to French and English law also, see Volker Ja¨nich, Geistiges Eigentum – eine Komplementa¨rerscheinung zum Sacheigentum? (66 Jus Privatum, Tu¨bingen: Mohr Siebeck, 2002), pp. 1–186. See further Thomas Dreier, “How Much ‘Property’ Is There in Intellectual Property? The German Civil Law Perspective,” in Helena R. Howe & Jonathan Griffiths (eds.), Concepts of Property in Intellectual Property Law (Cambridge: Cambridge University Press, 2013), pp. 118–122. See, for example, Pamela Samuelson, “Information as Property: Do Ruckelshaus and Carpenter Signal a Changing Direction in Intellectual Property Law?” (1989) 38 Catholic University Law Review 365–400, 398: “Clearly the word property is a very powerful metaphor that radically changes the stakes in legal disputes. Once a property interest is established, the law provides a wide range of legal protections for it, a much wider range, particularly in the criminal law area, than for breaches of trust or confidence, or other specific kinds of unfair conduct.”

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Introduction

3

hemisphere perspective (Western Europe and North America) will be taken,7 in addition to looking at international regulations. This implies that the framework is not meant to be limited to a specific legal order. Consequently, we will not carry out a top-down analysis of the concept of “property” in various jurisdictions. Instead, we will build on the previously mentioned premise that the term – in its linguistic variations – is used differently in different contexts. A common core, which should not be too controversial and is often referred to as the layperson’s perspective on property, is that the term property designates something that belongs to someone (be it an individual or a group of people).8 This implies, of course, that property is a powerful metaphor.9 Thus, the presence of the term in intellectual property inevitably suggests that what is protected by IP belongs to the right holder. It is not surprising then that debate over the use of the term property or the property metaphor in relation to IP is based on the premise that its use implies an expansion of intellectual property rights. Indeed, the term propertization is frequently employed in critical approaches to expansionist tendencies.10 Rights expansion is certainly a possible repercussion. Nevertheless, in transnational contexts or international relations, it is important to remember that the term property has a variety of meanings and that there are also different property traditions. For example, against the backdrop of a strong nationalization trend in Scandinavia after

7

8

9 10

For an analysis of IP and property in Jewish law, for example, see Neil W. Netanel & David Nimmer, “Is Copyright Property? The Debate in Jewish Law” (2011) 12 Theoretical Inquiries in Law 241–274. The analysis shows that there are similarities between the discussion in Jewish law and the parallel discussion on the background of secular Western law, although there are also differences in reasoning. In this book, religious legal regimes will not be discussed. This is the position expressed, for example, by Immanuel Kant, “The Metaphysics of Morals,” reprinted in Mary J. Gregor (trans. and ed.), The Cambridge Edition of the Works of Immanuel Kant. Practical Philosophy (Cambridge: Cambridge University Press, 1996), pp. 353–603, “The Universal Doctrine of Right,” part 1 chap. 1 § 1 p. 401: “That is rightfully mine (meom iuris) with which I am so connected that another’s use of it without my consent would wrong me.” In the German original: “Das Rechtlich-Meine (meum juris) ist dasjenige, somit ich so verbunden bin, daß der Gebrauch, der ein Anderer ohne meine Einwilligung von ihm machen mo¨chte, mich la¨dieren wu¨rde,” cited from Immanuel Kant, Metaphysische Anfangsgru¨nde der Rechtslehre. Metaphysik der Sitten Erster Teil, neuherausgegeben von Bernd Ludwig (Hamburg: Felix Meiner Verlag, 1986), p. 53. See supra fn. 6. See, for example, Michael A. Carrier, “Cabining Intellectual Property through a Property Paradigm” (2004) 54 Duke Law Journal 1–145, 4, noting that “[o]ne of the most revolutionary legal changes in the past generation has been the ‘propertization’ of intellectual property” where the “duration and scope of rights expand without limit, and courts and companies treat IP as absolute property bereft of any restraint.”

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4

Property Aspects of Intellectual Property

the Second World War, it was pointed out in legal commentaries that the use of the property metaphor in the context of intellectual property could easily also lead to the curtailing of IPRs.11 Thus, “property” does not necessarily imply a Blackstonian concept of property as “that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual of the universe.”12 It is, in other words, “possible to speak of IP as property while resisting the idea that IP is or ought to be intensively expansive across all its dimensions.”13 Still, as already pointed out, the word property often calls to mind property in tangible goods.14 Judges and other decision makers may be influenced by tangible goods analogies as long as the property metaphor is used in relation to IP. Hence, when discussing the use of the property metaphor in transnational and international contexts, the possible analogies with property in tangibles is a central theme and will be considered as such in this book. In discussions about property, several distinctions are made. One distinction is between private property and other kinds of property (communitarian, common, state and public property).15 Here, we will focus on the term property as referring to private property given that intellectual property rights (IPRs), in the sense discussed in this book – and we will return to this shortly – are private rights (i.e., rights that can be invoked by individuals and not by a community or society at large).16 Another distinction is between private property and constitutional property.17 The distinction is important, as the concepts are different in most jurisdictions. In some jurisdictions – Germany and the Scandinavian 11

12

13

14

15

16

17

Mogens Koktvedgaard, Konkurrenceprægede immaterialretspositioner: bidrag til læren om de lovbestemte enerettigheder og deres forhold til den almene konkurrenceret (Copenhagen: Juristforbundets forlag, 1965), pp. 193–195. William Blackstone, Commentaries on the Laws of England, Book 2: The Rights of Things (Oxford 1766; e-book reprint), p. 2. As recently expressed by Robert P. Merges, “What Kind of Rights Are Intellectual Property Rights?” (2018), in Rochelle Dreyfuss & Justine Pila (eds.), The Oxford Handbook of Intellectual Property Law, available at https://papers.ssrn.com/sol3/papers.cfm?abstrac t_id=2959073, 1–50, 3. Compare the approach of Jeremy Waldron, The Right to Private Property (Oxford: Clarendon Press, 1988), pp. 33–34, who takes property in tangibles as a point of departure before discussing “objects of property which are not corporeal,” including IP. See, for example, James W. Harris, Property and Justice (Oxford: Clarendon Press, 1996), pp. 102–110. See the Agreement on Trade-Related Aspects of Intellectual Property Rights, April 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 UNTS 299; 33 ILM 1197 (1994) [hereinafter TRIPS Agreement or TRIPS]. See, for example, C ¸ oban, Protection of Property Rights, pp. 10–34.

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Introduction

5

countries, for example – IPRs are not generally considered private property rights18 but are still covered by the concept of constitutional property.19 In this book, we will not discuss the distinction between private property and constitutional property specifically, but the concept of constitutional property will be addressed to the extent that it elucidates problems to be discussed in this book. The European Court of Human Rights (ECtHR) has, for example, repeatedly held that intellectual property rights are “possessions” under Protocol 1 Article 1 of the European Convention on Human Rights (ECHR) and are thus covered by the protection of property under this provision.20 Article 17 of the European Union’s Charter of Fundamental Rights has as its heading “Right to Property,” where Article 17(1) contains a general protection for “possessions” and Article 17(2) a provision that solely states that “Intellectual property shall be protected.” The Court of Justice of the European Union (CJEU) has thus confirmed that the fundamental right of property includes the rights linked to intellectual property.21 This shows that “property” in relation to IP in certain international contexts is not only a metaphor but also a legal term. A third distinction to be mentioned is between unitary property concepts – such as in civil law, under strong influence from Roman law, with an emphasis on holistic ownership—and bundle-of-sticks concepts of property, typical of common law and reflecting “the estate system and its many methods of carving up property from life estates to defeasible fees and various future interests.”22 For the purposes of this book, the distinction will not be problematized, as the aim is to discuss the use of the property term or metaphor in IP contexts at the international level, irrespective of domestic property regimes. This is not to say

18 19

20

21

22

In the sense of “ownership” (Eigentumsrecht, eiendomsrett). Compare C ¸ oban, Protection of Property Rights, p. 12; Wolfgang Mincke, “Property: Assets or Power? Objects or Relations as Substrates of Property Rights,” in James W. Harris, Property Problems: From Genes to Pension Funds (London, Haag, Boston: Kluwer, 1996), pp. 78–88 (chap. 7). See also Dreier, “How Much ‘Property’ Is There in Intellectual Property?” 118–125. European Convention on Human Rights November 4, 1950, 213 UNTS 221, in force September 3, 1953 [hereinafter ECHR]. The relevant provision and case law will be cited in Chapter 7 (Sections D.2.b and D.4.b). See, for example, case C-70/10, Scarlet Extended v. SABAM, ECLI:EU:C:2011:771, para. 44. See further Chapter 7 (Section E.2) below. See Yun-Chen Chiang & Henry E. Smith, “An Economic Analysis of Civil versus Common Law Property” (2012) 88 Notre Dame Law Review 1–55, 2. See also Dreier, “How Much ‘Property’ Is There in Intellectual Property?” 116–118; Geoffrey Samuel, “The Many Dimensions of Property,” in Janet McLean (ed.), Property and the Constitution (Oxford and Portland OR, 1999), pp. 40–63 (chap. 3); and Ugo Mattei, Basic Principles of Property Law: A Comparative Legal and Economic Analysis (Westport, CT: Greenwood Press, 2000), pp. 7–21.

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6

Property Aspects of Intellectual Property

that various concepts, such as the “bundle of sticks,” will not be touched upon when referring to discussions relevant to the IP-property interface. But insofar as the concepts nevertheless “coincide to a remarkable extent in their basic features,”23 the analysis applies irrespective of the precise property regime. The aim of this book is, first and foremost, to contribute to an awareness of the connotations of the property metaphor in relation to IP, particularly in view of its use in transnational and international contexts. This will be achieved by discussing three aspects of the use of the metaphor: (1) in relation to the justification of the rights, (2) in relation to the structuring of the rights, and (3) in relation to IPRs as assets. “Justification,” in this context, refers to the reasons given for having (various kinds of) IP protection in the first place. The overarching question raised is the following: What does it mean to use, and what are the possible implications of using, the property metaphor in justifying IP rights? Recalling that the property metaphor is easily associated with property in tangible objects, it is worth noting that there are indeed some common grounds for justifying property in tangibles and in IPRs. In this book, these grounds will be outlined (Chapter 2) and their possible implications, in light of the use of the property metaphor, will be discussed (Chapter 5). By “structuring” of rights, I refer to the way in which rights are built or constructed. On the face of it, there is a strong resemblance between property in tangibles and IP in that both entail exclusive rights apparently related to an object or a thing, which also may explain the use of the property metaphor in relation to IP. We will go deeper into this apparent resemblance (Chapter 3), including the commonly accepted notion that IP relates to “intangible goods.” We will also discuss what conclusions should be drawn on the basis of the use of the property metaphor to characterize the structuring of IPRs (Chapter 6). Finally, we will look into the use of the term property, or the property metaphor, in relation to IPRs as assets, that is, as objects having some sort of value. As will be explained in Chapter 4, it is analytically important – though largely ignored in the scholarship – to distinguish between the object of the rights, which in this book is dealt with under the structuring of rights, and rights as objects in the sense of assets. The further implications of rights as objects or assets will be discussed in Chapter 7. These three aspects – justification of the rights, structuring of the rights, and the rights as assets – are closely interrelated and are often “fused” in property theories. Implicit in this analysis is a belief that our understanding of the 23

Chiang & Smith, “An Economic Analysis of Civil versus Common Law Property,” 3. See also Dreier, “How Much ‘Property’ Is There in Intellectual Property?” 116–117; and Mattei, “Basic Principles of Property Law,” 18–21.

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Introduction

7

property connotations of IP would benefit from discussing these three aspects separately, though the link between them will be subsequently emphasized. As indicated, the analysis consists of two main parts: first, the sketching out of the three aspects (Part I, Chapters 2–4) and, second, a discussion of the (legal) conclusions that may be drawn from the use of the property metaphor (or term) in relation to the justification of rights, the structuring of the rights, and IP as assets respectively (Part II, Chapters 5–7). The ambition of the book is not to unveil another property theory. To be sure, the analysis – particularly on the justification of the rights – draws on various kinds of property theories, but the main focus is on the practical legal implications of the use of the property metaphor in IP law. My personal background is not irrelevant in this respect. I come from the Scandinavian legal realist tradition,24 which means that I have an interest in uncovering the realities behind legal concepts and metaphors and that I find legal arguments sustainable to the extent they reflect realities and not fictions.25 Consequently, I will point to problems related to the use of the property metaphor in international and transnational legal discourse from a realist point of view. My background does not, however, imply that I entirely embrace Scandinavian realism as a legal philosophy, nor does it imply the rejection of the usefulness of legal concepts or of “a strict separation between law and politics and law and morality.”26 Nevertheless, it is fair to say that both the problems that I seek to explore and the arguments that are put forward in the book reflect my background. Here, I will follow with a disclaimer. The topic of the book is extremely broad and touches on a myriad of complicated issues on which there is an insurmountable amount of previous research and writings. It is neither possible nor is it my ambition to delve deeply into the discussions that I touch upon. 24

25

26

For an account of Scandinavian realism as a legal philosophy, see Jes Bjarup, “The Philosophy of Scandinavian Realism” (2005) 18 Ratio Juris 1–15. For a comparison of Scandinavian and American legal realism, including an evaluation of how property is treated under the two “schools of thought,” see Gregory S. Alexander, “Comparing the Two Legal Realisms: American and Scandinavian” (2002) 50 American Journal of Comparative Law 131–174. For a classical example of the Scandinavian legal realist approach, applied to a topic relevant to this book, see Alf Ross, “Tuˆ Tuˆ” (1957) 70 Harvard Law Review 812–825, on the concept of “ownership,” comparing this concept with the tribal language expression “tuˆ tuˆ,” which on the one hand means “nothing at all,” but is “a word devoid of any meaning whatever,” while on the other hand, “in spite of its lack of meaning, [it] has a function to perform in the daily language”; its “pronouncement seem[ing] to fulfill the two main functions of all language: to prescribe and to describe; or, to be more explicit, to express commands or rules, and to make assertions about facts” (812–813). See Alexander, “Comparing the Two Legal Realisms,” 132, on the characteristics of Scandinavian legal realism.

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Property Aspects of Intellectual Property

My ambition is, first and foremost, limited to showing certain correlations that may be useful to legal thinking and practice when dealing with the property-IP interface. In doing so, I draw on previous writings and research. For those who wish to delve deeper into the historical, economic, and philosophical underpinnings, the sources referred to in this book may be more useful than the book itself. In the same way, since I avoid providing a top-down definition of the term property for the purposes of this book, the analysis does not require an exact account of what is meant by “intellectual property.” Nevertheless, some qualifications will be made. The fact that certain national legal systems (including the private law traditions in certain countries, such as Germany and the Scandinavian countries) are reluctant to classify intellectual property rights as property, is, however, irrelevant for the present analysis. Recalling that “intellectual property” is not a homogeneous concept, but “really a handy shorthand for a whole slew of disparate” phenomena related to products of the human mind,27 we will in this context concentrate on rights that are related to some kind of effort or achievement and not to a person’s personality or personal characteristics. Thus, rights of publicity to one’s image or other kinds of personality rights will not be covered by the term “IPR” as used in this book. Copyright in literary or artistic works (authors’ rights) and performers’ rights may, in some jurisdictions, be classified as personality rights,28 but that does not prevent them from being categorized here as IPRs since they remain effort or achievement related. Following this scheme, rights that are covered by the World Trade Organization (WTO) agreement29 on IPRs – the TRIPS Agreement30 – may serve as a starting point for what will be considered as IPRs in this context, including copyright and related rights, patents, trademarks, industrial design, protection of layout-design of integrated circuits, and even protection of trade secrets.31 Regarding protection of trade secrets, its status as an IPR is debatable,32 and there are indeed structural 27

28 29

30 32

David Vaver, “Intellectual Property: The State of the Art” (2000) 116 Law Quarterly Review 621–637, 621. See Dreier, “How Much ‘Property’ Is There in Intellectual Property?” 120. Agreement: Marrakesh Agreement Establishing the World Trade Organization, April 15, 1994, 1867 U.N.T.S. 154, 33 I.L.M. 1144 (1994) [hereinafter WTO Agreement], available at www.wto .org. See supra fn. 16. 31 TRIPS Agreement, Part II, Sections 1–7 (Articles 9–39). See, for example, Tania Aplin, “Right to Property and Trade Secrets,” in Christophe Geiger (ed.), Research Handbook on Human Rights and Intellectual Property (Cheltenham and Northampton MA: Edward Elgar Publishing, 2015), pp. 421–437 (chap. 22), 426–431. See also Lionel Bently, “Trade Secrets: Intellectual Property but Not Property?” in Howe & Griffiths (eds.), Concepts of Property in Intellectual Property Law, pp. 60–93 (chap. 3),

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Introduction

9

differences between the protection of trade secrets and “classical IPRs” such as copyright and patents.33 We will nevertheless include protection of trade secrets in the analysis since trade secrets are closely connected to a business’s efforts or achievements. Trademarks and trade names are normally classified as intellectual property, although hardly “intellectual” in the true sense of the word. They too, though, are related to efforts or achievements in terms of their importance in building up a business. For the purposes of this book, a distinction will be drawn between what we will call “creational IPRs,” where the effort or achievements that give rise to IPR protection are acts of creation in a broad sense (typically copyright and most related rights), patents and design rights and “business-related IPRs,” where the effort or achievements are related to building up a business without being creative in nature (typically trademark and trade name rights). Protection of trade secrets may be considered a hybrid in this respect. Protection against unfair competition is covered by Article 10bis of the Paris Convention for the Protection of Industrial Property34 and mentioned in Article 39(1) TRIPS in connection with the protection of trade secrets. Here, norms of unfair competition will be regarded as IPRs to the extent that they target specific efforts or achievements (e.g., trade secrets), but norms dealing with unfair competition in general will serve as a contrast to IP protection, rather than being considered part of it, for the purposes of the present analysis. We will come back to this in Chapter 3 when discussing the structuring of IP rights. Given that we will concentrate on private (or individual) IPRs, community property protection, like protection of traditional knowledge and folklore, although of utmost importance in many cultural settings, is outside the scope of this book.

33 34

83–84, for examples of various legal contexts where trade secrets are not considered intellectual property. See further Chapter 3 (Section C). Paris Convention for the Protection of Industrial Property March 20, 1883, as last revised at Stockholm, July 14, 1967, 21 UST 1583, 828 UNTS 305 [hereinafter the Paris Convention].

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part i

three property aspects of ip law

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2 Property in Justifying Rights

INTRODUCTION

The property metaphor is often used in relation to the justification of IP rights on the basis that there is some common ground with the justification for real property (property in tangibles). Thus, various kinds of property theories encompass both property in tangibles and intellectual property when trying to explain why someone holds exclusive rights to use a resource.1 The concept of a resource in relation to IP will be discussed at a later stage.2 For now, we will look at the use of the property metaphor in relation to the justification of IP, for which there is an insurmountable amount of literature, particularly in the United States. The debate is relevant to the use of the property metaphor in the transnational and international contexts, but it is neither possible nor is it my intention here to reiterate or review the literature in its entirety. Instead, we will highlight some features as background to the discussion in Chapter 5 about the conclusions that may be drawn from the use of the property metaphor. As pointed out, the reason for the use of the property metaphor in justifying IP is that there is indeed some common ground with justification for property in tangibles. On the other hand, it should be underscored (even at this early stage) that there are also important differences. The extent of the differences depends on the reasons given to justify both IP and property in tangibles. There are also differences in the use of the property metaphor in this respect. Authors who lament the tendency toward “propertization” of IP may suggest that analogies with real property have been taken too far and that the proper justification for IP is 1

2

For an overview, see, for example, Gregory S. Alexander & Eduardo Pen˜alvin, An Introduction to Property Theory (Cambridge: Cambridge University Press, 2012). See Chapter 3 (Section F).

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Property Aspects of Intellectual Property

different from that used for property in tangibles.3 These aspects of the discussion will be further elaborated in Chapter 5. In this chapter, we will look at the basic justifications used for IP and property in tangibles, with a particular focus on how these justifications apply to IP. We should also bear in mind the specificities of different kinds of IP as the particular justification given may differ within the IP field itself. When considering the (legal) conclusions that may, could, or should be drawn from the use of the property metaphor in relation to particular justifications for IP, it will be both relevant and necessary to take a closer look at the differences between property in tangibles and IP. For now, we will concentrate mainly on how the basic justification grounds apply to IP. The basic justification grounds for IP – as for real property – may be grouped and referred to in different ways. Here we will use four categories: (1) utilitarianism, (2) the labor idea, (3) personality ideas, and (4) other ideas.4 I use the term “idea” instead of “theory” to make clear that the justification grounds in question are based on a specific idea (or sets of ideas) that may form the basis for different kinds of theories. Although ideas may be rooted in various kinds of philosophies, they must nevertheless be operationalized to serve as legal arguments. This means, for example, that although the labor idea, to which we will return later, is closely associated with the property theories of John Locke (1632–1704), the meaning given by Locke to this idea, in the particular context in which it was written, though philosophically interesting, is not necessarily central when using the labor idea as an argument in favor of a particular legal solution today. For similar reasons, we will avoid referring to “natural law” or “natural rights” as a basis for property and IP rights, although Locke’s ideas were based on concepts of natural rights.5 This serves to underscore the fact that this work is about the legal, more than the philosophical, implications of the use of the property metaphor. Furthermore, it explains my preference for the term “idea” over “theory.” In discussions concerning the various justification grounds for property and intellectual property, a distinction is often made between consequential and non-consequential arguments, with the implication that the former target specific consequences while the latter do not.6 The previous categorization

3 4

5

6

See, for example, Lemley, “Property, IP and Free Riding,” 133–139. Compare, for example, William Fisher, “Theories of Intellectual Property,” in Stephen R. Munzer (ed.), New Essays in the Legal and Political Theory of Property (Cambridge: Cambridge University Press, 2001), pp. 168–199. Compare Jack Donnelly, “Human Rights as Natural Rights” (1982) 4 Human Rights Quarterly 391–405. See, for example, David McGowan, “Copyright Nonconsequentialism” (2004) 69 Missouri Law Review 1–72.

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Property in Justifying Rights

15

crosses the line between consequential and non-consequential justifications. While utilitarian accounts of property are by their very nature consequential, in the sense that property is explained through the goal of “net utility,” other ideas of property can be both consequential and non-consequential depending on how the basic ideas are further elaborated. Additionally, there are overlaps between the various justification grounds (e.g., utilitarian readings of Locke’s labor theory).7 A brief outline of the four categories of property justification follows, given in light of how they are believed to apply to intellectual property. The discussion of the legal conclusions to be drawn from each of the property justifications of IP in an international context will – as pointed out – be carried out in Chapter 5.

A UTILITARIAN JUSTIFICATION GROUNDS

1 The Tragedy of the Commons v. the Tragedy of the Free Rider Both property in tangibles and intellectual property may be explained on utilitarian grounds, although the implications may be very different. Common to both is the fact that the utilitarian account is rooted in Jeremy Bentham’s (1748–1832) moral philosophy on the goodness and badness of social choices.8 The utility of an action, according to Bentham, is measured by its tendency “to produce benefit, advantage, pleasure, good or happiness (all this in the present case comes to the same thing) or (what again comes to the same thing) to prevent the happening of mischief, pain, evil, or unhappiness to the party whose interest is considered.”9 In other words, Bentham’s notion of utilitarianism is the result of adding up the sum of total pleasure (minus the pain) brought about by an action. Thus, Bentham is classified as an actutilitarian, who judges the rightness or wrongness of actions by the goodness and/or badness of their consequences.10 7

8

9 10

See, for example, Richard A. Epstein, “Liberty versus Property? Cracks in the Foundations of Copyright Law” (2005) 42 San Diego Law Review 1–28. Jeremy Bentham, An Introduction to the Principles of Morals and Legislation (Oxford: Clarendon Press, Reprint of the New Edition, 1879 (1st edn. 1789)). Note, however, that David Hume is considered by some as the initial utilitarian theorist of property; see Stephen R. Munzer, A Theory of Property (Cambridge: Cambridge University Press, 1990), p. 194. Bentham, Principles of Morals and Legislation, p. 2. See J. J. C. Smart & Bernard Williams, Utilitarianism: For & Against (Cambridge: Cambridge University Press, 1973), pp. 12–13.

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Although Bentham, like most philosophers of his time, spoke of property rather than IP when applying the “principle of utility,”11 it is common on both sides of the Atlantic, albeit traditionally associated more with common law than with civil law, to justify IP on utilitarian grounds based on the view that the purpose of intellectual property law is to serve the good of society. The fundamental problem with the Benthamian utility paradigm is how to measure net utility. In the twentieth century, in particular, the concept of utility was refined using the modern welfare-economics notion of efficiency, whether by reference to Pareto optimality, the Kaldor-Hicks criterion, or allocative efficiency.12 Although it is important to underscore that combining utilitarianism with efficiency is not the same as utilitarianism as such,13 a combined principle of utility and efficiency is considered both possible and advantageous.14 As regards property in tangibles, and property in land specifically, the problem described by Garrett Hardin as the “tragedy of the commons” – the risk of overuse of a resource if it is open to the public – serves as a point of departure for modern utilitarian analyses of private property rights.15 Drawing also on Harold Demsetz’s concerns about “externalities” if land is communally owned, contemporary utilitarian theory holds that a person who seeks to maximize his communal rights will tend to overhunt and overuse the land because some of the costs of his doing so are borne by others.16 This illustrates 11

12

13 14 15

16

Meaning “that principle which approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the happiness of the party whose interest is in question,” Bentham, Principles of Morals and Legislation, p. 2. See, for example, Jules Coleman, “Efficiency, Exchange, and Auction: Philosophic Aspects of the Economic Approach to Law” (1980) 68 California Law Review 221–249; Munzer, A Theory of Property, pp. 198–202; Fisher, “Theories of IP,” 177–178. Although the concepts are not by their very nature utilitarian, they may serve as instruments to explain utility; compare Alexander & Pen˜alvin, An Introduction to Property Theory, p. 16, fn. 20. See Munzer, A Theory of Property, p. 193. See Munzer, A Theory of Property, pp. 202 et seq. Garrett Hardin, “The Tragedy of the Commons” (1968) 162 Science 1243–1248. The phenomenon that the term describes was, however, observed long before that; see James E. Krier, “Essay: Evolutionary Theory and the Origin of Property Rights” (2009) 95 Cornell Law Review 139–159, 140–141, fn. 8, who points out, with further references, that “Aristotle and Aquinas, for instance, both . . . understood that common ownership promotes not just overuse of the resource in question but also underproduction.” See also Henry E. Smith, “Exclusion versus Governance: Two Strategies for Delineating Property Rights” (2002) 31 The Journal of Legal Studies 453–487, 457, fn. 9, pointing to a Danish fisheries study (Jens Warming, “Om ‘grundrente’ af fiskegrunde,” 49 Nationaløkonomisk tidskrift (1911) 499–505) as the “first systematic study of the potential problem of overuse characteristic of a common.” Harold Demsetz, “Toward a Theory of Property Rights” (1967) 57 The American Economic Review 347–359.

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a disadvantage of communal property: the effects of a person’s activities on neighbors and future generations will not be taken into account, because individuals do not have incentives to do so.17 Communal property thus results in great externalities, which – in economic terms – means that the consequences of an actor’s choices are not included in (i.e., they are external to) the actor’s private cost-benefit analysis. Private ownership, on the other hand, “will internalize many of the external costs associated with communal ownership, for now an owner, by virtue of his power to exclude others, can generally count on realizing the rewards associated with husbanding game and increasing the fertility of his land.”18 The creation of private ownership is not free, but provided externalities are expensive enough, establishing private ownership becomes cost effective. Turning to intellectual property, it is a much noticed fact that the theory of the tragedy of the commons does not fit here because the output of the effort that results in the IP rights is not a scarce resource.19 One person’s use of a copyrighted work, an invention protected by a patent, or a trademark can be part of the commons (i.e., used by the public) and just as much information is left behind for others to consume, and in the same condition as it was before. There is, in other words, no risk of overconsumption of the output of IP rights.20 Herein lies an important difference between tangibles and information: the latter is neither scarce nor rivalrous. A utilitarian account of IP rights cannot therefore rely on the tragedy of the commons as such. In seeking an economic explanation for IP protection that relies on the utilitarian account of IP, a distinction should be made between economies of scale and the public good problem.21 Economies of scale imply that producers have large, but fixed, costs when producing and that they must sell a certain quantity of product to recoup production costs. The public good problem, on the other hand, means that producers do not have the same costs: once the

17

18

19 20

21

There is, however, certainly much to add to this picture. See, for example, Carol Rose, “The Comedy of the Commons: Custom, Commerce, and Inherently Public Property” (1986) 53 University of Chicago Law Review 711–781. Demsetz, “Toward a Theory of Property Rights,” 356. See further Alexander & Pen˜alvin, An Introduction to Property Theory, pp. 20–22; Thomas Merrill & Henry E. Smith, The Oxford Introduction to U.S. Law: Property (Oxford: Oxford University Press, 2010), pp. 43–50. See further Chapter 3 (Section F.1). See, however, William M. Landes & Richard A. Posner, “Indefinitely Renewable Copyright” (2003) 70 University of Chicago Law Review 471–518, 484–488, for a particular aspect of “overconsumption” (“congestion”) in IP (copyright) law, though one that is still quite different from that involving tangible objects. See Gillian K. Hadfield, “The Economics of Copyright: An Historical Perspective” (1991) 38 Copyright Law Symposium (ASCAP) 1–46, 14–15.

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public good is created, it can be used by others at no cost or at a cost considerably lower than that borne by the creator. Both economies of scale and public goods suffer from market failures, but in a different way. The market failure of a competitive market with economies of scale consists in producers not being able to produce at the quantity required to recover their costs. In a public good market, the problem is that later producers can undercut the first producer, the market failure being linked to the fact that the first producer of the public good will not be able to recoup its fixed costs. In both situations, efficiency considerations justify restrictions on competition, and, in both situations, free competition is likely to reduce incentives to produce. But, as recognized by economists in the twentieth century, market failure in certain IP fields, such as copyright and patents (and related rights), is a public good market failure. Historically, this has not been so obvious, as the privilege system upon which modern IP law developed was based on economies of scale rather than public goods.22 Furthermore, leading figures of the eighteenth and nineteenth centuries, including Adam Smith, Francis Hargrave, and Jeremy Bentham, based their understanding of IP on a combination of natural law thinking (the labor theory) and economies of scale, not public goods.23 The public good argument in relation to IP law emerged first and foremost in the twentieth century, although there are earlier traces of it in the political debate in both the United States and the UK.24 Pigou’s analysis of the economics of welfare is central in this respect,25 as are Plant’s groundbreaking articles on the economics of patents and copyright, respectively, which focused on incentives for creation.26 With the emergence of the “law and 22 23 24

25

26

See Hadfield, “The Economics of Copyright,” 11–16. See Hadfield, “The Economics of Copyright,” 16–28. See James Madison’s comment as to whether Congress should grant copyright and patent protection, where he stated inter alia that “[t]he right to useful inventions seems with equal reason to belong to the inventors” and that “[t]he public good fully coincides in both cases with the claims of individuals,” in The Federalist no 43 (January 23, 1788), available at http:// avalon.law.yale.edu/18th_century/fed43.asp (January 23, 2017). See also Lord Macaulay’s statement in 1841 that he “safely [took] it for granted that the effect of [copyright] monopoly generally is to make articles scarce” and that “it was good that authors should be remunerated; and the least exceptionable way of remunerating them is by a monopoly”; see Thomas Babington Macaulay, Speeches on Politics and Literature (London: J. M. Dent & Co., New York: E. P. Dutton & Co., 1909), p. 180. See also Hadfield, “The Economics of Copyright,” 25, 29. A. C. Pigou, The Economics of Welfare (London: Macmillan and Co., 1st edn. 1920, 4th edn. 1932). Arnold Plant, “The Economic Theory Concerning Patents for Inventions” (1934) 1 Economica 30–51; Arnold Plant, “The Economic Aspect of Copyright in Books” (1934) 1 Economica 167–195.

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economics (L&E) movement” in the second half of the twentieth century, the public good function of intellectual property rights (IPRs) has been accentuated, along with incentives inherent to exclusive rights that enable the right holder to set prices equal to or above marginal costs to recoup investments.27 Whether and to what extent this economic account of IPRs is normative, and thus should also be characterized as utilitarian, have been disputed, not least among proponents of the L&E approach themselves.28 However, as noted by Alexander and Pen˜alvin, “legal economists generally argue that a social choice is efficient to the extent that it maximizes social welfare, and that a social choice is good or better when it is more efficient than its alternatives.”29 Although efficiency is not synonymous with utility, the concept of social welfare is close to the utilitarian notion of well-being, not least because it also tends to internalize nonpecuniary welfare effects. Thus, it is claimed that the L&E account of IPRs, which aims to create optimal incentives for the production of inventions and works as public goods,30 comes closest to explaining how net utility can be achieved in this field. This does not mean, however, that the economic models are perfect and capable of explaining everything under the sun or – for that matter – giving precise guidance on what the law is or should be. In a legal context, economic models can only serve as proxies.31 Criticism raised against welfare economics includes its reliance on the “rational-actor 27

28

29 30

31

Landmark contributions include Kenneth Arrow, Economic Welfare and the Allocation of Resources for Invention (Princeton, NJ: Princeton University Press, 1962); Edmund W. Kitch, “Graham v. John Deere Co.: New Standards for Patents” (1966) The Supreme Court Review 293–346; Robert M. Hurt & Robert M. Schuchman, “The Economic Rationale of Copyright” (1966)56 American Economic Review 421–432; Harold Demsetz, “The Private Production of Public Goods” (1970) 13 Journal of Law and Economics 293–306 (on public goods in general); William M. Landes & Richard A. Posner, “Trademark Law: An Economic Perspective” (1987) 30 The Journal of Law and Economics 265–309; William M. Landes & Richard A. Posner, “An Economic Analysis of Copyright Law” (1989) 18 Journal of Legal Studies 325–363; William M. Landes & Richard A. Posner, The Economic Structure of Intellectual Property Rights (Cambridge, MA: Harvard University Press, 2003). See, for example, Richard A. Posner, “Utilitarianism, Economics, and Legal Theory” (1979) 8 The Journal of Legal Studies 103–140, 119, where he claims not to be a utilitarian, although this position is considerably modified in Richard A. Posner, “The Ethical and Political Basis of the Efficiency Norm in Common Law Adjudication” (1980) 8 Hofstra Law Review 487–507, 497, 506. Alexander & Pen˜alvin, An Introduction to Property Theory, pp. 18–19. Regarding the term “public goods” in this respect, see Landes & Posner, The Economic Structure of Intellectual Property Rights, p. 14, also pointing out the misleading associations it may bring. In the meaning “[a]n entity or variable used to model or generate data assumed to resemble the data associated with another entity or variable that is typically more difficult to research,” see www.thefreedictionary.com/proxy.

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model,”32 the inadequate weight given to individual preferences,33 and its lack of concern for wealth distribution.34 In addition, the public good concept of IPRs has been subject to criticism.35 In the past 20 years, a new economic trend, called behavioral economics, has emerged with its emphasis on empirical evidence on economic behavior, including the incentive function in IP law.36 Still, it is plausible to ask whether alternatives to the welfare economics theories better explain the utility function of IPRs. Here, we will nonetheless concentrate on this theory as the most influential explanation of our times. The fact that insufficiencies in the model lead to alternative explanations of IP being sought37 is a different issue, to which we will return in the following sections. The utilitarian account of IP – at least as concerns creational IP such as copyright and related rights, patents, and design rights – can be referred to as the “tragedy of the free rider” rather than the tragedy of the commons.38 It should, however, be emphasized that “free rider” in this context does not mean taking advantage of another’s efforts. The tragedy of the free rider with respect to the utilitarian account of IP refers to instances where copying others’ creational efforts hampers incentives to innovate and consequently leads to welfare losses.39 The externalities implicit in this tragedy of the free rider refer to the creator’s inability to recoup fixed costs, which also means that with exclusive IP rights, these externalities are internalized. Compared to property in tangibles, however, the externalities in IP law mainly concern underconsumption rather than overconsumption, as we shall see.40 32

33

34

35

36

37 38 39

40

See, for example, Samuel Issacharoff, “Can There Be a Behavioral Law and Economics?” (1998) 51 Vanderbilt Law Review 1729–1745, 1730. See, for example, Cass R. Sunstein, “Legal Interference with Private Preferences” (1986)53 University of Chicago Law Review 1129–1174. See, for example, Louis Kaplow & Steven Shavell, “Fairness versus Welfare” (2001) 114 Harvard Law Review 961–1388. See, for example, Tom G. Palmer, “Intellectual Property: A Non-Posnerian Law and Economics Approach” (1989) 12 Hamline Law Review 261–304. See Mark A. Lemley, “Faith-based Intellectual Property” (2015) 62 UCLA Law Review 1328–1346, 1332–1333 with references to many empirical studies covering a multitude of aspects. See Lemley, “Faith-based IP,” 1136. Alexander & Pen˜alvin, An Introduction to Property Theory, p. 22. The broader sense of “free riding,” implying that IP rights are defined “in such a way that they permit the intellectual property owner to capture the full social benefit of the inventions,” obviously goes beyond this. See Lemley, “Property, IP and Free Riding,” 1041. See Michael A. Heller, “The Tragedy of the Anticommons: Property in the Transition from Marx to Markets” (1998) 111 Harvard Law Review 621–688. Still, points have been made about overconsumption of IP as well; see, for example, Landes & Posner, “Renewable Copyright,” 485–487; John F. Duffy, “Intellectual Property Isolationism and the Average Cost Thesis” (2005) 83 Texas Law Review 1077–1095. For a discussion, see Niva Elkin-Koren & Eli M. Salzberger, The Law and

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It should also be added that the utilitarian account of IP, based on concepts of maximization of social welfare, is not to be confused with libertarian ideas of property, though the latter may at some level be based on utilitarian arguments. Allegations that recent law and economics approaches have turned in the direction of “propertization” of IP based on the rationale of the tragedy of the commons41 overlook differences in points of departure and ideology.42 To be sure, there has been discussion about the efficiency of IPRs ex post, i.e., after the granting of IP protection,43 and whether lessons may be learned from property in tangibles in this respect. Still, the claim that L&E accounts of the utilitarian justification of IP have shifted from an incentives paradigm to a proprietary paradigm, with a concurrent shift in focus from incentives ex ante to incentives ex post on the basis of the tragedy of the commons,44 seems to be an exaggeration at best. Here, it is maintained that the modern utilitarian account of IP is based on the tragedy of the free rider rather than the tragedy of the commons. Libertarian concepts of property will be presented in Section B of this chapter. 2 Trademarks and Trade Secrets It is also important to remember that the incentive function described earlier explains the economic rationale for creational IP, such as copyright (and related rights), patents, design, and so on. The public good argument does not give a satisfactory explanation as to why we have trademark protection or why trade secrets should be protected. The utilitarian case for protecting

41

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43

44

Economics of Intellectual Property in the Digital Age (London & New York: Routledge, 2013), pp. 133–143. See Elkin-Koren & Salzberger, The Law and Economics of IP, pp. 115–145 (chap. 4). See also Estelle Derclaye & Tim Turner, “Happy IP: Replacing the Law and Economics Justification for Intellectual Property Rights with a Well-being Approach” (2015) 37 European Intellectual Property Review 197–209, 202. See the references in Elkin-Koren & Salzberger, The Law and Economics of IP, p. 120, to Frank Easterbrook, “Intellectual Property Is Still Property” (1990) 13 Harvard Journal of Law and Public Policy 108–118; I. Trotter Hardy, “Not So Different: Tangible, Intangible, Digital, and Analog Works and Their Comparison for Copyright Purposes” (2001) 26 University of Dayton Law Review 212–245; Richard A. Epstein, “The Disintegration of Intellectual Property? A Classical Liberal Response to a Premature Obituary” (2010) 62 Stanford Law Review 455–521, which all seem to be predicated on libertarian property views rather than welfare economics. The pioneer work in this respect is Edmund W. Kitch, “The Nature and the Function of the Patent System” (1977) 20 Journal of Law and Economics 265–290. See Mark A. Lemley, “Ex Ante versus Ex Post Justifications for Intellectual Property” (2004) 71 University of Chicago Law Review 129–150. See supra fn. 41.

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trademarks is primarily related to keeping consumer search costs down; if there were no exclusive rights to trademarks, consumers would spend significant time, money, and effort on finding the product they want to purchase, and there would be much confusion, to the detriment of social welfare.45 This explains the so-called origin and quality functions of trademark law. Here, there are also free-riding aspects, in that “[t]he free-riding competitor will, at little cost, capture profits associated with a strong trademark because some consumers will at least assume . . . that the free rider’s and the original trademark holders’ brand are identical.”46 Although the incentive rationale hardly applies to trademarks (and trade names) as such – trademark protection is not granted to stimulate the creation of trademarks47 – a secondary effect of trademark protection is that it creates incentives to maintain consistent quality in the products to which the trademark applies.48 Obviously, “[t]here may be little incentive to improve goods or services if consumers cannot easily differentiate among them and associate the quality of the goods or services with a particular source.”49 In this sense, trademark (and trade names) protection has an incentive function too, but it is of a different kind and builds on a different rationale than incentives within the public good paradigm. The safeguarding of a trademark’s reputation and the so-called investment and advertising functions of a trademark50 are closely connected to this.51 The economic, and thus utilitarian, rationale for protecting trade secrets must be seen in close connection with deficiencies of other kinds of IP 45

46

47

48 49 50

51

See Landes & Posner, “Trademark Law”; Landes & Posner, The Economic Structure of Intellectual Property Rights, pp. 166 et seq. See also Stacey L. Dogan & Mark A. Lemley, “Trademarks and Consumer Search Costs on the Internet” (2004) 41 Houston Law Review 777–838; Dan Burk, “Law and Economics of Intellectual Property: In Search of First Principles” (2012) 8 Annual Review of Law and Social Science 397–414, 408–410. Landes & Posner, The Economic Structure of Intellectual Property Rights, p. 168. See also Burk, “Law and Economics of Intellectual Property,” 409. See Andrew Griffiths, An Economic Perspective on Trade Mark Law (Cheltenham: Edward Elgar Publishing, 2011), p. 32; Burk, “Law and Economics of Intellectual Property,” 408–409. See, however, Landes & Posner, The Economic Structure of Intellectual Property Rights, pp. 168–169, who point out that a “benefit of trademark protection derives from the incentives that such protection creates to invest resources . . . in inventing new words and symbols,” but still emphasizing that “[t]he importance of trademarks to language is only modest . . . because the contribution they make to the language is mainly a byproduct of the contribution that the products they designate make to the world of things.” See Landes & Posner, The Economic Structure of Intellectual Property Rights, p. 168. Burk, “Law and Economics of Intellectual Property,” 409. See, for example, the Court of Justice of the European Union (CJEU) in case C-487/07, L’Oreal v. Bellure, ECLI:EU:C:2009:378, para. 58. See Griffiths, An Economic Perspective on Trade Mark Law, pp. 138–149.

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protection and the need for the innovator to rely on alternative strategies for promoting innovation. Protection of trade secrets obviously cannot be explained through the public goods rationale, since the whole point of protecting trade secrets is to ensure information is kept from the public. In certain cases, however, keeping information secret may be a more efficient means of creating incentives for innovation than exposing it.52 Thus, creating incentives for innovation will also be an argument for protecting trade secrets, though not in the same sense as for mere creational IP.

3 Costs v. Benefits Costs are an important efficiency-based consideration, both for property in tangibles and for intellectual property. Different kinds of costs should be taken into consideration when designing and analyzing the legal framework for IP. First, there are transaction costs, i.e., the costs of transferring the rights.53 The socalled Coase theorem, implying that bargaining will be Pareto efficient54 – irrespective of the initial allocation of property – if transaction costs are sufficiently low,55 has greatly influenced L&E thinking on transaction costs, including with respect to intellectual property.56 Second, there are costs to be taken into account with regard to so-called rent seeking (i.e., seeking out new profits), which is particularly important to IP.57 Third, there are costs involved in protection, including the cost of (static) efficiency losses in creating a property (IP) right, and enforcement of the rights.58 The benefits of introducing and maintaining IP protection will have to be weighed against these costs and the outcome of this trade-off should be reflected in the content of the protection.59 52

53 54

55

56

57 58 59

See further Landes & Posner, The Economic Structure of Intellectual Property Rights, pp. 359 et seq. See also David D. Friedmann, William A. Landes, & Richard A. Posner, “Some Economics of Trade Secrets Law” (1991) 5 The Journal of Economic Perspectives 61–72, 62–66. See Landes & Posner, The Economic Structure of Intellectual Property Rights, p. 16. Pareto efficiency implies a state of allocation from which it is impossible to make one individual or preference better off by reallocating without simultaneously making at least one individual or preference criterion worse off. The concept comes from the Italian economist Vilfredo Pareto (1848–1923). On his influence, see Vincent J. Tarascio, Pareto’s Methodological Approach to Economics: A Study in the History of Some Scientific Aspects of Economic Thought (Chapel Hill: The University of North Carolina Press, 1968). See Ronald Coase, “The Problem of Social Cost” (1960) 3 The Journal of Law and Economics 1–44, 15 et seq. See, for example, Landes & Posner, The Economic Structure of Intellectual Property Rights, pp. 52, 92, 158–159, 274. See Landes & Posner, The Economic Structure of Intellectual Property Rights, pp. 16–18. Landes & Posner, The Economic Structure of Intellectual Property Rights, pp. 18–20. See Landes & Posner, The Economic Structure of Intellectual Property Rights, pp. 21–24.

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The general economic framework for handling cost-benefit issues is very much the same for property in tangibles and IP, which explains the frequent use of the property metaphor in L&E literature. The legal conclusions that may and should be drawn from this, in particular with regard to the use of the property metaphor in international contexts, will be discussed in Chapter 5. Here, we will simply add two dimensions to this picture that are also applicable to our discussion of the structuring of rights in Chapter 3: the property/ liability dichotomy and so-called modular rights, both of which are costrelated issues relevant to the property-IP interface. 4 The Doctrine of Property v. Liability (and Inalienability) Rules In modern legal discourse about property rights, a distinction is often made between property rules and liability rules. The distinction is to a large extent due to Calabresi and Melamed’s famous 1972 article.60 Calabresi and Melamed first articulated the concept of “entitlements” as a common phrase for various legal positions (property, liability, inalienability) and then went on to analyze the situations in which the various entitlements should apply: An entitlement is protected by a property rule to the extent that someone who wishes to remove the entitlement from its holder must buy it from him in a voluntary transaction in which the value of the entitlement is agreed upon by the seller. It is the form of entitlement which gives rise to the least amount of state intervention: once the original entitlement is decided upon, the state does not try to decide its value. It lets each of the parties say how much the entitlement is worth to him, and gives the seller a veto if the buyer does not offer enough. Property rules involve a collective decision as to who is to be given an initial entitlement but not as to the value of the entitlement. Whenever someone may destroy the initial entitlement if he is willing to pay an objectively determined value for it, an entitlement is protected by a liability rule. This value may be what it is thought the original holder of the entitlement would have sold it for. But the holder’s complaint that he would have demanded more will not avail him once the objectively determined value is set. Obviously, liability rules involve an additional stage of state intervention: not only are entitlements protected, but their transfer or destruction is allowed on the basis of a value determined by some organ of the state rather than by the parties themselves. An entitlement is inalienable to the extent that its transfer is not permitted between a willing buyer and a willing seller. The state intervenes not only to 60

Guido Calabresi & A. Douglas Melamed, “Property Rules, Liability Rules, and Inalienability: One View of the Cathedral” (1972) 86 Harvard Law Review 1089–1128.

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determine who is initially entitled and to determine the compensation that must be paid if the entitlement is taken or destroyed, but also to forbid its sale under some or all circumstances. Inalienability rules are thus quite different from property and liability rules. Unlike those rules, rules of inalienability not only “protect” the entitlement; they may also be viewed as limiting or regulating the grant of entitlement itself. It should be clear that most entitlements to most goods are mixed. Taney’s house may be protected by a property rule in situations where Marshall wishes to purchase it, by a liability rule where the government decides to take it by eminent domain, and by a rule of inalienability in situations where Taney is drunk or incompetent.61

In short, Calabresi and Melamed argued that entitlements should be allocated to those who value them most highly if the market facilitates the transfer of entitlement to those persons. In those cases, a property rule would apply. If, on the other hand, the market does not “cause people to express their true valuations and hence yield results which all would in fact agree are desirable . . . an argument can readily be made for moving from a property rule to a liability rule.”62 Moreover, the argument is that entitlements should change hands without the consent of the property owner upon the payment of compensation if the transaction costs involved in a market solution exceed the costs involved in collective valuation of the good.63 In other words, a liability rule should apply in the latter situation as well. Although the examples used by Calabresi and Melahmed in their article concern entitlements to land, their general scheme and arguments may well apply to intellectual property. Thus, exclusive IP rights may be characterized as property rules under this scheme, while compulsory licenses and other models permitting the use of IP-protected subject matter without the consent of the right holder but in return for compensation are referred to as liability rules. There is even a tendency in contemporary IP writings to use the property/liability dichotomy to describe the difference between granting right holders exclusive rights and providing compulsory licenses or other permitted-use regimes upon remuneration of the right holder.64 It is important to keep in mind the purpose of Calabresi and Melamed’s distinction, which was to provide a framework for a utilitarian or economic approach to a variety of legal problems and to remedy 61 62 63 64

Calabresi & Melamed, “Property, Liability and Inalienability,” 1092–1093. Calabresi & Melamed, “Property, Liability and Inalienability,” 1107. Calabresi & Melamed, “Property, Liability and Inalienability,” 1107. See Chapter 3 (Section G).

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problems in particular.65 The distinction is, therefore, not necessarily useful to describe the legal relationship between exclusivity rules and compensation rules. As follows from the definition cited earlier, under Calabresi and Melamed’s framework, an entitlement is protected by a liability rule “[w]henever someone may destroy the initial entitlement if he is willing to pay an objectively determined value for it.” This is the utilitarian perspective, where compensation in the form of damages is considered an alternative to protecting property by way of exclusivity rules. This perspective is not necessarily valid in a legal context,66 however, and it is important to recognize that Calabresi and Melamed’s article presents the relationship between exclusivity rules and compensation rules from one specific justification perspective. If the dichotomy is to be used in other contexts, the content of the concepts property and liability may very well be different from the concepts used in Calabresi and Melamed’s article. The fact that the property metaphor extends well to IP within the framework set up by Calabresi and Melamed does not mean it should automatically carry over to other contexts.67

5 The Notion of Modularity in Property Law Somewhat related to the property/liability dichotomy is the notion of modularity in property law.68 The right to exclude in property law is considered a way of dealing with complexity in systems to keep transaction costs low. It is held that [T]he main advantage of exclusive rights is their indirectness, or the lack of direct fit between exclusion as a mechanism and the purposes that it serves . . . Property rests on a foundation of simple rules like trespass that tell dutyholders to keep off. No direct reference needs be made to information about either the duty holder or the owner.69 65 66

67 68

69

Calabresi & Melamed, “Property, Liability and Inalienability,” 1092, 1127–1128. See James E. Penner, The Idea of Property in Law (Oxford: Oxford University Press, 1996/ 2000), pp. 66–67. For a similar view, see Nadezhda Purtova, Property Rights in Personal Data: A European Perspective (Alphen an den Rijn: Wolters Kluwer, 2012), pp. 57–58. See further Chapter 3 (Section G). See Henry E. Smith, “Intellectual Property as Property: Delineating Entitlements in Information” (2007) 116 Yale Law Journal 1742–1822, in particular 1751 et seq. See also Henry E. Smith, “Property as the Law of Things” (2012) 125 Harvard Law Review 1691–1726; Henry E. Smith, “Emergent Property,” in James E. Penner & Henry Smith (eds.), Philosophical Foundations of Property Law (Oxford: Oxford University Press, 2013), pp. 320–338. Smith, “Intellectual Property as Property,” 1742.

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As pointed out by Smith: [I]f I am walking through a parking lot, I know not to drive off with others’ cars, and I do not need to know who the owners are, how virtuous (or not) they are, or whether they are actual people or corporations. Likewise, the owners of the autos need not know much about me or the vast crowd of other dutyholders – the “rest of the world” against whom in rem rights avail. Our interactions can be relatively anonymous precisely because they are mediated by a thing – in this instance, the cars.70

This “only makes sense because of positive transaction costs,” as “positive delineation and information processing costs are the precondition for . . . the right to exclude. Its indirect protection of various privileges would not be necessary if more direct approaches were costless”71: If delineation were costless, we would not have this heavy reliance on broad exclusion rights in the law of property. Instead of delineating things, and recognizing owners’ rights to exclude others from those things, we would build everything from the ground up, based on interests in use and on the specific types of actions that either constitute uses or interfere with uses. We could specify in a grand tort- or contract-like scheme a list of all the actions . . . that each person is entitled to take or to veto. Each legal relation . . . between every pair of individuals would be drawn up in this gigantic list.72

Since delineation is not costless, much may be gained from a cost perspective in that the exclusive rights are built on a modular system that allows for information hiding.73 From this perspective, property law may be thought of as consisting of various modules, where the “exclusionary strategy” sets up the basic modules hiding information about uses and persons involved not relevant to the legal position, except in the case of some high-stakes conflicts regarding, for example, noise and odors connected to property in land.74 Taking as the point of departure the idea that intellectual property is related to property based on the role that information costs play in the delineation and enforcement of rights,75 Smith has pointed out that IP systems build on 70

71 72 73 74 75

Smith, “Intellectual Property as Property,” 1746, with an example inspired by Penner, The Idea of Property in Law, pp. 75–76. Smith, “Intellectual Property as Property,” 1747. Smith, “Intellectual Property as Property,” 1752–1753. See Smith, “Intellectual Property as Property,” 1761. Smith, “Intellectual Property as Property,” 1765. Smith, “Intellectual Property as Property,” 1745.

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a modular structure similar to property in tangibles, although there are differences between various kinds of IP rights in this respect. Patent law is said to rely heavily on the right to exclude, whereas copyright law makes greater use of what Smith calls “governance rules,”76 in that it “picks out uses and users in more detail, imposing a more intense informational burden on a smaller audience of duty holders.”77 The view that “patents on average give rise to greater information costs than do copyrights” is the main reason given for this difference.78 On this view, patents may be considered as more modular and hence also more property-like than copyrights. At a general level, it is noted that much of intellectual property has its origin in unfair competition, which in this context is considered as tort rather than property, and that “to get from unfair competition to full-blown property rights, we need to define a thing to be the object of exclusive rights against the world.”79 The structural side of this observation will be dealt with in Chapter 3. However, for the sake of the transaction costs argument, unfair competition law is not considered as full-blown property since it is not at all modular in its structure, while the “thingness” of “real” intellectual property makes it suitable for a modular structure that aims to save on information costs. Hence, it resembles property in tangibles more, even though there are also differences between the various kinds of IP in this respect.

B THE LABOR IDEA

1 Locke and the Notion of “Moral Desert” The labor idea or theory as a justification for property rights stems from British philosopher John Locke (1632–1704). Locke’s theories have had a great impact on property thought in the Western world and in particular among property rights libertarians. Locke’s property theory follows mostly from his Two Treatises of Government, published in 1689, but probably written between 1679 and 1682. It is important to read Locke’s work in the political context in which it was written and not least in the context of his opposition to the ideas of his political opponent Robert Filmer (who believed that God had given title in the entire world to Adam, which was then bequeathed to his descendants exclusively through the line of monarchs of the time). Locke’s natural law theory is 76 77 78 79

See also Smith, “Property as the Law of Things,” 453. Smith, “Intellectual Property as Property,” 1784–1786. See Smith, “Intellectual Property as Property,” 1801 and further 1801 et seq. Smith, “Intellectual Property as Property,” 1753–1755.

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a reaction to these ideas. He argued that God created the world to allow human beings to fulfill a duty to preserve themselves and that, since this duty belonged to each and every person in equal measure, each person was also entitled “to the use of those things, which were serviceable for his subsistence, and given him as means of his preservation.”80 The equal right and duty of self-preservation are crucial to Locke’s argument for private ownership and property. One reading of Locke’s property theory is based on notions of moral desert. The connection between fulfilling the divine directive and the institution of property is found in his ideas about labor and reward: 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. Whatsoever, then, he removes out of the State that Nature hath provided and left it in, he hath mixed his Labour with it, and joined to it something that is his own, and thereby makes it his Property. It being by him removed from the common State Nature placed it in, it hath by his labour something annexed to it that excludes the common right of other Men.81

The notion that property is the fruit of a person’s labor and therefore deserves protection against others’ use of it may still be valid in the twenty-first century, even if the concepts of natural rights and divine directives are rejected. Much has been written about Locke’s statement regarding mixing labor with what “the Man” removes from nature and various interpretations have been given.82 The basic notion could be that the justification for property lies in the underlying efforts made by the claimants of property rights,83 including (in modern society) efforts made to earn money to buy other things.84 Even this notion, though, leaves room for discussion of whether the labor idea holds for any kind of 80 81 82

83

84

John Locke, Two Treatises of Government (1689, e-book reprint), First Treatise, Section 81. Locke, Two Treatises of Government, Second Treatise, Section 27. Two famous interpretations, and critiques, of the mixing metaphor have been set out by Robert Nozick, Anarchy, State and Utopia (Oxford: Blackwell, 1974), in particular pp. 175–177; and Jeremy Waldron, “Two Worries about Mixing One’s Labor” (1983) 33 The Philosophical Quarterly 37–44. For an overview and an opinion, see Robert P. Merges, Justifying Intellectual Property (Cambridge, MA: Harvard University, 2011), pp. 42–44. See, in relation to IP for example, Ayn Rand, Robert Hessen, Alan Greenspan, & Nathanial Branden, Capitalism: The Unknown Ideal (New York: The New American Library, 1967), 130: “Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the production of his mind.” Cf. Locke, Two Treatises of Government, Second Treatise, Section 47: “And thus came in the use of money, some lasting thing that men might keep without spoiling, and that by mutual consent men would take in exchange for the truly useful, but perishable supports of life.”

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property claim. Locke did not specifically address intellectual property when he talked about entitlement to the products of one’s labor. The fact that, in his other writings, he described his own work as an author as labor85 does nothing to change that. Zemer criticizes other commentators for ignoring the fact that Locke wrote about authors’ rights and interests in his letter Liberty of the Press (1694) and for basing their Lockean view on IP exclusively on Locke’s writings in the Second Treatise.86 But as Zemer’s own analysis seems to confirm,87 Locke did not expressly address the labor justification for property claims in Liberty of the Press. Even Zemer’s allegation that Locke’s writings in his essay Labour (1693) “strengthens the argument that when he uses the term ‘property’ in [the Second Treatise of Government] he was well aware of intellectual property”88 is based on inferences as to what Locke must have meant, given the context, rather than express statements about the labor justification for intellectual property in Locke’s writings. Still, proponents of a “desert” reading of the labor theory suggest that the idea that labor justifies claims to the fruits is no weaker for most kinds of intellectual property than for property in tangibles. It has been noted, “if it is the case that people can ‘deserve’ property in the (unowned) tangible objects they improve with their labor, then surely the case is no weaker for their deserving property in the intellectual objects they create.”89 Others have claimed that irrespective of whether Locke’s labor theory is considered instrumental (we must provide rewards to get labor) or normative (labor should be rewarded), it “can be used to justify intellectual property without many of the problems that attend its application to physical property.”90 Further, they point out that even if “Locke talks a lot about land use . . . the better fit is with the quintessential intellectual creation of personhood.”91 Still others hold, on the contrary, that the Lockean case for intellectual property is weak.92 One view is that it cannot be justified 85 86

87 88 89

90

91

92

See Merges, Justifying Intellectual Property, p. 33. See Lior Zemer, “The Making of a New Copyright Lockean” (2006) 29 Harvard Journal of Law and Public Policy 891–947. Zemer, “The Making of a New Copyright Lockean,” 900–905. Zemer, “The Making of a New Copyright Lockean,” 908–911. Lawrence Becker, “Deserving to Own Intellectual Property” (1993) 68 Chicago-Kent Law Review 609–628, 609. Justin Hughes, “The Philosophy of Intellectual Property” (1988) 77 Georgetown Law Journal 287–366, 296–297. Gordon Hull, “Clearing the Rubbish: Locke, the Waste Provision and the Moral Justification of Intellectual Property” (2009) 23 Public Affairs Quarterly 67–93, 78. See, for example, Seana v. Shiffrin, “Lockean Arguments for Private Intellectual Property,” in Stephen R. Munzer (ed.), New Essays in the Legal and Political Theory of Property (Cambridge: Cambridge University Press, 2001), pp. 138–167; Tom W. Bell, “Indelicate

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under the labor theory because it conflicts with property in tangibles. Hence, “copyright and patent protection contradicts Locke’s justification of property. By invoking state power, a copyright or patent owner can impose prior restraint, fines, imprisonment, and confiscation on those engaged in peaceful expression and the quiet enjoyment of their tangible property.”93 Another claim is that any system of “property rights” that requires the violation of other property rights, e.g. the right to determine the peaceful use in one’s home of one’s own videocassette recorder or to purchase blank tapes without paying a royalty to a third party, is no system of rights at all. In short, a system of intellectual property rights is not compossible with a system of property rights to tangible objects, especially one’s own body, the foundation of the right to property in alienable objects.94

In any case, these views are not compatible with how IPRs play out in a modern society.95 In relation to the labor theory, it is plausible to hold that where labor justifies property in tangibles and intellectual property, the respective rights will have to be adjusted to each other instead of one having priority over the other.96 Justifying private rights because they are the products of a right holder’s labor, in a broad sense, could apply to a whole range of IPRs and even to protection of trade secrets and against acts of unfair competition.97 The question of the scope of such protection remains, however. Opinions differ according to the various interpretations of the so-called provisos, or conditions, derived from some of Locke’s statements.98 The most central one is the “sufficiency proviso,” derived from Locke’s statement that “for this

93 94 95

96

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98

Imbalancing in Intellectual Property in the Information Age,” in Adam Thierer & Clyde W. Crews Jr. (eds.), Copy Fights: The Future of Intellectual Property in the Information Age (Washington, DC: Cato, 2002), pp. 1–16 (chap. 1); Palmer, “Intellectual Property: A NonPosnerian Law and Economics Approach.” See Bell, “Indelicate Imbalancing in Intellectual Property,” p. 4. See Palmer, “Intellectual Property: A Non-Posnerian Law and Economics Approach,” 281. See Chapter 7 (Section C), where the relationship between IPRs and property rights in embodiments of IPRs is discussed further. See Wendy J. Gordon, “An Inquiry into the Merits of Copyright: The Challenges of Consistency, Consent, and Encouragement Theory” (1989) 41 Stanford Law Review 1343–1469, 1421, who points out that “[a]ll entitlements limit each other.” See, for example, the US Supreme Court decision in Ruckelshaus v. Monsanto Co., 467 US 986 (1984), 1002–1003, where the Court held that the general perception of trade secrets as property is consonant with a notion of “property” that extends beyond land and tangible goods and includes the products of an individual’s labor and invention. See further Chapter 7 (Section D.2.a). See, on the one hand, for example, Nozick, Anarchy, State and Utopia, pp. 181–182; Waldron, “Enough and as Good Left for Others” (1979) 29 The Philosophical Quarterly 319–328. See, on the other hand, for example, Gordon, “An Inquiry,” 1563–1564, 1567; Hull, “Clearing the Rubbish”; Benjamin Damstedt, “Limiting Locke: A Natural Law Justification for the Fair Use

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labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good left in common for others.”99 This implies that the laborer “does as good as take nothing at all” because he “leaves as much as another can make use of.”100 The statement is mirrored in the following paragraph: He that had as good left for his improvement, as was already taken up, needed not complain, ought not to meddle with what was already improved by another’s labour; if he did, it is plain he desired the benefit of another’s pains, which he had no right to, and not the ground which God had given him in common with others to labour on, and whereof there was as good left, as that already possessed, and more than he knew what to do with, or his industry could reach to.101

The second proviso, the “waste proviso,” is on spoilage. It suggests that no one may appropriate more than can be used before it spoils: “whatever is beyond this, is more than his share, and belongs to others. Nothing was made by God for man to spoil or destroy.”102 The third, the “charity proviso,” stems from Locke’s statement in his First Treatise,103 where he underscored the following: God hath not left one man so to the mercy of another, that he may starve him if he please . . . As justice gives every man a title to the product of his honest industry, and the fair acquisitions of his ancestors descended to him; so charity gives every man a title to so much out of another’s plenty, as will keep him from extreme want, where he has no means to subsist otherwise.104

Following the view that a modern account of the labor justification for legal purposes can hardly depend on a literal interpretation of what Locke wrote nearly 350 years ago, it may be suggested that the justification should be liberated from the provisos. Although it certainly makes sense, even today, to require that resources not go to waste, that something be left for others, and that consideration be given to those in need, these need not function as a straitjacket for delineating the idea that property is justified on the basis of

99 100 101 102 103 104

Doctrine” (2003) 112 Yale Law Journal 1179–1221; Zemer, “The Making of a New Copyright Lockean.” Locke, Two Treatises of Government, Second Treatise, Section 27. See Locke, Two Treatises of Government, Second Treatise, Section 33. Locke, Two Treatises of Government, Second Treatise, Section 34. Locke, Two Treatises of Government, Second Treatise, Section 31. Locke, Two Treatises of Government, First Treatise, Section 42(IV). See, however, Waldron, “Enough and as Good,” in particular 320–324, for an argument that this was not meant as a necessary condition on Locke’s part, but rather as a factual description of the situation.

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performed labor. Internalizing the considerations mentioned by Locke, however, without excluding the possibility of taking others into account, a more realistic view today seems to be that the labor claim should be proportionate to the labor performed.105 It has in this context been noted, “applying [Locke’s] theory to intangibles raises interesting questions” and that, in doing so, “one may ask whether the protection of intangibles should be commensurate with the author’s or inventor’s effort.”106 Inherent in a proportionality account lies the view that by mixing labor with existing phenomena, the laborer has added value that deserves protection, as well as the consideration that this value has to be weighed against other interests.

2 Alternative Readings of Locke Although Locke’s labor theory has been read by many as justifying property on the ground of moral desert, and thus as a non-consequential justification, there are also alternative readings that reject the move to ground Locke in moral claims. In this respect, the “most obvious point of criticism is that there is quite literally nothing that anyone has ever done to ‘deserve’ the creation of ownership rights in his own person.”107 These critics point to Rawls’s critique of the (liberal) claim that individuals own their own talents: “distributive shares are decided by the outcome of the natural lottery; and this outcome is arbitrary from a moral perspective. There is no more reason to permit the distribution of income and wealth to be settled by the distribution of natural assets than by historical and social fortune.”108 On the other hand, rejecting the claim that somebody who uses his/her skill, labor, and talents deserves to be entitled to the fruit of that labor does not mean that everybody else deserves it instead: “Quite the contrary, if the Lockean theory fails because it does not meet the standard of desert, then no other desert-based allocation is possible.”109

105

106

107 108

109

See Merges, Justifying Intellectual Property, pp. 48, 150. On the basis inter alia of the writings of Locke and Kant, Merges operates with proportionality as a so-called midlevel principle in IP law, defined as a basic concept “that ties together a number of discrete and detailed doctrines, rules and practices in a particular field” (p. 139). Daniel J. Gervais, “Human Rights and the Philosophical Foundations of Intellectual Property,” in Geiger (ed.), Research Handbook on Human Rights and IP, pp. 89–97, 89. Epstein, “Liberty versus Property?” See John Rawls, A Theory of Justice (Cambridge, MA: The Belknap Press of Harvard University Press, 1971), p. 73. For a further discussion about Rawls’s theories on distributive justice and IP, see Merges, Justifying Intellectual Property, pp. 102–136 (chap. 4). Epstein, “Liberty versus Property?” 7.

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Epstein provides a libertarian reading of Locke that is not desert based. This reading relies on the idea that the “unknown objects” that are mixed with labor are not owned by everybody (res communes) but are instead owned by nobody (res nullius). Thus, property based on labor does not mean interfering with the freedom of others, but exercising one’s own freedom.110 Those who object that freedom is restricted by property, since others are not entitled to trespass, are met with the following argument: [Property] works to the long-term advantage of everyone behind a veil of ignorance, so that these limitations on liberty are justified by the gains that they yield from the social ownership of property. The losses that people suffer from exclusion are small compared to the gains that they get both from their ability to privatize their labor and from their ability to enter into trade with those who have engaged in privatization.111

This reading of Locke is held to be utilitarian on the ground that “[i]n the long run, property rights make everyone better off than they would have been in a world with no limits on liberty of action and, in consequence, offered no security in one’s own person or possessions. The libertarian position thus is best understood as a Pareto improvement over the state of nature.”112 Under this reading, any claim “that the level of entitlement has to be proportional in some sense to the amount of effort that has been put into business” is rejected.113 And the theory carries over to IP “without a hitch.”114 Nevertheless, it is admitted that Locke did not offer any explicit treatment one way or the other of intellectual property rights . . . But it hardly follows that this theory has no implications for the area. Indeed the labor theory of acquisition seems, if anything, stronger here precisely because intellectual property does not require any form of mixing with tangible forms. Rather, these types of property appear to be the result of pure labor.115

As other non-desert-based interpretations of the labor idea, Gordon’s consequential and teleological approach, which rejects the desert principle,116 110 112 113 114

115 116

Epstein, “Liberty versus Property?” 14–16. 111 Epstein, “Liberty versus Property?” 17. Epstein, “The Disintegration of Intellectual Property?” 482. Epstein, “Liberty versus Property?” 8. The expression is taken from Richard A. Epstein, “What Is So Special about Intangible Property?: The Case for Intelligent Carryovers,” in Geoffrey A. Manne & Joshua D. Wright (eds.), Competition Policy and Patent Law under Uncertainty: Regulating Innovation (Cambridge: Cambridge University Press, 2011), pp. 42–74, 61. Epstein, “Liberty versus Property?” 23. See Wendy J. Gordon, “A Property Right in Self Expression: Equality and Individualism in the Natural Law of Intellectual Property” (1993) 102 Yale Law Journal 1533–1609, 1538.

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but accords much weight to the laborer’s purposiveness and refuses to accept “aimless efforts” as labor,117 and Nozick’s historical justification based on the notion of a minimal state,118 should also be mentioned. 3 The Labor Idea as a Justification for Modern IP There is a vast literature on Locke’s labor theory and its implications for IP law. As I have mentioned, different readings have been proposed in this respect. Nevertheless, the idea that labor justifies property protection at some level – and that this argument extends to most kinds of IP119 – seems to be widespread. That said, any version of the labor theory would suffer from the problem of demarcating the scope of the rights on the basis of the imprecise concept of labor.120 This is also true of the libertarian utility version of the labor theory in that it seems to be more belief and ideology based than supported by real evidence and cost-benefit analyses in alleging that broad property rights are generally good for society.121 It should also be noted that in respect of the demarcation of labor, there is a remarkable difference between property in tangibles and IP insofar as the former has “natural boundaries.”122 Whether or not the labor grounds for justifying property rights nonetheless have legal implications will be discussed further in Chapter 5. C PERSONALITY AND PERSONHOOD IDEAS

Although personality and personhood ideas are also based on notions of individual freedom, which have their basis in the thinking of German philosophers Immanuel Kant (1724–1804) and Georg Friedrich Hegel (1770–1831), they differ significantly from the labor idea. While the latter is rooted in notions of rewards and moral desert (or consequential considerations), the 117 118 119

120

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122

See Gordon, “A Property Right in Self Expression,” 1547. See Nozick, Anarchy, State and Utopia, pp. 153–182. For the view that Locke’s theories are suited to explain trademark law, see, for example, Jesse Dill, “Possessing Trademarks: Can Blackstone or Locke Apply to Fast Food, Grocery Stores, and Virtual Sex Toys?” (2010) 14 Marquette Intellectual Property Law Review 371–392. Cf. Peter Drahos, A Philosophy of Intellectual Property (Aldershot: Dartmouth, 1996), pp. 51–53. See also Jessica Litman, “The Public Domain” (1990) 39 Emory Law Review 965–1023, 1011–1012, who points out the problems concerned with “dissecting” the contents of an author’s work on the basis of her authorship process “to pare the preexisting elements from her astigmatic recasting of them.” Compare Peter S. Menell, “Governance of Intellectual Resources and Disintegration of Intellectual Property in the Digital Age” (2011) 26 Berkeley Technology Law Journal 1523–1559, 1525–1536 and Lemley “Faith-based IP,” 1337. Drahos, A Philosophy of Intellectual Property, pp. 51–52.

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personality and personhood ideas rest on concepts of the individual’s need to control an object as a result of the individual’s free will. The basic notion of ownership as a primitive concept whose roots run very deep in human consciousness – “mine and yours” – is a clear undercurrent.123 The Kantian and Hegelian property rights theories are based on many of the same premises, but while Kant regarded property in things as an extension of a person’s will (and personality), Hegel viewed things as external factors that could be transformed into alienable property through the expression of a person’s will. Whether Kantian property theory applies to IP is disputed. In connection with his statements that “[a]n external object which in terms of its substance belongs to someone is his property (dominium)” and that “all rights in the thing inhere (as accidents of substance) and . . . the owner (dominus) can, accordingly dispose of [it] as he pleases,” he expressly stated that “[i]t clearly follows from this that such an object can only be a corporeal thing (to which one has no obligations).”124 On the other hand, it follows from the context that the latter statement refers to the impossibility of holding property rights in persons, whether in oneself or in others. The statement does not necessarily imply, therefore, that Kant’s justification for property is not applicable to IP. It has also been pointed out that Kant categorized authors’ rights (copyright) as personal rights rather than property rights.125 In this context, it should be added that Kant, in one of his works, considered the output of an author as a “speech to the public.”126 Others maintain that Kant’s writing shows clear signs that his concept of “object” was meant as an abstraction, that “possession” in Kantian terms extended to phenomena other than physical things, and that Kant’s reflections on property also apply in the context of IP, and even to copyright.127

123 124

125

126

127

Merges, Justifying Intellectual Property, p. 72. See also supra Chapter 1, fn. 8. Cited from Kant by Gregor, Practical Philosophy, p. 421. German original: “Der a¨ußere Gegenstand, welcher der Substanz nach das Seine von jemanden ist, ist dessen Eigentum (dominium), welchem alle Rechte in dieser Sache (wie Accidenzen der Substanz) inha¨rieren, u¨ber welche der Eigentu¨mer (dominus) nach Belieben verfu¨gen kann . . . Aber hieraus folgt vom selbst: daß ein solcher Gegenstand nur eine ko¨rperliche Sache (gegen die man keine Verbindlichkeit hat) sein ko¨nne”; see Kant by Ludwig, “Metaphysische Anfangsgru¨nde der Rechtslehre,” p. 70. See Neil W. Netanel, “Copyright Alienability Restrictions and the Enhancement of Author Autonomy: A Normative Evaluation” (1993) 24 Rutgers Law Journal 347–442, 374. See Abraham Drassinower, “Copyright Infringement as Compelled Speech,” in Anabelle Lever (ed.), New Frontiers in the Philosophy of Intellectual Property (Cambridge: Cambridge University Press, 2012), pp. 203–224 (chap. 8), 204, with reference to Kant’s work “On the wrongfulness of the unauthorized publication of books” (1785), see Kant in Gregor, Practical Philosophy, pp. 30, 34. Merges, Justifying Intellectual Property, pp. 77–78.

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Hegel’s concepts of “objects” and “things” were, on the other hand, expressly wide enough to include IP. In his work Philosophy of Right, he stated: Mental aptitudes, eruditions, artistic skills, even things ecclesiastical (like sermons, masses, prayers, consecration of votive objects), inventions and so forth, become subjects of contract, brought on to a parity, through being bought and sold, with things recognized as things. It may be asked, whether the artist scholar, &c, is from the legal point of view in possession of his art, erudition, ability to preach a sermon, sing a mass, &c, that is whether such attainments are “things.” One may hesitate to call such abilities, attainments, aptitudes, &c, “things,” for while possessions of these may be the subject of business dealings and contracts, there is also something inward and mental about it . . . Attainments, eruditions, talents, and so forth, are, of course, owned by free mind and are something internal and not external to it, but even so, by expressing them it may embody them in something external and alienate them . . . and in this way they are put into the category of “things.” Therefore they are not immediate at the start but only acquire this character through the mediation of mind which reduces its inner possessions to immediacy and externality.128

Consequently, it is well settled that Hegel’s property theory is applicable to IP, even though it is disputed whether Hegel ascribed any special role to IP and whether the theory can “be used to support the proposition that the state must recognize intellectual property claims.”129 128

129

Georg W. F. Hegel, Philosophy of right (1821) para. 43, reprinted in T. M. Knox (ed. and trans.),Hegel’s Philosophy of Rights (London, Oxford, New York: Oxford University Press, 1967 (paperback)), pp. 40–41. The German original, cited from Georg W. F. Hegel, Grundlinien der Philosophie des Rechts, oder, Naturrecht und Staatswissenschaft im Grundrisse (Eduard Gans, ed., Berlin: Humbolt und Duncker, 1854), p. 78: “Geistige Geschictlichkeiten, Wissenschaft, Ku¨nste, selbst Religio¨ses (Predichten, Messen, Gebete, Segen in geweihte Dingen), Erfindungen u.s.f. werden Gegensta¨nde des Vertrags, anerkannten Sachen in Weise des Kaufens, Verkaufens u.s.f gleichgesetzt. Man kann fragen, ob der Ku¨nstler, der Gelehrte, u.s.f in juristischen Besitze seiner Kunst, Wissenschaft, seines Fa¨higkeit, eine Predicht zu halten, Messe zu lesen u.s.w. sei, d.i. ob vergleichten Gegensta¨nde Sachen segen. Man wird Austand nehmen, solche Geschichtlichkeiten, Kentniße, Fa¨higkeiten u.s.f. Sachen zu nennen, da u¨ber vergleichen Besitz eines Seits als u¨ber Sachen verhandelt und kontrahiert wird, er anderer Seits aber ein Inneres und Geistiges ist . . . Kentniße, Wissenschaften, Talente u.s.f. sind freilich dem freien Geiste eigen und ein Innerliches derselben, nicht ein Neuerliches, aber ebenso sehr er ihnnen durch die A¨ußerung ein a¨ußerliches Dasein geben und sie vera¨ußern . . . wodurch sie unter die Bestimmung von Sachen gesetzt werden. Sie sind also nicht zuerst ein Unmittelbares, sondern werden es erst durch die Vermittlung des Geistes, der sein Inneres zu Unmittelbarkeit und A¨ußerlichkeit herabsetzt.” Jeanne L. Schroeder, “Unnatural Rights: Hegel and Intellectual Property” (2006) 60 University of Miami Law Review 453–503, 454.

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The Kantian and Hegelian property theories have been further refined and modernized in contemporary literature.130 Hegel, like Kant, considered a person to be “an abstract autonomous entity capable of holding rights, a device for abstracting universal principles and hence by definition devoid of individuating characteristics.”131 This is said to be in contrast to the “intuitive view of property for personhood,” which is described as “wholly subjective: self-identification through objects varies from person to person.”132 Therefore, it is held, “[t]he intuitive personhood perspective on property is not equivalent to Hegelian personality theory, because that perspective incorporates the attributes of personhood that Hegel initially assumed away.”133 The intuitive personhood perspective implies the following: Most people possess objects they feel are almost part of themselves. These objects are closely bound up with personhood because they are part of the way we constitute ourselves as continuing personal entities in the world. They may be as different as people are different, but some common examples might be a wedding ring, a portrait, an heirloom, or a house . . . [A]n object is closely related to one’s personhood if its loss causes pain that cannot be relieved by the object’s replacement.134

On this basis, a distinction is made between “personal property” and “fungible property”: whereas personal property is bound up with a person, fungible property is property that can be substituted.135 The distinction is supposed to have legal implications.136 As long as both property in tangibles and intellectual property are rooted in the idea that they are objects of the owner’s personality or personhood, it may make sense to speak about property in both contexts. However, perhaps even more so than with utilitarian property theories and the labor idea, there may be considerable differences between various IP rights as regards the applicability of the personality and personhood ideas. Thus, it has been pointed out that even though “[p]oems, stories, novels, and musical works are clearly receptacles for personality . . . [m]ore difficult problems for the personality justification are posed by copyrightable computer software and other technological categories of intellectual property: patents, microchip 130

131

132 134 135 136

See, in particular, Margaret Jane Radin, “Property and Personhood” (1982) 34 Stanford Law Review 957–1015. Radin, “Property and Personhood,” 971, with reference to Hegel, Philosophy of Right, paras. 35, 35 R, and 36. Radin, “Property and Personhood,” 961. 133 Radin, “Property and Personhood,” 977. Radin, “Property and Personhood,” 959. Radin, “Property and Personhood,” 986–988 on the so-called personhood dichotomy. Radin, “Property and Personhood,” 991 et seq.

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masks, and engineering trade secrets.”137 At the same time, some hold it to be “an oversimplification to think that some genres of intellectual property cannot carry personality. This oversimplification avoids the true issue of the constraints of the economy, efficiency and physical environment which limit the range of personal expression.” The point is rather that the creative process is subject to external constraints and the more external constraints, “the less apparent personality is in the creation. At some point these constraints on a particular form of intellectual property may be too great to permit meaningful expression of personality.”138 As far as the distinction between personal property and fungible property is concerned, applying the distinction to intellectual property may imply that some IP, typically copyright-protected works, is classified as personal property, while other types of IP are considered fungible property. A critique that has been raised against the personality and personhood theories, and which is also relevant to the theories applied to IP, is that even though they may provide a general justification for private property, they fail to specify the further consequences. Hegel’s personality theory, it has been held, did not identify the types of property right the State ought to recognize.139 An objection against the more modernized personhood theory is that it does not necessarily explain why objects that are constitutive of personal identity should enjoy greater legal protection than those that are not or why such objects should be subject to “commodification.”140 The further implications of this justification will be discussed in Chapter 5 (Section A3).

D OTHER IDEAS

The previously discussed ideas may be considered the major justifications for property in general, and IP more specifically, all of which have their obvious insufficiencies. There are certainly other ideas or alternative approaches. Here, I shall briefly map out a selection of them. One alternative approach is the idea of human flourishing, which may be rooted in Aristotle’s famous statement that “man is by nature a political animal.”141 This means that humans are social creatures who choose to live with others and that this is good for us. The ultimate end of the good human 137 139 140

141

Hughes, “The Philosophy of IP,” 340–341. 138 Hughes, “The Philosophy of IP,” 342–343. Schroeder, “Unnatural Rights,” 454. See Stephen Schnably, “Property and Pragmatism: A Critique of Radin’s Theory of Property and Personhood” (1993) 45 Stanford Law Review 347–407, 357. Aristotle, Politics (trans. with commentaries by Hippocrates G. Apostle & Lloyd P. Gerson. Grinell, IO: The Peripatetic Press, 1986) A 2 1253a2-3, p. 18.

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life is happiness (eudaimonia) or flourishing. Every other good is sought because it is part of or leads to happiness. Activities make use of this function that distinguishes humans from other species. A system of private property is partly favored on grounds that resemble those of the utilitarian property justification: private property creates incentives for individuals to take better care of what they own than they would if resources were communally owned.142 Private property is also partly grounded in the idea that it promotes friendship and facilitates the exercise of virtues such as generosity and moderation.143 By this, Aristotle “means to say that the possibility of generosity depends upon the existence of some degree of private rights. Generosity presupposes a voluntary act of sharing so that the owner must willingly transfer to someone else the power to use and enjoy the resource.”144 The approach is concerned with “the individual owner’s social-responsibility and obligation.” The owner must “contribute to the redistribution of wealth . . . for the sake of equality of welfare.” The L&E version of utilitarianism fails to take this sufficiently into account.145 Thus, the Aristotelian approach provides “a helpful framework for weighing the many tangled considerations raised by intellectual property law where the answers seem less clear cut.”146 The (neo-)Aristotelian idea of human flourishing has a plural dimension, in that it is built around plural and incommensurable moral values, in contrast to the utilitarian property theory that is based on a single foundational moral value.147 Pluralistic approaches to the justification of property and IP need not, however, be based on such grounds. Instead, pluralism may simply follow from recognition of the insufficiencies of other justification grounds.148 142

143

144 145

146

147 148

Aristotle, Politics, A 5 1263a26-27, p. 44: “for property should be in some respect common, but in general private. For, when each attends to his own property, men will not complain against one another [in matters of property], and they will produce more since each will be paying special attention to what he regards as being his own.” Aristotle, Politics, A 5 1263a28-29, p. 44: “and because of virtue, the use of property will be according to the proverb ‘common are the possessions of friends’” and A 5 1263b12-14, p. 44: “generosity . . . is concerned with how property should be used . . . seeing that the function of generosity depends on the use of [one’s own] property.” Alexander & Pen˜alvin, An Introduction to Property Theory, pp. 83–84. See Gregory S. Alexander, “The Social Obligation Norm in American Property Law” (2009) 94 Cornell Law Review 745–819, 753. Alexander & Pen˜alvin, An Introduction to Property Theory, p. 201. Compare also the “social planning theory” presented in Fisher, “Theories of IP,” 192–194. See Alexander & Pen˜alvin, An Introduction to Property Theory, pp. 97–101. See, for example, Munzer, A Theory of Property, p. 3; D. B. Resnik, “A Pluralistic Account of Intellectual Property” (2003), 46 Journal of Business Ethics 319–335, 330 et seq. The same approach also follows de facto from McGowan, “Copyright Nonconsequentialism” and Merges, Justifying Intellectual Property, pp. 1–27 (chap. 1) and pp. 139–191 (chap. 5). See also Fisher, “Theories of IP,” 192 et seq., regarding the “social planning theory.”

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Realizing that property in tangibles and different kinds of IP may be justified using a mix of utilitarian, economic, labor-based, or personality-based reasons, guidelines or principles may be necessary to clarify which considerations take priority in cases of conflict.149 Here, we will not go further into this question. We will discuss the implications of the various justifications for property and IP in Chapter 5.

149

See, for example, Munzer, A Theory of Property, pp. 292–314, for an attempt to set up guidelines under a pluralistic approach consisting of utility/efficiency, justice/equality, and labor/desert.

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3 Property in the Structuring of Rights

INTRODUCTION

Although, as pointed out in the previous chapter, the property metaphor is often used in justifying intellectual property (IP) rights, the structuring of the rights is perhaps what is normally targeted when thinking about IP as property. In writings about IP as property, these two aspects (and even the third that I will return to in Chapter 4 – property as assets) are often interlinked. The purpose of separating these three aspects is to underscore that, legally, they do not go hand in hand. The interlinking of the different aspects may also lead one to draw unfounded conclusions. On the face of it, there are indeed great similarities between property in tangibles and IP in the way that the rights are constructed. In a normal structure, IP legislation grants the right holder the exclusive right to use or exploit the relevant subject matter, be it a work (copyright), an invention (patents), a trademark, a design, and so on. In a structural sense, this seems to closely resemble property in tangibles, where the owner holds exclusive rights to use or exploit a tangible object. Protection of trade secrets is a case apart that will be discussed in Section C. Generalizing across different kinds of intellectual property rights (IPRs), normal and seemingly generally accepted terminology refers to IP rights as rights in intangibles as opposed to real property in tangibles. In using this terminology, the structural resemblance of IP with property in tangibles seems obvious, the only important difference being that the former relates to intangibles – things without physical properties that we cannot touch. As always, however, things are not quite as simple as they appear. In much the same way as for the justification of property and IP rights, there has been a vast discussion about the nature of such rights and their true characteristics. When discussing the structuring of IP rights in light of the use of the property 42 Downloaded from https://www.cambridge.org/core. Nottingham Trent University, on 28 Aug 2019 at 15:38:45, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/9781139680318.004

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metaphor to refer to such rights, it is necessary to consider some of the much debated issues, including the role of the object (the “thingness”) in property law. Less debated perhaps, but in this context no less important, is the concept of an intangible and the characteristics of IPRs in this respect. Both issues are of utmost importance when discussing the structure of IP rights in light of the application of the property metaphor to IP. Since this analysis aims, above all, to warn against the drawing of unfounded conclusions, the structuring of rights presented in this chapter will be entirely descriptive. One of the problems with discussions about the structural aspects of property and IP is that they easily veer toward the normative. In this book, the descriptive and the normative will be separated, with the question of the (normative) implications and conclusions to be drawn from the structuring of rights discussed in Chapter 6.

A THE ROLE OF THINGNESS IN PROPERTY

The traditional conception of property rights is that they relate to a “thing” – they are rights in rem. This conception stems from Roman law and its distinction between actiones in rem – actions related to a thing (res) and opposable to everybody – and actiones in personam, which are related to obligations and therefore initiated only against the debtor of the obligation.1 The conception has been challenged in the twentieth and twenty-first centuries, in particular in the United States, not least due to Hohfeld’s understanding of the distinction. In line with his general conception of symmetry between rights and duties, Hohfeld considered both rights in rem and rights in personam as relations between persons. As a consequence, the former was not considered a “right against a thing.”2 Instead, Hohfeld relabeled the rights in personam, paucital rights (or claims), and rights in rem, multital rights (or claims): A paucital right, or claim, (right in personam) is either a unique right residing in a person (or group of persons) and availing against a single person (or single group of persons); or else it is one of a few fundamentally similar, yet separate, 1

2

See further W.W. Buckland, A Manual of Roman Private Law (Cambridge: Cambridge University Press, 1947), pp. 107–117. See also Samuel, “The Many Dimensions of Property” and, specifically related to the property IP discourse, Boudewijn Bouckaert, “What Is Property?” (1990) 13 Harvard Journal of Law & Public Policy 775–816, 782–783. See Wesley N. Hohfeld, “Fundamental Legal Conceptions as Applied in Legal Reasoning” (1917) 26 Yale Law Journal 710–770, in particular 720–721. The article must be read in close connection with Hohfeld’s almost identically titled previous article, Wesley N. Hohfeld, “Some Fundamental Legal Conceptions as Applied in Judicial Reasoning” (1913) 23 Yale Law Journal 16–59.

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Property Aspects of Intellectual Property rights availing respectively against a few definite persons. A multital right, or claim, (right in rem) is always one of a large class of fundamentally similar yet separate rights, actual and potential, residing in a single person (or single group of persons) but availing respectively against persons constituting a very large and indefinite class of people.3

According to this scheme, a property right in tangibles is considered a multital right which gives the owner(s) a multitude of separate rights against an indefinite number of people. Correspondingly, intellectual property rights would also be multital rights under this scheme.4 Hohfeld’s approach has had great influence on US property theory and the so-called bundle-of-sticks approach, implying that property is not a right to a thing but a bundle of legal relations between persons.5 From an outsider’s (i.e., non-US legal scholar’s) point of view, this conception may appear puzzling for a number of reasons. However, it can be explained, among other things, by its normative value and the introduction of social dimensions into the concept of property.6 If we remain at the descriptive level, it is clear that property rights, and correlative duties,7 are between persons and not between a person and a thing. All private legal relations are between persons, as a claim may only be made against a (legal) person and not against a piece of land or a chattel.8 Thus, the claimant will be the owner of a right or a title to the piece of land and the defender the alleged infringer. Equally obvious, from a descriptive point of view, is that the content of a claim concerning property in tangibles cannot reasonably be expressed without reference to the piece of land or the chattel in question. Thus, A’s claim against B for trespassing on his 3 4

5

6

7

8

Hohfeld, “Fundamental Legal Conceptions,” 718. Hohfeld, “Fundamental Legal Conceptions,” 733: “A Multital right, or claim (right in rem) is not always one relating to a thing, i.e,. a tangible object . . . The term right in rem (multital right) is so generic in its denotation as to include . . . [m]ultital rights (or claims) relating neither to definite tangible object nor to (tangible) person, e.g., at patentee’s right or claim, that any ordinary person shall not manufacture articles covered by the patent.” For a relatively recent account, and a defense, of the bundle-of-sticks approach, see, for example, Stephen R. Munzer, “A Bundle Theorist Holds on to His Collection of Sticks” (2011) 8 Econ Journal Watch 265–273. See, for example, Stephen R. Munzer, “Property as Social Relations,” in Munzer (ed.), New Essays in the Legal and Political Theory of Property (Cambridge: Cambridge University Press, 2001) pp. 36–75, with references to among others Felix S. Cohen, “Dialogue on Private Property” (1954) 9 Rutgers Law Review 357–387; and Robert L. Hale, “Bargaining, Duress and Economic Liberty” (1943) 43 Columbia Law Review 603–628. Following the terminology developed by Hohfeld, “Some Fundamental Legal Conceptions,” 30 et seq., where rights and duties are considered as “jural correlatives.” Compare Alf Ross, On Law and Justice (London: Steven & Sons, 1st ed., 1958, 2nd impr. 1974), pp. 190–192.

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property must necessarily refer to the piece of land owned by A. Without this, bringing the claim would be unrealistic. The allegation that a central feature of property rights is the hiding of information, in the sense that one does not need to have knowledge about the owner’s identity to know that one should not trespass,9 is difficult to dispute. On the other hand, it is inconceivable that the legal relation between the owner and the trespasser can be described in any other way than through reference to the object to which the property rights apply. Thus, from a merely descriptive point of view, it is hard to reject the in rem aspect of property in tangibles in the formal sense (i.e., that the legal relations relate to a tangible object). However, there is not necessarily a contradiction between this view and the personal relation perspective.10 The fact that the concept of a property right to a thing may, at least in certain legal jurisdictions, lead to claims of a Blackstonian property concept of “absolute dominion” explains why the emphasis might be on legal relations between persons and not on the object of these relations. In addition, as emphasized in Scandinavian legal discourse, drawing material conclusions from the distinction between rights in rem and rights in personam may easily lead to dubious legal results, not least in dynamic situations where rights to a thing are being transferred from one person to another.11 If one keeps the distinction at the descriptive level, however, describing property rights as rights in rem, related to a thing, and against an indefinite class of persons, undoubtedly seems more illuminating than the Hohfeldian dichotomy between paucital and multital claims.12 Moreover, as we will see, the conception also helps reveal important structural differences between property in tangibles and intellectual property. With the view that property is a composite of legal relations that hold between persons, and only incidentally involves a thing, the structural differences would be far less evident.13 Perhaps this explains why the legal realists in the 9

10

11

12

13

See, for example, Smith, “Emergent Property,” p. 336, with reference to Penner, The Idea of Property in Law, pp. 75–76. Compare Munzer, A Theory of Property, p. 17: “It is perfectly sound to think of property both as things (the popular conception) and as relations among persons (the sophisticated conception) – provided that the context makes clear what conception is meant.” I prefer to consider the conceptions – or perspectives – as complementary and at the same time avoid terms implying that they are measured in degrees of sophistication. See Ross, On Law and Justice, pp. 196–201. Compare also Hohfeld, “Fundamental Legal Conceptions,” 713–714. See also Andreas Rahmatian, “Intellectual Property and the Concept of Dematerialised Property,” in Susan Bright (ed.), Modern Studies in Property Law, Vol. 6 (Oxford: Hart Publishing, 2011), pp. 361–383 (chap. 17), p. 365. Compare Smith, “Intellectual Property as Property,” 1756: “By emphasizing that property rights hold between persons and only incidentally involve things, the realists were drawn to a view of property resembling unfair competition law.”

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United States have had few problems with classifying IP as property rights. Nonetheless, useful insights into the differences between property in tangibles and intellectual property easily get lost with this approach. In holding on to the notion that the in rem aspect of property implies a relation between persons and a thing, however, the structural differences between property in tangibles and intellectual property become more visible. Consequently, our analysis of the structuring of IP rights by reference to the property metaphor takes the concept of property in tangibles as a right to a thing – a right in rem – as a starting point. At the same time, it is underscored that this conception is embraced only at the descriptive level and implies no normative stand on the discussion in US property theory about the usefulness of the bundle-of-sticks approach to property. Admitting that property rights in tangibles should be described as “rights to things” does not, at this stage, mean that the same goes for IP rights. As pointed out in the introduction to this chapter, there are structural similarities between property in tangibles and intellectual property, on the face of it, but a deeper analysis of the structural relationship is needed. This will include discussion of the very common, but hardly illuminating, notion of IP as rights in intangibles.

B THE NOTION OF IP AS INTANGIBLES

1 General Remarks As pointed out, it is common to group IP as intangibles as opposed to tangibles.14 The notion of intangibles implies something that cannot be touched, but otherwise the concept is rather vague. In property theories, the notion serves to group legal positions other than property in tangibles under the property umbrella. In this respect, the notion is unhelpful in unraveling the structural particularities of IP rights. This also applies to the relating of IP to a thing or an object with respect to its classification as rights in rem. While the thing relating to tangibles is self-explanatory in its physical features, the

14

The distinction between tangibles (corporeals) and intangibles (incorporeals) has long historical roots and is clearly visible, for example, in William Blackstone’s writings, see Blackstone, Commentaries on the Laws of England, p. 10, when discussing corporeal and incorporeal hereditaments, stating that “[h]ereditaments . . . are of two kinds, corporeal and incorporeal. Corporeal consist of such as affect the senses, such as may be seen and handled by the body; incorporeal are not the objects of sensation, can neither be seen or handled; are creatures of the mind and exist only in contemplation.”

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thing inherent in IP rights is not, and the reference to intangibles does not help. Concepts such as “a chunk of the world,”15 “information,”16 or “resource”17 are also too vague to explain the particularities of the structure of IP rights. Such concepts may be useful to analyze the economic aspects of IP rights as well as to underscore structural similarities with property in tangibles, which we will come back to, but are insufficient to reveal important structural differences between the two. The same goes for the notion that the object or the thing that IP is related to is its economic value. This notion is circular since the rights themselves create the economic value of IPRs. And obviously, it makes little sense to consider the rights as the object of the rights.18 This does not mean that it is senseless to relate the property metaphor to IP rights – only that this notion is not helpful in revealing the specific structure of IPRs and thus explaining the structural aspects of IP as property.19 Rather, the economic value of IPRs should be considered an aspect in its own right, to be discussed further in Chapters 4 and 7.

2 Revealing the Nature of Intangible IP: The Scandinavian Post–WWII Discussion and Beyond The notion of IP as an intangible good was much debated in Scandinavian legal scholarship during the period 1945–1970. The German scholar Josef Kohler’s so-called Immaterialgu¨tertheorie (Immaterial Goods Theory) – which had a great impact on European and Scandinavian legal scholarship

15 16

17

18

19

See Smith, “Property as the Law of Things,” 1703. See, for example, Jacqueline Lipton, “Information Property: Rights and Responsibility” (2004) 56 Florida Law Review 135–194, in particular 140–141. See, for example, on a general level, David Lametti, “The Concept of Property: Relations Through Objects of Social Wealth,” 53 University of Toronto Law Journal 325–378, 334. Thus, the terminology used by Michael A. Heller, “The Boundaries of Private Property” (1999) 108 Yale Law Journal 1163–1223, where property entitlements (e.g., fee simple) are referred to as “legal things” (1176), is confusing, because the term “thing,” in a property context, necessarily refers to the object of the rights (e.g., Blackacre). When using the term “things” in relation to the rights as such (the fee simple), the same term is used in a quite different context, and adding “legal” to “thing” does not reduce the confusion this may create. Here the term “legal object” is used in a different meaning, see Section D. The same ambiguity exists in Merges, Justifying Intellectual Property, p. 5. When referring to “[t]he most important core principle of the institution of private property” as being the fact that “it assigns to individual people control over individual assets,” he apparently refers – by using the word “assets” – to both the “object” of the property rights and the rights as objects, without distinguishing between the two. In this book, the word “asset” is exclusively used to designate the latter.

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in the first half of the twentieth century – provided the background to these debates.20 The notion of intangible or immaterial goods was attacked by the Danish legal realist (in the Scandinavian – not the US – sense) Alf Ross, in a 1945 recension, in particular in view of the concept of the work in copyright law.21 Ross argued that the notion of a work as an intangible good with characteristics similar to those of a tangible good – except that it is intangible – was a fiction, because the work as such does not exist other than in people’s minds. The term work, Ross held, was only an abstraction designating the relative unity of the content of ideas in a series of experiences. To dispose of or exploit a work was, in a concrete sense, unimaginable, according to Ross. The reality was that certain embodiments, such as copies, were apt to evoke the experiences, or sensations, of the content of the ideas that are designated the work.22 Thus, copyright, Ross held, is not object centered in the same manner as property in tangibles. That a right has an object, he said, means that conduct that the law of order prescribes to the holder of the right is described as related to the exploitation of this object. This structure is absent in copyright according to Ross. What is present is the general scheme for a rights structure that leads to the search for such an object and what is found is the work as an intangible (immaterial) good. The real context, however, is that the author is given the power to control the material conditions for experiencing the work.23 Ross’s critique of the notion of a work as an intangible good sparked intense debate in the Scandinavian literature about the concept of the work as well as the function of the object in IP law. Although the debate revealed different approaches and viewpoints, Ross’s attack on the concept of the work as a unitary concept that serves as an intangible object similar to tangibles for “real property” was generally embraced and extended to other kinds of IP. This observation touches on an important point concerning the abstractions that, in the legislative acts of most IP regimes, appear as the objects of the rights: works, inventions, trademarks, designs, and so on. Consider – in accordance 20

21 22 23

See, for example, Josef Kohler, Urheberrecht an Schriftwerken und Verlagsrecht (Stuttgart: Verlag von Ferdinand Enke, 1907, new ed. Scienta Verlag Aalen, 1980). Kohler’s influence in continental Europe is still great, but the notion has recently been questioned by the German scholar Alexander Peukert on premises similar to those that were the basis for the Scandinavian discussion, although independently developed. Cf. Alexander Peukert, “Rethinking the Ontology of IP” (two unpublished drafts of June 2016 and May 2017, hereinafter referred to as Peukert, “Rethinking the Ontology of IP 2016” and Peukert, “Rethinking the Ontology of IP 2017,” respectively, cited with the permission of the author). Alf Ross, “Ophavsrettens grundbegreber” (1945) 58 Tidsskrift for rettsvitenskap 321–358. Ross, “Ophavsrettens grundbegreber,” 344–345. Ross, “Ophavsrettens grundbegreber,” 349–350.

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with the example given by Koktvedgaard – that the letter M stands for the creator A’s creation and that the creation is originally embodied in embodiment Ma (original). The designations M1a, M2a, and M3a stand for the creator’s subsequent embodiments (copies). The problem appears when alleged infringer B creates Mb. The general method of IP law is to compare Ma with Mb. Now, it is clear that the object of IP law cannot be M1 (given the existence of M2 and M3), so the abstractions – like the concept of a work in copyright – must cover what is common to the embodiments, designated W. So, when deciding whether Mb is an infringement, the question is whether Mb has the same qualities as Wa. The point is that the concept of an intangible good goes even further in that it does not leave W as the abstract classification of the Ms, but pretends that W is what is protected – the intangible good. This is the fiction, according to the Scandinavian legal realists. W does not exist in the real world; it is only an abstraction of the embodiments subject to protection.24 The problem of abstraction levels in IP law has also been discussed elsewhere,25 as has the ontology of IP,26 but outside of Scandinavia it is still normal (in legal terms) to retain the concept of IP rights as rights to intangible goods or objects.27 As the German legal scholar Alexander Peukert recently pointed out, however, in line with the observations in Scandinavian legal doctrine, “[t]he abstract IP object . . . only exists as a term in our language.”28 Legal practice is different. The rubrics of work, invention, trademarks, “designs,” and so on refer in reality to physical – and tangible – phenomena, in that what is protected is not what is inside the human mind but something that finds an expression, in one way or another, in the “outside” world. What is special about IP, however, compared to property in tangibles, is that it does not evolve around a particular extract of the physical world but relates to infinite physical phenomena. In the words of Koktvedgaard: The fact that [IP] takes as its point of departure an extract of the external physical world is not tantamount to it being “centered” around this point of 24 25 26

27

28

Koktvedgaard, Konkurrenceprægede immaterialretspositioner, p. 117. See further Chapter 6 (Section C). See, for example, Michael Wreen, “The Ontology of Intellectual Property” (2010) 93 The Monist 443–449; and James Wilson, “Ontology and the Regulation of Intellectual Property” (2010) 93 The Monist 450–463. See, however, the recent law and philosophy study by Niels van Dijk, Grounds of the Immaterial. A Conflict Based Approach to Intellectual Rights (Cheltenham and Northampton, MA: Edward Elgar Publishing, 2017), drawing also on the works of Ludwig Wittgenstein, see in particular pp. 25–30 and 33–36. Peukert, “Rethinking the Ontology of IP 2016,” p. 7.

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Property Aspects of Intellectual Property departure. Here we are faced with the most fascinating trait of the structure of [IP]. The scope of each single right is not limited to this specific extract of the external physical world that forms part of its individual point of departure. The scope is – correctly considered – the whole universe.29

Peukert’s description of IP practice may serve to concretize this idea: The practice starts with the creation of an artifact, for example a text, a product or process that solves of a technical problem, an industrial or handicraft article with a particular appearance, a sign that is capable of distinguishing products, etc. The artifact first exists in the mind of the author/inventor/designer etc. She may then write it down, create another, in particular digital two- or three-dimensional model or perform it instantaneously. At this or a later point in time, the first exemplar or copies of it receive a name or a number. This act of naming may be realized by the creator, but it is also often executed by third parties, e.g. patent offices, producers, or even the public. Already this nomenclature can be controversial if the parties involved do not agree on a title and/or the power to name the artifact is contested. In other cases, it is disputed which exemplar of, e.g., a painting or a movie shall be considered the original. Even more often it is doubtful whether modified versions, e.g. shortened or amended texts, still deserve the name of the original. Whether that is the case regularly depends upon a comparison between the concrete copy/ performance and the original. Again, however, the proper reference point, the criteria governing the comparison and the necessary degree of similarity are subject to debate.30

Thus, in line with the observation made in the Scandinavian discussion about the concept of the work and Peukert’s elaboration on IP practice, it should be underscored that the method for asserting the scope of the rights in most IP fields is totally different from that used with property in tangibles. With IP, one has to (1) identify the initial achievement (creation/artifact); (2) acknowledge that the scope of protection is not limited to the initial achievement; and (3) carry out a comparison between the right holder’s achievements and others’ 29

30

Koktvedgaard, Konkurrenceprægede immaterialretspositioner, p.118 (my own translation from Danish). Compare also Drahos, A Philosophy of Intellectual Property, p. 155. Peukert, “Rethinking the Ontology of IP 2016,” pp. 7–8. Cf. also Peukert, “Rethinking the Ontology of IP 2017” pp. 5–6, where he distinguishes between “the creation of a new brute fact (= an artifact), for example, the first or an updated version of text, a new formula, a drawing, software, a picture, video, a phonogram, a database, a chemical compound, a digital or realworld model of a machine or other good, etc.,” referred to as the “Master Artifact,” and “Secondary Artifacts,” which “can be copies of the Master Artifact or independently created artifacts that nevertheless share enough relevant properties with the Master Artifact so as to merit a common denominator.”

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achievements on the basis of certain legal doctrines, such as substantial similarity (copyright), equivalents (patents), likelihood of confusion (trademarks), and so on.31 The method is inherent in the abstractions used in IP law, for which there are historical reasons.32 This method is difficult to compare with assessing the boundaries of physical property. Gordon’s observation that “copyright provides its own boundaries which, by and large, substitute well for physical boundaries,”33 mentioning that the US copyright requirement that the work be fixated as one of the main features in this respect is far too rudimentary to explain the structure of copyright in a satisfactory way. The notion of fixation is only one point of departure.34 The idea that assessing the boundaries of IP is a process comparable to assessing the physical boundaries of a tangible good is obviously influenced by the notion of IP as an intangible object. Here, I suggest instead that no such abstract object analogous to concrete objects exists in a legal sense, since the terms to which the (exclusive) rights refer are mere abstractions that prescribe the legal method for determining the scope of IP rights.35 As will be discussed in further detail in Chapter 6, abandoning the notion of an intangible object helps one appreciate the structural differences between property in tangibles and IP. Underscoring such differences does not, however, imply that there are not similarities as well. We will return to these in Section D.

C THE STRUCTURAL PARTICULARITIES OF VARIOUS IP RIGHTS

As much as there are structural differences between property in tangibles and IP, there are also obvious structural variations between the various kinds of IP. The common method for determining the scope of rights in IP law begins with the identification of an achievement (creation, artifact) that serves as a starting point for the linguistic abstractions to which the exclusive rights are tied. 31

32

33 34 35

Gunnar Karnell, “Upphovsra¨ttens verksbegrepp” (1968) 81 Tidsskrift for rettsvitenskap 401–444, 402–403, distinguishes, in relation to the concept of work in copyright, between “primary occurrences” – something that someone can invoke against others as carriers of factual bases for copyright claims – and “secondary occurrences” – occurrences that are subject to comparisons with the primary occurrences and that cannot be invoked against the author’s right to the primary occurrence. Referring to the three stages here, (1) and (2) represent the primary occurrence and (3) the secondary occurrence, albeit all three stages, and consequently both the primary and the secondary occurrences, are parts of the concept of a “work.” Cf. Peukert, “Rethinking the Ontology 2016,” pp. 8–14; Peukert “Rethinking the Ontology of IP 2017,” pp. 6–8, elaborating on the historical move from the granting of privileges to the development of abstractions in IP law. Gordon, “An Inquiry into the Merits of Copyright,” 1380. See further Chapter 6 (Section B). Compare Drahos, A Philosophy of Intellectual Property, p. 4 and pp. 145–164.

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The role of these achievements may vary. In this context, the distinction set out in Chapter 1 between creational and business-related IP is relevant. With creational IP, such as copyright and neighboring rights, patents, designs, and so on, the initial achievement (or creation) may be directly linked to justifications for the rights. Irrespective of whether the justifications are rooted in the utilitarian rationale, the labor theory, or personality theories, what creational IPs aim to do is to give protection to the output of specific acts of creation. These acts of creation are the starting point for determining the concepts of works, inventions, design, and so on. In this respect, creational IPs have features in common with property in tangibles, in that there is a direct link between what is protected and the justification for the protection. With business-related IP, as with rights to trademarks and trade names, the picture is different.36 The achievement subject to trademark protection is the creation of the trademark itself. The justification for trademark protection is, however, not linked to this achievement but rather to the underlying economic value that stems from the fact that the public associate the undertaking (business) with the trademark, which creates demand for the product. The same goes for the protection of business names. The utilitarian-economic account for trademark protection, implying that such protection is needed to hold search costs for products down,37 presupposes that the justification lies in the production and distribution of products (in the wide sense, including services) and not the creation of marks, which only serves as a tool in this respect. The same goes for the incentive function linked to the maintaining of quality of the products and the safeguarding of the investment and advertising functions of trademarks.38 Similarly, allegations that Lockean labor ideas are “consistent with the principles of trademark” have been put forward on the basis that “a potential mark owner must work to create an association between itself and the mark to gain protection in the mark.”39 Hence, the justification lies in the work connected to the creation of an association and not in the achievement subject to IP protection (i.e., the creation of the trademark). The main point is in any event that IP protection does not relate to a specific component of the physical world but is connected to an achievement, which may or may not be directly linked to the justification for protection.40 The method for determining the scope of protection is normally determined 36

37 39 40

Compare Rahmatian “Intellectual Property and the Concept of Dematerialised Property,” 377–378. See Chapter 2 (Section A.2). 38 See Chapter 2 (Section A.2). Dill, “Possessing Trademarks,” 383. Compare the phrasing in Shyamkrishna Balganesh, “Alienability and Copyright Law” (2013), in Howe & Griffiths (eds.), Concepts of Property in Intellectual Property Law, pp. 161–182

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by way of linguistic abstractions (work, invention, design, trademark) with relational content in the sense that the scope of protection cannot be precisely pre-defined but will depend on concrete situations of assessments and comparisons.41 This is an important trait that sheds light on the more general and imprecise observation that the object of IPRs is intangible and consists of information and is also what justifies grouping together rights related to quite different phenomena such as artistic and aesthetic works (copyright), technical inventions (patents), signs or names that represent businesses (trademarks), plant varieties, industrial designs, and so on. As will be further demonstrated in Chapter 6, this trait is closely tied to differences between IP and property in tangibles with regard to the justifications for the rights. Having said this, some types of rights that are normally grouped as IPRs, including certain neighboring rights to copyright, evolve around quite concrete phenomena. Performers’ rights to public performances, phonogram producers’ rights to their phonograms, and broadcasters’ rights to their broadcasts,42 for example, are tied to the specific performance, phonogram, and broadcast, respectively, rather than being tied – like the concept of work – to imitations or adaptations of the performance, phonogram, or broadcast. This certainly does not mean that determining the scope of such rights is without problems. Here, it suffices to mention the German “Metall auf Metall” case regarding the question of whether a two-second sample of a phonogram infringes the phonogram producer’s right. The case went on for more than a decade and finally ended up in the Court of Justice of the European Union (CJEU).43 But the so-called abstractions levels that are typical of IP protection, and which we will discuss further in Chapter 6 (Section C), are to a large extent absent for these kinds of rights.

41

42

43

(chap. 7), p. 179: “Copyright’s entitlement is hardly about a “thing,” but is instead about actions that indirectly relate to specified subject matter.” The differences between the various “abstractions,” notably in copyright, patent, and trademark law, will be further discussed in Chapter 6 (Section C). See, at the international level, the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, October 26, 1961, 496 U.N.T.S 43, in force May 18, 1964 and WIPO Performances and Phonograms Treaty December 20, 1996, 2186 U.N.T.S. 203, in force May 20, 2002 [hereinafter WPPT]. See the decisions of the German Federal Supreme Court (BGH) in case I ZR-112/06, 62 Gewerblicher Rechtsschutz und Urheberrecht 2009, 403 and I ZR 182/11, 66 Gewerblicher Rechtsschtuz und Urheberrecht 2013, 614; the decision of the German Constitutional Court (BvGH) in case 1 BvR 1585/13, 48 International Review of Intellectual Property and Competition Law 2017, 317 (English trans.); the decision of the BGH in case I ZR-115/16, 1 June 2017, which asked the CJEU about the interpretation of certain provisions in various EU Directives (case C-476/17), including the protection of property in the EU Charter of Fundamental Rights, Article 17(2); see Chapter 7 (Section D).

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This is also the case for the legal protection of trade secrets, which concerns only that information that stays with the holder of the trade secrets and entails no protection against imitation and so on. There are, however, other fundamental differences between trade secrets protection and regular IPRs, in that the former is based on disclosure rather than exclusivity: protection is dependent on the right holder keeping the information secret rather than having exclusive rights to the information in the true sense. That is, if the right holder discloses the information, the legal protection ceases, in contrast to other kinds of IP, which are based on the fact that third parties may have access to the information but are not allowed to use it, due to the exclusive rights. On the other hand, as long as breaches of confidentiality are sanctioned under trade secrets law, the right to exclude others is certainly an element inherent in that field of law. Symptomatically, Article 4(1) of the EU Trade Secrets Directive obliges Member States to “ensure that trade secret holders are entitled to apply for the measures, procedures and remedies provided for . . . in order to prevent, or obtain redress for, the unlawful acquisition use or disclosure of their trade secrets,” and Article 4(3) specifies the circumstances under which “[t]he use or disclosure of a trade secret shall be considered unlawful whenever carried out, without the consent of the trade secret holder.”44 Since these circumstances are not restricted to situations where there is a contractual obligation not to disclose but also include any situation of unlawful acquisition,45 there is also an element of in rem rights in trade secrets law.46 Still, there are obvious structural differences between trade secrets protection and IPRs based on exclusive rights in relation to abstractions that may justify the IP term not being used in relation to IP. Since trade secrets law nevertheless has some aspects in common with real IP, we continue to include it in the analysis when appropriate. Whether trade secrets should be referred to as property is a different discussion, which depends on the use of the term property47 and

44

45 46

47

Directive (EU) 2016/943 of the European Parliament and of the Council of June 8, 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, OJ 2016 No. L 157, p. 1. Article 4(3)(a), in contrast to (b) and (c). Compare, regarding the US situation, Richard A. Epstein, “The Constitutional Takings of Trade Secrets under the Takings Clause” (2004) 71 University of Chicago Law Review 54–74, 60–61, in response to the allegation by Pamela Samuelson, “Privacy as Intellectual Property” (2000) 52 Stanford Law Review 1125–1173, 1152 fn. 148, that a trade secret right “is not ‘good against the world,’ except insofar as the owner’s power to control the behaviour of those he stands in confidential relations to.” See, for example, the negative attitude in this respect in particular related to British Commonwealth law in Bently, “Trade Secrets: ‘Intellectual Property’ but Not ‘Property’?” concluding that trade secrets are IP but not property.

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will not be discussed further here. Suffice it to say that there are differences with other kinds of IP both with regard to structure and justification.

D THE OBJECT FUNCTION IN IP LAW: DISTINCTION BETWEEN CONCRETE OBJECT AND LEGAL OBJECT (RIGHTS IN REM)

Following up on the previous arguments, we conclude that IP rights are not related to an abstract object analogous to concrete (tangible) objects and that talk about IP as intangibles or intangible objects is likely to conceal the particular structuring of IP rights. A further conclusion that has been drawn from this observation, in particular in the Scandinavian legal doctrine, is that IP rights should not be considered related to an object but “conduct based” – as exclusive rights to conduct oneself in a specific way.48 From a certain perspective this conclusion seems compelling, especially as regards concerns about the normativity of the notion of an abstract IP object. Thus, on the view that IPRs “should be conceptualized in a way that truly reflects their regulatory effects in order to avoid dysfunctionalities and unwanted consequences,” it can be held that “IPRs should be understood as exclusive rights to a certain conduct instead of exclusive rights in a certain object.”49 The normative aspects will be dealt with further in Chapter 6. Keeping the discussion about the structure in IP law to a descriptive level in this chapter, one question that can be raised is whether there are structural similarities between property in tangibles and IPRs that suggest that it makes sense to describe IP as related to an object. In this context, a distinction must be drawn between “concrete objects,” relating to a specific component of the physical world (tangibles) and “legal objects” in the sense of something that the rights are related to.50 When pointing out, in Section A, that property in tangibles, from a descriptive point of view, should be considered as relating to 48

49

50

Koktvedgaard, Konkurrenceprægede immaterialretspositioner, pp. 3–5, 44, and 203–205, considering IP rights as “competition relational legal positions”; Claes Martinson, “Sakra¨tt avseende annat a¨n a¨gendom,” in Go¨ran Lambertz, Stefan Lindskog, & Mikael Mo¨ller (eds.), Festskrift till Torgny Ha˚stad (Uppsala: Iustus, 2011), pp. 529–569, 532–533.Similarly, also Peukert, “Rethinking the Ontology of IP 2016,” pp. 21–23, has expressed a preference for the view that IPRs should be considered as primarily conduct based but suggests that conduct be considered as related to artifacts rather than the fictional abstract object of IP, thus advocating an “artifact-conduct–based” understanding of IP law; cf. Peukert, “Rethinking the Ontology of IP 2017,” pp. 8–10. Peukert, “Rethinking the Ontology of IP 2016,” pp. 21–22, however, with the specification that the conduct should relate to “a concrete artifact” rather than “some abstract ideal subject matter”; cf. Peukert, “Rethinking the Ontology of IP 2017,” p. 8; see also supra fn. 30. Compare Stig Stro¨mholm, Verksbegreppet i upphovsra¨tten (Stockholm: Nordstedt, 1970), p. 151 and Karnell, “Upphovsra¨ttens verkbegrepp,” 419. Compare also Rahmatian,

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a thing, the implication was that of a legal object. The point here is that rights, privileges, and duties concerned with property in tangibles cannot sensibly be described without relating them to the tangible good. This is characteristic of rights in rem. The rights revolve around the res (“thing”). As pointed out by Penner, the power and rights of the right holder, and consequently the nonrights and duties of others, “continue to exist only so long as the res itself does, and only against those who are in actual violation of the right in rem, i.e. wrongfully holding or harming the res.”51 In this respect, similarities between property in tangibles and intellectual property are obvious. Although IPRs cannot be considered as related to abstract objects that are analogous to concrete objects, concepts such as work, inventions, trademarks, and so on serve as designations of the legal objects to which the (exclusive) rights are tied. The very characteristic of the structure of IPRs, compared, for example, with open norms on unfair competition, is that they relate to specific achievements, and the legal protection for these achievements is expressed by way of the said concepts, as outlined in the previous section. This is not to deny the fact that even open norms of unfair competition can be interpreted as related to specific achievements or to deny that there are legal hybrids with both IP and unfair competition characteristics.52 The point is that IPRs, like property in tangibles, are exclusive rights related to something specific and that the content of the norms cannot sensibly be described without reference to this something. This is the feature that characterizes both property in tangibles and IPRs as rights in rem – as rights that can be invoked against an indefinite and unspecified group of persons.

51

52

“Intellectual Property and the Concept of Dematerialised Property,” in particular 368–370 and Andreas Rahmatian, Copyright and Creativity. The Making of Property Rights in Creative Works (Cheltenham UK & Northampton MA: Edward Elgar Publishing, 2011), pp. 10–12 and 13–21. Penner, The Idea of Property in Law, p. 31. Penner draws in his turn on the notion of exigeability explained by Peter Birks, An Introduction to the Law of Restitution (Oxford: Clarendon Press, 1985), pp. 49–50: “[A] right in rem is one whose exigeability is defined by reference to the existence and location of a thing, the res to which it relates. A right in rem cannot survive the extinction of its res . . . If you have wrongfully eaten my cake I can say I have a right in personam against you that you should pay for a cake which I once owned. But I cannot say in the present tense that there is a cake which I still own. [And] a right in rem cannot be exacted from anyone who has not got the res. It is nonsense for me to say, ‘That’s my cake,’ unless I can identify the cake in the hands of my addressee.” See, for example, J. H. Reichman, “Legal Hybrids between the Patent and Copyright Paradigms” (1994) 94 Columbia Law Review 2432–2558; Shyamkrishna Balganesh, “Quasi Property: Like, but Not Quite Property” (2012) 160 University of Pennsylvania Law Review 1889–1925.

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It is important in this regard to distinguish between what we refer to here as concrete objects and legal objects. Rights in rem do not have to be related to concrete objects, but they will relate to a legal object that serves more than mere syntactic functions;53 it is deemed to have some semantics as well. To serve as a legal object, it is not necessary that the content of the object be described in detail, nor that it be subject to concrete dispositions; it is sufficient that it relates to something specific.54 In this context – which we will come back to – words such as information or resource may be used to characterize the legal object, although they are insufficient to explain the structural differences between property in tangibles and IPRs. For example, generally, it can be said that IPRs are (exclusive) rights to information, where information is the common denominator for the content of concepts including work, invention, design, trademark, and so on. In this sense, the legal object may, with Penner, be described as a “monopoly, [insofar as] patents, copyright, trade marks, industrial designs, and so on [are] rights to monopolies.”55 This characterization underscores the fact that, on the one hand, IP rights function as restrictions on competition and, from this perspective, are to some extent compatible with the view that IPRs are exclusive rights to certain behavior.56 On the other hand, as will be discussed further in the following section, the concept of monopoly is problematic with respect to IP. Furthermore, this characterization may be circular in a similar sense to those theories that suggest economic value as the object of IPRs: it is the rights that create the monopoly, and it is awkward to consider the rights as the object of the rights. The main point in any case is that from a merely descriptive point of view, IPRs may be considered to be related to a legal object. At the same time, it must be underscored that this does not mean that IPRs have an object in the

53

54 55

56

Compare Koktvedgaard, Konkurrenceprægede immaterialretspositioner, pp. 86–88, distinguishing between object-centered rights, typically property in tangibles, where the rights have a special relation to the physical things as objects of the rights, and the mere syntactic function of an object, for example, the sentence “The audience discussed the topic E.” In the latter case, there is no doubt that E is the object of the discussion in the syntactic meaning of the word. Koktvedgaard points out that all legal relations depend on objects in a mere syntactic sense; however, most of them do this without being object centered in the way property in tangibles is. Karnell, “Upphovsra¨ttens verksbegrepp,” 419. See Penner, The Idea of Property in Law, p. 109, who describes “patents, copyright, trade marks, industrial designs, and so on . . . [as] right[s] to monopolies” (see also pp. 119–120) and who notes that “as monopolies, these rights clearly correlate to duties in rem, since everyone has a duty not to do what the monopoly reserves to the right holder.” See Koktvedgaard, Konkurrenceprægede immaterialretspositioner, pp. 205–207, underscoring the role of IPRs as competition-related rights.

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concrete sense. The normative conclusions to be drawn from these observations will be discussed further in Chapter 6. The consideration that IPRs and property in tangibles are structured in the same manner as rights in rem is an important element in the so-called module theory that was mentioned in Chapter 2 (Section A.5). The theory focuses in particular on exclusion as a way of keeping information costs down, since this is a common trait in property law, including IP.57 This structure, where the right holder has exclusive rights to a thing, employs information-hiding and limited interfaces to manage complexity. For example, if a car is not mine, I do not need to know who owns it, whether it is subject to a security interest or lease, and so forth, in order to know not to take or damage it. When A sells the car to B, many features of A and B are irrelevant to each other, and most are irrelevant to in rem duty holders, who only need know not to steal the car. Many details about A and B are irrelevant to their successors in interest.58

It is claimed that the same applies to IP.59 If a beautiful photograph is published on the Internet, for example, I do not need to know who is the original photographer (as long as I know it has not fallen into the public domain), nor whether the copyrights have been subject to transfers, to know that I cannot make a copy of it, put it in a frame, and sell the copy in my store. Thus, the in rem aspects of IP work in a similar way to property in tangibles regardless of the allegation made here – that the notion of an abstract object analogous to the concrete object of tangible is a fiction likely to conceal important structural differences between property and IP. On the other hand, this is not to say that the information cost picture is the same for IP as for property in tangibles. On the contrary, in many instances it will be much more cumbersome to obtain knowledge of whether something is protected by IP rights than to know whether somebody has a property right to “Blackacre.” With patents, for example, it is most often necessary to check the patent register and to read patent claims to have an idea of what one should stay away from.60 The differences in information costs are connected to the different justifications of the rights and will be further touched upon in Chapter 5 (Section A 1). The basic 57

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See, in particular, Thomas W. Merrill & Henry E. Smith, “What Happened to Property in Law and Economics?” (2001) 111 Yale Law Journal 357–398; Smith, “Intellectual Property as Property”; Smith, “Property as the Law of Things”; Smith, “Emergent Properties.” Smith, “Property as the Law of Things,” 1703. See Smith, “Intellectual Property as Property.” See James Bessen & Michael J. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (Princeton NJ: Princeton University Press, 2008), pp. 8–9, for an example of the failure of the “notice function” in patent law.

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point here is to note the structural similarity inherent in the in rem aspects of IP and property in tangibles. Although the module theory seems to be designed as a response to the bundle-of-sticks approach, acceptance of the theory at the descriptive level is not to be read as implying normative dismissal of the bundle of sticks. The following example from a Swedish Supreme Court case serves to illustrate the value of considering IPRs as related to a legal object, at least from an analytical point of view, and of recognizing the differences between in rem aspects of IPRs and rights in personam.61 A had developed a design for a walker X. A gave firm B permission to use the design and promised not to compete with B. B filed for design registration of X but withdrew the application for some reason with the result that X was not protected under Swedish design law. Later, A assigned rights to another walker Z, which was substantially similar to X, to firm C, which successfully filed for design registration. Due to the similarity of X and Z, B filed a complaint against C demanding that the latter transfer the design rights of Z to them. The lawsuit was unsuccessful. A unanimous Supreme Court came to the conclusion that B did not have such a claim against C but would have to settle for claiming damages against A for breach of contract or against C in case of bad faith. The members of the court differed with regard to the reasoning used to reach this result. The minority vote, in particular, showed the analytical usefulness of relating IP to a legal object. In the situation in question, C had a right in rem, in the sense of an exclusive right “against the world” to use the design, while B had only a claim against A not to compete. In the minority vote of the Swedish Supreme Court, the judge dissenting emphasized that the first to register had a legitimate claim to protection and that cost aspects and the interests of clearness and transparency also spoke in favor of C keeping its design rights. He held that C’s right related to a legal object – the registered design – while B’s right did not. This approach may make it easier to analyze the question and to see through the interests at stake than if the legal object function is ignored and both B’s and C’s legal positions are considered rights of conduct, with the latter being exclusive in character. To conclude, it is possible, from a merely descriptive point of view, to consider IPRs to be related to a legal object – as rights in rem – in a similar fashion to property in tangibles without conceding that the notion of IPRs is 61

NJA 2009 p. 695 (Dolomite), judgment November 4, 2009. This example is also used in my article about the discussion of objects in Scandinavian IP legal doctrine. Some of the views expressed here can also be found in that article: Ole-Andreas Rognstad, “Immaterialrettigheter som objekts- eller subjektsrelaterte rettigheter? Perspektiver pa˚ objektsdiskusjoner i skandinavisk rettslitteratur” (2016) 129 Tidsskrift for rettsvitenskap 518–538.

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related to intangible or abstract goods. Here, it is maintained, in accordance with the prevailing view in Scandinavian legal doctrine, that the latter is a fiction and thus misleading as a description of the structure of IP rights, but that it still makes sense – and fulfills certain purposes – to describe IPRs as relating to a legal object. With this approach, both the structural differences and similarities of property in tangibles and IP are recognized. The further implications of these findings, including whether IPRs should, for legal purposes, be viewed as exclusive rights to certain behavior, will be discussed in Chapter 6.

E IP AS MONOPOLIES?

A long-lasting dispute regarding IP, not least in the United States, is whether it is property or a monopoly. The discussion is often traced back to Thomas Jefferson’s statement about patents – that “‘the embarrassment of an exclusive patent’ was a special legal privilege justified only because these ‘monopolies of invention’ served the ‘benefit of society.’”62 Regardless of what Thomas Jefferson wrote about patents, however, there is no ultimate contradiction between the use of the property and monopoly metaphors in relation to IP. For example, as pointed out earlier, Penner’s view on IP – that it is a property right to monopolies – combines both aspects.63 Here, both structural differences and similarities between property in tangibles and IP have been pointed out; thus, one might as well use the term “monopolies” in relation to IP. The major objection to the use of the monopoly metaphor is that IPRs do not necessarily lead to monopoly market positions in the economic sense. Rather, as Carter has pointed out, “the typical proprietor of intellectual property lacks the market power (and . . . the incentives) to extract monopoly rents.”64 Thus, the allegation that IP is a monopoly is misleading in a literal economic sense. What is true, however, is that IP restricts static competition for reasons that have been explained by economists (see Chapter 2 (Section A)). Moreover, holders of IPRs may be more likely to be monopolists than owners of physical products. (Statements such as this may prove to be too general to stand up to scrutiny, since physical goods may also, in certain cases, 62

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See, Adam Mossoff, “Who Cares What Thomas Jefferson Thought About Patents? Reevaluating the Patent ‘Privilege’ in Historical Context” (2007) 92 Cornell Law Review 953–1012, citing from Letter from Thomas Jefferson to Isaac McPherson (August 13, 1813) (953) and reiterating and discussing the conclusions drawn from this statement both in case law and in the legal doctrine. Penner, The Idea of Property in Law, p. 109. See also Chapter 3 (Section D). Carter, “Does It Matter?” 717.

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be “essential facilities” that bring foreclosure to the relevant market.) The major point here is that, from a structural point of view, there is no necessary contradiction between the use of property and monopoly metaphors in relation to IP. Nevertheless, the monopoly metaphor may be misleading for other reasons, namely economic, though these features are more related to the justification of rights than the structuring of the rights.

F THE CONCEPTS OF RESOURCE AND INFORMATION IN RELATION TO IP

A different terminological question to be discussed in light of the elaboration of the structural aspects of IP is whether the use of terms such as “resource” and “information” are useful in explaining the structural particularities of IP. An answer to this question has already been suggested: such terminology is unfit to explain the structural differences between property in tangibles and IP but may be used in contexts where structural similarities, including exclusive rights tied to a legal object, are underscored. A few separate, but related, considerations should be made regarding the two concepts, respectively.

1 The Concept of Resource in Relation to IP The term resource is – as pointed out in Chapter 2 – quite commonly used in relation to the justification of rights. First and foremost, the expression is used with regard to the scarcity/non-scarcity paradigm in IP, which is relevant both to utilitarian arguments (and particularly those that espouse the notion of IP as a public good) and different readings of the labor theory. One objection to theories that describe IP as a non-scarce resource has been to argue that they result in an oxymoron by taking a false starting point: “The question whether IP is a scarce or non-scarce resource is wrongly posed from the outset because there simply is no distinct good that is created independently or used simultaneously by several people. Instead, authors, inventors, designers, as well as follow-on users of information do nothing but exercising their own capabilities and employing their own resources.”65 This is true, but a distinction should be made between the input and the output of IP.66 The input equipment (e.g., creative abilities) used to create the 65 66

Peukert, “Rethinking the Ontology of IP 2016,” p. 19. See Smith, “Intellectual Property as Property,” in particular 1758–1760, pointing out that “[c]learly [IP] do[es] not serve to prevent overuse by consumers of information; a nonrival resource cannot be overused. But the resources used to develop and commercialize the

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invention or the work, investments made in labor, or financial resources spent in developing the creation and launching it on a market, and so on are undoubtedly non-scarce. The scarcity paradigm applied to IP implies that the output is non-scarce in the sense that once the non-scarce resources are spent, the public can acquire and use the results of their spending. The function of legal rules granting exclusive rights to works and inventions (and for that matter trademarks) is to prevent this from happening. It has to be remembered, though, that the non-scarcity argument does not apply to all output covered by the IP umbrella in international IP conventions. With regard to trade secrets, the whole point of the protection is to maintain the scarcity of the resource, in the sense that the public does not have access. Nonscarce resource talk is not then appropriate in relation to everything that is referred to as intellectual property. A second objection to the characterization of IPRs as rights to resources relates to the understanding of IP objects as intangible objects or goods. The word resource may call up associations with unitary and concrete objects, comparable to tangibles. It is worth noting that in relation to the output of intellectual or commercial endeavors, the resource does not imply something that can be pre-defined. Rather, the term resource must take into account the particularities of the abstractions inherent in words such as works, inventions, trademark, and so on, and the method for determining the scope of IP rights that these words imply. In so doing, there is nothing to prevent us from characterizing the legal objects of IP as “some kind of a resource.” The possible normative implications of such language will be discussed further in Chapter 6 (Section E).

2 The Concept of Information in Relation to IP The content of the concepts of information and information law has long been disputed and will not be elaborated on here. Attempts have, however, been made to characterize IP law as the regulation of information, on the basis that it involves the communication of messages.67 IP also fulfills the basic criterion in any kind of definition of information insofar as the

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information are rival. They cannot be used by more than one person and are often nonrenewable.” This is the case not least with copyright law. See, for example, Alan L. Durham, “Copyright and Information Theory: Toward an Alternative Model of Authorship” (2004) Brigham Young University Law Review 69–125; Jeanne C. Fromer, “An Information Theory of Copyright Law” (2014) 64 Emory Law Journal 71–128. See also Lipton, “Information Property,” in relation to the question of whether there can be property rights to information.

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messages communicated are tied to a medium – a medial message being “represented through objectively detectible elements (signs, symbols, shapes, figures).”68 The image of IP related to a public good is closely tied to the concept of IPRs as regulating information: information is regarded as a “non scarce, non-rivalrous public good.”69 In this respect, both the problems and the benefits that arise when using the word resource in relation to IP rights similarly apply to the use of the term information. There is a risk that the simplified view of the structuring of IPRs as related to an intangible good will be adopted, in particular because knowledge and information are generally conceived of as intangible and as connected to people’s minds. Still, the fact that the information concept is medial underscores that information regulation applies not to mere intangibles (in the sense of things only existing as mental experiences) but also to representations of indefinite extracts of the physical world. In this sense, the information concept works well with the particular structure of IPRs, although it is too vague to explain particularities and also has the potential to be (falsely) considered as something analogous to tangibles (only intangible). As a concept used merely to generalize the legal object of IPRs, it works just fine, however, at least from a descriptive point of view. The normative aspects will be discussed in Chapter 6.

G EXCLUSIVE RIGHTS AND REMUNERATION RIGHTS IN IP LAW

As pointed out in the introduction to this chapter, a key feature of IPRs is that they entail exclusive rights. This includes the right to stop others from acting in certain ways, as well as the right or privilege70 to act in ways that others may not. Both in legal theory and practice, there has been vast debate, on both sides of the Atlantic, over whether the exclusive rights aspect of IPRs entail only a (negative) right to exclude or also include a (positive) right to “use.” As has been pointed out, this discussion is relevant not only to IPRs but also has its equivalent in property in tangibles.71 The discussion has indisputable 68

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Zohar Efroni, Access-Right: The Future of Digital Copyright Law (Oxford: Oxford University Press, 2010), p. 18. See Lipton, “Information Property,” 140–141; Wendy J. Gordon, “Authors, Publishers, and Public Goods: Trading Gold for Dross” (2002) 36 Loyola of Los Angeles Law Review 159–198; R. Polk Wagner, “Information Wants to Be Free: Intellectual Property and the Mythologies of Control” (2003) 103 Columbia Law Review 995–1034, 1001. If using the terminology adopted by Hohfeld, “Some Fundamental Legal Conceptions,” 32–33, cf. Hohfeld, “Fundamental Legal Conceptions,” 745–746. See, however, for a critical view on this terminology, Adam Mossoff, “Exclusion and Exclusive Use in Patent Law” (2009) 22 Harvard Journal of Law and Technology 321–373, 365–370. See Mossoff, “Exclusion and Exclusive Use,” in particular 360–364.

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normative underpinnings, since the view that IPRs only entail a right to exclude would imply that restrictions imposed on and regulation of the right to use do not interfere with right holders’ IPRs. Recently, at the international level, the point has been made in relation to the so-called plain packaging regulations in the tobacco sector, where the tobacco industry has attacked restrictions on the use of branding on cigarette packages on the ground that it interferes with their established trademark rights.72 If trademark rights only entail the right to exclude and do not include the right holder’s use of his or her own trademark, it may be argued that the plain packaging regulation does not interfere with trademark law.73 This claim is supported, at the international level, by the fact that Article 16 TRIPS confers upon the trademark owner “the exclusive right to prevent all third parties not having the owner’s consent” from using the trademark.74 This is a narrower formulation than a general exclusive right to use the trademark, but there are also counterarguments.75 Similar debates may arise in respect of other IPRs, 72

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See, for example, Jeffrey M. Samuels, “Public Health and Trademarks: Plain Packaging Laws and the TRIPS Agreement,” in Geiger (ed.), Research Handbook on Human Rights and IP, pp. 513–520 (chap. 27). See, in particular with regard to the international IP law context, for example, Mark Davison, “Plain Packaging of Tobacco and the ‘Right’ to Use a Trademark” (2012) 34 European Intellectual Property Review 498–501; Mark Davison & Patrick Emerton, “Rights, Privileges, Legitimate Interests, and Justifiability: Article 20 of TRIPs and Plain Packaging of Tobacco” (2014) 29 American University International Law Review 505–580; Enrico Bonadio, “Bans and Restrictions on the Use of Trade Marks and Consumers’ Health,” 2014(4) Intellectual Property Quarterly 326–345. See, for example, Mark Davison, “The Legitimacy of Plain Packaging under International Intellectual Property Law: Why There Is No Right to Use a Trademark under either the Paris Convention or the TRIPS Agreement,” in Tania Voon, Andrew D. Mitchell, & Jonathan Liberman (eds.), Public Health and Plain Packaging of Cigarettes: Legal Issues (Cheltenham: Edward Elgar Publishing, 2012), pp. 81–108 (chap. 5); Tania Voon & Andrew D. Mitchell, “Implications of WTO Law for Plain Packaging of Tobacco Products,” in Voon et al., Public Health and Plain Packaging, pp. 109–136 (chap. 6); Davison & Emerton, “Rights, Privileges,” 517–518, all with references to the report of the WTO panel in European Communities: Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, WT/DS174/R, 15 March 2005. See, for an early comment, Annette Kur, “The Right to Use One’s Own Trade Mark: A Selfevident Issue or a New Concept in German, European, and International Trade Mark Law? (1996) 18 European Intellectual Property Review 198–203, in particular 201–203. See also Daniel Gervais, “Analysis of the Compatibility of Certain Tobacco Product Packaging Rules with the TRIPS Agreement and the Paris Convention,” Report Prepared for Japan Tobacco International, 30 November 2010, available at www.jti.com/files/4513/3164/0486/Gervais.pdf (July 10, 2017) pp. 10 et seq.; Daniel Gervais, “Plain Packaging and the TRIPS Agreement: A Response to Professors Davison, Mitchell and Voon” (2013) 23 Australian Intellectual Law Journal 96–110, 99–102; Phillip Johnson, “Trade Marks Without a Brand: The Proposals on ‘Plain Packaging’ of Tobacco Products” (2012) 34 Intellectual Property Review 461–470, 464 et seq.

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given that “the right to prevent third parties” formulation is repeated with regard to other rights, such as design rights (Article 26 TRIPS), patent rights (Article 28) and even – though it also includes the right to “authorize” – copyright rental (Article 11) and producers’ and performers’ rights (Article 13). In this context, we will refrain from engaging in a discussion about whether international conventions provide for a (positive) right (or privilege) to use, in addition to the (negative) right to exclude. The question of whether a positive right is relevant under rules on (direct or indirect) expropriation of IPRs will be touched upon in Chapter 7 (Section D.3) concerning the implications of IPRs as assets. Nevertheless, as already suggested, the factual situation is that the IPR holder will have the right – or privilege – to carry out the conduct covered by the exclusive right unless there are rules or other circumstances preventing him or her from doing so.76 This is in line with the purpose of IP law and its function as a system of competitive privileges. IPRs shield the right holder from competition to enable the right holder to exploit the results of his or her achievement without interference from a third party. The fact that there may be situations where the right to exclude is sufficient to serve the purposes of IP law does nothing to change this. Whether the legal basis for the positive right (to use), in the absence of regulation to the contrary, is IP law or other kinds of rules depends on domestic law. In Scandinavia, the prevailing view has been that exclusive IP rights functionally imply a positive right (to use), in addition to the right to exclude, even though the former could be derived from general principles of freedom of conduct.77 In this respect, no structural difference exists between property in tangibles and intellectual property; the difference lies in the character of the legal object, which also implies that a right to use in IP law is quite different from its equivalent for property in tangibles. We will come back to this in Chapter 6 (Section D). In any case, IP rules are more than exclusive rights. Pursuant to justificationbased trade-offs, most IP regimes contain rules that entitle the right holder to economic compensation instead of exclusive rights. Irrespective of the classification of such rules as compulsory licenses, statutory licenses, remuneration rights, or other, they are integral parts of the IP system, often with a basis in international IP conventions. Obviously influenced by distinctions in law and economics (L&E) theory, like the property/liability dichotomy introduced by 76

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See Mossoff, “Exclusion and Exclusive Use,” 330–337. See also Larissa Katz, “Exclusion and Exclusivity in Property Law” (2008) 58 University of Toronto Law Review 275–315. Koktvedgaard, Konkurrenceprægede immaterialretspositioner, pp. 196–197, with reference to Svante Bergstro¨m, Uteslutande ra¨tt att fo¨rfoga o¨ver verket: studier o¨ver upphovsmannara¨ttens fo¨rema˚l och inneha˚ll enligt det s.k. nordisk fo¨rslaget (Uppsala: Uppsala universitets a˚rsskrift, 1954), pp. 144–145.

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Calabresi/Melamed,78 it is normal in legal contexts to classify exclusive IP rights as property rights, as distinguished from compensation rules, which are “liability rights.”79 Similarly, when there is a shift toward more exclusivity in IP law, the term propertization is used.80 This terminology may give the impression that exclusive rights are the only real IP rights and that compensation rules are outside the scope of such rights. This impression is misleading. First, even compensation rules can be considered in rem, insofar as they are related to the same legal object as the exclusive rights and are rights against the world, implying that the right holder will have a claim against an indefinite group of people (i.e., those whose behavior is subject to the remuneration right). Second, there is a causal relationship between the exclusive rights and the compensation rules. The choice of legal tool is a result of policy considerations connected to the justification for the rights, not least transaction cost considerations. The strict terminological distinction between exclusive rights as property rights and compensation rights as liability rights may conceal the structural similarities inherent in the facts just mentioned. In any case, it is natural to classify both sets of rules as IP rights.

H CONCLUSION: ON PROPERTY IN THE STRUCTURING OF RIGHTS

The use of the property metaphor in intellectual property is to a large extent believed to reflect the fact that the structuring of IP rights on the face of it resembles that of property in tangibles. There are historical reasons for this. Modern IP rights have roots in the European privileges system, which regulated activities related to tangible objects – like publishers’ privileges against the copying of books.81 As a result of various kinds of developments (political, economic, philosophical, and technological), the regulations evolved from regulating activities related to tangibles to affording legal protection to abstract concepts such as works and inventions.82 As a consequence, considerable 78 79

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See Chapter 2 (Section A.4). See, for a couple of coincidental examples outside of the US context, Jens Schovsbo, “The Necessity to Collectivize Copyright and Dangers Thereof,” in Jan Rose´n (ed.), Individualism and Collectiveness in Intellectual Property Law (Cheltenham: Edward Elgar Publishing, 2012), pp. 166–191 (chap. 8), 169; Daniel Krauspenhaar, Liability Rules in Patent Law: A Legal and Economic Analysis (Berlin and Heidelberg: Springer Verlag, 2015). See, for example, Lemley, “Property, IP and Free Riding.” See, for example, Mark Rose, Authors and Owners: The Invention of Copyright (Cambridge, MA: Harvard University Press, 1993), pp. 9–30 (chap. 2). For example, Peukert, “Rethinking the Ontology 2016,” pp. 9–14 and Peukert, “Rethinking the Ontology 2017,” pp. 6–8. See, in particular in relation to copyright, Stina Teilmann-Lock, The Object of Copyright: A Conceptual History of Originals and Copies in Literature, Art and

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structural differences exist between property in tangibles and IP that are concealed by language, including talk about IP as related to intangible goods or objects. Thus, IPRs have kept up their property appearance despite the considerable structural differences inherent in the abstractions used to describe the objects of IP law. These differences have led to proposals that object talk be abandoned in favor of considering IP as conduct related rather than object related. This shift sheds light on the use of the property metaphor in IP as reflecting apparent structural similarities with property in tangibles. In fact, these similarities are not so apparent when the nature of IP rights is analyzed more profoundly, going beyond the notions of intangibles, information, and resources. On the other hand, as demonstrated earlier, at least from a descriptive point of view, the concepts of work, inventions, trademarks, and so on still have an object function. They refer to a legal object, to which the rights are tied, even if that legal object does not refer to a concrete homogenous concept. These legal objects underscore the in rem aspects of IPRs, thus revealing a structural similarity with property in tangibles. Whether or not this justifies the use of the property metaphor in relation to IP can indeed be discussed; however, given the diversity of the property concept, we will not go into this here. What we should bear in mind are the structural differences, as well as the similarities – including the fact that IP law is more than exclusive rights. The legal conclusions that should be drawn from this will be discussed in Chapter 6.

Design (London: Routledge, 2016); Michael Madison, “The End of the Work as We Know It” (2012) 19 Journal of Intellectual Property Law 325–355, 333 et seq.

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4 Property as Assets

A third aspect of IP as property is its status as an asset. Here we are referring to intellectual property rights in the widest sense (i.e., the results of the legal positions that follow from IP legislation). These rights may be subject to legal dispositions (e.g., transfers and securitization), bankruptcy proceedings, taxation, and protection against expropriation, or they may be considered protected investments, on the basis that they represent value on the part of the right holder. Viewing IPRs as assets, it is the rights as such – or the legal positions inherent in the prospect of acquiring rights1 – that constitute the basis for the assets. The property metaphor used in intellectual property right (IPR) contexts frequently refers to the rights as assets. When (regional) human rights conventions or instruments protect intellectual property (IP) as property, as pointed out in the Introduction,2 they do so on the basis of IPRs as assets.3 The distinction between property as assets and the two foregoing aspects (the justification for IP and the structuring of IPRs) is important for the following reasons. When it comes to the relationship between the justification aspect and the asset aspect, the former explains why there is or should be a legal position in the first place. When establishing the legal position, the IPR becomes an asset irrespective of the justification ground and whether or not one thinks the legal position is properly justified. Compared, for example, with property in tangibles, as outlined in Chapter 2, there may be similar general justification grounds and yet differences in their concrete application. The same goes for different kinds of IP. When treating IPRs as assets, however, they are placed on

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2 3

See the European Court of Human Rights (ECtHR), Application no. 73049/01, AnheuserBusch Inc. v. Portugal, decision January 11, 2007 and further in Chapter 7 (Section D.2.b). For references, see also Chapter 7 (Sections D,2,b and D,4,b). See further Chapter 7 (Sections D and E).

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an equal footing with other property rights in the sense that they are considered – like property in tangibles – to represent value on the part of the right holder. An important question is to what extent differences in justification should or are reflected in their treatment as assets. Concretely, the patent holder’s exclusive rights are assets whether the rights are justified on utilitarian grounds or on the basis of the labor idea. On the other hand, the justification may have – or at least should have – an impact on the further regulation of IPRs as assets. In legal doctrine, the increased attention accorded to IPRs in international trade and investment agreements has been considered a move from IP as incentives to innovate toward the commodification and assetization of IPRs.4 Here the allegation made is that there is no necessary contradiction between IPRs as incentives to innovate and their treatment as assets, even in international trade or investment agreements.5 As pointed out earlier, the fact that IPRs are assets follows from their status as legal positions creating (economic) value. That IPRs have, as a result, been subject to regulation in international trade agreements and are considered “investments” in relation to investment agreements is hardly surprising. The challenge, however, is how IPRs are treated in this respect. It will only be mentioned here in passing that the incentive function of IPRs is emphasized in Article 7 TRIPS.6 The justification-asset interface will be further discussed in Chapter 7. With regard to the relationship between the structuring of IPRs and IPRs as (economic) assets, these two aspects are easily confused. The confusion is related to object talk in property law and the failure to distinguish between the object of legal protection and the legal positions themselves.7 Also, talk about resources and the previously mentioned distinction between tangible and intangible assets contribute to the confusion. On the one hand, resources may refer to the legal object as discussed in Chapter 3 (Section D) (i.e., the

4

5 6 7

See Rochelle Dreyfuss & Susy Franklin, “From Incentive to Commodity to Asset: How International Law Is Reconceptualizing Intellectual Property” (2015) 36 Michigan Journal of International Law 557–602. See also Dreyfuss & Franklin, “From Incentive to Commodity to Asset,” 591 et seq. See further Chapter 5 (Section C). See, for example, Emily Sherwin, “Two- and Three-Dimensional Property Rights (1997) 29 Arizona State Law Journal 1075–1102, 1076, who in her discussion about two- and threedimensional property rights, on the one hand, speaks about “objects of property,” obviously referring to what is subject to regulation (cf. the phrase “the object of property need not be a physical object if it is defined”) and, on the other hand, states that “the assignment of an object to an individual means that that individual may use the property as she likes subject to whatever limiting principles are then in force,” ignoring the important legal fact that what is assigned is not the “object” but the rights tied to the legal object.

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piece of land or the chattel for property in tangibles or the bundle of information inherent in concepts such as work, invention, trademark, and so on, for intellectual property).8 On the other hand, it may also refer to the legal positions granted by the legislator that create the asset on the part of the right holder. It is important to distinguish between the two meanings of “resources” for several reasons. One reason is related to the justification issue. The justification of IP relates to the underlying resource in that it explains why there is, or should be, IPR protection at all and to what extent. The distinction reveals that existing IP protection, which goes beyond its justification grounds, will still be an asset protected on its own terms. Thus, distinguishing between the underlying resource subject to IP protection and IPRs as assets enables us to question the legitimacy of asset protection that extends beyond the grounds for which it was granted. It is also worth adding here that it is strictly speaking misleading to talk about tangible or intangible assets.9 All assets are intangible as long as they refer to legal positions, irrespective of the character of the legal object to which they are tied.10 In this respect, there is no difference between IPRs and other kinds of private rights. They constitute economic assets on the basis of the legal positions they provide access to. Again, the terminology blurs the distinction between the “object of the rights” and the “rights as objects” (or, as here, assets). In Chapter 3, the concept of IP as an intangible good was scrutinized; the concept is based on a fiction and may therefore lead to incorrect associations being made as regards the nature of the rights. The concept of IPRs as intangible assets indirectly refers to the concept of intangible goods. It is, however, utterly misguiding because it conceals the important fact that it is

8 9

10

See Chapter 3 (Section F.1). See, for example, UNCITRAL Legislative Guide on Secured Transactions. See further Chapter 7 (Section B), which uses the term intangible assets in several contexts, defining it in the glossary in para. 20 as follows: “all types of movable assets other than tangible assets [including] incorporeal rights, receivables and rights to the performance of obligations other than receivables.” In other words, the definition is restricted to various kinds of “rights.” For an example in the literature, see Bertram Boie, “The Protection of Intellectual Property Rights Through Bilateral Investment Treaties: Is There a TRIPS-plus Dimension?” 2010(4) NCCR Trade Regulation Working Papers 4, who argues that IPRs “are one of the most precious assets in the international economy” and that “[r]egularly, most of a company’s value consists in its intangible assets such as its IPRs, whereas its tangible property, such as the production facilities, has much less value.” Such language mixes the asset aspect and the character of the legal object subject to the rights. Compare Hohfeld, “Some Fundamental Legal Conceptions,” 23: “It is clear that only legal interests as such can be inherited, yet . . . there is inextricable confusion between the physical or ‘corporeal’ objects and the corresponding interests, all of which latter must necessarily be ‘incorporeal.’”

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the rights that constitute the assets and that, in this respect at least, there is no discernible difference between rights in tangibles and intangibles. The point of this short chapter has been to underscore the distinction between IPRs as assets and the justification and structuring of such rights. The further implications of the property as assets approach will be discussed in Chapter 7.

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par t i i

implications of the three aspects of property

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5 Conclusions to Be Drawn from the Justification of Rights

INTRODUCTION

As was shown in Chapter 2, property in tangibles and intellectual property (IP) can be justified on similar grounds, using utilitarian justifications, different readings of the labor theory, various accounts of personality theories, and even a mix of these philosophies and/or others. The question to be discussed in this chapter is what this means with respect to the use of the property metaphor in transnational and international IP law contexts. As a starting point, the answer is “not much.” Even though general theories, thoughts, or philosophies for justifying why we have rules of property in tangibles may also apply to IP, there are so many variations in their concrete application to different subject matters – even between the various kinds of IP – that arguments based on the idea that IP is property (and so demands specific property solutions) can easily be countered. This is so unless all-embracing justifications are developed and applied consistently to various kinds of property, including IP. As we will see, this is hard enough to accomplish within a special jurisdiction, although there are attempts to provide such unifying property theories, not least on libertarian grounds, in the United States.1 In transnational and international contexts, this is even harder since there is no link between property in 1

Cf. what has been referred to as the “property rights movement,” one of the leading figures being Law Professor Richard Epstein. See Peter S. Menell, “The Property Rights Movement’s Embrace of Intellectual Property: True Love or Doomed Relationship?” (2007) 34 Ecology Law Quarterly 713–754; Peter S. Menell, “Intellectual Property and the Property Rights Movement: Should Intellectual Property Be Accorded the Same Protections as Tangible Forms of Property?”(2007–2008) 30 Regulation 36–42; Richard A. Epstein, “The Property Rights Movement and Intellectual Property: A Response to Peter Menell” (2007–2008) 30 Regulation 58–63, objecting to being part of any “movement” (58). On Epstein’s “unifying” property justification, see, for example, Epstein, “Liberty versus Property”; Epstein, “The Disintegration of Intellectual Property”; Epstein, “What Is so Special about Intangible Property?”

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tangibles and IP in international conventions, apart from human rights protection of property. Moreover, there is no common point of reference since property in tangibles is largely dealt with in national law traditions, which differ significantly in their treatment. Still, it is at least possible to say something about arguments that follow from the various justifications, based on what was outlined in Chapter 2. That will be done in Section A. Additionally, problems arise when different justification grounds are used for property in tangibles and IP, as well as for various kinds of IP. These problems will be discussed in Section B.

A CONCLUSIONS DRAWN FROM COMMON GROUNDS OF JUSTIFICATION

1 Utilitarian Grounds Even on the presumption that property in tangibles and IP are justified on similar grounds, sustainable arguments to be derived from the use of the property metaphor in relation to justification of IP can be quite limited. Starting with a utilitarian approach to property, a basic problem – as pointed out in Chapter 2 – is how to measure utility. Despite all its flaws and deficiencies, it is difficult to see, at least in the legal context, how to improve on the explanations offered by law and economics, perhaps with the addition of insights from empirical and behavioral economics.2 In this respect, and leaving aside what might be called “faith-based”3 or ideology-driven utilitarianism, including utilitarian readings of Locke,4 there are indeed substantial differences in the rationales offered to justify property in tangibles and IP, as well as with regard to the justifications for different kinds of IP. If we take as our starting point the fact that modern utilitarian justifications of private property in tangibles are concerned with the overuse of tangible resources and the accompanying externalities, it is difficult to see how arguments justifying “real property” can carry over to IP. As pointed out in Section 2.A, the economic rationale for justifying IP may vary depending on whether or not one confines oneself to the scarce v. non-scarce paradigm. To be sure, there are incentives to be secured with property in tangibles too, in the sense that the willingness to invest in the property will depend on whether the owner holds exclusive rights to it, but the incentives are linked to different 2 4

See Lemley, “Faith-based IP,” 1332–1333. 3 Lemley, “Faith-based IP.” See, for example, Epstein, “Liberty versus Property”; Epstein, “What Is So Special about Intangible Property?”

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phenomena. With protection for creational IP, such as patents and copyrights, economic incentives to create are linked to the prospect of recovering the fixed costs involved in creation, since competitive markets are likely to drive profits down to zero.5 At the same time, the dynamic benefits of restricting competition to create must be weighed against the deadweight losses resulting from the (static) restriction of competition. Here, the problems are quite different from those of property in tangibles, since allowing one more user to use the tangible resource diminishes the enjoyment of others, which is not the case for IP.6 These differences are only accentuated if we consider that the grounds for justifying trademark protection involve reducing search costs. The different problems encountered in regulating also suggest that the whole cost-benefits picture is different. In general, the costs related to obtaining, delineating, transferring, and enforcing IP rights are quite different from those related to property in tangibles.7 This also influences the question of whether a property rule or a liability rule is to be preferred and the usefulness of the “modularity” structure. Both will depend on specifics concerning the rights in question.8 The point here is that although the use of the property metaphor can point to general structures and patterns that are common to the economic analysis of property in tangibles and IP,9 it may also be misleading in the sense that it conceals significant differences with regard to the outcome of such analyses. We simply note here that the modern utilitarian take on IP suggests that there are very few (if any) conclusions to be drawn from the use of the property metaphor in relation to justifying IP, both with regard to policy issues concerning how IP rules should play out and with regard to the interpretation of existing rules. This has two main implications. First, the use of the property metaphor to emphasize general economic structures applicable to both property in tangibles and various kinds of IP tells us little about whether IP protection should be granted to begin with. It is worth recalling that different strategies are available to solve the specific incentive problems in relation to technological and cultural innovations.10 For example, it is not given that the 2016 proposal of 5 6 7 8 9

10

Compare Menell, “Governance of Intellectual Resources,” 1523–1559, 1534. Compare Menell, “Government of Intellectual Resources,” 1535. See Landes & Posner, The Economic Structure of Intellectual Property Rights, pp. 16–20. See Chapter 2 (Sections A.4 and A.5). This is the main point of the economic framework set out in Landes & Posner, The Economic Structure of Intellectual Property Rights, see pp. 11–12. Menell, “Government of Intellectual Resources,” 1535. See, for example, in relation to copyright, Stephen Breyer, “The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs” (1970) 84 Harvard Law Review 281–351 and, following up on this article, Michael Abramowicz, “A New Uneasy Case for Copyright (Celebrating the

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the EU Commission to introduce a new “neighboring right” for newspaper publishers11 is the most appropriate remedy to “ensure quality journalism and citizens’ access to information” and to “ensure sustainability of the publishing industry” against the backdrop of the “problems . . . publishers of press publications are facing . . . in the transition from print to digital . . . in licensing their publications and recouping their investments.”12 It is, for example, not self-evident why relying on transferred copyright from authors is insufficient in this respect and the Commission may be criticized for failing to provide evidence as to why a new IP right is needed.13 In any case, the fact that the property metaphor is used in relation to the utilitarian justification of IP rights in general and the fact that property in tangibles can be justified on utilitarian grounds are certainly not valid arguments for introducing a new right for press publishers. If the proposal is based on utilitarian grounds (and the language in the recitals suggests that it is14), a case should be made as to why a new publishers’ right is good for society. From a utilitarian perspective, adding new rights to the “IP catalog” is hardly justified in itself. Second, the allegation is that general use of the property metaphor in justifying IP on utilitarian grounds hardly serves as an argument to further the scope and contents of the rights. The much debated US Supreme Court decision in eBay v. MercExchange is illustrative.15 The firm MercExchange held a number of US business method patents for online auction systems, which it used for litigation purposes only (so-called patent trolls). The online auction giant eBay was sued for infringement of MercExchange patents after having refused to enter into a license agreement for the use of the inventions. The suit was successful, in that the district court found grounds for infringement, but the court denied the motion for permanent injunctive relief.16 That decision was reversed by the Court of Appeals for the Federal Circuit.17 The Federal Circuit referred to the declaration in the US Patent Act18 that “patents shall have the attributes of personal property” and held that because the “right to exclude

11

12 13

14 16 17

Fortieth Anniversary of Justice Breyer’s Article ‘The Uneasy Case for Copyright’)” (2011) 79 George Washington Law Review 1644–1691. Proposal for a Directive of the European Parliament and of the Council on Copyright in the Digital Single Market, 2016/0280 (COD), Article 11. Recitals 31 and 32 to the proposal. See, for example, Alexander Peukert, “An EU Related Right for Press Publishers Concerning Digital Uses: A Legal Analysis” 2016 (22) Research Paper of the Faculty of Law, Goethe University Frankfurt am Main, para. 70 et seq. See supra fn. 12. 15 eBay Inc. v. MercExchange, L.L.C., 547 US 388 (2006). MercExchange, L.L.C. v. eBay, Inc., 275 F. Supp. 2d 695 (2003). MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323 (Fed. Cir. 2005). 18 35 USC § 261.

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recognized in a patent is but the essence of the concept of property, the general rule is that a permanent injunction will issue once infringement and validity have been adjudged.”19 According to the Federal Circuit, departures from this rule are only viable in circumstances where “a patentee’s failure to practice the patented inventions frustrates an important public need for the invention, such as the need to use an invention to protect public health.”20 The US Supreme Court, on the other hand, unanimously vacated and remanded the Federal Circuit’s decision, confirming the district court’s decision. The judges held that the so-called four-step test applied by courts of equity when considering whether to award permanent injunctive relief to a prevailing plaintiff applies to disputes arising under the Patent Act.21 The Supreme Court, referring to the fact that patents must have the attributes of personal property, distinguished between the creation of a right and the provision of remedies for violations of that right. It held that injunctive relief would only be issued in accordance with the principles of equity. The court stressed, with reference to earlier case law concerning copyright, that patents and copyright are “given by the public for benefits bestowed by the genius and meditations and skill of individuals, and the incentive to further efforts for the same important objects.”22 In opening up the possibility of denying injunctive relief in patent and copyright cases, beyond “exceptional” and “rare” cases, the court seems to have acknowledged that even if this means limiting the power to exclude, it does not necessarily conflict with the incentive function of patents and copyright. It is to be noted that four of the justices claimed that “trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases,” pointing to the particular characteristics of patents only intended for licensing (“patent trolls”) and business method patents more generally.23 One may certainly dispute this approach, even from a utilitarian perspective and not least from the perspective of costs concerned with legal 19 21

22

23

MercExhange v. eBay, Fed. Cir., 1338. 20 MercExhange v. eBay, Fed. Cir., 1338. eBay v. MercExchange, 547 U.S. 390. This four-step test requires a plaintiff to demonstrate (1) that it has suffered an irreparable injury; (2) that remedies available at law 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. ebay v. MercExchange, 547 U.S. 391–392, citing Fox Film Corp. v. Doyal, 286 U.S. 123, 127 (1932). ebay v. MercExchange, 547 U.S. 395, JJ Kennedy concurring with Stevens, Souter and Breyer joining. See also Chapter 7 (Section A).

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uncertainties.24 Still, the key point here is that the US Supreme Court refused to accept arguments put forward in the case that the court has consistently granted permanent injunctions in cases concerning real property.25 In this respect, the Supreme Court’s decision in eBay is sensitive to the obvious differences between the utilitarian accounts of property in tangibles and IP.26 2 Labor Idea As pointed out in Chapter 2 (Section B), it is difficult to see how John Locke’s labor theory, which was developed in a particular historical context with radically different societal conditions to those we know today, can be directly applicable as a justification for property (including IP) in a legal context, in the twenty-first century. Given that Locke did not address the implications of his labor justifications for property in relation to IP, one may wonder – at least when moving beyond the mere historical and philosophical context – why the legal justification must rely on more or less strained elaborations on what Locke actually meant or might have meant. Still, the very idea that someone who has invested resources in something is entitled to the results of his or her efforts should correspond to a general sense of justice. To be sure, the concept of moral desert may be questioned (e.g., based on the Rawlsian approach to distributive justice27), but modern policymaking in the field of IP seems to rely on the idea that creators and investors need some kind of reward. One example is Recital 10 of the European Copyright Directive (“Infosoc Directive”),28 which states that “[i]f authors and performers are to continue their creative and artistic work, they have to receive an 24

25 26

27

28

See, for example, Yixin H. Tang, “The Future of Patent Enforcement after eBay v. MercExchange” (2006) 20 Harvard Law Journal of Law & Technology 235–252; Douglas Ellis, John Jarosz, Michael Chapman, & L. Scott Oliver, “The Economic Implications (and Uncertainties) of Obtaining Permanent Injunctive Relief after eBay v. MercExchange” (2008) 17 The Federal Circuit Bar Journal 437–471. For an empirical analysis of the consequences of the eBay decision, see Christopher Seaman, “Permanent Injunctions in Patent Litigation after eBay: An Empirical Study” (2016) 101 Iowa Law Review 1982–2018. See Menell, “The Property Rights Movement’s Embrace,” 740. See also Menell, “The Property Rights Movement’s Embrace,” 744–747. Merges, Justifying Intellectual Property, pp. 165–166, sees on his part the ruling in eBay as an expression of his “midlevel” principle of proportionality, which is more pluralistically founded (see pp. 159–160). Rawls, A Theory of Justice. See, for example, Merges, Justifying Intellectual Property, pp. 106–117. For a Rawlsian approach to copyright, see Justin Hughes & Robert P. Merges, “Copyright and Distributive Justice” (2016) 92 Notre Dame Law Review 513–577. Directive 2001/29/EC of the European Parliament and of the Council of May 22, 2001, on the harmonization of certain aspects of copyright and related rights in the information society, OJ 2001 No, L 167, p. 10.

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appropriate reward for the use of their work, as must producers in order to be able to finance this work.” The statement is certainly ambiguous, as it seems to refer to incentives on the premise that rewards are a precondition for creation and production. This may suggest a utilitarian justification, but there is no reference or link to the promotion of wealth or welfare and to the fact that the reward is a means in this respect. Thus, the statement may simply be read as a belief that people and businesses will not work unless they are rewarded. This may be based on a particular conception of rational behavior, particularly in the case of businesses, but also in a normative claim that no one should be expected to work for free. Either way, we are left with the following question: What is “an appropriate reward”? If the question of the “appropriate reward” is decoupled from utilitarian goals of maximizing social welfare – for example, on the ground that the necessary instruments for measuring utility are lacking – it is hard to avoid the idea that the labor performed, for which the reward is awarded, will have to serve as a point of departure. The fact that labor was not necessarily dominant in Locke’s property theory29 does little to change this. The obvious problem, however, is that labor “is either too indeterminate or too incomplete a basis on which to base a justification of property.”30 It is also a fact that although the labor performed in certain IP contexts may be a relevant criterion for protection – the British originality criterion for protection of copyrighted works and the EU database sui generis protection being two examples31 – the link may be quite remote in other instances. Still, if one adopts a broad concept of labor,

29 30

31

See, for example, Drahos, A Philosophy of Intellectual Property, p. 48. Drahos, A Philosophy of Intellectual Property, p. 48, who continues: “It may work well in some cases, for example making a dolls house or growing a crop, but its usefulness runs out with forms of works that are characterized by the presence of many independent relations (the design of a computer program or building a skyscraper).” See on the British originality criterion, for example, the decision by the House of Lords in Ladbroke v. William Hill, [1964] 1 All ER 465, 469, requiring that the author must have exercised “labour, skill and effort” (Lord Reid) in producing the work. For a different formulation of this “sweat of the brow” doctrine, see, for example, David I. Bainbridge, Intellectual Property (Harlow: Pearson, 9th ed., 2012), p. 48. The status of the doctrine is affected by the case law of the CJEU; see, for example, Eleonora Rosati, Originality in EU Copyright: Full Harmonisation Through Case Law (Cheltenham and Northampton, MA: Edward Elgar, 2013), pp. 111–119. Regarding the EU Database Directive, Directive 9/96/EC on the legal protection of databases, OJ 1996 No. L 77, p. 20, the so-called sui generis right set out in Article 7 of the Directive grants the right holder exclusive rights on the basis of “substantial investment” in the obtaining, verification, or presentation of the contents of the database, Recital 40 of the Directive specifies that “such investment may consist in the deployment of financial resources or the expending of time, effort and energy.”

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relating it to any “achievement” that forms the basis for IP protection,32 the reward may, directly or indirectly, be linked to this achievement. Based on the discussion in Chapter 2 (Section B), one approach to determining what is an appropriate reward for the labor performed is to seek a level of protection that is proportionate to or commensurate with the laborer’s efforts. Linking it to notions of desert, it can be described as the power to receive “what a person rightfully deserves, or . . . what makes sense, given the circumstances.”33 The approach may comply with Locke’s “sufficiency proviso,” that is, with the laborer having a property right as long as there is enough, and as good, left in common for others.34 There are certainly different readings of this, however.35 In any case, the much used “formula” in IP, as well as other property law, that a balance must be struck between right holders and other interests, including public interests, can be considered rooted in a proportionality-oriented account of the labor idea. On the one hand, the right holder deserves to be entitled to the fruits of his or her labor. On the other hand, the scope of such rights must not be incommensurate with the efforts involved, given other legitimate interests. The problem with this approach is that, in itself, it gives limited guidance on how this balance is to be struck. The approach is nevertheless quite common in the IP field, though it should be remembered that it might also be rooted in a mix of utilitarian and nonutilitarian ideas. Even under this scenario, however, where both property in tangibles and (specific kinds of) IP are justified on the basis of a proportionality- (or balancing-) based version of the labor idea, the common justification should have minimal legal impact. Again, it must be acknowledged that the problems to be solved and the interests to be balanced are quite different. These considerations are part of the discussion about whether Locke’s labor theory is applicable to IP at all.36 One aspect is the different nature of the “commons” when 32 33 34

35

36

See Chapter 1 and Chapter 3 (Section C). Compare Merges, Justifying Intellectual Property, p. 160. Compare, for example, Gordon, “A Property Right in Self-Expression,” 1562 et seq., who claims that the proviso “plays a crucial role both in the Lockean justification for property, and in resolving the conflicts that can arise between a laborer’s property claims and the public’s entitlements” (1562). See, for example, Nozick, Anarchy, State and Utopia, p. 165, implying a quite different take on the criterion. See, for example, Lipton, “Information Property,” 179: “The Lockean provisos on ownership make more sense in relation to tangible goods like land, crops, and livestock, than in relation to intangible goods like information.” See also Shiffrin, “Lockean Arguments,” pp. 154–166; and Seana Shiffrin, “Intellectual Property,” in Robert Goodin, Philip Pettit, & Thomas Pogge, A Companion to Contemporary Political Philosophy (Malden, MA; Oxford; and Victoria, AU: Blackwell Publishing, 2007), pp. 653–668 (chap. 36), 656–660.

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discussing tangible objects and when dealing with IP. Problems concerning the public’s access to land, and the interests involved, are of a different character to the right to use others’ “ideas, concepts, theories, scientific or research methods, scientific principles, mathematical algorithms, laws of nature, words, names [and] symbols.”37 Second, and specifically related to creative IP, creative labor is difficult to compare with labor involved in the acquisition and maintenance of tangible objects.38 Third, the weighing of other interests inherent in a proportionality approach to the labor idea39 involves completely different considerations to those that must be taken into account when dealing with property in tangibles. To illustrate, the fact that state law grants me the right to trespass Blackacre (owned by another person) for recreational purposes gives, and should give, me little guidance as to whether I am allowed to borrow a book from a library without the permission of the copyright owner. With IP, there are also questions about delineating the scope of labor to allow follow-up innovations by third parties; these are problems that hardly find a parallel in property in tangibles. Consequently, the claim here is that with a proportionality-based approach to the labor justification, the use of the term property should have little bearing on how the balance of interests is to be struck and what constitutes an appropriate reward for the labor performed. The situation seems to be quite different with certain libertarian readings of the labor theory. These readings may lead to the conclusion that IP rights are not justified at all,40 but they may also favor strong property rights on the grounds that state-created property rights are compatible with individual freedom and that it is in fact the intervention of property that restricts individual freedom.41 Arguments in favor of strong property rights may be further backed up by utilitarian considerations suggesting that such rights are an efficient way of managing resources.42 On this view, it has been argued that the system of 37

38

39

40

41 42

Paraphrasing the examples in Richard Spinello & Maria Bottis, A Defense of Intellectual Property Rights (Cheltenham: Edward Elgar, 2009), p. 156, of what constitutes “the intellectual commons from which this intangible property is enclosed.” On the specific ontology of creativity, see Drahos, A Philosophy of Intellectual Property, pp. 60–64. Whether this approach is compatible with an orthodox reading of the writings of John Locke can certainly be discussed, but for a Lockean justification of the US fair use doctrine in copyright, see, for example, Damstedt, “Limiting Locke,” basing the justification on Locke’s so-called waste or spoilage proviso. See, for example, Bell, “Indelicate Balancing”; Palmer, “Intellectual Property: A NonPosnerian Law and Economics Approach.” See Chapter 2 (Section B). Nozick, Anarchy, State and Utopia; Epstein, “Liberty versus Property.” See, for example, Epstein, “Liberty versus Property”; and Epstein, “The Disintegration of Intellectual Property.”

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property rights in tangibles has great “carry-over effect” to IP (and other kinds of property for that matter). It is thus claimed that “[t]he key question of system design asks what configuration of patents and copyrights will maximize the net gains over the libertarian formulation [and that] [t]he best approach is to determine how few deviations from the traditional views of property in tangibles need to be made in order to develop a sensible system for copyrights and patents.”43 Overall, “the proposition that each area of law is to some extent ‘special’ such that it needs special consideration” is strongly contested.44 With this approach, it is presumed that the property metaphor has a great impact on the legal solutions called for, as long as it is adjusted as necessary at the margin to take into account the differences between tangible and intangible property.45 It could be held, however, that it is not evident under this approach why something is covered, or left out, by intellectual property rights (IPRs) in the first place. It is submitted that “the analogy to physical resources open to all is, of course, ordinary language, ideas, laws of nature and other natural occurring phenomena, none of which are located within the sphere of private property.”46 The question may still be asked why, for example, an original idea cannot be subject to copyright protection as long as labor forms the basis for the protection. Why is it that all ideas are to be treated in the same way as physical resources open to all? The utilitarian-libertarian account of the labor theory is not self-explanatory in this respect.

3 Personality Ideas Although it is conceivable that both property rights in tangibles and various kinds of IP rights can in principle be justified on the basis of personality ideas, the conclusions that follow from this are not obvious. As pointed out earlier, modern views on personhood suggest that a distinction should be made between fungible and personal property. This may imply a different take on various kinds of tangible property, as well as considerable differences between various kinds of IP. These differences may extend to various kinds of intellectual achievements that span the divide between different types of rights. For example, where software is likely to be considered fungible, artwork and novels are rather personal. Likewise, some kinds of trademarks or business names can be considered personal (e.g., personal names), while most are likely to be 43 44 45 46

Epstein, “The Disintegration of Intellectual Property,” 482–483. Epstein, “What Is so Special about Intangible Property?” 74. See further Epstein, “What Is so Special about Intangible Property?” 50–54. Epstein, “What Is so Special about Intangible Property?” 50.

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fungible. This also implies that there may be vital differences between property in tangibles and specific aspects (at least) of IP. In addition, the personality aspects of IP rights may be considered from angles that are hardly comparable with property in tangibles. Thus, considerations of a (copyright) work as public speech47 can hardly be compared with property in tangibles, notwithstanding the fact that property in tangibles may also be grounded in personality ideas. Regarding copyright specifically, and especially in continental European traditions as reflected in international conventions, there is a line between economic rights and moral rights, with moral rights undoubtedly influenced by Kantian and Hegelian personality thinking.48 In some jurisdictions, including Germany, economic and moral rights are considered to be integrated (monistic). Indeed, some of the resistance in German law to considering IP, and copyright in particular, as property (Eigentum)49 rests on the notion that copyright (authors’ rights) is a personality right and that no one can own his or her personality.50 That said, the distinction between economic rights and moral rights in copyright, the latter being at least partly inalienable,51 implies a difference with property in tangibles that should lead to the conclusion that the use of the property metaphor in relation to copyright does not include the moral rights aspect. However, looking at the broader picture, it seems difficult – for the reasons outlined earlier – to draw specific arguments from any general presumption that both property in tangibles and intellectual property may be justified on the basis of personality or personhood ideas.

47

48

49

50 51

See, for example, Neil W. Netanel, “Copyright in a Democratic Civil Society” (1996) 106 Yale Law Journal, 283–387; Niva Elkin-Koren, “Cyberlaw and Social Change: A Democratic Approach to Copyright in Cyberspace (1996) 14 Cardozo Arts and Entertainment Law Journal, 215–296; Drassinower, “Copyright Infringement as Compelled Speech”; Abraham Drassinower, What’s Wrong with Copying? (Cambridge, MA and London: Harvard University Press, 2015) (chap. 4); Laura Biron, “Public Reason and Intellectual Property, in Annabelle Lever (ed.), New Frontiers in Intellectual Property (Cambridge: Cambridge University Press, 2012), pp. 225–260 (chap. 9). See, for example, Elizabeth Adeney, The Moral Rights of Authors and Performers: An International and Comparative Analysis (Oxford: Oxford University Press, 2006), pp. 25–27; Charles R. Beitz, “The Moral Rights of Creators of Artistic and Literary Works” (2005) 13 Journal of Political Philosophy 330–358. Note, however, that the German concept of Eigentum is much narrower than the English concept of “property”; cf. Dreier, “How Much ‘Property’ Is There in Intellectual Property?” p. 122. See Dreier, “How Much ‘Property’ Is There in Intellectual Property?” pp. 120–121. See further Chapter 7 (Section A).

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Property Aspects of Intellectual Property B PROBLEMS WITH DIFFERENT JUSTIFICATION GROUNDS

The previous discussion is meant to show that it is reasonably difficult to draw legal conclusions from unified justifications for property in tangibles and IP. Even if the same type of justification is relevant to both categories, and this also applies to a large extent to different kinds of IP, the difference in the interests at stake and the problems to be solved implies that the property metaphor is of little help when advocating a specific solution to legal problems. Thus, it is submitted that analyzing the justification for IP from a broader property perspective may be useful to give a theoretical framework for the allocation of resources at large, but the differences between the resources at stake means that the concrete justifications for property in tangibles have minimal carry-over effect to IP. This is true unless one argues in favor of generally strong property rights on the basis of a libertarian account of the labor theory. We will come back to the question of whether there are grounds for such a reading in an international IP context. The limited guidance provided by the property metaphor for the justification of IP is further accentuated where the concrete grounds for justifying IP are different from those justifying property in tangibles. This includes pluralistic justification approaches, both because the differences implied in the various justification grounds will be reflected in the pluralistic approaches and because the emphasis – and priorities – may be different. In addition, there may be instances where the justification grounds for (various kinds of) IP may be different from the grounds used to justify property in tangibles.52 Patents may be a case in point. A possible allegation is that the utilitarian case for justifying patent protection is clearer than justifications for both other kinds of IP and property in tangibles. Arguments as to why private law remedies are not well suited to sanctioning patent infringements are illustrative.53 According to such arguments, “real property” in the United States “historically . . . protected individual interests, and . . . grew out of a common law tradition not so much concerned with utilitarian values, but instead personal autonomy and liberty.”54 “[T]he overriding goal of patent law,” on the other hand, “is to promote technological innovation.” Thus, the claim is made that the US Supreme Court has “roundly rejected the natural rights notion that patents are a species of personal right designed to protect an inventor’s interest in liberty, security, or personhood.”55 On this basis, a case is 52

53

54

See, for example, Stewart E. Sterk, “Intellectualizing Property: The Tenuous Connection between Land and Copyright” (2005) 83 Washington University Law Review 417–470. See Ted Sichelman, “Purging Patent Law of ‘Private Law’ Remedies” (2014) 92 Texas Law Review 518–571. Sichelman, “Purging Patent Law,” 531. 55 Sichelman, “Purging Patent Law,” 529.

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made for the reconfiguring of patent law remedies to promote innovation instead of the classical private law remedies.56 Interestingly enough, the approach also implies a criticism of the Supreme Court’s decision in MercExchange. This decision – despite its implicit rejection of the real property analogy – is predicated on the notion that injunctions are available as remedies for patent infringement, a position held to impede “efficient levels of innovation.”57 We will not venture further here into the discussion on whether private law injunctions should be available in US patent law or whether the utilitarian grounds on which they are based call for other approaches to remedies. However, this case does illustrate how different justifications for real property and (a certain kind of) IP are used as arguments for different legal solutions and cannot carry over from one kind of property to the other.

C JUSTIFYING IP IN THE INTERNATIONAL CONTEXT

When using the property metaphor in relation to IP in an international context on the basis that the basic justification grounds are the same as for property in tangibles, it is important to bear in mind the differences in their concrete applications that have been outlined earlier. In addition, as pointed out in the Introduction to this chapter, one of the problems with drawing conclusions from common justification grounds in the international context is that the law on property in tangibles is to a large extent influenced by national legal (and philosophical) traditions. This means that the use of the property metaphor will bring with it different associations. Further, the concrete justifications for real property may differ from country to country. This requires particular caution in the international context. Still, to determine the conclusions that may be drawn from justification grounds, it is important to look into the justification for IP under international conventions and treaties. In this respect, examples of regional cooperation are also of interest, such as EU regulation and multilateral trade and investment agreements. There are certainly clear indications that utilitarian approaches to IP protection exist. This is particularly true of trade regulation of IP. In Article 7 of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) under the World Trade Organization (WTO),58 the objective of “the protection and enforcement of [IPRs]” is generally, and without any differentiation, referred to as that of “contribut[ing] to the promotion of technological innovation and to 56 58

Sichelman, “Purging Patent Law,” 536 et seq. See supra Chapter 1, fn.16.

57

Sichelman, “Purging Patent Law,” 538.

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the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.” The formulation is reiterated in Article 18(2) of the Trans Pacific Partnership Agreement (TPP).59 In particular, the words “conducive to social and economic welfare” point in the direction of a utilitarian objective, and the reference to the “balanc[ing] of rights and obligations” is not necessarily in conflict with this objective, since a social welfare approach must be considered to imply such balance. It is also contended that the principles set out in Article 8 TRIPS (i.e., Member States must “adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development”) are compatible with this objective.60 A different question is how these provisions are to be reconciled, but this will not be considered further here.61 Another question is whether the one size fits all justification expressed in Article 7 TRIPS really reflects the rights and obligations that follow from the agreement. The question may apply to all substantive fields and provisions of the agreement, but particular attention should be drawn to the obligation on the Member States under Article 9 to comply with the substantive provisions of the Berne Convention (BC) for the protection of literary and artistic works.62 The copyright field is traditionally divided internationally between the continental European tradition of authors’ rights and the Anglo-American copyright tradition, although the image that the latter historically is utilitarian while the former is based on natural law is more of a stereotype than anything else.63 Also, apart from the fact that the authors’ moral rights64 must be

59

60

61

62

63

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Trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and the United States (later withdrawn), signed on February 4, 2016, not yet in force. See the WTO Panel Report in Canada: Patent Protection of Pharmaceutical Products, WT/ DS114/R (March 17, 2000). For a discussion, see, for example, Peter K. Yu, “The Objectives and Principles of the TRIPs Agreement” (2009) 46 Houston Law Review 979–1046. Berne Convention for the protection of literary and artistic works, September 9, 1886, as last revised in Paris July 24, 1971, amended September 28, 1979, 1161 U.N.T.S. 3 [hereinafter Berne Convention or BC]. See, for example, Jane C. Ginsburg, “A Tale of Two Copyrights: Literary Property in Revolutionary France and America” (1990) 64 Tulane Law Review 991–1031, regarding the relationship between French and US copyright traditions; and Rose, “The Comedy of the Commons,” 711–781, on the historical development of UK copyright law, which shows the clear Lockean influence on the latter. Considering here that the moral rights regulation (right of attribution) in BC Article 6bis is excluded from the rights and obligations under TRIPS; cf. TRIPS Article 9(1) second sentence.

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considered as personality-based rather than utilitarian-based, international copyright is likely to be viewed in a pluralistic justification perspective, where the utilitarian rationale as well as labor and personality ideas have been influential in forming the rules.65 The pluralistic approach is somewhat visible in the preamble to the WIPO Copyright Treaty (WCT),66 where, on the one hand, “the outstanding significance of copyright protection as an incentive for literary and artistic creation” is emphasized and, on the other, “the need to maintain a balance between the rights of authors and the larger public interest, particularly education, research and access to information, as reflected in the Berne Convention” is recognized.67 While the reference to the incentive function may point in the direction of a utilitarian goal, there is no mention of a further aim that this function is meant to serve. Indeed, it may be that the balancing of authors’ rights and the “larger public interest” implies a proportionality variant of the labor idea. This ambiguity is even more visible in the preamble to the EU Copyright Directive.68 According to its recital 2, “[c]opyright and related rights . . . [shall] protect and stimulate the development and marketing of new products and services and the creation and exploitation of their creative content.” Read in the context of recital 4, where it is pointed out that a “harmonized legal framework on copyright and related rights . . . while providing for a high level of protection of intellectual property, will foster substantial investment in creativity and innovation, including network infrastructure and lead in turn to growth and increased competitiveness,” there are some indications that one aim is to promote social welfare, although it is possible to question what a “high level of protection” implies in this context. The same is true of recital 9, where it is stated that a high level of protection is crucial to intellectual creation and that protection of copyright and related rights “helps to ensure the maintenance and development of creativity in the interests of authors, performers, producers, consumers, culture, industry and the public at large.” The statement seems predicated on the notion that a “high level of protection” is good for the society at large. This may seem to imply a utilitarian approach,

65

66

67 68

See, for example, Paul Goldstein & P. Bernt Hugenholtz, International Copyright: Principles, Law, and Practice (Oxford: Oxford University Press, 2013), pp. 6–8. WIPO Copyright Treaty, December 20, 1996, 2186 U.N.T.S 152, in force March 6, 2002 [hereinafter WCT]. WCT recitals 4 and 5. Directive 2001/29/EC of the European Parliament and of the Council of May 22, 2001, on the Harmonization of Certain Aspects of Copyright and Related Rights in the Information Society, OJ [2001] L 167, p. 10.

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though both the content of the concept of high level of protection and the presumption as such are questionable. As pointed out in Section A, the subsequent statement in recital 10, however, that if “authors or performers are to continue their creative and artistic work, they have to receive an appropriate reward for the use of their work” can be linked to both utilitarian concepts and the proportionality version of the labor idea. The same goes for the subsequent statements in the same recital that “[t]he investment required to produce products such as phonograms, film or multimedia products, and services such as on demand services, is considerable” and that “[a]dequate legal protection of intellectual property rights is necessary in order to guarantee the availability of such a reward and provide the opportunity for satisfactory returns on this investment.” If read as providing producers with protection adequate to compensate for fixed costs to create incentives for further production, the approach may be considered utilitarian, but a loose reference to “adequate protection” for investments carried out may just as well imply a proportionality version of the labor idea. In addition, recital 11 emphasizes that “[a] rigorous, effective system for the protection of copyright and related rights is one of the main ways of . . . safeguarding the independence and dignity of artistic creators and performers,” implying a reference to the personality aspects of copyright. The latter may also be inferred from recital 16 of the Copyright Term Directive,69 where it is stated that “[a] photographic work within the meaning of the Berne Convention is to be considered original if it is the author’s own intellectual creation reflecting his personality, no other criteria such as merit or purpose being taken into account.” The statement has been followed up in the case law of the Court of Justice of the European Union (CJEU).70 Thus, EU copyright law is likely to be based on a blend of consequential and non-consequential justification grounds, although the relationship between utilitarian ideas and the reward function remains unclear. International human rights should be added to this picture. Starting with the Universal Declaration of Human Rights (UDHR),71 Article 27(2) states, “[e]veryone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.” The provision is separated from the general property protection in Article 17, which underscores the fact that it has 69

70 71

Directive 2006/116/EC of the European Parliament and of the Council of December 12, 2006, on the term of protection of copyright and certain related Rights, OJ 2006 No. L 372, p. 12. See case C-145/10, Eva Maria Painer v. Standard Verlag, ECLI:EU:C:2011:798, para. 88. Universal Declaration of Human Rights, December 10, 1948, U.N.G.A. Res. 217 A (III) [hereinafter UDHR].

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its own basis.72 Its language is moreover mirrored in Article 15(1)(c) of the International Covenant on Economic, Social and Cultural Rights (ICESCR).73 In General Comment No. 17 to the latter (2005),74 the Committee on Economic, Social and Cultural Rights stated the following: Human rights are fundamental, inalienable and universal entitlements . . . [and] inherent to the human person as such, whereas intellectual property rights are first and foremost means by which States seek to provide incentives for inventiveness and creativity, encourage the dissemination of creative and innovative productions, as well as the development of cultural identities, and preserve the integrity of scientific, literary and artistic productions for the benefit of society as a whole.

In this picture, IPRs appear “first and foremost” as utilitarian in contrast to the fundamental and inalienable nature of human rights. It should be evident from the foregoing that the statement implying a one size fits all approach to IPR is not necessarily in line with the rationale and historical roots of international IP law. It is, however, possible to link the protection of the moral and material interests resulting from any scientific, literary, or artistic production to Lockean and Kantian perspectives.75 Thus, General Comment no. 17 states the following: [T]he human right to benefit from the protection of the moral and material interests resulting from one’s scientific, literary and artistic productions safeguards the personal link between authors and their creations and between peoples, communities, or other groups and their collective cultural heritage, as well as their basic material interests which are necessary to enable authors to enjoy an adequate standard of living.76 72

73

74

75

76

For an account of the drafting history of this provision and Article 15(1)(c) ICESCR, see, for example, Peter K. Yu, “Reconceptualizing Intellectual Property Interests in a Human Rights Framework” (2007) 40 UC Davis Law Review 1039–1149, 1050–1069. International Covenant on Economic, Social and Cultural Rights, December 16, 1966, 999 U.N.T.S. 171 and 1057 U.N.T.S. 407, in force January 3, 1976 [hereinafter ICESCR]. Similar wordings are found in the American Declaration on the Rights and Duties of Man 1948, Article 13 and Article 14 of the Additional Protocol to the American Convention on Human Rights in the Area of Economic, Social and Cultural Rights. 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 or She Is the Author, 4, U.N. Doc. E/C.12/GC/17 (January 12, 2006) [hereinafter General Comment No. 17]. For an account of the background, structure, and content of General Comment No. 17, see Hans Morten Haugen, “General Comment No. 17 on ‘Authors” Rights” (2007) 10 Journal of World Intellectual Property 53–69. See Gervais, “Human Rights and Philosophical Foundation’s,” 94–95 on the interface between the Lockean justification for IP and these human rights provisions. General Comment No. 17, para. 2.

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In contrast, according to the subsequent statement, “intellectual property regimes primarily protect business and corporate interests and investments.”77 Again, it is possible to question the generality of the observations, but still the following opinion is expressed: [T]he scope of protection of the moral and material interests of the author provided for by article 15, paragraph 1 (c), does not necessarily coincide with what is referred to as intellectual property rights under national legislation or international agreements . . . [I]t is therefore important not to equate intellectual property rights with the human right recognized in article 15, paragraph 1 (c).78

This has at least two implications: first, that only parts of the IP legislation will be covered by the human rights protection79 and, second, that “a propertybased regime is not the only acceptable modality of protection that can be used to realize the right to the protection of material interests in intellectual creations.”80 The point in this context is that human rights may influence the concrete justification of IP rights, perhaps even in ways that are not necessarily compatible with the justification of other kinds of property, notwithstanding the general human rights protection of property.81 To conclude this brief outline of justification for IP at the international level, the justifications used are likely to be pluralistic, in the sense that IP is based on multiple justifications. Guidance is lacking, however, on how these interests are to be reconciled. It is also important to note that the justifications used are not only likely to vary between various kinds of IP, there may also be differences between the grounds for justifying protection within a certain category of IP, typically software protection under copyright law. That said, it is difficult to find a ground for justifying IP law internationally based on libertarian ideas of generally strong property rights and a commitment to noninterference. Rather there seems to be a mix of a utilitarian focus on benefiting society as a whole and non-consequential natural law–inspired ideas of moral desert and personality protection, which attempt to balance the protection of rights and of the public interest.

77 79

80 81

General Comment No. 17, para. 2. 78 General Comment No. 17, paras. 2 and 3. See Peter K. Yu, “The Anatomy of the Human Rights Framework for Intellectual Property” (2016) 69 SMU Law Review 37–95, 85–86. Yu, “Reconceptualizing Intellectual Property Interests,” 1089. See the discussion in Yu, “Reconceptualizing Intellectual Property Interests,” 1086–1088, who also points out that ICESCR, unlike UDHR, does not contain any general provisions on the protection of property.

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D CONCLUSION

The foregoing overview and analysis have intended to show that the utmost caution is necessary in using the property metaphor in relation to IPRs to reflect a common ground for justifying property rights in transnational and international contexts. First, the point has been made that even if one accepts that property in tangibles and IP can be justified on the same basic ground (whether utilitarian, the labor idea, or personality ideas), the differences in the nature of the resource require that caution be exercised in drawing material legal conclusions from the use of the property metaphor. Second, caution is also called for insofar as property in tangibles and IP – and different kinds of IP for that matter – may be justified on different kinds of grounds. Third, international IP regulation does not seem to provide arguments for a unified property justification approach, for example, based on libertarian ideas of noninterference with property rights. Instead, it suggests the existence of a plurality of approaches to the justification of IP, not least in the case of copyright, and also adds a human rights dimension to IP. A different question is what conclusions may be drawn from the use of the property term or metaphor in relation to IPRs as assets. This question will be dealt with in Chapter 7.

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6 Conclusions to Be Drawn from the Structure of Rights

INTRODUCTION

In the discussion about the structuring of intellectual property (IP) rights in Chapter 3, four major points were made. First, the concept of IP as related to intangible objects is a fiction in the sense that intellectual property rights (IPRs) do not relate to fixed objects (though intangible) in the same sense as tangibles. Rather, they attach to linguistic abstractions related to specific achievements. Second, from a descriptive point of view, IPRs are still related to legal objects that emphasize the in rem structure of the rights. As such, these legal objects may in general terms be thought of as “resources” or “information.” Third (and still on the descriptive level), although the core of IPRs is the exclusive rights, various kinds of mandatory compensation schemes, without exclusivity, are also parts of the IPR system. Fourth, exclusive IPRs have a negative and a positive side: the right to exclude and the right or privilege to behave in the manner subject to exclusion (“right to use”). What is disputed, though, is the legal ground for the latter and whether it is a feature of IP law. As pointed out in Chapter 3, there are different views on this, including in relation to international IP legislation. This will not be discussed further here. Instead, we will discuss the possible normative implications of the structuring of IPRs and, in particular, the implications of the use of the term “intangible goods.” According to the view expressed in Chapter 3, use of this term is based on a fiction. In this context, we will briefly consider the relationship between the justification for and the structuring of the rights (Section A), before discussing the notion of drawing IP boundaries (Section B). We will then examine the implications of the so-called abstraction levels in IP law (Section C) and the notions of “use” of IP subject matters (Section D), before returning to the discussion about object talk in IP including its possible normative implications for IP law and policy (Section E). 94 Downloaded from https://www.cambridge.org/core. University of Texas Libraries, on 06 Jan 2020 at 11:56:08, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/9781139680318.007

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A THE RELATION BETWEEN JUSTIFICATION AND STRUCTURE

The differences in the structuring of IPRs and of property rights in tangibles that were pointed out in Chapter 3 are closely related to the differences in justifications used for rights. The existence of different justifications, I argue, calls for caution to be exercised in drawing concrete legal conclusions from the use of the property metaphor. This applies also to legal analogies from one set of rules to the other.1 The main point is that the problems to be regulated are quite different, and this is reflected in the structuring of the rights. The same applies to different kinds of IP rights. In the fields that here, rather rudimentarily, are called creational IP rights, it is the results of creational activity and efforts that are protected, along with any investments related to such activities. This is reflected both in the justification and the structuring of the rights. As regards business-related rights, including trademark and trade name protection, the justification is to a large extent reflected in the right holder’s protection against the likelihood of confusion of its own trademark or trade name and designations used by others. In both cases, the competitive relationship between the right holder and third parties is reflected in both the justification and the structuring of the rights. The main point to be made here is that the relationship between the justification and the structuring of (various) IPRs may be disturbed by the notion of the intangible good. In other words, the claim is that the scope of the rights should be based on the grounds for justification and not on a fictive notion that may lead to false analogies with property in tangibles. In what follows, we will look at three basic concepts that are, or may be, easily affected by the fiction of the intangible good: the boundaries of IP rights, abstraction levels in IP law and use or exploitation rights in IP law. These three concepts are closely related – the first overlaps with the two others – but they are all illustrative of how property thinking may affect the outcome of IP law in a way that is not necessarily in line with the grounds for having IP rights. Here, the basic message is that no conclusions should be drawn from the fictive notion of intangible goods. This has obvious consequences for the three problems discussed.

B IP BOUNDARIES

One of the consequences of using the notion of the intangible good as the object of IPRs is that the process of drawing the boundaries of the intangible 1

See Chapter 5.

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good is compared with that of drawing boundaries for physical goods, for example, land. Thus, one common claim is that the boundaries of IP are “fuzzier” than those for property in tangibles.2 This comparison makes sense from an economic point of view (e.g., to point out differences regarding information costs), but it may give the impression that the method for drawing such boundaries is essentially the same, the only difference being the fuzziness.3 It follows from the analysis in Chapter 3 that we find such explanations to be insufficient to reveal the structural particularities of the various kinds of IPRs. Further, there is a risk that such approaches may lead to analogies with property in tangibles that are not supported by the justification for the rights. With the alternative approach to the “object-oriented” account of IP – a “conduct-oriented” approach implying that IPRs are exclusive rights to a certain kind of conduct4 – the difference between the method for determining the boundaries of IP rights compared to property in tangibles is accentuated. Thus, this approach has the advantage of preventing the drawing of false analogies on the basis of the structuring of the rights. As pointed out in Chapter 3, the approach may alternatively conceal the function of the legal object in IP law. As a result, it carries the risk of engendering other false conclusions (as we will see in Section E). Here, we will settle for the observation that determining the scope of the legal object requires methods very different from those used to determine the boundaries of physical goods, making the two phenomena difficult to compare. However, the structural differences inherent in the specific features of legal objects are the key to acknowledging the differences in information costs (pointed out in Chapter 5 (Section A)). In the following, the particularities of determining the boundaries of IPRs will be sketched out. Symptomatically, scholars who advocate a unified property theory tend to underestimate problems regarding the demarcation of IP. Thus, Epstein has pointed out that although “demarcation of the scope of property rights in some forms of intellectual property – e.g. patents – is sometimes more difficult than it is for physical property . . . that difference of specification is less critical in areas like copyright and trademark, where the distinctiveness of the claim is 2

3

4

See, for example, Epstein, “The Disintegration of Intellectual Property?” 487; Menell, “Governance of Intellectual Resources,” 1537, 1548–1549. Compare, for example, Gordon’s observation that “copyright provides its own boundaries which by and large, substitute well for physical boundaries” in Gordon, “An Inquiry,” 1380. See also Chapter 3 (Section B.2) (infra fn. 33) and Smith’s observation that infringement doctrines in patent law, like prosecution history estoppel and the doctrine of equivalents, are merely causing “some indeterminacy around the edges” of the exclusion strategy in patent law (Smith, “Intellectual Property as Property,” 1755). See Chapter 3 (Sections B.2 and H).

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easier to establish.”5 According to Epstein: “this explains why the recordation systems for these two forms of intellectual property more closely resemble the ministerial systems that are used to record titles to land and automobiles, while the registration of patent rights involves a far more complex system of public examination prior to registration.”6 Disregarding the fact that this description is US-specific, the ease with which one may establish a claim in copyright and trademark law is certainly relative. This is due not least to what has been emphasized earlier: the scope of protection for works and trademarks cannot be predetermined, but must be determined on a case-by-case basis, subject to a comparison between the protected subject matter and the alleged infringement. This is not to say that everything is unpredictable. Nor does it mean that US Judge Learned Hand’s famous statement in relation to copyright that “decisions cannot help much in a new case” and that “[n]obody has ever been able to fix [the] boundary [between ideas and expressions], and nobody ever can”7 is fully embraced. It does mean, however, that the human mind cannot foresee all future creations, so it is not possible to predetermine any boundary. It may also be argued that the demarcation of copyrights and trademark rights carries more uncertainty than do patents, because the scope of the invention is described in detail in the patent claim and the criteria for infringement are based on more subjective assessments in copyright and trademark law than in patent law. Here, opinions differ. Some will emphasize the specific problems in demarcating the scope of copyright compared to patents,8 while others will do the opposite.9 It seems fair to say that “the point is not that either conceptualization is right or wrong, but that both are uncomfortable,” in the sense that the lack of clear boundaries has always been a problem in IP law and has become increasingly more so as new doctrines have been developed.10 The observation is closely connected to the discussion about the abstraction levels in IP law, which will be dealt with in the next section.11

5 6 7 8

9

10 11

Epstein, “What Is so Special about Intangible Property?” 51. Epstein, “What Is so Special about Intangible Property?” 51. Nichols v. Universal Pictures, 45 F.2d 119 (2d Cir. 1930). See, for example, Clarissa Long, “Information Costs in Patent and Copyright” (2004) 90 Virginia Law Review 465–549, 488–489; and Litman, “The Public Domain,” 965, 1004–1005. See, for example, Smith, “Intellectual Property as Property,” 1799–1800; and Richard A. Posner, “Misappropriation: A Dirge” (2003) 40 Houston Law Review 621–641, 638. See Hughes, “Copyright and Incomplete Historiographies,” 1077–1078. Compare Hughes, “Copyright and Incomplete Historiographies,” 1078: “The boundaries of copyright took a quantum leap in fuzziness over a century ago – when our sense of justice led us to protect against more activities than exact complete reproduction” and “we redefined

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The problems with determining the boundaries of the legal object in IP law are closely connected to the justification used for the rights, including the “public good problem.” In utilitarian terms, problems arise in connection with the fact that creational IP, like patents and copyrights, is a response to the tragedy of the free rider rather than the tragedy of the commons.12 Exclusive rights to inventions and works restrain competition in the market in order for right holders to recoup their investments, but they may also be justified on the basis that they provide incentives to innovate. The trade-off between different innovation perspectives is reflected in the terms of protection, even if it can be debated, particularly in relation to copyright, whether the length of protection may also reflect non-consequential justifications for the rights.13 With regard to property in tangibles, however, time limitations would create problems in relation to the commons, as sketched out in Chapter 2 (Section A), and which do not apply to IP. In this respect, the unlimited duration of rights to property in tangibles does not carry over to IPRs.14 Even in the case of IPRs not subject to immediate time limitations, such as trademarks and trade name protection, the justification for this differs from the justification used for property in tangibles.15 In addition to the differences reflected in the limited term of protection, other demarcation problems are linked to the monopolization of information. These are typically reflected in doctrines such as the idea/expression dichotomy in copyright and other basic requirements for protection. The trade-offs between grounds for protection and grounds for limiting protection are moreover reflected in exceptions and limitations to the exploitation rights, which we will come back to in Section D.

12 13

14

15

‘expression’ to include levels of abstraction significantly above what is really expression. This exacerbated the fuzzy boundaries problem.” See Chapter 2 (Section A) and Chapter 5 (Section A). See, however, Landes & Posner, “Indefinitely Renewable Copyright,” arguing in favor of copyright extension from an L&E perspective. As noted by Ruth Thowse, Christian Handke, & Paul Stepan, “The Economics of Copyright Law: A Stocktake of the Literature” (2008) 5 Review of Economic Research on Copyright Issues 1–22, 7, Landes & Posner seem to have changed their view on this topic since their 1989 article, “An Economic Analysis of Copyright Law.” See even Epstein, “What Is so Special about Intangible Property?” 51. See, on the other hand, Molly S. Van Houweling, “Disciplining the Dead Hand of Copyright: Durational Limits on Remote Control Property” (2016) 30 Harvard Journal of Law & Technology 53–74, 60 et seq. for examples of time limitations in US property law applying to tangibles. See, for example, Landes & Posner, “Trademark Law,” 286: “If a given name has no scarcity value, so that it yields zero rents, perpetual compared to limited duration cannot create rentseeking problems even if discount rates are very low (or zero or, for that matter, negative). And identification costs, which would plague perpetual patents, are not a serious problem either.”

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The function of the delineation of IPRs may depend on the role of third parties not entitled to the rights (“observers”). One classification advanced is the distinction between “avoiders,” “transactors,” and “builders.”16 According to this terminology, avoiders are “those who merely wish to avoid infringing the . . . rights and have little interest in comprehending the good beyond those boundaries.” Transactors are those “who wish to transact with owners of goods, either to consume the good or to enter into some other contractual negotiation,” in other words those who are interested in IPRs as assets. Builders are characterized as “those observers who, in addition to fulfilling their legal duties of avoidance, do wish to comprehend the good in detail because they are interested in building on it or inventing around it.”17 The difficulties involved in the delineation of IP rights will affect different observers differently: those merely seeking to avoid infringing the rights of the owner (avoiders) will need less information than those who wish to transact or circumvent the rights (transactors and builders). For avoiders, it may be sufficient to know of the existence of an achievement and the basic legal criteria for infringement. Transactors will need to know what it is that gives value to the IPR in question. For builders, who want to develop products without transacting with the right holders, information regarding the criteria for infringement is most critical. Here, in other words, is where the infringement criteria fully kick in and where the notion of intangible good, with features similar to tangibles, fails. For builders, it is necessary to fully test the boundaries of the IP rights, and this is where the nature of IP protection shows its true character. Although there are different infringement criteria in the different fields of IP law,18 the common trait is that boundaries are drawn on the basis of comparisons between manifestations of the achievement leading to the IP (e.g., a fixation of a work) and manifestations of the competing product. A builder that wants to stay clear of a protected IP right will need to know the criteria for infringement to make the necessary comparison assessments to avoid infringement. Similarly, the right holder who claims that an infringement has taken place will make his or her case on the basis of the infringement criteria and a comparison between the manifestations. Where a conflict is taken to the courts, the court too will have to decide the case on this basis. The intangible good approach – implying that information is a good comparable to tangibles only blurrier around the edges – may perhaps make sense 16 18

C. Long, “Information Costs,” 489 et seq. 17 See C. Long, “Information Costs,” 491–492. For example, the doctrine of equivalents in patent law, the likelihood of confusion doctrine in trademark law, and various kinds of similarity tests in copyright law.

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for avoiders but will fail entirely for the two other categories. The process of assessing the scope of IPRs is simply not comparable to observing the characteristics of a coffee mug or a widget,19 or assessing the area of a piece of land. Transactors and builders, for example, need information on the circumstances in which the IPRs in question may infringe third-party rights. They also need to know when other subject matters do not infringe the IPRs. The notion of the intangible good is not helpful in determining the kinds of assessments that are necessary. Instead, the notion conceals the considerable differences between such assessments (based on comparisons between manifestations of achievements) and assessments used to determine the physical boundaries of land or chattels.20 Although it may be correct to say that “intellectual property’s close relationship to property stems from the role that information costs play in the delineation and enforcement of rights,”21 it is also important to recognize that different methods are used for demarcating the boundaries of the (legal) “objects” of the two types of rights.22 Two problems in particular will be discussed in the following section: the abstraction level in IP law and the concept of “use”/“exploitation” of IP.

C ABSTRACTION LEVELS IN IP LAW

1 General Remarks As pointed out in Chapter 3, the concepts forming the basis for legal objects in IP law (i.e., works, inventions, designs, trademarks) are abstractions. The abstractions serve an obvious function, which is closely related to the justification for the rights, namely to prevent legal protection from becoming too narrow to fulfill its purpose. Thus, when the term work covers more than just the concrete copies of my novel, it is because otherwise someone else may copy the text, changing only a few words, and claim that it is not the same work. Likewise, if inventions were limited to the physical embodiments 19 20

21 22

See the examples in C. Long, “Information Costs,” 476. To be sure, in relation to tangibles, it may also be a question of rights to dispose of the thing in ways other than the merely physical. See, for example, the German Federal Supreme Court decision of December 17, 2010, regarding whether a landowner could prohibit the taking of photographs of his property. The court answered in the negative. See case V ZR 45/10, 64 Gewerblicher Rechtsschutz und Urheberrecht 2011, 323. Still, it is the concrete excerpt of the tangible world that is subject to the disposition, in contrast to IP, which is infinite in this respect. Smith, “Intellectual Property as Property,” 1745. The result is that the information cost picture as well as the concrete information costs are not comparable with the situation for property in tangibles; see Chapter 5 (Section A).

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made by the inventor, tiny amendments would suffice to get around the patent. With such protection, one can assume that the creators would be unable to recoup their fixed costs or receive an appropriate reward for the labor performed. Thus, the concepts of works and inventions have evolved over time, so as to take into account economic, cultural, and technological developments.23 The same structure is visible in trademark law for similar reasons: if trademark protection were limited to the use of identical marks, the basic function of the trademark would be hampered, imposing search costs, causing consumer confusion to the detriment of social welfare, and preventing trademark owners from benefiting from the labor put into creating the association between mark and owner. On the other hand, the purpose of trademark and trade name protection implies that the protection does not necessarily extend to identical marks or names in cases where there is no likelihood of confusion.24 Thus, the abstractions are tools used to fulfill the justification for the rights, though they may carry the risk of becoming detached from the justification grounds, resulting in over- or underprotection. Whether or not this occurs may depend on the level of abstraction appropriate to serve the function of the IPR in question. Here is certainly not the place for exploring such complex questions in detail, but some problems related to abstraction levels in copyright, patent, and trademark law can be pointed to, not least to avoid false conclusions from being drawn about the characterization of IP as intangible goods.

2 Abstraction Levels in Copyright The abstraction levels problem has received particular attention in US copyright law, but the phenomenon is universal. In the Nichols v. Universal Pictures case, which concerned the use of a play’s plot (Abie’s 23

24

See, for copyright, Teilmann-Lock, “The Object of Copyright,” 120–121. See also Madison, “The End of the Work,” 333–340. For a historical account of the development of patent law, see, for example, Pamela O. Long, “Invention, Authorship, Intellectual Property and the Origin of Patents: Notes Toward a Conceptual History” (1991) 32 Technology of Culture 846–884. See, for example, the EU Trade Mark Directive, Directive 2015/2436 of the European Parliament and of the Council of December 16, 2015, to approximate the laws of the Member States relating to trade marks, OJ 2015 No. L 336, p. 1, Article 10(2)(a), which states that the trademark proprietor’s exclusive rights extend to signs that are “identical with the trade mark and [are] used in relation to goods or services which are identical with those for which the trade mark is registered.” In other words, and a contrario, the protection for identical trademarks does not extend to nonidentical goods; in those cases, the likelihood of confusion test or protection for well-known marks kicks in; see the Directive Articles 10(2)(b) and 10(2)(c).

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Irish Rose) in a movie (The Cohen and the Kelleys), Judge Hand famously held the following: 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 [and that] 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 expressions, his property is never extended.25

This implies that at a certain level of abstraction, copyright protection no longer applies, the series of abstractions becoming unprotected ideas. However, there are abstraction levels that fall within the scope of protection as protected expressions. Thus, literary plots may be protected in most jurisdictions, provided that they are not too general. One example is the German Federal Supreme Court’s (BGH) decision in the Dr. Zhivago case.26 Here, an English lawyer had, under the pseudonym of Alexander Molin, written a novel entitled Lara’s Child as a continuation of Boris Pasternak’s famous novel Dr. Zhivago and was successfully sued for copyright infringement by the publisher of the latter. The Supreme Court held that Molin had “adopted individual creative literary material from Doctor Zhivago to a large extent, even if there is no point at which parts of the older work have simply been transferred to the more recent work.”27 The court noted that the more recent work had taken over “substantial elements of the fictional world created in Doctor Zhivago with its characters, the network of their relationships, their fate and their entire life situation otherwise, including the places at which decisive events took place in Doctor Zhivago.”28 Lara’s Child, the court held, was so skillfully tied to the strands of the action of “Doctor Zhivago” that the reader is led by the author more deeply into the fictional world of this work in the initial chapter. This is achieved by the artistic device that [Lara’s Child] begins with the particularly moving sleigh scene from “Doctor Zhivago” in which Zhivago, who has remained in the Varykino mansion, can be seen in the distance on the steps in front of the house. This scene, a key scene in the 25 26

27

28

See supra fn. 7. Case I ZR 65/96, English translation in 31 International Review of Intellectual Property and Competition Law (2000)1050, German language version in 33 Geweblicher Rechtsschutz und Urheberrecht Internationaler Teil (1999) 884. Cited from the English translation, 31 International Review of Intellectual Property and Competition Law (2000) 1050, 1052. Dr. Zhivago (BGH), 1052–1053.

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action of “Doctor Zhivago” since it is followed by a decisive change in the lives of the main figures Zhivago and Lara, also serves in [Lara’s Child] again by adopting a large number of details and circumstances that characterize this scene, as the key by which the reader is once again introduced into the world experience of “Doctor Zhivago.”29

In finding that this constituted a copyright infringement under German copyright law, the court stressed that “it is not only the specific textual wording or the direct embodiment of a thought that can be protected by copyright [but also] individually personally marked components and formative elements of the work that are to be found in the course of the action, in the characterization and distribution of roles of the persons involved, the presentation of scenes and in the ‘scenery’ of the novel.” Lara’s Child, as an adaptation of Doctor Zhivago, did not qualify as a permissible independent work (under s. 24 of the German Copyright Act), as the decisive criterion for this was “the distance between the new work and the borrowed individual characteristics of the work that has been used.” The court underscored that “[t]he standard applied must not be too mild.” An independent work, it held, “presupposes that the borrowed individual personal characteristics of the protected older work pale beside the unique nature of the new work,” as well as the following: As a rule, this takes place such that the individual personal characteristics borrowed from the protected older rule fade into the background in the new work in such a way that the new work no longer uses the older work to a relevant extent, with the result that the older work appears merely as a stimulus for new independent creation.30

The conclusion was that “[t]he adoptions from ‘Doctor Zhivago’ go far beyond a mere reference to figures and events in ‘Doctor Zhivago’ that would be permissible under copyright law . . . and are not absorbed into [Lara’s Child] as an independent work with a corresponding internal distance to the model.”31 The Dr. Zhivago decision illustrates the abstraction levels in copyright law in that the court here found that Lara’s Child had used protected expressions from Dr. Zhivago and not merely unprotected ideas. Moreover, the court drew the line between adaptations of the older work and independent works, characterized by the level of “internal distance” to the older work. Different doctrines in different jurisdictions are used to define the levels of abstraction that fall within the scope of protection (i.e., originality criteria, the idea/ 29 31

Dr. Zhivago (BGH), 1052–1053. Dr. Zhivago (BGH), 1054.

30

Dr. Zhivago (BGH), 1053.

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expression dichotomy, similarity criteria, and lines between adaptation and independent work), but the general problem is universal in nature. The intention here is not to discuss the correctness of the Dr. Zhivago decision. Doctrinally, it seems to align well with accepted principles in German copyright law,32 and it would not be surprising if the Court of Justice of the European Union (CJEU) came to the same result under EU law. Rather, the decision is used as an illustration for discussing some of the problems related to abstraction levels in copyright law in light of the structural particularities of this field of law. The decision underlines these structural particularities, showing that what is at stake is the comparison between the manifestation of one creation – the novel Dr. Zhivago – and the manifestation of another creation – the novel Lara’s Child. Furthermore, it shows that the concept of work extends beyond the first manifestation (Ma) and also covers part of a further manifestation (Mb).33 The fact that it grants the right holders protection beyond the mere copying of the original novel confirms the purpose of the concept of a work. However, express reference to this purpose is absent from the decision. The court concentrates on whether “individually personally marked components and formative elements” of the first novel are found in the new novel and “the distance between the new work and the borrowed individual characteristics of the work that has been used.” To be sure, these questions reflect the idea that the author should have protection for what he or she has created. The problem is that it is difficult to define what is really created by the author, and this problem is inherent in the elusive distinction between ideas and expression.34 What is really at stake here is how to find an appropriate level of protection for the creative effort, whether one starts from the utilitarian incentive argument, a quest for an appropriate reward on the basis of the labor performed, or personality-oriented arguments. It is not a given then that the author should have an absolute exclusive right to make sequels to his or her novel. In US copyright doctrine, certain commentators have spoken in favor of introducing harm as a factor in nonliteral copyright infringement cases.35 One might imagine that such an approach would affect the concept of the work, for 32

33 34

35

See, for example, Ulrich Lo¨wenheim in Gerhard Schricker & Ulrich Lo¨wenheim (eds.), Urheberrecht: Kommentar (Munich: Beck, 5th ed., by Ulrich Lo¨wenheim, Mathias Leistner, & Ansgar Ohly, 2016), § 24 paras. 10–17 (pp. 660–665). See Chapter 3 (Section B.2). See, for example, the criticism of this distinction by Gunnar Karnell, “Copyright to Sequels – With Special Regard to Television Show Formats” (2000) 31 In 886–913. See, for example, Chris Sprigman, “Copyright and the Rule of Reason” (2009) 7 Journal on Telecommunications & High Technology Law 317–342, from a utilitarian point of view; and Wendy J. Gordon, “Harmless Use: Gleaning from Fields of Copyrighted Works” (2009) 77

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example, with regard to the scope of protection against adaptations, or that harm would concurrently be introduced as a criterion for fair use or other kinds of limitation doctrines. Here is not the place to discuss how a possible harm doctrine should be implemented, nor whether harm should be a decisive criterion for nonliteral copyright infringement. The point is rather that the effect of the two choices – lowering the level of abstraction or introducing specific exceptions or limitations – is the same with regard to the scope of protection. The treatment of parodies in copyright law under various jurisdictions is illustrative. In German law and the law of the Nordic countries, noninfringing parodies have been treated as “independent works” that do not affect the scope of protection of the work subject to the parody. In other countries, including under the EU Copyright Directive (“Infosoc Directive”), parodies are exempted as “permitted uses.”36 The consequence, in both cases, is that parodies are not infringements, as long as they fulfill the criteria for non-infringing use. Symptomatically, the BGH held, in the Bettina Z case, that treating parodies as independent works was in accordance with the exception for parodies in Article 5(3)(k) of the directive as long as the German rules were interpreted in accordance with the directive.37 The main point in this context is that the notion of the work as an intangible good may easily lead to the abstraction being detached from the functions it is supposed to serve. Treating non-infringing parodies as exceptions to the exclusive right to exploit the work, presupposing that the concept of a work includes such parodies, may be a symptom. The formal reason for such treatment is likely to be that parodies copy copyrighted elements, i.e., “expression.”38 On the one hand, following the CJEU in the Deckmyn case, which held that a non-infringing “parody should display an original character

36

37 38

Fordham Law Review 2411–2435, also with a Lockean take. See further Christina Bohannan, “Copyright Harm, Foreseeability and Fair Use” (2007) 85 Washington University Law Review 969–1031; and Pamela Samuelson, “A Fresh Look at Tests for Nonliteral Copyright Infringement” (2013) 107 Northwestern University Law Review 1821–1849. See Dinusha Mendis & Martin Kretschmer, The Treatment of Parodies under Copyright Law in Seven Jurisdictions: A Comparative Review of the Underlying Principles (Newport: The Intellectual Property Law Office (vol. 23), 2013), with a survey of copyright regulation of parodies in seven countries (UK, Canada, France, Australia, Germany, the United States, and the Netherlands). Note additionally that a special exemption for parodies in the UK was introduced under the “fair dealing provision” in 2014, cf. s. 30A, Copyright, Designs and Patents Act 1988 added by Copyright and Rights in Performances (Quotation and Parody), Regulations 2014/2356. Case ZR-9/15, 69 Gewerblicher Rechtsshutz und Urheberrecht 2016, 1157, para. 24. See, for example, Richard A. Posner, “When Is Parody Fair Use?” (1992) 21 Journal of Legal Studies 67–78, 68–69.

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of its own, other than that of displaying noticeable differences with respect to the original parodied work [and] could reasonably be attributed to a person other than the author of the original,”39 is it plausible to say that it is part of the original creation but that the behavior is still permitted? It is possible to claim that this approach is influenced by a metaphysical concept of a work analogous to a physical thing with a “fixed” boundary. On the other hand, the notion of the parody as an independent work characterized by the “internal distance” to the original work may be influenced by a metaphysical and static concept of a work as an intangible good, represented by two things that do not touch each other. Both approaches, then, are apt to blur the function of the work as an abstraction and what the cases are really about, namely, whether permitting a sequel to a novel (as in the Dr. Zhivago case) or a parody affects incentives to innovate is in accordance with the author’s claim for an appropriate (proportional) reward for his or her labor, or in one way or another conflicts with personality claims. One problem with current copyright law is that it is easily detached from its purposes, as we will discuss further in Section D. This is primarily explained by the development of concepts that tend to “live their own lives.” It has been alleged in this respect that the prima facie structural similarity with property in tangibles contributes to this detachment. Here, we have pointed to the problems inherent in the abstract concept of a work subject to exclusive rights on the part of the author. The aim has been to emphasize its function as extending the protection beyond the mere copying of the embodiments of the creation. It is not my intention here to suggest a correct level of abstraction, nor do I propose to introduce alternatives to tying copyright protection to the abstract concept of the work.40 Instead, I wish to address the importance of consciousness about the abstraction level problem and to warn against drawing (false) conclusions from the notion of a work as an intangible good and (false) analogies from the assessment of the boundaries of property in tangibles, including when the term is used in transnational and international contexts. 3 Abstraction Levels in Patent Law The concept of an invention in patent law serves the same basic function as the concept of a work in copyright: it is an abstraction designating what the 39

40

Case C-201/13, Johan Deckmyn and Vrijheidsfonds VZW v. Helena Vandersteen and Others, ECLI:EU:C:2014:2132, para. 21. For the latter, Peukert, “Rethinking the Ontology of IP,” has suggested replacing the current scheme related to abstract objects with a “realistic concept of regulating market behavior with regard to reproducible artifacts” (2016, 23, cf. also 2017, 8–10).

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inventor has created. However, there is a substantial difference in the structuring of copyright and patent rights that affects the methods used for determining the scope of an invention and the occurrence of an infringement of patent. While the work is an abstraction derived from the manifestations of the author’s creation, written claims form the basis of an invention.41 Leaving aside the question of whether there are different concepts of invention,42 patent claims as such are abstractions in that they may cover an overwhelming number of embodiments. As with the concept of work, however, the concept of invention designates embodiments in the sense that a physical embodiment is always required for infringement.43 The concept of the “invention as an intangible good” is likely to blur this fact. Similarly, as with copyright regarding works, the point of tying patent protection to the abstract concept of invention is to grant protection that reflects the innovative efforts of the inventor. Since the utilitarian justification is more clear-cut for patents than for copyright, the incentive yardstick should always be relevant when assessing whether the concept of an invention and consequently the scope of protection in patent law fulfills its purposes. In patent law, there are multiple possible levels of abstraction. To a large extent, these levels are inherent in the patent claims. The broader the claim is, the higher the level of abstraction.44 Their broadness depends on how they are constructed, though here is not the place for elaborating on the delicate problem of the construction of claims. But, as held by Burk and Lemley, who compare claim construction with the “abstraction test” in US copyright law, courts can “read a term abstractly, so that a ‘fastener’ becomes anything 41

42

43 44

See, however, Fromer, “An Information Theory in Copyright Law,” for a view on “claims” under US copyright law. See Tun-Jen Chiang, “The Levels of Abstraction Problem in Patent Law” (2011) 105 Northwestern University Law Review 1097–1152. Cf. Chiang, “The Levels of Abstraction Problem,” 1097. As an example of a conscious choice as to levels of abstraction, see the Protocol on the Interpretation of Article 69 of the European Patent Convention (EPC) of October 5, 1973, 1065 U.N.T.S. 255 [hereinafter EPC] (deciding that the extent of protection conferred by a European patent shall be determined by the patent claims). Article 1 states that “Article 69 should not be interpreted as meaning that the extent of the protection conferred by a European patent is to be understood as that defined by the strict, literal meaning of the wording used in the claims,” nor that it “may extend to what, from a consideration of the description and drawings by a person skilled in the art, the patent proprietor has contemplated,” but “as defining a position between these extremes which combines a fair protection for the patent proprietor with a reasonable degree of legal certainty for third parties.” For a discussion about the implications of the abstraction levels implicit in this provision, in particular in view of UK and German patent law, see Christian von Drathen, “Patent Scope in English and German Law under the European Patent Convention 1973 and 2000” (2008) 39 International Review of Intellectual Property and Competition Law 384–419.

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that attaches two other things together, or they can read the same term more concretely, defining a fastener to be a particular type of connector such as a nail or a U-bolt. Or they may choose a level in between.”45 The decision of the US Federal Circuit in the Kinetic Concept case is illustrative.46 In claims for appliances and methods for the treatment of wounds, the claims could be understood in accordance with a common understanding of this generic term, meaning “trauma to any of the tissues of the body,” or more narrowly. The court chose the latter option, relying on the specification that mentioned a variety of wounds but limited to skin wounds, ending up with the construction of “wound” being “tissue damage to the surface of the body, including the epithelial and subcutaneous layers.”47 The relationship between the claims and the specifications is of special interest in dealing with the abstraction problem, because the specification will contain embodiments of the invention. Although principles of claim construction will vary depending on the jurisdiction, and in US law there are competing doctrines in this respect,48 it is clear that the term invention in patent law extends beyond the embodiments demonstrating the invention itself.49 The precise extent of protection will depend on further construction of the claims and on the application of infringement doctrines, including the doctrines of equivalents and reverse equivalents.50 On the other hand, in patent law, various doctrines will limit the accepted level of abstraction, for example, possible doctrines implying that abstract ideas cannot be patented and rules denying protection for natural laws, etc.51 The main point here is to insist on the importance of being aware of abstraction levels in patent law, as they are inherent in the doctrines of construction of claims and equivalents. Otherwise, the concept of invention may tend to “live its own life,” detached from the functions it is supposed to fulfill. Again, no 45

46 47

48

49

50 51

Dan L Burk & Mark A. Lemley, “Quantum Patent Mechanics” (2005) 9 Lewis and Clark Law Review 29–56, 31. See Chiang, “The Levels of Abstraction Problem,” 1107–1108. Kinetic Concepts, Inc. v. Blue Sky Medical Group, Inc., 554 F.3d 1010 (Fed. Cir. 2009) 1018–1019. It is to be noted that, in the case at hand, it was the plaintiff (patent holder) who had interest in the narrow construction of the claims since it affected the non-obviousness of the invention. See, related to the abstraction problem, Chiang, “The Levels of Abstraction Problem,” 1097–1099. See, for example, Protocol 1 to Article 69 EPC (supra fn. 44), which states, “the description and drawings [are to be] employed only for the purpose of resolving an ambiguity found in the claims.” See, for example, Burk & Lemley, “Quantum Patent Mechanics,” 38–39. See Mark R. Carter, “Copyright’s Hand Abstractions Test for Patent’s Section 101 Subjectmatter Eligibility” (2014) 30 Santa Clara High Technology Law Journal 497–525.

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conclusions should be drawn from the notion of the invention as an intangible good. A conduct-oriented approach, implying that patent claims prescribe a certain kind of conduct, to which the patent holder has exclusive rights, may ensure a better understanding of the function of the abstractness of the invention. 4 Abstraction Levels in Trademark/Trade Names Law The legal concepts of trademark and trade names are also abstractions in the sense that what is protected under exclusive rights to use a brand extends beyond the physical embodiment of the mark or name used or registered by the right holder. Here, the abstraction levels are, to a large extent, determined by infringement doctrines, namely, the likelihood of confusion doctrine and the protection of well-known brands. As pointed out earlier, with regard to other IPRs, trademarks and trade names are abstractions that serve to fulfill the functions and purposes of the rights. Consequently, there are also abstraction levels in trademark and trade names law. For example, when it comes to the likelihood of confusion, one problem is to determine the similarity of the goods or services to which the protected and the allegedly infringing trademark, or trade name are applied. When comparing the goods, a high level of abstraction in the classification of similarity will imply broad trademark protection on the ground that the more goods, or services, that are subject to comparison, the greater the risk of likelihood of confusion. The Guidelines for Examination of European Union Trademarks, issued by the European Intellectual Property Office (hereinafter EUIPO Guidelines), provide one example.52 When drawing up guidelines for the assessment of the similarity of goods and services, the CJEU decision in the Canon case is taken as a point of departure.53 In that case, the court held that “[i]n assessing the similarity of goods or services concerned . . . all the relevant factors relating to those goods or services themselves should be taken into account, [including] their nature, [intended purpose] and their method of use and whether they are in competition with each other or are complementary.”54 These factors, called “the Canon factors” in the EUIPO Guidelines, along with some additional 52

53 54

Guidelines for Examination in the European Union Intellectual Property Office (EUIPO) on European Union Trade Marks, Part C, Sect. 2, chap. 2, last updated on February 1, 2017, available at https://euipo.europa.eu/ohimportal/trade-mark-guidelines. EUIPO Guidelines, pp. 22–23. Case C-39/97, Canon Kabushiki Kaisha and Metro Goldwyn-Mayer Inc., EU:C:1998:442, para. 23.

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factors, form the basis for the similarity test set out in the Guidelines, where it is stated that what matters is “whether the connections between the relevant factors are sufficiently close to find similarity.”55 As regards the intended purpose criterion, it is emphasized that the purpose is defined by the function of the goods/services in that it answers the question of what need the goods/ services satisfy and what problem they solve. However, it is admitted that it is sometimes difficult to define the proper level of abstraction for the purpose as it must be defined sufficiently narrowly, as is the case when defining the nature of the good. As an example, the EUIPO Guidelines mention the case of vinegar, where “the intended purpose should not be defined as ‘human consumption,’ which is the general purpose that all foodstuffs share, but as ‘everyday seasoning.’”56 From the way that the reference to the level of abstraction is used in the Guidelines, it would seem that it applies to all the factors relevant to the similarity test, the point being that the factors should be construed (sufficiently narrowly) so as to reflect their function in assessing the likelihood of confusion. The decision of the Norwegian Supreme Court in the Pangea case illustrates how this may work in practice.57 The question in this case was whether the trade name Pangea Property Partners AS (PPP) was likely to be confused with the trade name Pangea AS (P). The Norwegian Act on Trade Names states that likelihood of confusion for trade names only exists if they are used or can be expected to be used for identical or similar types of undertakings.58 In this case, P was a credit card service with an environmental profile, while PPP offered a “complete portfolio of services within the fields of property transactions and corporate finance.” The corporation did not participate in the financing of projects it was involved in but assisted its clients in gathering capital from different financial sources. It was not disputed before the courts that there was a high degree of similarity between the two names and that “Pangea” was a distinctive element dominant also in PPP. The question, however, was whether the services undertaken by the two companies were sufficiently similar to cause a likelihood of confusion among consumers. In this respect, the court referred to the statements in the EUIPO Guidelines on levels of abstraction, which it found to be relevant for trade names, and remarked, by analogy from the vinegar example in the Guidelines, that similarity could not be derived from the fact that both undertakings offered financial services. 55 57 58

EUIPO Guidelines, p. 23. 56 EUIPO Guidelines, p. 27. HR-2016–01993-A, judgment September 22, 2016. Act of June 21, 1985 no 79, s. 3(2), para. 2.

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Basing its similarity assessment on what it considered to be the proper level of abstraction, the court found that the services offered by the two undertakings were considerably different. In this respect, it referred to other parts of the EUIPO Guidelines saying that the fact “that real estate may have to be financed in order to be purchased is not enough to find similarity between real estate affairs and financial services [because] consumers usually turn first to a real estate agent to search for property, and secondly to a financial institution to finance the property.” Taking into consideration other arguments, including the fact that there was no competitive relationship between the undertakings, the Norwegian Supreme Court concluded that the required minimum of similarity was not fulfilled such that there was no likelihood of confusion under the Norwegian Trade Names Act. The EUIPO Guidelines, along with the Norwegian Supreme Court decision, illustrate the abstractness of seemingly concrete concepts such as trademark and trade names, in the sense that their legal protection extends beyond, or even within the confines of, the original achievement. To be sure, in particular in relation to trademarks (or trade names), it is linguistically quite normal to distinguish between the right holder’s trademark and other trademarks,59 such that the concept of trademark is narrower (or in some cases broader) than the legal protection of the trademark. This proves, rather than disproves, that references to trademarks (not the trademark rights) as intangible goods subject to legal protection are more confusing than explanatory. In trademark law, it is important to find the abstraction levels that reflect the functions and the purpose of the rules, for example, when assessing likelihood of confusion. This shows, as in copyright and patent law, that problems related to the assessment of the boundaries of the legal object in IP law are very different from those that arise when determining the boundaries of a physical good. As such, no analogies should be made in this respect.

D THE CONCEPT OF USE/EXPLOITATION OF IP LAW – IN PARTICULAR IN RELATION TO COPYRIGHT

1 Outline As has been pointed out, the structure of IPRs appears to resemble that of property in tangibles in that exclusive rights are related to a legal object. The implications of the difference between the legal object of property in tangibles – a physical good – and the legal object of IPRs – linguistic 59

See, for example, Article 10(2)(b).

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abstractions related to an achievement – have been set out earlier. Here, we will point to some additional implications related to so-called exploitation rights. As a result of the structural similarities between property in tangibles and IPRs, the rights inherent in the latter are formulated as “use rights.” Leaving to one side the question, touched upon in Chapter 3 (Section G), of whether exclusive IPRs entail only negative rights – the right to exclude – or positive rights as well – the right to use, the exclusive rights are nevertheless formulated as rights to use, or dispose of, the legal object. For example, taking the TRIPS rules as a point of departure, Article 16 states the following: [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. (Emphasis added here.)

With regard to patents, Article 28(a) TRIPS provides that the right holder “where the subject matter of a patent is a product shall have [the exclusive right] . . . to prevent third parties not having the owner’s consent for the acts of: making, using, offering for sale, selling, or importing for these purposes that product.” Identical terms are used to describe the rights under a process patent in Article 28(b) concerning “the product obtained directly” by the process. In addition, the right holder shall have the exclusive right “to prevent third parties not having the owner’s consent from the act of using the process.” Turning to copyright, Article 9 TRIPS refers to the regulation in the Berne Convention (1971). Under the convention, authors have the exclusive rights to reproduction of their works (Article 9); public performances and communication to the public thereof (Article 11); broadcasting and other wireless communications, including retransmission of broadcasts (Article 11bis); public recitation (Article 11ter); adaptation (Article 12); and various rights related to cinematographic works (Article 14 and 14bis). Turning to the more recent WIPO Copyright Treaty (WCT, 1996), it includes the right of distribution (Article 6); right of rental (Article 7); and the right of communicating the work to the public (Article 8), including “the making available to the public of . . . works in such a way that members of the public may access these works from a place and at a time individually chosen by them” (the making available right). In addition, Article 11 TRIPs provides for a right of rental. These examples show three things. First, the formulation of the use subject to the rights is broadest in trademark law, where the trademark holder’s

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exclusive entitlement is described by the general term “use,” delineated by the requirement that the use be in the “course of trade,” so that uses for other purposes, such as private use, fall outside the scope of the rights. Second, the more specific acts under patent protection apply either to products covered by product patents or to products derived from patented processes, which means physical embodiments of the invention, while the general term use is used as regards the rights to the process as such. Third, the exploitation rights in copyright differ considerably from both those of trademark and patent law, in that they are separated into several sub-rights – or a bundle of rights/bundle of sticks, to use that terminology – related to the use of the work as such and not limited to physical embodiments of it. To be sure, both the obligations to introduce or maintain a distribution right and a rental right pursuant to WCT are limited to the distribution and rental of tangible copies, cf. the agreed statements to Articles 6 and 7 saying that “[a]s used in these Articles, the expressions ‘copies’ and ‘original and copies,’ being subject to the right of distribution and the right of rental under the said Articles, refer exclusively to fixed copies that can be put into circulation as tangible objects.”60 Other kinds of rights, however, notably the right of communication to the public in its different variants and the right of public performance, relate to the work as such and not to tangible copies of it. The right of reproduction’s ambiguous character in the digital realm follows from its expansion beyond tangible copies, most obviously demonstrated by the EU Directives expressly including acts of temporary copying.61 Other than particular borderline cases concerning what constitutes relevant use of a trademark,62 the greatest difficulties in delineating the exploitation rights occur in copyright law. The problems are perhaps more apparent in jurisdictions without a general exemption clause, such 60

61

62

See, for example, Sam Ricketson & Jane C. Ginsburg, International Copyright and Neighbouring Rights. The Berne Convention and Beyond (Oxford: Oxford University Press, 2nd ed., 2006), paras. 1176 and 1192, pp. 687–688 and 696–697 (Volume I); Mihaly Ficsor, The Law of Copyright and the Internet: The 1996 WIPO Treaties, Their Interpretation and Implementation (Oxford: Oxford University Press, 2002), p. 486, emphasizing that this reflects the “minimum level of protection” as the so-called umbrella solution of the WCT implies that states may also extend the right to cover digital transmissions. See, for example, “Infosoc Directive” Articles 2 and 5(1). For an overview, see Michel M. Walter & Silke von Lewinski, European Copyright Law: A Commentary (Oxford: Oxford University Press, 2010), pp. 1017–1027. As to the handling of this problem under WCT, see Ficsor, The Law of Copyright and the Internet, pp. 448–449. See, for example, in the EU context, case C-2/00, Michael Ho¨lterhoff v. Ulrich Freiesleben, ECLI:EU:C:2002:287, paras. 12–16; C-206/01, Arsenal Football Club v. Matthew Reid plc., ECLI: EU:C.2002:651, paras. 38–62; joined cases C-236–238/08, Google France SARL et al. v. Louis Vuitton Malletier SA et al., ECLI:EU:C:2010:159, paras. 50 et seq.

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as the fair use rule in US copyright law.63 But even in US law, the problems of delineating the scope of the exploitation rights are considerable. The problems that we see in copyright in this respect are symptomatic of the rights structure of IP law and will be dealt with in more detail in the following subsection, before discussing the general conclusions that may be drawn from this.

2 Problems Relating to Exploitation Rights in Copyright As demonstrated by way of the international copyright conventions, the exploitation rights in copyright are to a large extent structured in the same way as those for property in tangibles, at least as far as we might expect a positive enumeration of different uses in this field of law, with the difference that the categorized dispositions relate to an abstraction – the work – and not a tangible object. Thus, where the owner of Blackacre holds exclusive rights to hunting, fishing, logging, and so on, on his or her property, the copyright holder has exclusive rights to reproduction, public performance, public communication, and so on of his or her work. As indicated earlier, as long as the dispositions are tied to tangible copies, including the distribution and lending of physical copies of the work, the property structure is hardly problematic beyond what follows from the abstraction problems discussed in Section C. The problems occur when the dispositions extend beyond the use of tangible copies and relate to abstractions as such. Here, the property analogy fails and the attempt to categorize the various kinds of conduct easily leads to concepts detached from the purpose they are supposed to fulfill. This will be demonstrated next. In this context, it is important to understand how the concepts have developed historically. Modern copyright arose from the privileges system, where the State granted publishers exclusive privileges to print books.64 Thus, the first “real” copyright acts, such as the British Statute of Queen Anne, gave 63

64

US Copyright Act of 1976, 17 USC § 107. See Melville B. Nimmer & David Nimmer, Nimmer on Copyright (New York: Matthew Bender, 1963–2017), § 13.05. For a thorough account of the privilege system, see Jane C. Ginsburg, “Proto-property in Literary and Artistic Works: Sixteenth Century Papal Printing Privileges,” in Isabella Alexander & H. Toma´s Go´mez-Arrostegui (eds.), History of Copyright Law (Cheltenham; Northampton, MA: Edward Elgar Publishing, 2016), pp. 237–267. In some circumstances, these privileges were given directly to the authors, such as Miguel de Cervantes, who in 1605, by royal decree, received the exclusive license to print “The Ingenious Gentleman Don Quixote of la Mancha” for a period of 10 years; see “Don Quixote’s Privilege, Madrid (1605),” in Lionel Bently & Martin Kretschmer (eds.), Primary Sources on Copyright (1450–1900), www.copyrighthistory.org.

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authors rights to the printing and reprinting of books,65 meaning the physical exemplars. As pointed out earlier, the concept of the abstract work evolved at a later stage.66 Along with the emergence of the abstract concept of a work came the broadening of the concept of exploitation rights. Rights to the “printing and reprinting of books” and the “representation” of positively enumerated forms of dramatic compositions67 developed into general rights of reproduction, public performance, and public communication of the works, with various subcategories.68 The development, which is a result of technological, economic, and societal changes, explains to a large extent the “property structure” of economic rights, stemming from the fact that the original concepts were tangible in nature and that the evolving abstractions and broadening of the descriptions of the conduct were tied to the same basic structure of prohibitions and exclusive rights. The problems with adapting copyright to technological and societal changes are almost as old as copyright itself. Even the problems encountered in applying the abstract and broadened concepts to these dynamics are not something that has emerged as a result of the digital revolution of the past 20 years. As an example, the concept of the “retransmission of broadcasts” in Article 11bis of the Berne Convention was intensely discussed at the Brussels conference in 1948, resulting in the current regulation of the problem.69 The emergence of the Internet with its dissolution of tangibility and innumerable methods for the dissemination of information has, however, taken the problem to the extreme. A few examples may help show that the structure 65

66 67

68

69

See Statute of Anne, London (1710), in Bently & Kretschmer, Primary Sources on Copyright (1450–1900), determining that “the Author of any Book or Books already Composed and not Printed and Published, or that shall hereafter be Composed, and his Assignee, or Assigns, shall have the sole Liberty of Printing and Reprinting such Book and Books for the Term of fourteen Years, to Commence from the Day of the First Publishing the same, and no longer.” See Chapter 3 (Section H) and Chapter 6 (Section C.1). If sticking to the development of UK copyright law as the example, see the Dramatic Literary Property Act, London (1833), in Bently & Kretschmer, Primary Sources on Copyright (1450–1900), stating that “the Author of any Tragedy, Comedy, Play, Opera, Farce, or any other Dramatic Piece or Entertainment, composed, and not printed and published by the Author thereof or his Assignee . . . shall have as his own Property the sole Liberty of representing, or causing to be represented, at any Place or Places of Dramatic Entertainment whatsoever.” This development, and there are similarities in other jurisdictions, is reflected in s. 1(2)(a) of the UK Copyright Act 1911 where, for the purposes of the act, “copyright” was defined as “the sole right to produce or reproduce the work or any substantial part thereof in any material form whatsoever, to perform . . . the work or any substantial part thereof in public,” including “the sole right to produce, reproduce, perform, or publish any translation of the work.” See Ricketson & Ginsburg, “International Copyright and Neighboring Rights,” para 12.27, p. 726.

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based on the idea that the work is something that can be “disposed of” in analogous ways to tangible goods is fallacious. One example is the discussion in US law of whether or not the distribution right applies to peer-to-peer file sharing on the Internet. In the analog context, the concept of the distribution of copies of the work makes good sense, since it refers to a change in possession of a tangible copy. Transferring the concept to tangible digital copies, such as CDs and DVDs, also makes good sense, although the interests at stake may be affected by the fact that digital content puts the distributor in a position to make – and retain – perfect representations of the content and thus maintain it in practically the same shape. The conceptual problem occurs when access to the content is given to a third party without any tangible copies changing hands, as is the case with peer-to-peer file sharing on the Internet. In many jurisdictions, including under EU law, the distribution right has been limited – in accordance with the agreed statements of WCT – to the passing of the possession of tangible copies.70 This intention has been challenged in the EU, however, by the UsedSoft decision of the CJEU regarding software licenses,71 which we will come back to in Chapter 7 (Section C). In US law the distribution right – which applies to the distribution of “copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership”72 – is considered applicable in certain cases of digital transmission. The question of whether it applies to peer-to-peer file sharing has been discussed in several court cases, which have pointed in different directions.73 One of the controversies is whether the concept of distribution is equivalent to the concept of publication and whether the mere offering of works (making them available) to the public suffices to make it an act of distribution or if it is necessary that the public actually accesses the work.74 In any case, it is not a requirement that a copy change hands for there to be an act of distribution. It is, according to US courts, sufficient that the “distributee” (the receiver), “when the transaction is completed . . . has a material object” in the sense that “he receives into his computer a digital sequence representing the [sound recording].”75

70 71 72 73 74

75

See Infosoc Directive, recital 29. Case C-128/11, UsedSoft GmbH v. Oracle, ECLI:EU:C:2012:407. 17 USC Section 106(2). See Nimmer & Nimmer, Nimmer on Copyright, § 8.11[C][3] and [D]. See Nimmer & Nimmer, Nimmer on Copyright, § 8.11[C][3][a], with references to case law showing a “swinging pendulum.” See London Sire Records, Inc. v. Doe 1, 542 F.Supp. 2d 153 (D. Mass. 2008), 174.

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While the question of whether the mere offering for sale constitutes an act of distribution has hardly caused controversy in the analog context,76 courts have struggled to apply a similar construction to the digital environment for obvious reasons. In the analog context, the offering of a copy of the work concerns a specific tangible copy. Thus, it seems unproblematic to apply the concept of distribution to the first stage of the transaction that leads to the receiver getting access to the copy. In the digital situation, however, with peerto-peer file sharing, the receiver’s copy does not exist at the first stage of the transaction, when the file sharer places a digital file in a share folder; it first comes into existence at the time of the download. Hence, the concept of the distribution of a copy is not easily transferred to stages prior to the existence of the copy accessed by the receiver. In fact, the whole concept of distribution of a copy, in the sense of a concrete disposition over a tangible object, becomes a fiction in the peer-to-peer file-sharing situation where the copy received by the user of the file-sharing system is not identical to the copy uploaded by the file sharer. This fiction certainly does not prevent the US lawmaker from deciding that the concept of distribution applies to the digital environment provided there is some kind of materiality at the receiving point. But it does explain why courts struggle with the concept,77 spending much time on this issue before being able to address the real question at stake, namely, whether there are arguments in favor of allowing sound recordings to be made available for download through file-sharing networks that suffice with regard to the application of the distribution right. Only after having discussed whether the distribution right is applicable, and having answered in the affirmative, can one begin to address whether there are grounds for permitting peer-to-peer file sharing by applying the fair use rule.78 If it is taken as a point of departure that copyright rules reflect the interests at stake, the distribution discussion is a legal detour, as it brings nothing to the question of why peer-to-peer file sharing has harmful effects. If the distribution right were not considered to cover this kind of conduct, it would be because the legislators have not been able to fill the gap that occurs when the distribution right is applied in a digital context – not because such file sharing is harmless to right holders’ interests. The example shows that the concept of distribution of copies of the work gets complicated in the digital realm because it is no longer about passing on possession of the distributor’s copy. In fact, the distributor gives the receiver access to the information inherent in the work, albeit that access must fulfill 76 77 78

See Nimmer & Nimmer, Nimmer on Copyright, § 8.11[D][3][a]. See Nimmer & Nimmer, Nimmer on Copyright, § 8.11[3][b]. See Nimmer & Nimmer, Nimmer on Copyright, § 13.05[G].

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certain qualifications by way of the requirement of materiality. In other words, the concept of distribution of (tangible) copies, which fits well with the property structure, becomes a fiction, and it is this fiction that the courts are struggling with. This leads us to another example of a current copyright problem that US courts have solved on the basis of the same fictive copy approach, namely, the problem with linking on the Internet. Meanwhile, the identical problem has been solved using a different approach in Europe (though not without considerable complications in its interpretation). In the United States, courts have handled the problem of direct liability for the generator of links under rights of distribution and display of copies of the work.79 In Google v. Perfect 10, the Ninth Circuit found that the generating of so-called inline links to (unlawfully uploaded) copyrighted photographs, which led the user to a website containing the photographs, were not acts of distribution since the generator (Google) “communicates HTML instructions that tell a user’s browser where to find [the copyrighted material] on a website publisher’s computer, but . . . does not itself distribute copies of the [material]. It is the website publisher’s computer that distributes copies of the [material] by transmitting [the material] electronically to the user’s computer.”80 On similar grounds, it was also held that the links did not infringe the right of public display,81 applying the so-called server test, which holds responsible the computer owner who stores an image and serves that electronic information directly to the user, but not the generator of a link, since the latter “does not have any material objects . . . in which a work is fixed . . . and from which the work can be perceived, reproduced, or otherwise communicated” and thus cannot communicate a copy.”82 Again the distinction between the communication and noncommunication of copies is fictional in the sense that the (electronic) copies stored by the website publisher are not the same copies as those stored by the user. In effect, the user may get access to the relevant information (material), and for that matter the copy, either by visiting the website directly (by inserting the website address in the browser) or by using a search engine that generates hyperlinks. The underlying reason why the first method of providing access 79 80 81

82

See Nimmer & Nimmer, Nimmer on Copyright, § 12.01[A][2]. Perfect 10 Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007), 1162. 17 USC § 106(5), granting the copyright owner exclusive rights “in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly.” Google v. Perfect 10, 508 F.3d, 1160–1161.

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but not the second is covered by the exclusive right is certainly not the enjoyment of the copies on the part of the user, which will be the same in both situations but seems simply to be that the generation of hyperlinks by search engines is an activity that the copyright holder should not be entitled to control as a matter of principle. Instead, a remedy must be sought on the basis of rules on secondary liability.83 In EU law, the same problem has been dealt with in a conceptually different way, although the results have been similar. Here, the right to communicate to the public in Article 3 of the Infosoc Directive is at play. On the question of whether the provision of hyperlinks “on a website . . . to protected works published without any access restrictions on another site” is an act of communication of the work to the public, the CJEU has held on the one hand that it is an act of communication, since it “affords users of the first site direct access to those works.”84 On the other hand, the court found that such links fell outside the scope of the author’s exclusive right to communication to the public since the communication in question is not directed to a new public (i.e., “a public that was not taken into account by the copyright holders when they authorised the initial communication to the public”).85 In this situation, however, even the concept of communication of the work to the public becomes quite fictional and makes little sense.86 Indeed, as the court also holds, the information embedded in the work is being communicated to the public in the sense that the users get access to it through the link.87 Also, from one perspective – conditio sine qua non – it could be held that in many situations the public is in fact new, since most users would not have had actual access to the relevant information were it not for the hyperlinks (which enabled them to find the material). From a conceptual point of view, it makes at least as much sense to say that the generator or poster of the link communicates the work to the (new) public, as to hold the opposite. Again, the underlying reason for holding the hyperlinking to unrestricted material to be outside the concept of communication to the public, even if the court states

83 84

85

86

87

Google v. Perfect 10, 508 F.3d, 1169 et seq. Case C-466/12, Nils Svensson and others v. Retriever Sverige AB, ECLI:EU:C:2014:76, paras. 18–20. In case C-348/13, Bestwater International GmbH v. Michael Mebes & Stefan Potsch, ECLI:EU:C:2014:2315, paras. 17–19, the CJEU made it clear that the same applies to inline/ embedded links used in relation to so-called framing. Paras. 24–27. A “new public” is defined as “a public that was not taken into account by the copyright holders when they authorised the initial communication to the public.” See also Ole-Andreas Rognstad, “Linking – a Gordian Knot of Copyright Law,” in Gunnar Karnell et al., Liber Amicorum Jan Rose´n (Visby: Eddy, 2016), pp. 681–694. Case C-466/12, Svensson, paras. 18–22.

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that it constitutes such an act, is that the right holder should not be entitled to control such acts. Conceptually, however, the construction makes little sense. The conceptual collapse is utterly accentuated through the development of the CJEU case law on links. In the GS Media case, the court had to decide whether links to unauthorized content – i.e., photographs that were uploaded to the Internet without the consent of the copyright holder – constituted an act of communication to the public.88 The court drew a line between actors who had knowledge of, or reasons to know, the unauthorized content and those having no such knowledge. It also considered whether or not the linking activities were carried out for profit. The court held the following, with some support in statements from previous case law: For the purposes of the individualised assessment of the existence of a “communication to the public” . . . it is . . . necessary, when the posting of a hyperlink to a work freely available on another website is carried out by a person who, in so doing, does not pursue a profit, to take account of the fact that that person does not know and cannot reasonably know, that that work had been published on the internet without the consent of the copyright holder . . . In contrast, where it is established that such a person knew or ought to have known that the hyperlink he posted provides access to a work illegally placed on the internet, for example owing to the fact that he was notified thereof by the copyright holders, it is necessary to consider that the provision of that link constitutes a “communication to the public.”89

Additionally, the court held as follows: [W]hen the posting of hyperlinks is carried out for profit, it can be expected that the person who posted such a link carries out the necessary checks to ensure that the work concerned is not illegally published on the website to which those hyperlinks lead, so that it must be presumed that that posting has occurred with the full knowledge of the protected nature of that work and the possible lack of consent to publication on the internet by the copyright holder.90

In other words, both a knowledge requirement and a rebuttable presumption of knowledge for undertakings that hyperlink for profit were included in the concept of communication to the public.91 88 89 91

Case C-160/15, GS Media BV v. Sanoma Media Netherlands BV et al., ECLI:EU:C:2016:644. GS Media, paras. 47 and 49. 90 GS Media, para. 51. See also the Filmspeler case, C-527/15, Stichting Brein v. Jack Frederik Wullems, ECLI:EU: C:2017:300, paras. 47–51, where the CJEU applied the criteria set out in C-466/12, Svensson, C-348/13, BestWater and C-160/15, GS Media to confirm that a seller of a multimedia player with “add ons” containing links to copyright-protected material not authorized by the right holder also engaged in acts of communication to the public.

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The CJEU’s reasoning in GS Media clearly demonstrates the court’s attempt to adjust the concept of communication to the public to what seems like a reasonable solution from an interest point of view. Conceptually, it is difficult to understand why somebody with knowledge of the infringing content communicates, or makes it available, to the public, while someone without such knowledge does not, and also what profit has to do with whether or not there is a communication. Clearly, the either/or solution implicit in the concept – either there is a communication for which the right holder is directly liable or there is not and the situation becomes more ambiguous92 – contributes to such constructions. Vain attempts to provide alternative explanations for the court’s reasoning – e.g., claiming that knowledge of infringement is relevant to the liability of one who facilitates infringement and not a criterion for determining whether the act itself is a communication to the public,93 despite the fact that the court in GS Media explicitly adopted the latter position94 – are equally symptomatic. Concepts such as communication to the public are not appropriate for dealing with linking problems, where it is equally logical that the linker make the work available to the public as to hold the opposite and where conflicting interests call for balancing solutions, whether a utilitarian incentive-based95 or a balance of interest approach is taken.

3 Conclusion Copyrighted works, as an abstraction of a bundle of information, cannot be subject to concrete and factual dispositions analogous to those used for tangible goods. Attempts to give meaning to concepts on this basis easily fail, with the result that courts must adjust them to make them reflect the interests at stake. Broader and more generally formulated rights to use, such as those

92

93

94 95

See Rognstad, “Linking – a Gordian Knot,” pp. 682–683, for the view that the same either/or scheme also follows from US law. See the “Provisional Opinion of ALAI’s Executive Committee on the Right of Communication to the Public: The Advocate General’s Opinion in Filmspeler Case C-527/ 15 and Ziggo Case C-610/15,” available at www.alai.org/en/assets/files/resolutions/170327-ALAI -Provisional-opinion_Filmspeler_Ziggo.pdf, p. 2. See C-160/15, GS Media, para. 47 and previous quotation. See Ole-Andreas Rognstad & Joost Poort, “The Right to a Reasonable Exploitation Concretized,” in Bernt Hugenholtz (ed.), Reconstructing Copyright: Rethinking Copyright’s Economic Rights in a Time of Highly Dynamic Technological and Economic Change (Deventer: Kluwer, 2018).

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that exist in trademark law, avoid problems that arise with the more detailed bundle approach.96 This means that exceptions and limitations to the rights must, to a large extent, bear the brunt of the job of delineating the rights. One problem with this approach is evident in current copyright law: the prevailing principle in many jurisdictions (including international copyright law) is to construe exceptions and limitations narrowly. This may lead to a more biased copyright than what should follow from the justification for the rights. The problem is also visible in trademark law, which is based on a broad right to use.97 The approach adopted by the CJEU has been to delineate the rights through a “function test.” The question of whether there is a use of a trademark depends, in this case, on whether the conduct is liable to affect the functions of the trademark.98 In this way, the delineation of rights is handled in line with the purpose of the rights. Some have suggested that exploitation rights in copyright should be dealt with in a similar fashion.99 In some respects, one might say that in dealing with the problems faced in (digital) copyright law in this way, we are making the right more modular.100 The bundle of sticks is replaced by a general use right, or different modes of dissemination of the relevant information (“dissemination right”) are bundled, revealing alternative ways of dealing with complexity and the need to delineate the rights.101 From one perspective, this is simply a response to the differences between IPRs and real property, in that the concept of disposing of 96

97

98

99

100

101

Proposals to amend the economic rights in this direction may be found, for example, in Jessica Litman, Digital Copyright: Protecting Intellectual Property on the Internet (Amhurst, NY: Prometheus, 2001); Daniel J. Gervais, “Towards a New Core International Copyright Norm: The Reverse Three-Step Test” (2005) 9 Marquette Intellectual Property Law Review 1–35; Paul E. Geller, “Beyond the Copyright Crisis: Principles for Change” 55 Journal of the Copyright Society USA 165–199; Ole-Andreas Rognstad, “Restructuring the Economic Rights in Copyright: Some Reflections on an ‘Alternative Model’” (2015) 62 Journal of the Copyright Society USA 503–544. See, for example, Lisa P. Ramsey & Jens Schovsbo, “Mechanisms for Limiting Trade Mark Rights to Further Competition and Free Speech” (2013) 44 International Review of Intellectual Property and Competition Law 671–700, arguing for limits to trademark law to cope with freedom of speech and competition issues. See, for example, C-206/01, Arsenal, para. 51; C-245/02, Anheuser-Busch Inc. v. Bude˘jovicky´ Budvar, na´rodnı´ podnik, ECLI:EU:C:2004:717, para. 59; C-48/05, Adam Opel AG v. Autec AG, ECLI:EU:C:2007:55, para. 21; C-487/07, L’Oreal SA et al. v. Bellure NV, para. 58. See Alain Strowel, “Reconstructing the Communication to the Public and the Reproduction Rights: How to Align Copyright with Its Fundamentals”; Se´verine Dusollier, “Realigning Economic Rights with Exploitation of Works: The Control of Authors on the Circulation of Works in the Public Sphere”; Ansgar Ohly, “A Fairness-based Approach to Economic Rights,” all in Hugenholtz (ed.), Reconstructing Copyright. See Smith, “Intellectual Property as Property”; Chapter 2 (Section A.5) and Chapter 3 (Section D). See, for example, the contributions in supra fn. 99.

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an intangible object in the same way as property in tangibles is based on a fiction. From a different perspective, however, “the more the uses are bunched together, the more exclusion based the rights appear and the more property-like the right becomes.”102 Either way, it is important to recognize that the extent of delineation of the exclusive right depends, as with the question of delineation of real property rights, on policy choices within the framework of domestic laws and international regulations. Here, we wish simply to suggest that delineation through specification of the uses that follow from the exclusive right is not necessarily the ideal solution, because the object of intellectual property cannot be used in the same concrete sense as tangibles.

E CONCLUSIONS ON IP AS OBJECTS

Some of the implications of the particular structuring of IPRs have been mapped out. These show that the idea that IPRs are related to intangible objects – and that this is the major structural difference between IPRs and property in tangibles – is too simplistic and may result in false analogies, which underestimate the abstractions present in IP law. As shown in Section D, it may also lead to the creation of concepts that are detached from the interests at stake and the purposes that IPRs pursue, such that the particular justifications for IPRs are lost from sight. As has been pointed out, the risk of drawing false analogies from the apparent structure of IPRs could be reduced if the notion of IPRs as related to an object was abandoned altogether. Object talk inevitably brings with it associations to property in tangibles. In this respect, it is worth bearing in mind the importance of language in legal matters.103 However, it is difficult to avoid the fact that the abstractions (work, invention, trademark, etc.) function as legal objects as suggested in Chapter 3 (Section D). The solution seems to lie in the distinction made there between (abandoning) the notion of intangible good or object, on the one hand, and (recognizing) the function of legal objects, on the other. An absolute precondition for adopting this approach, however, is that the notion of IP as designating a legal object remains at the level of pure description; no 102 103

See Smith, “Intellectual Property as Property,” 1800. For an overview of philosophical discussions about law and language, see, for example, “Law and Language.” Stanford Encyclopedia of Philosophy (last updated April 15, 2016), available at https://plato.stanford.edu/entries/law-language/ (July 16, 2017); and Michael Freeman & Fiona Smith, “Law and Language: An Introduction,” in Michael Freeman & Fiona Smith (eds.), Law and Language: Current Legal Issues (Oxford: Oxford University Press, 2013 (vol. 15)), pp. 1–7.

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normative conclusions should be drawn therefrom. In other words, talk about works or inventions as legal objects only implies that these concepts are used to describe the behavior subject to these rights, in the same way as tangibles for real property, but this structural similarity is no basis for drawing material analogies from one set of rules to the other. Analogies should be drawn on the basis of common justifications for the rights (e.g., similarities regarding information costs) and not the structural similarities as such. Moreover, one should, when using the property metaphor in international or transnational IP contexts, also refrain from drawing material conclusions from distinctions between rights in rem and rights in personam. This is not to ignore the fact that the distinction may have material implications in domestic law,104 but the distinction is closely tied to specific legal systems and should not carry over beyond these contexts. Here, the distinction has been used simply to characterize the particular structure inherent to both property in tangibles and IP, in that they are rights “against the world,” a universal trait embedded in (exclusive) rights related to a legal object. By using the terms, we are simply referring to this trait and not to specific remedies or actions that might be found in some legal regimes influenced by Roman law, but not in others.105 Using the distinction in transnational and international contexts to describe the particular structure of IPRs implies that no material, or normative, conclusions can be drawn from this description. On the contrary, given the substantial differences inherent in the nature of the legal object of property in tangibles and various kind of IPRs, the same caution exercised when drawing conclusions from the justification aspects of the use of the property metaphor in relation to IP is also called for with regard to the structural aspects. Thus, object talk in relation to IP should not incite the drawing of material or normative conclusions. However, as demonstrated in Chapter 3 (Section D), the concept of IPRs as related to a legal object still fulfills a function and is useful in legal analyses, as long as it is used only at the descriptive level. It should not be abandoned – and nor could it be. Another argument calls for prudence with respect to abandoning all object talk in IP law and fully embracing the notion that IPRs are exclusive rights to a certain kind of conduct. This approach, too, carries the risk of drawing false 104

105

See, for example, Martin Husovec, “Injunctions against Innocent Third Parties: The Case of Website Blocking” (2013) 4 Journal of Intellectual Property, Information, Technology and E-Commerce Law (JIPITEC) 116–129, 118 et seq. See, for example, Mattei, “Basic Principles of Property Law,” 183–187, concerning the principles rei vindicatio and rei negatora in German, French, Italian, and Austrian law.

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conclusions. Thus, while in Scandinavia a prevailing opinion in legal doctrine has been that it makes no sense to talk about objects in IP law,106 one commentator has drawn the conclusion that the principle of prior tempore potior in jure (“first in time, greater in right”) is badly suited to solving conflicts where, for example, transferor A has transferred an IP right both to B and to C. The reason given is that unlike the situation for tangibles, where the principle does apply to situations of conflicting dispositions in Scandinavian law, IPRs are not about objects but about who is entitled to behave in certain ways. Thus – it is claimed – it makes little sense to solve conflicts concerning irreconcilable dispositions over intangibles by reference to who was “first in time”; other solutions should be sought.107 This argument overlooks the distinction between objects of the rights and the rights as objects – or assets – that is emphasized here.108 Situations of conflicting dispositions over IPRs concern the latter, namely, IPRs as assets and must be distinguished from discussions over whether or not IPRs are related to an object (or a thing). Thus, the question of conflicting dispositions is always about conflicting rights: either they are related to tangible objects or they are not. Consequently, the principle prior tempore potior in jure applies just as much to conflicts concerning IPRs as to other kinds of rights (assets), although there may be special considerations to take into account due to the nature of the rights and the claim that other solutions should be sought is not necessarily false per se.109 Having said that, the confusion is understandable and shows that both the idea of IPRs as related to an object and the idea that IPRs are not related to an object may give rise to false conclusions. Hence, it is considered more accurate to warn against the notion of IPRs as intangible objects, while at the same time accepting the function of abstractions in IP law as legal objects, as long as this function remains at the descriptive level and no normative conclusions are drawn on this basis.

106

107 109

Ross, “Ophavsrettens grundbegreber”; Koktvedgaard, Konkurrenceprægede immaterialretspositioner; Stro¨mholm, “Verksbegreppet i upphovsra¨tten.” Martinson, ‘sakra¨tt avseende annat a¨n a¨gendom,” 529–569. 108 See Chapter 4. Compare Chapter 7 (Section B).

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7 Conclusions to Be Drawn from IPRs as Assets

INTRODUCTION

So far the discussion has led to the conclusion that the use of the property metaphor in relation to the justification and the structuring of rights should not influence the scope and content of intellectual property rights (IPRs). The reason lies in the considerable differences between property in tangibles and IPRs with respect to their justifications and their structuring, despite substantial similarities on the surface. The discussion has also shown that there is a risk that the apparent structural similarities may lead to solutions that are not compatible with the grounds used to justify IPRs. One of the main points made in the foregoing discussion was that caution should be exercised to avoid drawing false analogies. A number of the possible pitfalls of such analogies were highlighted. The situation may be different when it comes to IPRs as assets. As pointed out in Chapter 4, as with any legal position deriving from private rights, IPRs as assets raise the question of the implications of established legal positions, irrespective of their justification and structure. For example, if the proposal of the EU Commission for a neighboring right for press publishers is accepted,1 it will constitute an asset for press publishers, irrespective of whether its introduction is properly justified on the grounds set out in the proposal. The implication may well be that the carry-over effect from other kinds of property is greater when it comes to the handling of IPRs as assets than it is for the justification and structure of IPRs with regard to their content and scope. Still, when discussing the implications of the asset aspect of IPRs, one should bear in mind that the justification and the structuring of the rights may

1

See Chapter 5 (Section A).

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also have an impact on the handling of IPRs as assets. We will consider this question in detail in the discussion that follows. Again, it is not my intention, nor is it possible here, to carry out an in-depth analysis of the implications of IPRs as assets. Rather, some of the problems and issues will be pointed out in the hope that this will help complete the picture the book intends to sketch. Topics that will be touched upon in the following sections include the transfer of IPRs, including the relationship between the transfer of IPRs and the transfer of rights to copies of intellectual property (IP) protected material, protection against expropriation (takings), and the “balancing” of the protection of IPRs as assets with the protection of other (fundamental) rights or interests.

A ALIENABILITY V. INALIENABILITY OF IPRs

One central feature of IPRs is that, as a general rule (though with important exceptions), they can be transferred – or alienated.2 In this context, the word transfer is used in a broad sense, comprising both the assignment of ownership and of licenses, where the licensee retains certain rights to the IP subject matter. In property theories in common law countries, and in the United States specifically, the right of alienability is considered one of the central bundles of property law – along with the right to exclude.3 This perspective is not taken here, the rights to exclude and to transfer having quite different functions. The right to exclude is part of the structure and the content of a right, while the right to transfer concerns dispositions over the right as such (including over the right to exclude). This important distinction is often overlooked and is blurred by language that (falsely) suggests that it is the (legal) object – the res – that is transferred, rather than the rights related to the (legal) object.4 The point is that differences with regard to the structuring 2

3

4

“Hohfeldian” ideas about the nontransferability of rights in the real sense, on the ground that the rights after a transaction are not strictly speaking identical to the rights held prior to the transaction, because of the different personal constellation, are neither embraced nor pursued here; see also James E. Penner, “On the Very Idea of Transmissible Rights,” in Penner & Smith (eds.), Philosophical Foundations of Property Law, pp. 246–263 (chap. 11). See the famous “bundle analysis” by A. M. Honore´, “Ownership,” in A. G. Guest (ed.), Oxford Essays in Jurisprudence: First Series (Oxford: Oxford University Press, 1961), pp. 107–147, however with the urge to supplement the bundle picture by adding several others. See also, for example, Lee Anne Fennell, “Adjusting Alienability” (2009) 122 Harvard Law Review 1403– 1466, 1405; Balganesh, “Alienability and Copyright Law,” pp. 161–165. See, for example, Balganesh, “Alienability and Copyright Law,” p. 162: “An essential attribute of ownership, alienability refers to the transmissibility or transferability of whatever forms the object of the property right in question (that is, of the res).”

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of the rights, including the right to exclude, do not necessarily affect the right to alienate the rights (as assets). On the contrary, the right to alienate is a common feature of most private rights. On the other hand, differences in justification and structure may imply that the rules regarding transferability vary depending on the character of the rights. Here, different rules and solutions will apply in different jurisdictions, but some general observations may nevertheless be made. When it comes to transferability, it is important to note that with IPRs as with other private rights, not all rights can be transferred. Thus, inalienability may be a characteristic for certain types of rights – or legal positions. Recall that inalienability stood alongside – and as an alternative to – property and liability in Calabresi and Melamed’s entitlement analysis that was mentioned in Chapter 2 (Section A.4).5 Here, the question of whether inalienability contravenes the concept of property, or even the concept of an “asset,”6 will not be discussed. The only observation made is that transferability (alienability) is a central feature of IPRs as assets. The fact that inalienable rights may have other features that are relevant to the discussion of IPRs as assets is, on the other hand, not denied.7 The extent to which rights are transferrable or inalienable8 is closely related to the grounds of justification for the rights. With a utilitarian approach, the transfer of rights is generally encouraged.9 Alienability contributes to efficiency, in that rights are passed on to those who value them most and who are in a position to exploit them most efficiently. This is a general trait of private rights. For creative IPRs, transferability is important to ex ante incentives to create. For the author who writes a novel, it is important to know that the publishing rights may be transferred to someone (in a publishing company) who is in a better position to secure the novel’s publication. However, there may also be efficiency concerns about alienability.

5 6

7 8

9

Calabresi & Melamed, “Property Rules, Liability Rules and Inalienability.” See, for example, Joshua Weisman, “‘Ownership,’ ‘Assets’ and Transferability of ‘Property Rights’” (1993) 27 Israel Law Review 652–660 and his discussion with Guido Tedeschi, “Ownership of Organs Taken from a Living Person” (1993) 27 Israel Law Review 624–651. See Section D.2.b. Inalienability here meaning restrictions on the transfer of rights, and not including restrictions on “ownership” and “use.” See Susan Rose-Ackerman, “Inalienability and the Theories of Property Rights” (1985) 85 Columbia Law Review 931–969, or in other words not “other conditions, restrictions, or features that limit, as a practical matter, the [transferor’s] prospects for alienating the [rights],” see Fennell, “Adjusting Alienability,” 1427–1428. See Netanel, “Copyright Alienability Restrictions,” 368–370, who points out that the same is the case for labor-based natural rights models.

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In the patent field, the debate over so-called patent trolls is illustrative. Patent trolls or non-practicing entities (NPEs) are persons or entities “who acquire . . . ownership of a patent without the intention of actually using it to produce a product.” They buy “the patent and either license . . . the technology to a person that will incorporate it into a product, or . . . sue . . . a person believed to already have incorporated the technology in a product without permission.”10 In other words, NPEs benefit from the alienability of patent rights. On the one hand, these patent trolls – or less condescendingly, “patent dealers”11 – may remedy market failures implicit in the fact that the inventor is generally not a threat to conscious infringers of the patent, since individual inventors and small businesses rarely have the financial resources to defend their patents by commencing and sustaining a lawsuit.12 Thus, it has been alleged that through the establishment of NPEs in the market, “a credible threat of litigation” has been created. This makes the patent market more efficient by “making patents more liquid, and setting market clearing prices.”13 On the other hand, NPEs have been accused of (ab)using the patent system opportunistically to their own benefit (hence, the name “patent trolls”) and causing an explosion in litigation, thus imposing “substantial direct costs on high-tech innovators with little apparent offsetting benefit to inventors.”14 The concerns about NPEs are implicit in the US Supreme Court decision in Merck v. Exchange, mentioned in Chapter 5 (Section A). If the court found that injunctions for patent infringements were subject to the “four factors test” rather than an automatic presumption, it was on the implied premise that patents acquired for licensing purposes only may have detrimental effects on markets.15 Thus, without restraining alienability as such, the decision of the court may nevertheless indirectly affect alienability. This is evident from the decision of the district court on remand to decline the grant of an injunction, 10

11 12 13 14

15

See James McDonough III, “The Myth of the ‘Patent Trolls’: An Alternative View of the Function of Patent Dealers in an Idea Economy” (2006) 56 Emory Law Journal 189–228, 189. McDonough, “The Myth of the ‘Patent Trolls,’” 198. McDonough, “The Myth of the ‘Patent Trolls,’” 209–211. McDonough, “The Myth of the ‘Patent Trolls,’” 216. James Bessen & Michael J. Meurer, “The Direct Costs from NPE Disputes” (2014) 99 Cornell Law Review 387–424, 388. See also the overview by Mark A. Lemley & A. Douglas Melamed, “Missing the Forest for the Trolls” (2013) 113 Columbia Law Review 2117–2189, 2118–2121, with further references, still proffering the view that the problems concerning patent trolls are symptoms of more fundamental problems within the patent system. See the concerns of Justice Kennedy, concurring: “An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees . . . For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent,” 547 US 395.

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holding that “MercExhange had utilized its patents as a sword to extract money rather to protect its right to exclude,”16 the ability to extract money from acquired goods being the essence of alienability.17 Although restrictions on alienability may be justified on utilitarian grounds,18 the most obvious restrictions in the field of IP are more likely to be influenced by Kantian and Hegelian personality ideas.19 In this respect, differences exist between Kant’s view of literary works as part of the author’s person (rather than an external thing) and Hegel’s concept of intellectual endowments as external things (rather than extensions of personality).20 Kant’s ideas have obviously influenced the “monistic” school of thought that dominates German (and Austrian) copyright law, which implies that economic and moral rights are intertwined and that copyright is a personality right.21 As a consequence, copyright is inalienable.22 The consequences of this provision are not as drastic as they may seem, since the granting of exploitation rights is still permitted and it is possible to give a global license covering all exploitation rights, including the right to alter the work.23 Thus, it is the transfer of the copyright “as a whole” that is inalienable. In practice, the consequences are not much different from those of a Hegelian “dualistic system,” where the economic and moral rights are separated, as for example in France.24 Laws in both Germany and France have a number of inalienable moral rights, such as the right of disclosure (including the right of first publication), the right of withdrawal, the right of attribution, and the right of integrity.25 Furthermore,

16 17 18

19

20 22

23 24

25

MercExchange, L.L.C. v. eBay, Inc., 500 F Supp. 2d 556, 572 (E.D. Va. 2007). See Fennell, “Adjusting Alienability,” 1414–1415. See Fennell, “Adjusting Alienability”; and Rose-Ackerman, “Inalienability and the Theory of Property Rights.” For a skeptical view on alienation restrictions, see Richard A. Epstein, “Why Restrict Alienation?” (1985) 85 Columbia Law Review 970–990. See, for example, Netanel, “Copyright Alienability Restrictions,” 374–382, contrasting also with the more utilitarian-oriented Anglo-American law (382 et seq). Netanel, “Copyright Alienability Restrictions,” 376–377. 21 See Chapter 5 (Section A.3). See s. 29(1) of the German Copyright Act September 9, 1965, which states that “[c]opyright is not transferrable, unless it is transferred in execution of a testamentary disposition or to coheirs as part of the partition of an estate,” see www.gesetze-im-internet.de/englisch_urhg/eng lisch_urhg.html, translation by Ute Reusch. The original German text reads: “Das Urheberrecht ist nicht u¨bertragbar, es sei denn, es wird in Erfu¨llung einer Verfu¨gung von Todes wegen oder an Miterben im Wege der Erbauseinanersetzung u¨bertragen.” Ss. 29(2), 31 and 39 of the German Copyright Act. See Netanel, “Copyright Alienability Restrictions,” 378–381. See also Adolf Dietz, “Legal Principles of Moral Rights,” in Le droit moral de l’auteur – The Moral Right of the Author (Civil Law): General Report (Paris: ALAI, 1993), pp. 54–80, 60–66. See Netanel, “Copyright Alienability Restrictions,” 383–388. The French moral rights rules follow now from the Intellectual Property Code (Code de la Propriete´ Intellectuelle) of July 1, 1992, last consolidated March 17, 2017, Articles L-121–1 – L-121–4. See further Cyrill P.

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other alienability restrictions in continental European copyright law are related to personality claims, including the principles of the narrow interpretation of copyright transfers, the bans on re-transfers of copyright, and the restrictions regarding transfers of rights to future works.26 The point in this context is not to go further into continental European copyright law, but to show that there are important alienability restrictions in domestic IP law – and some traces too in international copyright law27 – that are closely related to the grounds used to justify rights.28 Thus, when it comes to alienability restrictions, caution must be exercised in drawing analogies between property in tangibles and IP (and, for that matter, between different kinds of IP) if different justifications are being used. To the extent that IP rights can be transferred, they are likely to be considered subject to the same general legal principles as other kinds of assets. Still, the character of the legal object (“resource”) undeniably has an impact on the transfer of the rights. Again, there is no room for an indepth analysis, but some comments will be made.

B TRANSFERS AND SECURITAZATION OF IPRs: THE IMPACT OF THE NATURE OF THE LEGAL OBJECT

Given that IPRs can be transferred, the general schemes for transferring legal positions as assets will normally apply, including general rules on contracts, protection against third parties’ interests, rules on inheritance, and so on. On the other hand, particularities owing to the nature of the resource or legal object will also affect the legal regulation and the practical implications of such a transfer. One central particularity lies in the nature of (the output of) IP or the “the inexhaustible quality of information.” This “means that a[n IP] owner can license multiple users without degrading the value of the information,” distinguishing the licensing of IPRs from, for example, the rental of cars, if, by analogy with property in tangibles, “a sale is called an assignment

26 27

28

Rigamonti, “Deconstructing Moral Rights” (2006) 47 Harvard International Law Journal 353– 412, 359–367. Netanel, “Copyright Alienability Restrictions,” 390–392. Cf. Article 6bis Berne Convention; Article 5 WPPT; Article 5, Beijing Treaty on Audiovisual Performances, 24 June 2012, available at www.wipo.int/wipolex/en/treaties/text.jsp?file_i d=295838, not yet in force. It is to be noted that there are considerable differences with regard to transferability of IPRs on a global level; see the AIPPI study of IP contracts, “Summary Report. Question Q190. Contracts regarding Intellectual Property Rights (assignments and licenses) and third parties” (2006), available at http://aippi.org/wp-content/uploads/committees/190/SR190English.pdf (accessed July 18, 2017) (hereinafter “AIPPI Summary Report IP Contracts”).

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and a rental is called a license.”29 This statement requires an important qualification, however. Whether or not multiple (IP) licensing may happen without degrading the value of information will depend on market conditions and the state of competition. In many instances, a potential licensee will not find it economically viable to invest at the level necessary to develop the technology covered by the license or to launch a product based on the license unless he or she gets some degree of, or full, exclusivity in the relevant market. Thus, the grounds for granting exclusive IPRs in the first place may also be a reason for a licensee wanting the same, or similar: a shield against competition that is inherent in the IPR. At best then, the non-scarcity paradigm tells only half of the story when explaining the particularities of IP licensing. The previous statement shows that no physical conditions lead to the degradation of the value of information as such, so there is no need for contractual use restrictions for this reason, unlike for tangible objects where, “[f]or example a car rental agreement prohibits the renter from using the car recklessly, and typically sets payment terms that influence the distance driven and locations visited.”30 Restrictions in IP licensing agreements are, on the contrary, likely to be set according to market conditions, which also explains why competition authorities or courts may be more generous with a patent holder, for example, than with an owner of tangible property when it comes to competition restrictions.31 Restrictions in favor of the former – as already pointed out – may be justified on the same, or similar, grounds as those justifying patent protection in the first place. In addition, particularities related to the assignment or licensing of IPRs follow from the discussion in Chapter 6, namely, the fact that IPRs are tied to abstractions based on specific achievements, rather than tangible objects. As pointed out in Chapter 6 (Section B), this difference is, along with the intangible object approach, often explained with reference to the blurriness or fuzziness32 of IP boundaries. In this book, an attempt has been made to upgrade the rough picture painted by the intangible object approach, by distinguishing between the intangible object – which, for IP, is based on a fiction – and the legal object. This was done to emphasize the structural similarities and differences between property in tangibles and IP and to link IP protection more closely to its function in encouraging competition. The latter – irrespective of the justification foundations of IPRs – also explains the 29

30 31 32

Bessen & Meurer, “Patent Failure,” p. 31, addressing patents specifically but phrased in a way that is applicable also to other kinds of IPRs. Bessen & Meurer, “Patent Failure,” p. 31. Compare Bessen & Meurer, “Patent Failure,” pp. 31–32. See Bessen & Meurer, “Patent Failure,” p. 8.

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blurriness (or fuzziness) in that the function of the abstractions, which demarcate the boundaries of IPRs, is to grant the right holder appropriate protection against the exploitation of his or her achievement by others. The point, in any case, is that the method for determining the scope of IPRs implies high information costs and that there are considerable problems concerning the valuation of IP rights.33 Both of these factors are relevant when considering the regulation and the practical implications of IPR transfers. As of today, there is no harmonization of general rules on assignments and licenses at the global or regional level, although such rules may be called for given the commonness and the importance of IP transactions “in today’s information-intensive, interconnected, and dematerialized business environment.”34 Studies show that there are considerable differences between the various jurisdictions in this respect.35 The differences are inherent in general domestic property law, contract principles, and (particularly) in the handling of IP assignments and licenses. Differences also exist across the various IP fields. For example, there are considerable variations in how local laws treat the issue of whether, and under what circumstances, a licensee of IPRs can sue for infringement of his or her rights.36 At the domestic level, proposals for reform have been made so as to better link the rules for legal transactions concerning IP to general private law principles, rules of civil procedure, and private international law.37 This will not, however, improve the situation at the global level, since general private law and rules of civil procedure vary considerably. Though general rules on the transfer of rights may be applicable to 33

34

35

36

37

See, for example, Xiao-Yang Yu & Chiang Xin Xu, “A Research on Intellectual Property Valuation Model under Uncertainty,” 2013 International Conference on Management Science and Engineering (20th Annual Conference), 469–475, 470–471, pointing to various factors complicating IP valuations. Regarding different methods and approaches for valuating IP, see, for example, Harald Wirtz, “Valuation of Intellectual Property: A Review of Approaches and Methods” (2012) 7 International Journal of Business and Management 40– 48, with further references. See Jacques de Werra, “International IP Licensing Transactions: Time to Adopt Global Rules for the Right of Exclusive Licensees to Sue for Infringement of the Licensed IP Rights?” (2017) 48 International Review of Intellectual Property and Competition Law 251–253. See “AIPPI Summary Report IP Contracts.” See also the various country studies (44) leading to the Summary Report at http://aippi.org/committee/contracts-regarding-intellectual-prop erty-rights-assignments-and-licenses-and-third-parties-2 (accessed July 18, 2017). See “AIPPI Summary Report IP Contracts,” question 3. See also de Werra, “International IP Licensing Transactions”; and Jacques de Werra, “Can Exclusive Licensees Sue for Infringement of Licensed IP rights? A Case Study Confirming the Need to Create Global IP Licensing Rules” (2016) 30 Harvard Journal of Law and Technology 189–209. See, for example, Hans Ju¨rgen Ahrens & Mary-Rose McGuire, Model Law on Intellectual Property: A Proposal for German Law Reform (Munich: Sellier European Law Publishers and GRUR, 2013), p. 21, regarding the situation in Germany.

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the assignments and licensing of IP, one should pause before drawing conclusions – based on the use of the property metaphor – for the transnational and international context. This is especially so given the great degree of variation between some jurisdictions in how IP transactions are handled and the variety of special rules for dealing with the specific problems of the assignment and the licensing of IPRs, depending on the field of IP subject to regulation. One important aspect of IPRs as assets, closely related to IP transfers, has, however, been the subject of harmonization efforts, namely, the issue of security rights in IPRs. This example demonstrates the difficult task of striking a balance between the general principles applicable to all kinds of assets and the need to address the IP field specifically. In 2009, the United Nations Commission on International Trade Law (UNCITRAL) issued its (nonbinding) Legislative Guide on Secured Transactions to serve as a reference model for international legislative harmonization.38 The Guide applies, with limited exceptions, to all types of movable assets, including intellectual property rights, insofar as the guidelines are not inconsistent with national law or international IP conventions.39 However, the guidelines were not “prepared with the special intellectual property law issues in mind.”40 Initiatives have, therefore, been taken since to draft a supplement to the guide specifically aimed at security rights in IP. This was completed in 2010.41 The IP Supplement deals with the problems of applying the general guidelines to the securitization of IPRs, as well as the call for specific solutions on this issue. Since the UNCITRAL Guidelines, including the IP Supplement, are nonbinding, they have not yet resulted in the actual harmonization of a field that, like IPR assignments and licenses, to large extent depends on domestic traditions.42

38

39

40

41

42

Hereinafter the “UNCITRAL Guide,” available at www.uncitral.org/pdf/english/texts/secur ity-lg/e/09–82670_Ebook-Guide_09–04-10English.pdf (accessed July 18, 2017). For a brief account of the history and mandate of the UNCITRAL and the emergence of the UNICTRAL Guide, see Andrea Tosato, “The UNCITRAL Annex on Security Rights in IP: A Work in Progress” (2009) 4 Journal of Intellectual Property Law & Practice 743–750, 744–745. UNCITRAL Legislative Guide, part I B, recommendations 2 and 4(b). For a critical analysis, see Gerard McCormack, “American Private Law Writ Large? The UNICTRAL Secured Transactions Guide” (2011) 60 International and Comparative Law Quarterly 597–625. Official Records of the General Assembly, Sixty-first Session, Supplement No. 17 (A/61/17), para 82. See also Tosato, “The UNCITRAL Annex,” 746. UNCITRAL Legislative Guide on Secured Transactions: Supplement on Security Rights in Intellectual Property (hereinafter “UNCITRAL IP Supplement”), available at www.uncitral .org/pdf/english/texts/security-lg/e/10–57126_Ebook_Suppl_SR_IP.pdf. See the various country reports prepared for the recent AIPPI study on security interests over IP along with the “Summary Report, Study Question – General: Security Interests over

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Still, a brief outline of some of the special considerations in the UNCITRAL IP Supplement regarding security rights in IPRs will be given for illustrative purposes. According to the introductory remarks, the objective of the Supplement is “to make credit more available and at a lower cost to intellectual property owners and other intellectual property right holders, thus enhancing the value of intellectual property rights as security for credit.”43 The Supplement makes it clear that the definition of intellectual property in the UNCITRAL Guidelines refers to “copyrights, trademarks, patents, service marks, trade secrets and designs and any other asset considered to be intellectual property under the domestic law to which the enacting State is a party.” That is, the definition refers to the rights (as assets), in that the term IP is “to be understood as referencing ‘intellectual property rights,’ such as the rights of an intellectual property owner, licensor or licensee.”44 Intellectual property rights and “the rights to payment that flow from it, such as the right to payment of royalties” are also distinguished, the latter referred to as “receivables” (i.e., an “encumbered asset”45 in itself).46 Here we will concentrate on the securitization of IPRs as such. In the Supplement, it is underscored that “in line with general rules of property law,” for a security right to be created, the IPR as an asset must be transferrable under IP law; the inalienable moral rights of an author under copyright law are used as an example of an IPR that cannot be securitized.47 A security right may be created not just in the rights of an IP owner but also in the rights of a licensor or a licensee under a license agreement.48 Further, securitization may take various forms: “outright or conditional transfers of intellectual property, mortgages, pledges, trusts,” or similar constructions.49 In line with the general provision in the UNCITRAL Guidelines, which holds that security rights may be granted in future assets, the IP Supplement confirms

43 45

46 48

49

Intellectual Property” (2016) and a “Resolution” on the same subject, available at http://aippi .org/committee/security-interests-over-intellectual-property (accessed July 18, 2017). Still, according to the Resolution (para. 5), the country reports “indicate a broad consensus that at least some harmonization is desirable.” At the same time, it is emphasized that “[t]his consensus is consistent with the work done and ongoing by UNCITRAL for the harmonization of laws for secured transactions.” UNCITRAL IP Supplement, para. 1. 44 UNCITRAL IP Supplement, para. 18. That is, an asset that is subject to a security right, see UNCITRAL Guidelines, section B, para. 20, and UNCITRAL IP Supplement, para. 30. UNCITRAL IP Supplement, para. 19. 47 UNCITRAL IP Supplement, paras. 53 and 92. UNCITRAL IP Supplement, para. 89; see also paras. 91–107 for the further implications for the IP owner, licensor, and licensee respectively. UNCITRAL IP Supplement, para. 80.

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that a security right can be created in future intellectual property insofar as it is not inconsistent with the law related to IP.50 The general UNCITRAL Guidelines apply to a great extent also to IPRs as security assets, but the particular problems with IP valuation are emphasized in the Supplement.51 Furthermore, distinguishing between the creation of a security right and its effectiveness against third parties,52 the UNCITRAL IP Supplement insists that a security right in IPRs as “intangible assets” requires a written document,53 in contrast to the general recommendation in UNCITRAL Guidelines that “a security agreement may be oral if accompanied by the secured creditor’s possession of the encumbered asset.”54 The effectiveness of a security right against third parties, the particular problems concerning the distinction between registered and non-registered IPRs, and the registration of rights related to IPRs registered in the IP register are all addressed specifically in the IP Supplement.55 The UNCITRAL Guidelines recommend that security rights be made effective against third parties by registration of a notice in a general security rights registry.56 However, where specialized registers exist that permit or require registration of a document or a notice to achieve third-party effectiveness – which often will be the case for registered IPRs – registration of security rights in such a register is accepted as a method for fulfilling this purpose.57 Regarding unregistered IPRs – such as copyright and related rights, unregistered trademarks or designs, and so on – the possible conflict between general and specialized registries does not exist and the recommendation of registration by way of a general registry system applies, even here.58 Where security rights in IPRs may be registered both in a general and in a specialized registry, the Supplement contains quite detailed guidelines as to how to handle dual registrations, giving priority to registration in specialized registries.59

50

51 52 53 54 55 56 57

58

59

UNCITRAL IP Supplement, paras. 113–118 with reference to the UNCITRAL Guidelines recommendation 17. UNCITRAL IP Supplement, para. 30–31. UNCITRAL IP Supplement, para 77 with reference to the UNCITRAL Guidelines. UNCITRAL IP Supplement, paras. 78 and 82, with reference to recommendation 13. UNCITRAL Guidelines, recommendation 15. UNCITRAL IP Supplement, paras. 124–172. UNCITRAL Guidelines, recommendation 33. See UNCITRAL IP Supplement, para. 127. UNCITRAL Guidelines, recommendations 38 and 77–78; UNCITRAL IP Supplement, para. 127. See also Tosato, “The UNCITRAL Annex,” 747. UNCITRAL IP Supplement, paras. 128–129 and 135, the latter underscoring that the UNCITRAL Guidelines do not recommend the creation of a specialized registration system if one does not already exist. UNCITRAL IP Supplement, paras. 144–154.

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As to questions of priority of a security right in IPRs against competing claimants, both the Guidelines and the IP Supplement contain special considerations regarding IP. While the general recommendation is that a security right in an asset is effective upon registration against later competing claims, implying that a later transferee, lessee, or licensee “takes its rights subject to the security right,”60 the UNCITRAL Guidelines exempts “the rights of a nonexclusive licensee of an intangible asset licensed in the ordinary course of the licensor’s business from this point of departure, provided that the licensee is in good faith about the security right.”61 This exception is taken further in the IP Supplement, explaining that the “rule is intended to protect everyday, legitimate transactions, such as the off-the-shelf purchases of copyrighted software . . . [as] purchasers should not have to do a search in a registry or acquire the copyrighted software subject to scrutiny.”62 The handling of the problem in the Guidelines has, however, been controversial,63 and in the IP Supplement both the scope and the impact of the rule are downplayed, with reference to the fact that secured creditors will often have no interest in limiting the ability of a licensor to grant licenses and collect license fees and to the limitations inherent in the exception.64 As an example of the latter, the secured creditor will take its rights in the case where the licensor has granted the licensee exclusive rights.65 It is also pointed out that the concept of “ordinary course of business” is taken from commercial law and may cause confusion in an IP financing context.66 Apart from this special situation, the UNCITRAL IP Supplement discusses various problems with the non-scarcity character of IPRs, where multiple licenses and sub-licenses are granted in competition with both the licensor’s and the licensee’s creation of security rights. A particular consideration in such situations (and also, for that matter, in the situation mentioned in the previous paragraph) is that the recommendations only apply to the extent that the solutions comply with (domestic and international) IP law.67 This means, for example, that if sublicensing of IPRs under domestic IP law is not permitted without the consent of the licensor, the solutions may deviate from those that follow from the recommendations in the Guidelines.

60 61 62 64 65 66 67

UNICTRAL Guidelines, recommendation 79, see UNCITRAL IP Supplement, para. 82. UNCITRAL Guidelines, recommendation 81(c). UNCITRAL IP Supplement, para. 195 63 See Tosato, “The UNCITRAL Annex,” 748. UNCITRAL IP Supplement, paras. 198–212. UNCITRAL IP Supplement, para. 208, for an example. UNCITRAL IP Supplement, para. 200. See also Tosato, “The UNCITRAL Annex,” 748. UNCITRAL Guidelines, recommendation 4(a). As to the problems discussed here, see, for example, UNCITRAL IP Supplement.

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A brief account of some of the particular aspects of securitization of IPRs in the UNCITRAL Guidelines on Secured Transactions has here been given – leaving aside other problems addressed in the IP Supplement, including the applicable law and insolvency issues.68 The survey demonstrates that although a general framework for the handling of assets is also applicable to IPRs, it is necessary to make considerable adjustments due to the special character of the rights, not least with regard to the question of alienability discussed in Section A. The remarkable differences that remain between regulations in various jurisdictions,69 despite efforts to create a framework for harmonization, underscore the fact that a reference to IP as property is hardly helpful in the transnational or international context, beyond establishing that general rules on the treatment of assets may, to some extent, also apply to IPRs.70

C THE INTERFACE BETWEEN THE TRANSFER OF IPRs AND THE TRANSFER OF COPIES OF IP-PROTECTED SUBJECT MATTER

When discussing the transfer of IPRs as assets, it is important to bear in mind the distinction between the transfer of IPRs as such and the transfer of title to physical – or tangible – embodiments of what is protected by IPRs (i.e., tangible copies of works, inventions, trademarked goods). On the one hand, the distinction illustrates the relationship between IPRs and property rights in tangibles; on the other hand, dispositions over copies of IP-protected material may also be covered by IPRs. A brief sketch of this interface will be given here. As a starting point, the transfer of rights to copies of IP-protected material implies the transfer of rights to the tangible and not to the IPRs as assets. At the same time, these transfers may be covered by IPRs, depending on the jurisdiction in question and on the kinds of rights at stake. Generally, the tension between IPRs and property in tangibles is to some extent solved by first sale doctrines (US) or exhaustion doctrines (Europe/international).71 Although such doctrines may have various justifications, relieving the tension between 68 69

70

71

See UNCITRAL IP Supplement, X and XII. See the country reports under the 2016 AIPPI study on “Security Interests over Intellectual Property” (supra fn. 42). See AIPPI Summary Report on “Security Interests over Intellectual Property,” questions 20 and 21 (supra fn. 42), observing that 80 percent of countries are of the view that there should be specific provisions regulating security interests over IPRs, while 20 percent consider that general commercial law principles should be relied upon so as to have one single set of rules that regulates all security interests. In the United States, the first sale doctrine is codified in the Copyright Act, 17 USC Sec. 109(a), while the doctrine for trademarks and patents (normally referred to as the exhaustion doctrine) follows from case law. The exhaustion doctrine in the European Union was first developed by

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IPRs and property in tangibles and securing the alienability of the latter have traditionally been among the doctrines’ main functions.72 Still, the applicability of the doctrines is dependent on various conditions, such as the first transfer (sale) of the copy being carried out with the consent of the right holder. There are also important exceptions to exhaustion in European copyright law, for example, with regard to renting copies of copyrighted works.73 The conditions and exceptions imply that the distinction between the transfer of copies and the transfer of IPRs is not always clear-cut despite the first sale and exhaustion doctrines. The decision of the US Court of Appeals for the Ninth Circuit in Vernor v. Autodesk is illustrative.74 Vernor had purchased several used copies of Autodesk’s software on CD-ROM from one of Autodesk’s customers, CTA, and had then sold them on eBay. CTA had entered into a standard license agreement with Autodesk on a “take it or leave it” basis. According to the terms of the agreement, Autodesk retained the title to all copies; customers had a nonexclusive and nontransferable license to use the software and were banned from renting, leasing, or transferring the software without prior consent, in addition to various use restrictions. When Vernor was sued for copyright infringement for selling the software on eBay, he invoked the first sale doctrine, codified in Section 109(a) of the US Copyright Act,75 in his defense. The first sale doctrine states, “the owner of a particular copy . . . lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner to sell or otherwise dispose of the possession of that copy.”76 Pursuant to Section 109(d), however, the provision does not “extend to any person who has acquired possession of the copy . . . from the copyright owner, by rental, lease, loan, or otherwise without acquiring ownership of it.” The Ninth Circuit found that the first sale doctrine did not apply

72

73

74 76

the CJEU on the basis of the rules on free movement of goods, first in case 78/70, Deutsche Grammophon Gesellschaft mbH v. Metro-SB-Großma¨rkte GmbH & Co. KG, ECLI:EU: C:1971:59, and later in various directives. For a recent account of the various aspects of exhaustion and first sale at the national, international, and global levels, see Irene Calboli (ed.), Research Handbook on Intellectual Property Exhaustion and Parallel Imports (Cheltenham, Glouchester: Edward Elgar Publishing, 2016). See, for example, for US law, Nimmer & Nimmer, Nimmer on Copyright, § 8.12[A]; and Molly van Houwelling, “Touching and Concerning Copyright: Real Property Reasoning in MDY Industries, Inc. v. Blizzard Entertainment, Inc” (2011) 51 Santa Clara Law Review 1063–1085, 1069. Directive 2006/115/EC of the European Parliament and of the Council of December 12, 2006 on rental right and lending right and on certain rights related to copyright in the field of intellectual property, OJ 2006 No. L 376, p. 28, Articles 1 and 3(1). Timothy S. Vernor v. Autodesk Inc. 621 F 3d 1102 (Ninth Cir., 2010). 75 See supra fn. 71. See Chapter 6 (Section D).

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to the situation at hand. Citing its previous case law,77 it held that a software user is a licensee, rather than an owner of a copy, where the copyright owner (1) specifies that the user is granted a license, (2) significantly restricts the user’s ability to transfer the software, and (3) imposes notable use restrictions.78 The court emphasized that Autodesk had retained title to the software and imposed significant transfer restrictions on CTA. Consequently, CTA was a licensee rather than an “owner of a particular copy” and was not entitled to resell the software. Vernor, therefore, was not an owner of the copy, nor were his customers.79 The decision of the Ninth Circuit illustrates the fine line between the transfer of rights to copies (tangibles) and the transfer of IPRs as assets. Since ownership of the copy was not considered to have been transferred from Autodesk to CTA, the transaction between Autodesk and CTA was deemed a copyright license, which CTA, due to contractual restrictions, was not entitled to re-transfer. The classification here follows from the copyright rules. If the transaction had, instead, been considered a sale of a copy, the first sale doctrine would have applied, and the purchaser would have been free to resell the copy irrespective of copyright. Although the classification of software agreements differs from one jurisdiction to another80 (and, on this point, the reasoning of the CJEU in the UsedSoft case, where the European exhaustion doctrine was applied to online software licenses, goes against the “Vernor rationale”81), the general approach of the Ninth Circuit – that agreements that do not comply with the first sale doctrine are to be considered as (IP) license agreements – is at least legally consistent.82 Whether or not the first sale or exhaustion doctrines apply, apart from being a legal question, is also strongly influenced by policy considerations. This is well illustrated by the CJEU’s decision in UsedSoft, where the court held that “the first sale of the copy had already enabled the rightholder to obtain an 77

78 80

81

82

United States v. Wise, 550 F.2d 1180 (Ninth Cir. 1977); MAI Systems v. Peak Computer, 991 F.2d 511 (Ninth Cir. 1993); Triad Systems v. Southeastern Express, 64 F.3d 1330 (Ninth Cir. 1995); Wall Data v. Los Angeles County Sheriff’s Department, 447 F.3d 769 (Ninth Cir. 2006). Vernor v. Autodesk, 621 F 3d 1111. 79 Vernor v. Autodesk, 621 F 3d 1112. See Reto Hilty, Kaya Ko¨klu, & Fabian Hafenbra¨dl, “Software Agreements: Stocktaking and Outlook – Lessons from the UsedSoft v. Oracle Case from a Comparative Law Perspective” (2013) 44 International Review of Intellectual Property and Competition Law 63–292, 266–272. Case C-128/11, UsedSoft, in particular paras. 45–47, holding that the right holder’s making available of a copy of its computer program and the conclusion of a user license for that copy was intended to make the copy permanently usable by the customer in return for payment of a fee reflecting the economic value of the copy, that this involved the transfer of the ownership of the copy, and that it made no difference whether the copy was made available to the customer by way of download or by means of a material medium such as a CD-ROM or DVD. Compare Hilty et al., “Software Agreements,” 471.

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appropriate remuneration” for the software, so that “a restriction of the resale of copies of computer programs downloaded from the internet would go beyond what is necessary to safeguard the specific subject matter of the intellectual property concerned.”83 The reasoning of the court mirrors the rationale applied in other IP cases concerning the distribution of tangible goods,84 but what is peculiar about this case is that the court applied the exhaustion doctrine beyond the context of the distribution of tangible objects in the real sense, since the copies in question were not tied to a tangible medium but downloaded using an online service. As pointed out in Chapter 6 (Section D.2), the concept of the sale and distribution of copies is rather illusory in this situation, since the question really concerns whether the purchaser was entitled to produce his or her own copies. A more consistent approach would, therefore, have been to hold that the CJEU in UsedSoft mandated the re-licensing of IPRs, rather than the resale of goods, allowing purchasers to produce copies of the work or alternatively setting an exhaustion (limitation) to the reproduction right. Hence, in this situation, it is a question of securing the alienability of IPRs rather than the alienability of rights in tangibles.85 Still, the fact that the CJEU applies the same policy considerations in UsedSoft as it relies on in cases concerning the distribution of tangible copies only highlights the thin line between the transfer of IPRs and the transfer of rights to tangibles in these cases. D TAKINGS/EXPROPRIATION OF IPRs

1 Introduction One important feature of IPRs as assets is the extent to which they can be protected against government intervention (i.e., takings and direct and indirect expropriation). There are, indeed, a variety of potential foundations for such protection, notably domestic constitutional law, international or regional human rights conventions, and international investment agreements (IIAs). These instruments are based on different legislative grounds and legal systems; the intention here is not to go into a detailed analysis of the various instruments with all their complexities. I simply wish to give some examples of the treatment of IPRs under various general expropriation regimes as an 83 84

85

Case C-128/11, UsedSoft, para. 63. See, for example, case 15/74, Centrafarm BV and Adriaan de Peijper v. Sterling Drug Inc., ECLI:EU:C:1974:114, paras. 9–12 (patents); joined cases 55&57/80, Musik Vertrieb Membrane GmbH and K-Tel International v. GEMA, ECLI:EU:C:1981:10, paras. 12–15 (copyright). Compare Balganesh, “Alienability and Copyright Law,” 171–172.

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illustration of problems that arise and as a basis for drawing some conclusions regarding this aspect of property as assets. For the purpose of the analysis, we will look at case law: under the takings clause of the US Constitution86 (notably the Supreme Court decision in Ruckelshaus v. Monsanto concerning trade secrets87); under the property protection of Protocol 1 Article 1 of the European Convention on Human Rights (ECHR); under Article 17 of the EU Charter of Fundamental Rights; under the corresponding Article 13 of the American Convention on Human Rights; and, finally, decisions of Tribunals under the International Center for Settlement of Investment Disputes (ICSID). The point is not to give a comprehensive analysis of the context in which the decisions are given – numerous books and articles are available on the subject – but to extract some arguments relevant to the general topic of IPRs as assets. 2 IPRs as Protected Subject Matter under Expropriation/Takings Rules a US Takings Clause: Ruckelhaus v. Monsanto As a general tendency, both domestically and internationally, IPRs are protected against government intervention due to their status as assets and the desire to protect legitimate expectations and established legal positions. In the United States, there has been debate over whether and to what extent the Takings Clause in the Fifth Amendment of the US Constitution, which states that private property shall not be taken for the purpose of public use without just compensation, applies to IPRs.88 There are few Supreme Court cases on the matter: only a couple of nineteenth-century decisions expressly stated that patent rights are property protected by the Takings Clause89 and a recent confirmation of the same 86 88

89

US Constitution, Amendment V. 87 Ruckelshaus v. Monsanto Co., 467 US 986 (1984). See, for example, Thomas F. Cotter, “Do Federal Uses of Intellectual Property Implicate the Fifth Amendment?” (1998) 50 Florida Law Review 529–572; Shubha Ghosh, “Toward a Theory of Regulatory Takings for Intellectual Property: The Path Left Open after College Savings v. Florida Prepaid” (2000) 37 San Diego Law Review 637–709; Adam Mossoff, “Patents as Constitutional Private Property: The Historical Protection of Patents under the Takings Clause” (2007) 87 Boston Law Review 689–724; 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 George Mason Law Review 1–43; Kenneth J. Sanney, “Balancing the Friction: How a Constitutional Challenge to Copyright Law Could Realign the Takings Clause of the Fifth Amendment” (2014) 15 Columbia Science & Technology Law Review 332–374. McKeever v. United States, 14 Ct. Cl. 396 (1878); Campbell v. James, 104 US 356 (1882). See further Mossoff, “Patents as Constitutional Private Property,” 703–711.

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in Horne et al. v. Department of Agriculture.90 Although the latter was not about IPRs (it concerned a requirement that those growing raisins set aside a certain percentage of their crop for the account of the government free of charge), the Supreme Court discussed at length whether the per se takings rule, requiring just compensation where “the government directly appropriates private property for its own use,” applied to personal property and not just real property.91 Confirming that it did, the court noted that “[n]othing in this history suggests that personal property was any less protected against physical appropriation than real property.” In support, the court cited one of the nineteenth-century patent decisions, Campbell v. James, where it was held 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.”92 Thus, the court apparently leaves no doubt about the status of patent rights as property with respect to constitutional takings in US law.93 Otherwise, the Supreme Court discussed the constitutional property status of trade secrets in its 1984 decision Ruckelshaus v. Monsanto, recognizing trade secrets as property under the Fifth Amendment.94 This decision – it has been claimed – “is particularly important to the determination of which types of intellectual property are protected” on the ground that “[i]f trade secrets, one of the weakest forms of intellectual property, are protected by the Fifth Amendment, then patents, copyrights and trademarks must logically be protected as well.”95

90 91

92 93

94 95

Horne v. Department of Agriculture, 576 US ___ (2015), 14–275. Horne v. Department of Agrictulture, 576 US ___ (2015), 14–275 (Chief Justice Roberts delivering the opinion of the Court). 104 US 358 (1882), cited in 576 US ___ (2015), 14–275. See Adam Mossoff, “The Supreme Court Recognizes that Patents Are Property” (blogpost), Antonin Scalia Law School, George Mason University, June 22, 2015. See also Gregory Dolin & Irina D. Manta, “Taking Patents” (2016) 73 Washington and Lee Law Review 719–796, 770– 772. For a different view, see Camilla Hrdy & Ben Picozzi, “The AIA Is Not a Taking: A Response to Dolin & Manta” (2016) 72 Washington and Lee Law Review Online 472–486, 476– 479, who question the precedential status of the decision. In any case, the recognition of patents as property under the Fifth Amendment leaves doubts as how to handle so-called regulatory takings; see Merges, “What Kind of Right,” pp. 46–48 and Section D.4.a in this chapter. See supra fn. 87. Paul J. Heald & Michael L. Wells, “Remedies for the Misappropriation of Intellectual Property by State and Municipal Governments Before and after Seminole Tribe: The Eleventh Amendment and Other Immunity Doctrines” (1998) 55 Washington and Lee Law Review 849–914, 856.

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Some observations regarding the Supreme Court’s reasons for protecting trade secrets under the Takings Clause will be made. In Ruckelshaus v. Monsanto, the regulation of activities by the Environmental Protection Agency (EPA) was challenged by a manufacturer of pesticides (Monsanto). In short, manufacturers of pesticides were under the obligation, under a federal act, to submit data to the EPA to be granted marketing permission, whereby EPA was authorized to use and to some extent disclose such data. Monsanto claimed that the regulation constituted a taking of property under the Fifth Amendment. In discussing whether the health, safety, and environmental data submitted by Monsanto to the EPA was protected by the Takings Clause, the Supreme Court stated, “[b]ecause of the intangible nature of a trade secret, the extent of the property right therein is defined by the extent to which the owner of the secret protects his interest from disclosure to others.” The court emphasized that “[t]rade secrets have many of the characteristics of more tangible forms of property,” in that they are “assignable,” “can form the res of a trust” and “pass . . . to a trustee in bankruptcy.”96 Moreover, it pointed to several legal sources supporting “the general perception of their property-like nature” and – interestingly – remarked that “[t]his general perception of trade secrets as property is consonant with a notion of ‘property’ that extends beyond land and tangible goods,” with express reference to the works of Blackstone and Locke.97 The court added that although it had “never . . . squarely addressed the question whether a person can have property interest in a trade secret, which is admittedly intangible,” it had “found other kinds of intangible interests to be property for purposes of the Fifth Amendment’s Takings Clause,” with reference to case law concerning liens and valid contracts. Quoting a passage from its previous case law, the Supreme Court found it “conceivable that [the term ‘property’ in the Takings Clause] was used in its vulgar and untechnical sense of the physical thing with respect to which the citizen exercises rights recognized by law.” However, “[o]n the other hand, it may have been employed in a more accurate sense to denote the group of rights inhering in the citizen’s relation to the physical thing, as the right to possess, use and dispose of it” and “[i]n point of fact, the construction given the phrase has been the latter.” The court concluded that Monsanto had an interest in its health, safety, and environmental data being cognizable as a trade secret under state law.98 The court’s reasoning may, on the face of it – at least if leaving out the last passage quoted – give the impression that what is protected against takings is 96 98

Ruckelshaus v. Monsanto, 467 US 1002. Ruckelshaus v. Monsanto, 467 US 1003.

97

Ruckelshaus v. Monsanto, 467 US 1002–1003.

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the data constituting the trade secret, that is, the object of the rights instead of the rights as objects.99 In particular, the reference to the “intangible nature of the trade secret” and the comparison with tangible goods support such an impression. From the Court’s discussion about whether there was a taking, to which we will return, it is, however, clear that it is not the data as such but the legal positions protecting the data that constitute the “property interest” subject to the taking. Discussing whether Monsanto had a “reasonable investment-backed expectation,” the court emphasized that “[t]he right to exclude others is generally ‘one of the most essential sticks in the bundle of rights that are commonly characterized as property.’”100 This right is also central to trade secrets. These consequences follow from the fact that without a right to exclude, “[o]nce the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data.”101 That it is the right to exclude as a legal position and not the data as such that the Supreme Court considered to be the asset protected by the Takings Clause is accentuated by the Court’s remark that even if the data could retain usefulness for Monsanto after disclosure, for example, as the basis for the development of new products or as a marketing and advertising tool, this would be “irrelevant to the determination of the economic impact of the EPA action on Monsanto’s property right.” The “economic value of that property right lies in the competitive advantage over others that Monsanto enjoys by virtue of its exclusive access to the data.”102 Moreover, it is worth noting that the examples the Supreme Court mentions as “other kinds of intangible interests to be property for purposes of the Fifth Amendment’s Takings Clause” – liens and valid contracts – also refer to legal positions. Further, in the passage quoted earlier, the Court explicitly emphasized that a “more accurate” use of the term property in the Fifth Amendment would denote the group of rights related to the thing and not the thing itself.103 The decision still illustrates the confusion inherent in the term “intangible nature” when it actually refers to legal positions and not to the resources subject to the regulation. In accordance with the previous analysis, it is more accurate to link the intangibility to the legal object subject to the rights, which are themselves protected by the Takings Clause, than pretending that the clause applies to intangible as well as tangible objects. The difference is 99 100

101

102

See Chapter 4. Ruckelshaus v. Monsanto, 467 U.S.US 1011, with reference to Kaiser Aetna v. United States, 444 US 164, 176 (1979). Ruckelshaus v. Monsanto, 467 US 1011, with reference to Kaiser Aetna v. United States, 444 US 164, 176 (1979). Ruckelshaus v. Monsanto, 467 US 1012. 103 Ruckelshaus v. Monsanto, 467 US 1003.

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important for the analysis of the problem, because – as pointed out – the latter approach erroneously implies that it is the trade secrets as such and not the legal prohibition against the disclosure of such secrets that triggers the Takings Clause. As follows from the Supreme Court’s decision in Ruckelshaus v. Monsanto, it is the established legal positions protecting the investment that create economic value and give rise to a reasonable investment-backed expectation that the legal positions will be protected by the Takings Clause – not the information constituting the trade secret itself.104

b Protocol 1 Article 1 of the ECHR: Case Law Turning to the protection of property under Protocol 1 Article 1 (P1–1) of the ECHR, it is equally clear that it applies to legal positions derived from national law and creates “legitimate expectations” on the part of the property owner. According to P1–1(1), every natural or legal person is entitled to “the peaceful enjoyment of his possessions,” meaning that “[n]o one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.” P1–1(2), on the other hand, states that the former provision “shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.” Apart from confirming that P1–1 is about protection of property although P1–1(1) uses the term “possession,”105 P1–1(2) also implies a contrario that interference by control of use may be covered by the provision in addition to deprivation.106 It follows from the case law of the European Court of Human Rights (ECtHR) that IPRs are included in the concept of “possessions” under P1–1. The decision of the Grand Chamber in Anheuser-Busch (2007) is illustrative of

104

105

106

Compare Richard A. Epstein, “The Constitutional Protection of Trade Secrets under the Takings Clause” (2004) 71 University of Chicago Law Review 57–74, 57–58, 59–60. See Marckx v. Belgium, application no. 6833/74, decision June 13, 1979, para. 63: “By recognizing that everyone has the right to the peaceful enjoyment of his possessions, [P1–1] is in substance guaranteeing the right of property. This is the clear impression left by the words ‘possessions’ and ‘use of property’ . . . the ‘travaux pre´paratoires,’ for their part, confirm this unequivocally; the drafters continually spoke of ‘right of property’ or ‘right to property’ to describe the subject-matter of the successive drafts which were the forerunners of the present Article 1.” See Laurence R. Helfer, “The New Innovation Frontier? Intellectual Property and the European Court of Human Rights” (2008) 49 Harvard International Law Journal 1–52, 9.

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the broadness of the concept.107 The case concerned the never-ending trademark dispute between the Czech brewer Budeˆjovicky´ Budvar and the American company Anheuser-Busch regarding the rights to “Budweiser” as a trademark. In the case before the ECtHR, Portuguese courts had annulled the decision of the industrial property office of the country to register AnheuserBusch’s trademark “Budweiser” on the ground that the bilateral agreement between Czechoslovakia and Portugal on geographical origin required the latter to accept “Budweiser Bier” as a Czech geographical indication. Anheuser-Busch challenged the Portuguese Supreme Court’s final decision before the ECtHR for violation of P1–1. The challenge was not successful, for reasons we will come back to in Section D.4. However. while the Chamber (5– 2) rejected the claim on the ground that a trademark application was not a possession, the Grand Chamber (15–2) came to the opposite conclusion, on review, though it still dismissed the claim for lack of interference with the proprietary interest. The majority of the Chamber recognized that the legal position of the applicant for registration of a trademark involved some economic interests, in that the application could be transferred or licensed to third parties, and it was not ruled out that such a transfer could have significant economic value, but the legal position was not strong enough to constitute a “legitimate expectation” pursuant to P1–1.108 The Grand Chamber, on the other hand, took “due note of the bundle of financial rights and interests that arise upon an application for the registration of a trade mark” and held, with reference to the position of the Chamber, “that such applications may give rise to a variety of legal transactions, such as sale or license agreement for consideration, and possess – or are capable of possessing – a substantial financial value.” The Grand Chamber added the following: [I]n a market economy, value depends on a number of factors and it is impossible to assert at the outset that the assignment of an application for the registration of a trade mark will have no financial value. In the instant case . . . the mark in question possessed a definite financial value on account of its international renown.

In this respect, the court did not rule out the possibility that the applicant could have obtained compensation under Portuguese law “for the illegal or fraudulent use by a third party of a mark in respect of which an application for 107

108

Anheuser-Busch, Inc. v. Portugal (Grand Chamber), application no. 73049, decision January 11, 2007. Anheuser-Busch (Chamber), decision of October 11, 2005, para. 48.

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registration was pending.” Taken as a whole, these elements suggested “that the applicant company’s legal position as an applicant for the registration of a trade mark came within P1–1, as it gave rise to interests of a proprietary nature.”109 Thus, in the Anheuser-Busch case, the ECtHR not only confirmed that P1–1 reaches beyond “ownership of physical goods and is independent of the formal classification in domestic law,” underscoring the autonomy of the concept of “possessions” under the ECHR. It also showed that “certain other rights and interests constituting assets can be regarded as ‘property rights,’ and hence as ‘possessions’ for the purposes of this provision.”110 Nor did it limit itself to concluding – inter alia with reference to the Smith Kline decision regarding patents of its predecessor the European Commission of Human Rights (ECommHR) in the 1990s111 and one of its own earlier copyright cases, Melnychuk v. Ukraine,112 – “that [P1–1] is applicable to intellectual property as such”113 and trademarks more specifically.114 By way of the Grand Chamber decision, the court even applied P1–1 to trademark applications, thus strengthening the priority position obtained by such applications.115 There is little reason to believe that the court’s reasoning is limited to the trademark field and would not apply to applications to register other kinds of IP, including patents, industrial designs, plant varieties, and integrated circuits. The court’s focus on the legal implications and the economic value of such applications seems to imply that the same criteria would be relevant when considering applications to register other forms of IP.116 On the other hand, it is clear from both Anheuser-Busch and other decisions that P1–1 only applies to existing possessions, or other assets based on legitimate expectations,117 and not to the mere prospect of future income, including business goodwill as such.118 109 110

111 112 113 114 115

116 117

118

Anheuser-Busch (Grand Chamber), paras. 76–78. Anheuser-Busch (Grand Chamber), para. 63. See also Anheuser-Busch (Chamber) paras. 47–48. Smith Kline, Case No. 12633/87, decision October 4, 1990. Application no. 28743/03, admissibility decision of July 5, 2005. Anheuser-Busch (Grand Chamber), para. 72. Anheuser-Busch (Grand Chamber), para. 73, citing the Chamber’s decision on this point. See Klaus D. Beiter, “The Right to Property and the Protection of Interests in Intellectual Property: A Human Rights Perspective on the European Court of Human Rights’ Decision in Anbeuser-Busch Inc. v. Portugal” (2008) 39 International Review of Intellectual Property and Competition Law 714–721, 715. See Helfer, “The New Innovation Frontier?” 24. Anheuser-Busch (Grand Chamber), para. 64. See also, for example, Jan Malhous v. the Czech Republic, application no. 33071/96, admissibility decision of December 13, 2000 (GC). See Malik v. United Kingdom (Grand Chamber), application no. 23780/08, decision of March 13, 2012. See also Alexander Peukert, “The Fundamental Right to (Intellectual)

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The basis for applying P1–1 to IPRs is further illustrated by Balan v. Moldova (2008).119 The Moldovan government had issued national identity cards using a background photograph without the consent of the photographer. The photographer requested compensation from the government for copyright infringement, in addition to conclusion of a contract for the future use of the photograph. The request was rejected and the photographer filed a claim for copyright infringement. The claim was successful before the Moldovan Supreme Court, which upheld the regional court’s decision to grant an award. The Moldovan Ministry consequently ceased using the photographs as of May 1, 2000. The photographer filed a new claim before the courts for damages for the use of the photographs in the period between the regional court’s decision and May 1, 2000, but this time the claim was unsuccessful. The Supreme Court held, in a decision dated October 16, 2002, that the photographer had been compensated for the unlawful use of the photograph, but that the identity cards were to be considered public documents and were not covered by the Moldovan Copyright Act. The photographer subsequently brought the case before the ECtHR, claiming inter alia a violation of P1–1; he was successful. The court emphasized, with reference to its earlier case law, that “[i]n certain circumstances, a ‘legitimate expectation’ of obtaining an ‘asset’ may enjoy the protection of [P1–1]” and where a proprietary interest is in the nature of a claim, the person in whom it is vested may be regarded as having a “legitimate expectation” if there is a sufficient basis for the interest in national law, for example where there is settled case-law of the domestic courts confirming its existence.120

In this case, the court took note of the fact that the domestic courts had already recognized the applicant’s rights to the photographs he had taken. This was not altered by the 2002 decision of the Supreme Court, in which the court had referred only to identity cards and not to the background photograph, since the Moldovan Copyright Act distinguished between the author’s rights in the work created by him or her and property rights over the material object in which the creation (photograph) was embodied.121 Consequently, the ECtHR found that

119 120

121

Property and the Discretion of the Legislature,” in Geiger (ed.), Research Handbook on Human Rights and IP, pp. 132–148 (chap. 8), 137. Application no. 19247/03, decision of January 29, 2008. Balan v. Moldova, para. 33, with reference to Kopecky´ v. Slovakia, application no. 44912/98, decision of September 28, 2004, para. 52. Balan v. Moldova, para. 35.

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the photographer had a “possession” and – as we will discuss in Section D.4 – that Moldova had interfered with this possession in violation of P1–1. The decisions in Dima v. Romania122 and Melnychuc v. Ukraine,123 in which the ECtHR found that there were no possessions, show the contrast. In the former case, a graphic artist (Victor Dima) had created a design for a new national emblem, which was adopted by the Romanian Parliament as the State emblem, attributing the artist as the “graphic designer,” though without paying him for the work. The Romanian Patent and Trademark Office rejected the emblem for design registration, but the director of the country’s copyright agency confirmed in various letters to the artist that he enjoyed copyright protection. In lawsuits against the State, however, the Romanian Supreme Court found that the artist held no copyright in the design since, under Romanian law, the Parliament, which commissioned the design, was to be considered the author of the work. Moreover, it was held that symbols of the State could not be subject to copyright. The artist challenged the rulings before the ECtHR, and in its admissibility decision, the court merely stated that the legal field of intellectual property was covered by P1–1, with reference to one of the Commission’s decisions.124 The court noted that most national copyright systems, including the Romanian system, state that copyright arises from the creation of artistic works. However, the task of settling copyright claims belongs to the courts, which had denied copyright protection for the design. Thus, the artist had no legitimate expectation that he would be recognized as author of the design. The decision underscores the fact that no claim under P1–1 can be made on the basis of an assessment of whether someone deserves IP protection; the decisive factor is whether the national IP regime, including the dispute settlement system, creates a basis for legitimate expectations. In Melnychuc v. Ukraine, another admissibility decision in the same year (2005), the ECtHR confirmed that national court decisions rejecting copyright claims could not give rise to responsibility under P1–1.125 The case concerned a dispute between a poet and a newspaper that had published critical reviews of the author’s works. The author filed suits before Ukrainian courts against the newspaper, alleging inter alia that the negative reviews infringed the copyright to his works, but the trial court dismissed the claims. The author then brought the case to the ECtHR, claiming that the dismissal violated his property rights under P1–1, but this claim was also rejected. The 122 124 125

Application no. 58472/00, admissibility decision of May 26, 2005. 123 See supra fn. 112. Aral, Aral and Tekin v. Turkey, Case No. 24563/94, decision January 14, 1998. See supra fn. 123.

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ECtHR repeated that P1–1 protects intellectual property but stated, “the fact that the State, through its judicial system, provided a forum for the determination of the applicant’s rights and obligations does not automatically engage its responsibility under [P1–1].” In exceptional circumstances, the court held, “the State might be held responsible for losses caused by arbitrary determinations,” but in the present case “the national courts proceeded in accordance with domestic law, giving full reasons for their decisions. Thus their decisions were not flawed by arbitrariness or unreasonableness contrary to [P1–1].” Consequently, the applicant’s claim was not a possession under the provision. It is interesting to note that the court made no comment concerning the evidently weak claim for copyright infringement. This confirms that it is the decisions of the national courts, and not the strength of the argument from an IP viewpoint, that preclude the claim’s status as property in the sense of P1–1, although there is an opening for considering the domestic court’s rejection of IP claims as protected under P1–1 in cases where the decisions are based on arbitrary or unreasonable premises.126 These decisions confirm that protection under P1–1 depends on the applicant’s legal position. It is not, however, necessary that the legal position be derived from government action. Thus, in another admissibility case, Paeffgen v. Germany, the ECtHR concluded, inter alia on the basis of Anheuser-Busch, that domain names constituted a possession under P1–1, even though the exclusive right to register domain names was based on contract and not statutory provisions.127 In the case in question, the applicant had inter alia successfully applied for registration of the domain name “freundin-online.de” with the competent German domain name authority (DENIC e.G.) and was sued by the German women’s magazine Freundin for trademark infringement for using the domain name. The Munich Regional Court allowed the plaintiff’s action and the domain name owner brought the case before the ECtHR, claiming that the court order interfered with his property under P1–1. The case was dismissed on the ground of lack of unlawful interference, but in holding that the domain name registration constituted a possession the court held the following: [C]ontracts with the registration authority gave the applicant company, in exchange for paying the domain fees, an open-ended right to use or transfer the domains registered in its name. As a consequence, the applicant could offer to all internet users entering the domain name in question, for example, 126 127

Compare Helfer, “The New Innovation Frontier?” 30. Application nos. 25379/04, 21688/05, 21722/05 and 21770/05, Paeffgen GmbH v. Germany, admissibility decision September 18, 2007.

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advertisements, information or services, possibly in exchange for money, or could sell the right to use the domain to a third party. The exclusive right to use the domain names in question thus had an economic value. Having regard to the above criteria, this right therefore constituted a “possession,” which the court decisions prohibiting the use of the domains interfered with.128

Thus, it follows clearly from the cited case law (and the most recent decision in SIA AKKA/LAA v. Latvia about broadcasters’ copyright license agreements can be added to this picture129) that P1–1 applies to legal positions related to IPRs and that the latter represent the protected assets. Although the case law so far is limited to copyright, trademarks, domain names, and patents, if we also include the decisions of the Commission, with the emphasis that the ECtHR has put on economic value and legitimate expectations in its case law, it is likely that the provisions will apply to all kinds of IPRs that are covered by international conventions, and – as demonstrated by Paeffgen v. Germany – even beyond. Despite arguments put forward in favor of not characterizing trade secrets as possessions pursuant to P1–1, inter alia that “while persons regularly ‘sell’ or ‘licence’ trade secrets, this is not, strictly speaking, assignment or licensing in the way that we see for patents, trade marks, designs or copyright,”130 the key factors in the case law of the ECtHR for applying P1–1 seem applicable to legal protection of trade secrets as well.131 Though – as pointed out in Chapter 3 (Section C) – the characteristics of legal protection of trade secrets differ from those of copyright, patents, trademarks, and designs, it is hard to imagine that the ECtHR would not consider such protection as possessions under P1-1, for example in circumstances similar to those in the US case Ruckelshaus v. Monsanto.132 This would in particular be the case insofar as domestic law provides for protection against unlawful acquisition, use, and disclosure of trade secrets, cf. for example the EU Trade Secrets Directive.133 It 128 129 130 131

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Paeffgen v. Germany, part 1, para. 3. Application no. 562/05, judgment of July 12, 2016. See, for example, Aplin, “Right to Property and Trade Secrets,” p. 424. Aplin, “Right to Property and Trade Secrets,” p. 424, therefore, also admits that since “[i]t is arguable that trade secrets have a present economic value and are capable of being marketable . . . the ECtHR might accept that financial interests in the use or transfer of trade secrets suffice to characterize them as possessions for the purposes of [P1–1],” still leaving the court’s emphasis on legitimate expectations out of the analysis. It is to be remembered in this context that rights in personam are also considered to be possessions under the ECHR, irrespective of such rights not being classified as property in domestic law; see Çoban, Protection of Property Rights, pp. 150–162. Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, OJ (2016) L 157, p. 1.

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is even imaginable that moral rights under domestic copyright law (e.g., the right of attribution) would be covered by P1–1, on the basis that they represent a potential economic value on the part of the right holder, since they might contribute to raising the profile of the author,134 but the ECtHR has not yet ruled on this issue. c European Union Charter of Human Rights Article 17 The content of the fundamental rights recognized in the EU Charter of Fundamental Rights135 resembles to a large extent that of the ECHR, in addition to being inspired by the constitutional traditions common to the EU Member States.136 Thus, it is no wonder that Article 17(1) of the EU Charter protects property in terms very similar, though not strictly identical, to ECHR P1–1. Article 17(1) states, “[e]veryone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions” and that “[n]o one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss.” On the other hand, “[t]he use of property may be regulated by law in so far as is necessary for the general interest.” What is remarkable in relation to IP is the explicit statement in Article 17(2) that “[i]ntellectual property shall be protected.” Though it may seem surprising that this provision “rather strangely ‘uplifts’ an ‘ordinary’ economic right to the European constitutional level,”137 it is plausible to consider Article 17(2) as first and foremost a clarification, or a subcategory, of Article 17(1).138 This approach also 134

135 136

137

138

Compare Christophe Geiger, “Constitutionalising Intellectual Property Law? The Influence of Fundamental Rights on Intellectual Property in the European Union” (2006) 37 International Review of Intellectual Property and Competition Law 371–406, 383; and Helfer, “The New Innovation Frontier?” 17. OJ 2000 No. C 364, p. 1. Compare Jonathan Griffiths, “Constitutionalising or Harmonising? The Court of Justice, the Right to Property and European Copyright Law” (2013) 38 European Law Review 65–78, 66–67. Christophe Geiger, “Implementing Intellectual Property Provisions in Human Rights Instruments: Towards a New Social Contract for the Protection of Intangibles,” in Geiger (ed.), Research Handbook on Human Rights and IP, 661–689 (chap. 35), 670. See Geiger, “Implementing Intellectual Property Provisions,” 679. See also Christophe Geiger, “Intellectual Property Shall Be Protected!? Article 17(2)of the Charter of Fundamental Rights of the European Union: A Mysterious Provision with an Unclear Scope” (2009) 31 European Intellectual Property Review 113–117, 116; Griffiths, “Constitutionalising or Harmonising?” 68; Jonathan Griffiths & Luke McDonagh, “Fundamental Rights and European IP Law: The Case of Art 17(2) of the EU Charter” in Christophe Geiger, Constructing European Intellectual Property Achievements and New

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seems to be confirmed by the case law of the Court of Justice of the European Union (CJEU).139 Apart from the deviations in wording, there are also structural and functional differences between the Charter and the ECHR in that the former is a constitutional document with the potential of direct effect between private parties, whereas the latter only binds state parties.140 Still, there is reason to believe that the courts will seek to interpret basic concepts, including “possessions,” in the same manner under the EU Charter and the ECHR.141 Consequently, while Article 17(2) seems to confirm that IPRs are to be considered possessions under Article 17(1), a harmonized approach to the basic concepts of P1–1 ECHR and Article 17(1) EU Charter suggests that trademark applications – and other applications for IP protection – might fall under the latter as well. This will be the case as long as they possess, or are likely to possess, economic value, in line with the Anheuser-Busch decision of the ECtHR. Case law under Article 17(1) of the EU Charter also confirms that the provision, like P1–1 ECHR, applies to established legal positions. In Sky O¨sterreich, a broadcaster (Sky) was given exclusive rights to broadcast Europe League soccer games by the Austrian communications regulator KommAustria, on a contractual basis in 2009.142 Shortly thereafter, Sky entered into an agreement with another broadcaster, ORF, to produce short news reports containing extracts from the soccer games upon payment to Sky. In 2010, an amendment was made to the Federal Austrian Law on Exclusive Television Broadcasting Rights, against the backdrop of EU Directives 2007/ 65 and 2010/13 (the prevailing versions of the Audiovisual Media Services Directive). The amendment provided that a broadcaster who acquires exclusive broadcasting rights to an event of general interest is required to grant the right to make short news reports, to any broadcaster that requests it, upon reimbursement of the additional costs directly incurred in providing access to the signal. Following a request from ORF, KommAustria subsequently decided in 2010 that Sky was required to grant ORF the right to produce short news reports on this basis. The decision was appealed to a tribunal that referred certain questions to the CJEU. In particular, the court asked whether

139

140 141 142

Perspectives (Cheltenham; Northampton. MA: Edward Elgar Publishing, 2013), pp. 75–93, 80–81. See, for example, case C-70/10, Scarlet Extended SA v. SABAM, ECLI:EU:C:2011:771, paras. 43–44; case C-227/10, Martin Luksan v. Petrus van der Let, ECLI:EU:C:2012:65, para. 68. See Griffiths & McDonagh, “Fundamental Rights and European IP Law,” p. 82. Griffiths & McDonagh, “Fundamental Rights and European IP Law,” p. 82. Case C-277/11, Sky O¨sterreich GmbH v. O¨sterreichischer Rundfunk, ECLI:EU:C:2013:28.

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the granting of ORF’s right to produce short news reports interfered with property and so conflicted with Article 17(1) of the EU Charter. Given the circumstances of the case, the CJEU raised the question of whether Article 17(1) of the EU Charter extended to audiovisual broadcasting rights acquired contractually. Here, the CJEU remarked – in line with the position of the ECtHR – that the protection granted by this article did not “apply to mere commercial interests or opportunities, the uncertainty of which are part of the very essence of economic activity”143 but “applies to rights with an asset value creating an established legal position under the legal system, enabling the holder to exercise those rights autonomously and for his benefit.”144 The court held that contract-based rights to broadcasting extended beyond mere commercial interests or opportunities, thus having an asset value as such, but did not constitute an established legal position. This was due to the 2007 directive that requires Member States to provide broadcasters with a right to make short news programs without compensation beyond costs. In light of this legislation, and the fact that Member States were required to transpose the directive by the end of 2009, contractual exclusivity did not confer an established legal position on the broadcaster.145 Thus, it was not the contractual basis as such that prevented the right from representing a possession – in the same manner as the domain name in the Paeffgen case under the ECHR146 – but the fact that existing EU legislation imposed a limitation on the contractual right. The CJEU concluded that the contractual right did not, therefore, represent a legal position that was protected by Article 17(1) of the Charter.147

d American Convention on Human Rights Article 21: Palamara-Iribarne v. Chile The wording of Article 21 of the American Convention on Human Rights (ACHR) resembles that of the ECHR P1–1, though the provision is far from identical. It states, “[e]veryone has the right to the use and enjoyment of his property,” “[t]he law may subordinate such use and enjoyment to the interest 143

144 147

Sky O¨sterreich, para. 34, referring inter alia to joined cases C-120/06 P and C-121/06, P FIAMM and Others v. Council and Commission, ECLI:EU:C:2008:476, para. 185, where it was held that it “follows from the Court’s case-law that an economic operator cannot claim a right to property in a market share which he held at a given time, since such a market share constitutes only a momentary economic position, exposed to the risks of changing circumstances” (with further references). Sky O¨sterreich, para. 34. 145 Sky O¨sterreich, paras. 35–39. 146 See Section D.2.b. Sky O¨sterreich, para. 40.

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of society,” and “[n]o one shall be deprived of his property except upon payment of just compensation, for reasons of public utility or social interest, and in the cases and according to the forms established by law.”148 To date, one decision of the Inter-American Court of Human Rights (IACHR) specifically deals with IPRs and confirms that they are covered by the provision: PalamaraIribarne v. Chile (2005).149 The case concerned the confiscation of Etica y Servicios de Inteligencia (“Ethics and Intelligence Services”), written by Humberto Palamara-Iribarne, a retired Chilean navy officer. In it, “he addressed issues related to military intelligence and the need to bring it into line with certain ethical standards.” The government was of the opinion that the book revealed confidential information about the navy and confiscated not only printed copies of the book but also the hard drive of the author’s computer with the original manuscript. The court asserted the following: [T]he concept of property is a broad one and comprises, among other aspects, the use and enjoyment of “property” defined as those material objects which are susceptible of being possessed, as well as any rights which may be part of a person’s assets [including] all movables and immovables and all tangible and intangible assets, as well as any other property susceptible of having value.

Consequently, “within the broad concept of ‘assets’ whose use and enjoyment are protected by the Convention are also the works resulting from the intellectual creation of a person, who, as the author of such works, acquires thereupon the property rights related to the use and enjoyment thereof.”150 Elaborating further on the asset aspect, the court emphasized as follows: The protection of the use and enjoyment of a person’s works, grants the author rights which have both tangible and intangible aspects. The tangible dimension of such property rights includes, among other aspects, the publication, exploitation, assignment, or transfer of the works, while the intangible dimension of such rights is related to the safeguard of the authorship of the works and the protection of the integrity thereof. The intangible dimension is the link between the creator and the works, which extends over time. The exercise of both the tangible dimension and the intangible dimension of 148

149

150

American Convention on Human Rights, November 21, 1969, 1144 U.N.T.S 123, in force July 18, 1978 [hereinafter ACHR]. Palamara-Iribarne v. Chile, decision November 22, 2005. For a discussion of the Court’s treaty interpretation, pointing to the expansionist interpretation of the court, see Lucas Lixinski, “Treaty Interpretation by the Inter-American Court of Human Rights: Expansionism at the Service of the Unity of International Law” (2010) 21 European Journal of International Law 585–604. Palerma-Iribarne v. Chile, para. 102.

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property rights is susceptible of having value and becomes part of a person’s assets. Therefore, the use and enjoyment of intellectual works is [sic] also protected by Article 21 of the American Convention.151

The court’s distinction between the “tangible” and “intangible” dimensions of IPRs is somewhat confusing, as it is hard to understand what, for example, makes assignment or transfer of the works tangible instead of intangible. Moreover, the language used is not clear as to whether it is the works as such or the rights to dispose of the works that are protected as property. The subsequent remarks, where the court emphasizes that IPRs under Chilean intellectual property law comprise “both pecuniary and non-pecuniary rights, which protect the use and enjoyment, authorship and integrity of the works,” should leave no doubt that it is the legal positions related to IPRs that are protected under the property rule of Article 21 ACHR. The reference to “nonpecuniary rights” also seems to imply that moral rights are included in the property protection under Article 21 ACHR. Otherwise, the “broad concept of asset” that the court refers to seems to suggest that property protection under the ACHR includes any kind of IPR, although Palarama-Iribarne v. Chile was about “straightforward” copyright to works.

e International Investment Law: ICSID Awards The IPRs as assets aspect is particularly evident where IPRs are granted protection as investments under international investment agreements (IIAs). Such agreements may be bilateral between two countries (BITs) or parts of multilateral trade agreements, for example, the North American Free Trade Agreement (NAFTA) or the negotiated but not yet in force Trans-Pacific Partnership Agreement (TPPA). The foundation for treating IPRs as assets is indeed different for investment agreements than for domestic constitutional property protection or property protection in international or regional human rights conventions. However, since most investment agreements have expropriation clauses and contain clauses for dispute settlement under the International Centre for Settlement of Investment Disputes (ICSID), to which private parties have access,152 IIAs are alternative instruments for 151 152

Palerma-Iribarne v. Chile, para. 103. See, for example, August Reinisch, “Expropriation” in Peter Muchlinski, Frederico Ortini, & Christoph Schreuer (eds.), The Oxford Handbook of Investment Law (Oxford: Oxford University Press, 2008), pp.407–458 (chap. 11), 421; and August Reinisch & Loretta Malintoppi, “Methods of Dispute Resolution,” in Muchlinski et al. (eds.) The Oxford Handbook of Investment Law, pp. 691–720 (chap. 18), 692.

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challenging government interventions in the IP field. Here, we will concentrate on the expropriation aspects of IIAs. The treatment of IPRs as investments under IIAs can hardly be discussed at the general level. IIAs differ considerably in how they regulate IPRs; there is as much variety between IIAs as there is between IPRs themselves.153 The concept of legitimate expectations is relevant too in this context, although the picture is not clear-cut.154 Models for regulating investments in IIAs differ depending on which IPRs are relevant.155 One is by way of defining investments broadly so as to include “every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk” and to include IP in the enumeration of examples.156 Another is to use similarly broad language, without specific references to IP. A third variant is to include “real estate or other property, tangible or intangible, acquired in the expectation or used for the purpose of economic benefit or other business purposes.”157 Generally, there is reason to believe that IPRs, including the legal protection of trade secrets, will qualify as investments under such definitions, but additional conditions and circumstances may render the protection of investments inapplicable. First, legal protection of IPRs in the host country – in other words, the country where protection for the investments is sought158 – is likely to be a precondition for considering IPRs as investments there. Thus, the prevailing principle of territoriality in IP law is important, as a technology that is patented in the investor’s home country but not in the host country most likely will not 153

154

155

156

157 158

See, for example, Ruth Okediji, “Is Intellectual Property ‘Investment’? Eli Lilly v. Canada and the International Intellectual Property System” (2014) 35 University of Pennsylvania Journal of International Law 1121–1138, 1125; Carlos Correa & Jorge Vin˜uales, “Intellectual Property Rights as Protected Investments: How Open Are the Gates?” (2016) 19 Journal of Economic Law 91–120, 93 et seq. See Michele Potesta`, “Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept” (2013) 28 ICSID Review 88–122. See Bryan Mercurio, “Awakening the Sleeping Giant: Intellectual Property Rights in International Investment Agreements” (2012) 15 Journal of Economic Law 871–915, 874–876; Correa & Vin˜uales, “IPRs as Protected Investment,” 93 et seq. See Mercurio, “Awakening the Sleeping Giant,” 874, with reference inter alia to US– Republic of Korea (KORUS) FTA, Article 11.28. See also Article 1, US Model BIT (2012). For example, Article 139(g) of the North American Free Trade Agreement (NAFTA). Note in this respect the important distinction between protection in the context of IPR law, which means legal protection against infringements, and protection for investment under investment law, which “provides right-holders the legal power to seek compensation for adverse acts/omissions by a sovereign state in its territory”; see Correa & Vin˜uales, “IPRs as Protected Investments,” 91.

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be considered as an investment in the latter.159 Domestic law, therefore, plays a crucial role in determining whether there is an investment under IIAs, although again there are different models, referred to as “full referral” and “reliance.”160 Under the former, recognition by domestic law is a constitutive element of the existence of an investment.161 Under the latter, the final characterization as an investment depends on international law principles, although the identification of an asset is delegated to domestic law.162 The recent dispute in the Lilly v. Canada case, to which we will return shortly, is to some extent illustrative.163 In either case, the legal positions under domestic law form the basis for the investments. A different question is whether they suffice to claim a protected investment. This leads to the second point, namely, that there might be additional conditions for the investment to be protected, for example, requirements of establishment or acquisition of an enterprise in the host country.164 Third, it is not given that the mere existence and acquisition of an IPR is sufficient to constitute an investment, for example, in situations where foreign companies acquire IPRs only to prevent imports from other countries.165 Whether or not applications for registration (of patents, designs, trademarks, etc.) are to be considered investments may depend on the investment clause in question as well as the circumstances of the case. The fact that the expectation of exclusive rights may represent some economic value – as the ECtHR found under the property rule of ECHR P1–1 in the Anheuser-Busch case – may speak in favor of there being an investment,166 while there may be counterarguments.167 A general answer to the question can hardly be given. Turning to the few ICSID Tribunal awards to date in IP cases, the question of whether trademark rights in the cigarette brand Marlboro were an 159 160 161 162 163 164

165

166 167

Compare Mercurio, “Awakening the Sleeping Giant,” 876–877. See Correa & Vin˜uales, “IPRs as Protected Investments,” 96–100. Correa & Vin˜uales, “IPRs as Protected Investments,” 96. Correa & Vin˜uales, “IPRs as Protected Investments,” 97. See Correa & Vin˜uales, “IPRs as Protected Investments,” 98–99. See Correa & Vin˜uales, “IPRs as Protected Investments,” 108–110, with reference inter alia to the Indian Model BIT (2012). See also Peter K. Yu, “The Investment-Related Aspects of Intellectual Property Rights” (2017) 66 American University Law Review 829–908, 878–877. for a discussion of various possible requirements. See Correa & Vin˜uales, “IPRs as Protected Investments,” 112–113; Okediji, “Is Intellectual Property ‘Investment’?” 127. See Mercurio, “Awakening the Sleeping Giant,” 878–880. See Correa & Vin˜uales, “IPRs as Protected Investments,” 100, pointing to Apotex Inc. and Apotex Holding Inc. v. United States, ICSID Case No. ARB(AF)/12/1, award 25 August 2014, where the Tribunal held that applications for marketing approval for generic drugs did not represent an investment on the part of the applicant.

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investment under the Switzerland-Uruguay BIT was not disputed as such in Philip Morris v. Uruguay.168 The reason was that Article 1(2)(b) of that treaty explicitly defined “investments” as “copyrights, industrial property rights (such as patents of inventions, utility models, industrial designs or models, trade or service marks, trade names, indications of source or appellation of origin), know-how and goodwill.”169 The case is one of many in which the tobacco producer Philip Morris has challenged national regulation of cigarette packaging, in this instance, using investment law. One issue of dispute in this case, however, was whether the claimants could be held to “own” the trademarks in question given that Uruguayan trademark law states that no modifications to the trademark will be allowed after the application for registration has been submitted. The decree regulating cigarette packaging had prohibited several of the descriptors on the packaging covered by the trademark registration, such as (Marlboro) “lights,” “ultra light,” and “mild.” The Tribunal, noting that the question of ownership of the trademarks was to be determined by national law, remarked on the difficulty of having to apply Uruguayan trademark regulation in the presence of the diverging opinions of the parties.170 Still, since the Tribunal did not find that the trademark rights had been expropriated, it found it unnecessary “to reach a definite conclusion on the question of the Claimants’ ownership of the banned trademarks.” It nevertheless went so far as to accept that the changes to descriptors on the package (e.g., from “lights” to “Gold”) did not affect the distinctiveness of the trademarks and that Uruguayan law did “not deny protection to alterations based on the first registration.” The court thus assumed “without deciding, that the trademarks continued to be protected under Uruguayan trademark law.”171 Another question related to what constituted the investment in the case at hand was whether the trademark rights conferred a “right to use” upon the trademark holder or only a right to exclude. This question, which is related to the discussion about the structuring of IPRs and was touched upon in Chapter 3 (Section G), will be discussed in the following subsection, along with the Tribunal’s reasoning on this point. The second ICSID Tribunal case concerning IP and investment law to be decided on its merits is Lilly v. Canada.172 Here, the American pharmaceutical company Eli Lilly challenged a Canadian Supreme Court decision 168

169 170 172

Philip Morris Brands Sa`rl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, award July 8, 2016. Philip Morris v. Uruguay, para. 235 (emphasis added here). Philip Morris v. Uruguay, para. 243. 171 Philip Morris v. Uruguay, para. 254. Eli Lilly and Company v. Canada, ICSID Case No. UNCT/14/2, award March 17, 2017.

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invalidating its Canadian patents on the basis of a so-called utility doctrine (i.e., a requirement that the invention be useful).173 Lilly claimed that the invalidation of its patents on the basis of this doctrine represented a violation of its investments in Canada in breach of various provisions of NAFTA’s investment section, inter alia the expropriation clause in Article 1110. The Tribunal, holding that Canada had not violated the NAFTA investment rules by applying the utility doctrine, did not expressly discuss whether or not Eli Lilly had made an investment pursuant to Article 1139 (g) of the treaty (“real estate or other property, tangible or intangible, acquired in the expectation or used for the purpose of economic benefit or other business purposes”). Under a “full referral doctrine,” the Tribunal could have dismissed the case on the basis that there was no investment in Canada as long as the Canadian Supreme Court had invalidated the patent, but Canada refrained from challenging the characterization of the asset as an investment for jurisdictional purposes.174 Instead, the Tribunal seemed to treat the granted patents as an investment. Nevertheless it held that Canada’s obligations to treat fairly and equitably (Article 1105 NAFTA) and to abstain from unlawful expropriation (Article 1110 NAFTA) were not violated as long as the Canadian Supreme Court did not effect a dramatic change from previously well-established law when applying the utility doctrine. The claimant (Lilly) had in the case confirmed that it would have to prove that such change had taken place to succeed with its claims, but the Tribunal repeatedly rejected the claim that the utility doctrine altered Canadian patent law dramatically.175 Although determining whether a court decision alters national law dramatically is not tantamount to “full referral,” it nevertheless seemed to give national courts considerable leeway to develop national IP law without being considered as interfering with IPRs as assets (investments).176 In any case, the investment protected against “dramatic changes” is derived from the legal positions in domestic IP law.

3 What Rights Are Protected against Expropriation/Takings? The Right to Exclude or Also the Right (Privilege) to Use? In the discussion about the structuring of the rights, we concluded that from a merely descriptive point of view, exclusive IP rights potentially imply both a 173 174

175

For further background on the case, see Okediji, “Is Intellectual Property ‘Investment’?” See Correa, “IPRs as Protected Investments,” 99, with reference to the Respondent’s Counter Memorial of January 27, 2015, para. 209. See Lilly v. Canada, paras. 337, 351, 366, 387. 176 See, however, infra fn. 262.

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right to exclude and a right or a privilege to behave in the excluded manner.177 Although the legal grounds for the latter may vary depending on domestic law, the key point of exclusive IP rights is that the right holder should be in a position to exploit the competitive advantage he or she is given by way of the exclusive rights. This implies not only a right to prohibit others from carrying out the conduct determined by the exclusive right but also the privilege of acting in this way or of transferring this right to “use” or exploit to others. Moving to the normative level, the practical implications of the question of whether IPRs are simply negative rights (rights to exclude) or also include positive rights (rights to use) concern first and foremost the governmental freedom to regulate the latter. The ongoing dispute about trademarks and plain-packaging regulations is illustrative. If trademarks are considered mere negative rights, so the argument goes, national or regional regulation requiring neutral cigarette packaging without trademarks or any other branding does not interfere with trademark rights. Taking the opposite view – that trademark rights not only imply the right to exclude others from using the trademark but also aim to secure the trademark holder’s own entitlement to use the trademark – tobacco producers have claimed that plain-packaging regulation violates their trademark rights. Two types of legal grounds are put forward to support this claim: on the one hand, international trademark rules requiring certain trademark standards, such as Articles 15 and 20 TRIPS and, on the other hand, expropriation or takings rules stemming from domestic constitutional law, international (or regional) human rights, or international investment law. While the former address the scope of the rights mandated by international IP standards, the latter concern the protection of IPRs as assets, which is what will be discussed here. Although a close connection certainly exists between the two, we will – as already announced178 – leave the question of whether the scope of international IP protection comprises a right to use, rather than simply a right to exclude, out of the discussion and concentrate on the asset aspect. One allegation that has been raised against the arguments “that a right to use necessarily exists as a consequence of a right of exclusion” is that they “face the fundamental theoretical flaw that they do not differentiate between a right to exclude others from using something and a privilege of using that same thing.”179 The distinction between rights and privileges stems from Hohfeld’s taxonomy of legal positions where “rights” are classified as legal positions with 177 179

See Chapter 3 (Section G). 178 See Chapter 3 (Section G). See Davison & Emerton, “Rights, Privileges, Legitimate Interests and Justifiability,” 505– 580, 537.

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correspondent “duties,” whereas “privileges” do not correspond with duties but with “no rights.”180 Thus, according to this taxonomy – and terminology – the right to exclude is a right, since it corresponds with a duty to abstain from the conduct subject to the exclusion. The privilege to carry out the conduct (use) is a privilege (liberty) and not a right because the counterpart of use is not a duty to use, but no use. Hence, it is claimed that the observation that a government prohibition on the use of a trademark deprives the right owner of the enjoyment of its right to exclude third parties from using its trademark is not accurate as “[t]he way to enjoy the right to stop other traders from using a trademark is to stop them from using that trademark,” while “[t]he way to enjoy a privilege of using a trademark is to use the trademark.”181 This might be correct from a logical point of view, but the economic reality remains. The value of a trademark right – or any other IPR – is likely to depend on a combination of the legal position that entitles the right holder to prohibit third-party use and the legal position that puts him or her at liberty to carry out the conduct in question (e.g., to use a trademark) or to transfer this legal position to others – whether or not the first is referred to as a right and the second a privilege. After all, these are only descriptive labels applied to legal positions. In relation to the assessment of the economic value of the legal positions, it is difficult to ignore the fact that even limiting the privilege potentially affects its value. If a trademark owner’s options with regard to the exploitation of the registered (or, for that matter, non-registered) trademark is limited by way of government regulation, this may reduce the value of the trademark, due to a decrease in sales, which after all is the intention of tobacco regulations, and consequently a decrease in the potential transfer value of the trademark rights as such. This is not to dispute the possible legitimacy of such regulation, but it may have an impact on the legal grounds for accepting such regulation. In this respect, a distinction should be made between limiting the right – or privilege – to use, as part of the initial rights scheme, and introducing such limitations after the initial rights are granted. In the first instance, the regulation may be considered a trade-off between various kinds of interests and supported by the justificatory grounds on which the rights are granted. This includes the question of the scope of international IP regulation. For example, the claim that “the starting point at international law is that governments do enjoy [the power to restrict the privilege of use of a trademark], and there is nothing in the Paris Convention [for protection of industrial property] that 180 181

Hohfeld, “Some Fundamental Legal Conceptions,” 30 et seq. Davison & Emerton, “Rights, Privileges, Legitimate Interests and Justifiability,” 537.

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removes it” implies that this power is inherent in the scope of protection guaranteed by the Paris Convention.182 The correctness of this allegation will not be discussed further here. A different question, however, is how regulation of the right/privilege to use post grant is to be assessed in light of the fact that it limits conduct or behavior that would have been acceptable prior to regulation. Does such regulation automatically fall short of expropriation/takings rules because the privilege to use is not part of the rights scheme or will it be considered an interference with the legal positions as assets such that the regulation must be cleared on different grounds? Although it is not possible to answer this question in general terms, the ICSID panel’s reasoning in Philip Morris v. Uruguay under the SwitzerlandUruguay BIT illustrates the problem and a potential approach that may be relevant beyond the context of the case. In the case, Philip Morris and its licensor, Abal Hermanos, challenged three measures of the Uruguayan tobacco regulation, which imposed (1) a prohibition on any cigarette brand variation, permitting a brand only to maintain a “single presentation” (SPR) and thus one product variety (e.g., one variety of Marlboro and not Marlboro Red, Gold, Blue, and Green); (2) mandatory warning labels on cigarette packaging, constituting 80 percent of the front and back panels of the package; and (3) the inclusion of “shocking and sensational images designed to evoke emotions of repulsion and disgust, even horror” as part of the health warnings on packages.183 The claimants objected to these requirements, claiming that they were “extreme” and harmful to their trademarks as investments under the BIT. They argued that the regulation represented an unlawful expropriation under Article 5 of the BIT.184 The Tribunal first addressed Uruguay’s allegation that no rights were capable of being expropriated since Uruguayan trademark law does not recognize an affirmative right for registrants to use their trademark in commerce. The Tribunal started out by stating that the central issue concerning trademarks was over what rights a registered trademark accords its owner under Uruguayan law.185 Noting “that there is nothing in the Paris Convention that states expressly that a mark gives a positive right to use” and that no absolute

182 183 184

185

Davison & Emerton, “Rights, Privileges, Legitimate Interests and Justifiability,” 537. See further Philip Morris v. Uruguay, paras. 108–132. Article 5 bans direct or indirect “measures of expropriation, nationalization or any other measure having the same nature or the same effect against investments belonging to investors of the other Contracting Party, unless the measures are taken for the public benefit as established by law, on a non-discriminatory basis, and under due process of law, and provided that provisions be made for effective and adequate compensation.” Philip Morris v. Uruguay, para. 255 et seq.

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right to use could be inferred either from Article 20 TRIPS, cf. Article 16, or from Article 11 of the MERCOSUR protocol,186 the Tribunal remarked that although “both Parties have focused on a dichotomy between a right to use and a right to protect . . . it may be more fruitful to view the case as a question of an absolute versus exclusive right to use.” Thus, an exclusive right to a trademark contains “a right of use that exists vis-a`-vis other persons,” a relative right, but “not an absolute right to use that can be asserted against the State qua regulator.”187 Consequently, remarking that “[t]here is nothing in the relevant legal materials to support a carve-out of trademarks from the legitimate realms of regulation,” the Tribunal concluded, “under Uruguayan law or international conventions to which Uruguay is a party the trademark holder does not enjoy an absolute right of use, free of regulation, but only an exclusive right to exclude third parties from the market.”188 Still, the Tribunal did not share Uruguay’s position that the claimants had no rights to expropriate since Uruguayan trademark law does not recognize an affirmative right for registrants to their trademark. The Tribunal noted that the absence of a right to use does not mean that trademark rights are not property rights under Uruguayan law. On the contrary, the Tribunal found that the claimants had property rights in their trademarks, which could indeed be expropriated. It stated, “[i]t must be assumed that trademarks have been registered to be put to use, even if a trademark registration may sometimes only serve the purpose of excluding third parties from its use.” It further observed that in the case in question, the claimant had made use of all of its thirteen trademark variants prior to seven of them being banned and the regulation limiting the space to display the visual elements of the remaining brands.189 The Tribunal nevertheless came to the conclusion that there was no expropriation in breach of Article 5 of the BIT for reasons that we will return to in Section D.4 For now, it suffices to conclude that the Tribunal treated the trademark rights as an investment and a property right, capable of being expropriated, although the regulation in question only affected the right holder’s right – or privilege – to use the trademarks and not the right to exclude. Although the reasoning of the ICSID Tribunal under investment law is not directly applicable to other expropriation or takings regimes, it is 186

187 189

Protocol on Harmonization of Intellectual Property Norms in MERCOSUR (Mercado Comu´n del Sur) in the Field of Trademarks, Indications of Source & Appellations of Origin (1998). The full members of the free trade co-operation MERCOSUR are Argentina, Brazil, Paraguay, and Uruguay. Philip Morris v. Uruguay, para. 267. 188 Philip Morris v. Uruguay, paras. 270 and 271. Philip Morris v. Uruguay, paras. 272–274.

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plausible that a similar approach will apply. That is, regulation of the “positive right” (or privilege) to carry out the conduct subject to exclusive rights may be considered a potential interference with the right to property, such that the legitimacy of the regulation must be found on other grounds. In US law, it is disputed whether and to what extent the Takings Clause of the Fifth Amendment applies to IPRs.190 Further, the Supreme Court in Ruckelshaus v. Monsanto – based on the facts of the case – concentrated on the right to exclude inherent in the protection of trade secrets. Nevertheless, there are reasons to believe that the positive right, or privilege, to use IP-protected subject matter will be covered by the property protection.191 Turning to Protocol 1 Article 1 ECHR, there is no precedent on the question yet and it seems wise to abstain from drawing direct analogies from ECtHR cases where the court has upheld a right to use in relation to rules denying an owner access to his or her physical property.192 Still, given that the freedom to carry out a specific kind of conduct inevitably has potential economic value as long as it is backed up by a right to exclude others from carrying out the same conduct, the case law of the ECtHR (indicating that legal positions of substantial economic value are to be considered as “possessions” under P1–1193) could imply that limits imposed on the positive right to use may potentially interfere with IPRs as property. However, the fact that the ECtHR has deferred to domestic law when determining whether the claimant has a legal position that gives rise to legitimate expectations, leaving the decision to national courts save for instances of arbitrariness,194 could on the one hand imply that it will do the same when “considering whether intellectual property rights are positive, as well as negative, rights.”195 On the other hand – and in line with the reasoning of the ICSID panel – even if one were to conclude, on the basis of national, regional, or even international IP legislation, that the IPR as such only prescribes a negative 190 191

192

193 194 195

See Section D.1. See Mossoff, “Patents as Constitutional Private Property,” 718, with reference inter alia to the Supreme Court decision in Adams v. Burke, 84 US 453, 456 (1873). See Jonathan Griffiths, “On the Back of a Cigarette Packet: Standardised Packaging Legislation and the Tobacco Industry’s Fundamental Right to (Intellectual) Property” (2015) 4 Intellectual Property Quarterly 343–369, 354 with reference to Application no. 15317/89, Loizidou v. Turkey, decision December 18, 1996 and Application no. 8803/02, Dogan v. Turkey, decision June 29, 2005. Anheuser-Busch (Grand Chamber), para. 76. See, for example, Balan v. Moldova and Melnychuc v. Ukraine. See Griffiths, “On the Back of a Cigarette Package,” 354.

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right to exclude,196 the right holder’s legal position would still be that he or she has the freedom, or privilege, to use the trademark in the absence of legislation determining that he or she may not. From a functional point of view, considering the positive and negative aspects of IPRs in isolation leads one to ignore the economic value implicit in the interplay between the negative and the positive rights (or right to exclude and privilege to use). To be sure, it is possible to claim that the right holder does not have a legitimate expectation against national governments limiting the liberty of action. However, it seems more consistent to address this point on the basis of whether there is an unlawful interference with the right holder’s possessions than rejecting the property status of the right to use.197 Regarding protection of property and IP under Article 17 of the EU Charter of Fundamental Rights, the situation may be different in that the EU IP legislation could be interpreted as implying a competence on the part of Member States to limit the right to use. Still, it seems probable that the compatibility of regulations restricting the right to use IP under Article 17 will be assessed on the basis of whether they interfere with the right holder’s possessions.198 The same seems to follow from the broad take on property adopted by the ACtHR under Article 21 ACHR and, implicitly at least, from the IACHR decision in PalamaraIribarne v. Chile.199 This leads us to the question of the treatment of IPRs under the various expropriation or takings rules. Again, no thorough analysis will be undertaken, but some points are sufficient to shed light upon the asset aspect of IPRs.

4 What Constitutes an (Unlawful) Expropriation/Taking of IPRs Most regimes distinguish somehow between direct and indirect expropriation. Under US takings doctrine, a distinction has been made between explicit (or physical) takings or eminent domain, on the one hand, and regulatory takings on the other.200 Both P1–1 of the ECHR and Article 17(1) of the EU Charter of Fundamental Rights distinguish between deprivation and control of use, where the latter may under certain conditions be considered as interfering with the 196

197 198 200

See, for example, the England and Wales Court of Appeal (Civil Decision) judgment in British American Tobacco UK Ltd. et al. and The Secretary of State for Health [2016] WLR(D) 640, [2016] EWCA Civ 1182, paras. 46 et seq. See British American Tobacco, paras. 91 et seq. See British American Tobacco, paras. 116 et seq. 199 See Section 4.c. See, for example, Merrill & Smith, The Oxford Introductions to US Law: Property, pp. 241– 257; Alexander & Pen˜alvin, An Introduction to Property Theory, pp. 156–182.

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possessions of the “property owner.”201 Article 21(2) ACHR only mentions deprivation, but the case law of the IACHR shows that the concept also extends to what is understood as indirect expropriation.202 Regarding expropriation clauses in international investment agreements, virtually all IIAs, including Article 5 of the Switzerland-Uruguay BIT in Philip Morris v. Uruguay and Article 1110 of NAFTA’s investment chapter in Eli Lily v. Canada, contain substantially similar, if not verbatim, provisions that cover direct and indirect expropriation.203

a US Takings: Ruckelshaus v. Monsanto Under the US Takings Clause, basically four questions need to be addressed: (1) Has private property been taken? (2) If so, is there a justification for the taking? (3) Is the taking for public use? (4) Is there any compensation for the property taken?204 The skepticism against applying the takings rule to IP – which was mentioned in Section D.2.a and is reflected inter alia in the decision of the Court of Appeals of the Federal Circuit in Zoltek v. United States205 – is rooted in a fear of throwing open the floodgates to regulatory takings claims in this field.206 We will not discuss this further here but will limit ourselves to looking at how the Supreme Court treated the takings claims in Ruckelshaus v. Monsanto, after having confirmed that (legal protection of) trade secrets constituted property and consequently fell within the scope of the Takings Clause, inter alia with reference to the works of Locke and Blackstone.207 201 202

203

204

205 206

207

See C ¸ oban, Protection of Property Rights, pp. 180–186. See, for example, Ivcher-Bronstein v. Peru, decision February 6, 2001, where the Peruvian government took measures to reduce a television network owner’s influence over his own company. The court, in its decision, remarked that it should not “restrict itself to evaluating whether a formal dispossession or expropriation took place” but “should look beyond mere appearances and establish the real situation behind the situation that was denounced” (para. 124). See also Sebastia´n Lo´pez Escarcena, Indirect Expropriation in International Law (Cheltenham: Edward Elgar Publishing, 2014), p. 53. See Christopher Gibson, “A Look at the Compulsory License in Investment Arbitration: The Case of Indirect Expropriation” (2010) 25 American University International Law Review 357– 422, 379; Andreas F. Lowenfeld, International Economic Law (Oxford: Oxford University Press, 2008), p. 559. See Richard A. Epstein, Takings: Private Property and the Public Domain (Cambridge, MA; London: Harvard University Press, 1985), p. 31; Epstein, “The Constitutional Protection of Takings,” 58. Zoltek Corp. v. United States, 442 F.3d 1345, 1353 (Fed. Cir. 2006). See, for example, Isaacs, “Not All Property Is Created Equal”; and Hrdy & Picozzi, “The AIA Is Not a Taking.” See also Merges, “What Kind of Rights?” pp. 46–49. See Section D.2.a.

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The Supreme Court started out by admitting that the question of whether a taking occurred, when the governmental agency (EPA) disclosed the data submitted for registration of pesticides or when it considered the data in evaluating another application for registration, was a difficult one. Whereas the question of what constitutes a taking was one that the Court had “wrestled with” many times, the Court stressed that it “never [had] been the rule that only governmental acquisition or destruction of the property of an individual constitutes a taking.” On the other hand, “[g]overnmental action short of acquisition of title or occupancy has been held, if its effects are so complete as to deprive the owner of all or most of his interest in the subject matter, to amount to a taking.”208 Thus, the Supreme Court prepared the ground for treating the disclosure of trade secrets as a “regulatory taking,” suggesting a “lower standard of review” than for physical or explicit takings, a position that has been criticized by commentators advocating clear limits to government powers.209 The court referred to the factors that it has tended to apply to determine whether there is a regulatory taking, namely, the so-called Penn Central doctrine,210 including (1) the character of the governmental action, (2) its economic impact, and (3) its interference with reasonable investmentbacked expectations.211 In particular, the Court drew attention to the last of these factors – the reasonable investment-backed expectations – “for we find that the force of this factor is so overwhelming, at least with respect to certain of the data submitted by Monsanto to EPA, that it disposes of the taking question regarding those data.”212 In answering the question of whether the disclosure of the data interfered with the “reasonable investment-backed expectation” of the “owner” of the trade secret, and quoting previous case law stating that this concept requires “more than a unilateral expectation or an abstract need,”213 the Supreme Court distinguished among three legal situations. Prior to 1972, the legislation regulating the marketing of pesticides was silent with respect to the disclosure 208

209 210

211

212 213

Ruckelshaus v. Monsanto, 467 US 1004–1005, with reference to United States v. General Motors Corp., 323 US 373 (1945), PruneYard Shopping Center v. Robins, 447 US 74 (1980) and Pennsylvania Coal Co. v. Mahon, 260 US 393 (1922). See Epstein, “The Constitutional Protection of Trade Secrets,” 64 et seq. Stemming from Penn Central Transportation Co. v. New York City, 438 US 104 (1978). See, for example, William A. Fischel, Regulatory Takings: Law, Economics and Politics (Cambridge, MA: Harvard University Press), pp. 49–51. Ruckelshaus v. Monsanto, 467 US 1005. See the criticism in Epstein, “The Constitutional Protection of Trade Secrets,” 65. Ruckelshaus v. Monsanto, 467 US 1005. Ruckelshaus v. Monsanto, 467 US 1006, with reference to Webb’s Fabulous Pharmacies 449 US 155 (1980).

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of health and safety data submitted with an application for registration of the pesticides. The 1972 amendment to the legislation, which remained in force until 1978, gave the submitter of data the opportunity to designate any portions of the data as “trade secrets or commercial or financial information” and prohibited the EPA from publicly disclosing information that contained or related to trade secrets or commercial or financial information. In 1978, the legislation was again amended, granting applicants a 10-year period of exclusive use for data on active ingredients contained in pesticides. All other data (submitted since 1970) could be cited and considered in support of other applications for 15 years provided the applicant offered to compensate the original submitter. The Supreme Court found that only the legislation during the second period (1972–1978) gave rise to reasonable investment-backed expectations and thus protection for trade secrets under the Takings Clause. As to the situation after 1978, Monsanto knew that the EPA would not use the relevant information for a period of 10 years but also that the EPA could use the data without permission on expiry of this period. It knew too that it was entitled to compensation from a subsequent applicant for a period of 15 years following the application, but no longer. Thus, the Supreme Court held that “as long as Monsanto is aware of the conditions under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data by an applicant in exchange for the economic advantages of a registration can hardly be called a taking.”214 With regard to the situation before 1972, the Trade Secrets Act 1905 provided a penalty for any employee of the US government who disclosed any trade secret information revealed to him or her during the course of official duties. The Supreme Court found, however, the act to be no “guarantee of confidentiality to submitters of data” and that it could not “be construed as any sort of assurance against internal agency use of submitted data during consideration of the application of a subsequent applicant for registration.”215 Therefore, the Court held that “Monsanto could not have had a ‘reasonable investment-backed expectation’ that EPA would maintain those data in strictest confidence and would use them exclusively for the purpose of considering the Monsanto application in connection with which the data were submitted.”216 For data submitted under the 1972–1978 regulation, however, the situation was different. Since, under this statutory scheme, a submitter was given an 214 216

Ruckelshaus v. Monsanto, 467 US 1007. Ruckelshaus v. Monsanto, 467 US 1010.

215

Ruckelshaus v. Monsanto, 467 US 1008.

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opportunity to protect its trade secrets from disclosure by designating them as trade secrets, a disclosure “would frustrate Monsanto’s reasonable investmentbacked expectation with respect to its control over the use and dissemination of the data it had submitted.”217 Referring to the right to exclude as generally “one of the most essential sticks in the bundle of rights that are commonly characterized as property” and that, with respect to trade secrets, the right to exclude others is central to the very definition of the property interest, the Court concluded that the disclosure of data submitted between 1972 and 1978 could constitute a taking as long as the data were to be classified as trade secrets under state law.218 The Supreme Court also held that such disclosure was for public use. One judge dissented on the findings of data submitted before 1972 not being a taking.219 Thus, the majority vote in Ruckelshaus v. Monsanto held that the protection of trade secrets against takings depended on Monsanto having a reasonable investment-backed expectation in situations where it could rely on the trade secrets being respected. Where the legislation failed to guarantee that the data would not be disclosed beyond a certain time limit, there was no taking. The ruling has been criticized on the ground that the regulatory scheme was “not an ordinary bargain between equal strangers from which Monsanto could walk away at its free will and pleasure,” but rather a system imposed on the trade secret holder. Consequently, the notion of a reasonable investmentbacked expectation allegedly becomes a fiction since it is government regulation that decides whether or not there is such expectation, or so the argument goes.220 From a different perspective, one might argue that the reasonable investment-backed expectation strikes a balance between the government’s freedom to regulate and the interests of the holder of the trade secret.221 b Protocol 1 Article 1 ECHR and Article 17 EU Charter: Case Law Under P1–1, the ECtHR, having confirmed that the alleged asset constitutes a possession, normally asks whether there has been interference with the claimant’s peaceful enjoyment of the possession (first paragraph, first 217 219

220 221

Ruckelshaus v. Monsanto, 467 US 1011. 218 Ruckelshaus v. Monsanto, 467 US 1013. Justice O’Connor, concurring in part and dissenting in part, Ruckelshaus v. Monsanto, 467 US 1021. See Epstein, “The Constitutional Protection of Trade Secrets,” 66–68. Compare Dustin Marlan, “Trademark Takings: Trademarks as Constitutional Property under the Fifth Amendment Takings Clause” (2013), 15 University of Pennsylvania Journal of Constitutional Law 1581–1629, 1618, noting in relation to trademarks that “it is difficult to imagine a context in which a lack of investment-backed expectations of trademark owners would prohibit protection under the Takings Clause.”

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sentence). In practice, there are three categories of possible interference: deprivations, use controls, and other interferences.222 Deprivations include expropriations, nationalizations, confiscations, and other instances of extinction of the owner’s property rights, while control of use has been understood broadly and encompasses other situations that imply a lesser degree of interference.223 To the question of whether the interference is justified, it must generally pass three hurdles: (1) it must be provided for by law, (2) it must pursue a legitimate aim, and (3) it must strike a fair balance between the general interest of the community and protection of the individual’s fundamental rights (proportionality), implying that payment of compensation is part of the picture.224 In the following, the assessment in relation to IPRs will be illustrated using the aforementioned case law, without forgetting that the ECtHR grants the State a reasonable margin of appreciation as to whether there is unlawful interference with property. In Anheuser-Busch, the Grand Chamber of the ECtHR had to assess a possible interference based on the Portuguese courts’ refusal to register the Budweiser trademark. The refusal to register was justified on the ground that it contravened the bilateral agreement between Portugal and Czechoslovakia on geographical origin indications. The majority of the Grand Chamber noted, however, that the complaint was mainly about the interpretation and application of domestic law in a conflict between two rival claimants to the same name and that the court’s competence to verify the correctness of the interpretation and application was limited to ensuring that national decisions were not arbitrary or otherwise manifestly unreasonable.225 Nor was it for the court to review the Portuguese Supreme Court’s interpretation of the bilateral agreement. The majority found that the Supreme Court had reached its decision on the basis of the material it considered relevant and sufficient for the resolution of the dispute and found no basis for concluding that the decision was arbitrary or manifestly unreasonable. Consequently, the court concluded that the Portuguese Supreme Court’s decision to deny trademark 222

223 224

225

The ECtHR having developed a third type of interference against the backdrop of the right of enjoyment of property (P1–1, first sentence) for the first time in the landmark case, Sporrung and Lonnroth v. Sweden, application nos. 7151 and 7152/75, decision September 23, 1982. See C ¸ oban, Protection of Property Rights, pp. 186–189. In relation to IP, see Helfer, “The New Innovation Frontier?” 9. C ¸ oban, Protection of Property Rights, pp. 175–186; Helfer, “The New Innovation Frontier?” 9. See Helfer, “The New Innovation Frontier?” 9–10; and Griffiths, “On the Back of a Cigarette Package,” 359, the latter with reference to Article 17(1) of the EU Charter, although pointing out the “significant distinctions between the methodologies applied by the Strasbourg and Luxembourg courts on this issue.” Anheuser-Busch (Grand Chamber), para. 83, with reference inter alia to Article 19 ECHR.

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protection did not interfere with the trademark application as a possession.226 Two judges dissented, finding an unlawful interference with the applicants’ legitimate expectations. The dissenting judges wondered why the majority had bothered with a lengthy discussion concerning the property status of the trademark application if the conflict was no more than a dispute between private parties that the domestic court was free to resolve.227 Instead, the dissenting judges found that the Portuguese authorities had objectively caused damage to the applicant company, by concluding the bilateral agreement of 1986 and applying it retroactively. The majority did not share this opinion. In Paeffgen v. Germany, the ECtHR had to decide whether the court order prohibiting a domain name holder from using and disposing of his registered domain names and ordering him to apply for cancellation of the domain names constituted a deprivation of his possessions or a control of use of his property.228 Clearly, the order appeared to constitute a deprivation, but the court reiterated previous case law where it had already “found that a number of measures such as confiscation, forfeiture and destruction of property, even though they involved a deprivation of possessions, fell to be qualified as a control of the use of property.”229 The court underscored the fact that the possessions in question “were not tangible, physical assets . . . but a contractual right to the exclusive use of domain names,” that the contract in question expressly confirmed the domain holder’s obligation to verify that the registration did not infringe the rights of others, and that the applicant had been aware of the risk that its domain names could conflict with existing IPRs. Thus, the order constituted measures of control of the use of property. The question was whether it complied with the State’s right under P1–1, second paragraph, “to enforce such laws at it deems necessary to control the use of property in accordance with the general interest.” The court emphasized that the order “served to further the legitimate general interest of maintaining a functioning system of protection for trademarks and/or names by effectively preventing unauthorised third parties (in this case, the applicant company) from unduly taking advantage of the distinctiveness and esteem of protected marks or names to the detriment of their holders.” With regard to the proportionality requirement, it observed that the domestic court had not considered less restrictive measures, such as requiring the applicant to clarify possible confusions with third-party trademarks on websites. Nevertheless, the court found the orders not to be excessive, as the 226 227 228

Anheuser-Busch (Grand Chamber), para. 86. Anheuser-Busch (Grand Chamber), dissenting opinion paras. 8–10. Paeffgen, part. 1, para. 6. 229 Paeffgen, part. 1, para. 7.

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applicant had failed to demonstrate the ways in which he might use the domains without interfering with third-party rights. The ECtHR therefore found that the court order had struck a fair balance between protection of the applicant’s possession and the requirements of the general interest.230 The question about striking a fair balance also came up in SIA AKKA LAA v. Latvia.231 Here, after several failed attempts to reach an agreement, the Supreme Court of Latvia had ordered a collective music organization to conclude license agreements with a broadcaster at a fixed royalty rate of 2 percent of the broadcaster’s turnover. The ECtHR asserted that the order represented an interference with the applicant organization’s possessions, in the form of a control of the use of property, as prescribed by law.232 On the question of the legitimate aim of the interference, the court respected the State’s margin of appreciation in implementing social and economic policies and in determining the content of “the public interest.” Nevertheless, it noted that the domestic court’s decision had, to a certain extent, been due to the organization’s lack of efficiency in carrying out negotiations with the broadcaster. In this respect, it had attempted to maintain a balance between the rights of the organization to obtain equitable remuneration for the use of musical work and the broadcaster’s interest in obtaining a license. The ECtHR therefore held that the domestic court’s decision was not manifestly without reasonable foundation.233 As to the question of whether a fair balance had been struck, the court noted that the domestic courts had faced two alternatives: (1) order the conclusion of a license by fixing the remuneration itself or (2) confirm the organization’s right to prohibit the use of the musical work until a license agreement had been concluded. The court held that the latter option was not in the interests of the copyright holders and the general public. In so doing, it emphasized three factors. First, the domestic courts had endeavored to give the parties time to reach an agreement. Second, the same courts had taken the interests of the individual right holders into consideration and had come to the conclusion that they would not benefit from a broadcasting ban. And third, the measure was limited in scope and in time. Consequently, there was no violation of P 1–1.234 On the other hand, the ECtHR found that a violation had taken place in Balan v. Moldova.235 In this case, too, having concluded that the domestic 230 231 232 234 235

Paeffgen, part. 1, para. 8 et seq. SIA AKKA LAA v. Latvia, application no. 562/05, decision July 12, 2016. SIA AKKA LAA v. Latvia, paras. 61–66. 233 SIA AKKA LAA v. Latvia, paras. 67–71. SIA AKKA LAA v. Latvia, paras. 72–82. Balan v. Moldova, application no. 19247/03, decision of January 29, 2008.

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court’s acceptance of copyright in the photographs used in identity cards indicated possession, the court underscored that it was not its role to take the place of national authorities. Thus, it saw no reason to question the domestic courts’ application of national copyright law. The special circumstance in this case, however, was that the courts – including the Supreme Court – had confirmed the photographer’s copyright to the photographs on the identity cards before denying him the right to control further distribution of the cards. The latter constituted an interference with the photographer’s property rights.236 On the question of whether the interference was proportionate to the aims pursued, the court accepted that issuing identity cards to the population served “an undoubtedly important public interest,” but it stated that it was “apparent that this socially important aim could have been reached in a variety of ways not involving a breach of the applicant’s rights,” for example, by entering into a contract with the applicant.237 The court saw no compelling reason to use the particular photograph, so the public interest could well have been served without violating copyright. Thus, the ECtHR found that the domestic courts had failed to strike a fair balance between the interests of the community and those of the applicant; accordingly, the latter’s property right was violated pursuant to P1–1.238 Regarding Article 17(1) of the EU Charter, the basic structure for determining whether there is an unlawful taking seems to be the same as under ECHR P1–1. Both rely on the distinction between deprivation and use controls (including a right to compensation, which follows explicitly from Article 17(1) based on the case law of the ECtHR239) and a proportionality requirement, which includes a fair balance test.240 One significant difference, however, lies implicitly in the legislative powers of the EU. The CJEU not only decides when national decisions interfere with existing property rights but also has the competence to determine the boundaries of these property rights. This implies that the margin of appreciation that the ECtHR grants contracting parties to the ECHR is applied differently under the EU Charter.241 Still, as pointed out earlier, the handling of the question of whether domestic law interferes with property protection under P1–1 ECHR is also relevant to interpretation of Article 17(1) of the EU Charter. The differences in context between the two provisions are, however, reflected in the fact that property protection in the case law of the CJEU, including in 236 238 239 240

241

Balan v. Moldova, paras. 37–40. 237 Balan v. Moldova, para. 45. Balan v. Moldova, paras. 45–46. See Griffiths, “On the Back of a Cigarette Package,” 351. See, for example, joined cases C-402/05 and 415/05, Yassin Abdullah Kadi and Al Barakaat International Foundation v. Council of the European Union and Commission of the European Communities, ECLI:EU:C:2008:461, para. 360. Compare Griffiths, “Constitutionalising and Harmonising?” 70.

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relation to IPRs, is being challenged not so much from the perspective of expropriation/takings of property as by the balancing of property protection with other fundamental rights. This will be dealt with in the next section. Of relevance for the expropriation/takings issue is the CJEU’s repeated statement that the right to property, including IPRs, is not an absolute right but must be viewed in relation to its social function.242 The CJEU touched upon the takings issue in the Luksan case, concerning a provision in Austrian copyright law that vested the exploitation rights for commercially produced cinematographic works in the film producer (and not the film director).243 The dispute in the case arose when the producer of a film made the film available on the Internet and was sued by the film director, who contended that he alone had the right to decide how the film was to be exploited. The producer invoked the previously mentioned provision of the Copyright Act. In deciding, in a preliminary ruling, whether such a provision conflicted with EU law, the CJEU insisted that denying the film director the exploitation rights “would be tantamount to depriving him of his lawfully acquired intellectual property right.”244 The legal background for this conclusion was the court’s interpretation of the relevant EU copyright provisions, including their relation to international copyright conventions, notably the Berne Convention (Article 14bis). This led to the finding that EU copyright law required that the principal film director hold the exploitation rights in question.245 In this situation, denying the principal director the rights to exploit a cinematographic work would not, according to the CJEU, “be consistent with the requirements flowing from Article 17(2) of the Charter of Fundamental Rights guaranteeing the protection of intellectual property.”246 The ruling has been criticized for being thinly reasoned with regard to the apparently “automatic” application of Article 17. The court did not problematize the status of the national provision at issue, nor did it ask why the provision represented a deprivation of property rather than a regulation of use, thus escaping scrutiny due to the fair balance test.247 The court’s penchant for

242

243 244 246 247

See for property in tangibles, for example, joined cases C-379/08 and C-380/08, Raffinerie Mediterranee et al. v. Ministerio dello Sviluppo economico et al., ECLI:EU:C:2010:127, para. 80, with further references, and for IPRs, case C-70/10, Scarlet Extended, para. 43. See s. 38(1) of the Austrian Copyright Act, cf. case C-227/10, Luksan, para. 21. C-227/10, Luksan, para. 70. 245 C-227/10, Luksan, paras. 37–67. C-227/10, Luksan, para. 71. See Griffiths, “Constitutionalising or Harmonising?” 76–77. See also Henning G. Ruse-Khan, “Overlaps and Conflict Norms in Human Rights Law: Approaches of European Courts to Address Intersections with Intellectual Property Rights,” in Geiger, Handbook on Human Rights and IPRs, pp. 70–88, 77–78, questioning the argumentation both on the grounds of its narrow interpretation of Article 351 of the Treaty of the Functioning of the European Union

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harmonized solutions to EU copyright issues seems to be the main reason for its approach to Article 17 in the Luksan case.248

c American Convention on Human Rights Article 21: Palamara-Iribarne v. Chile In the Palamara-Iribarne case before the IACHR, the question of whether there was a deprivation of property rights was rather straightforward as long as the court acknowledged that IPRs constituted property.249 Here, the Chilean government demanded the erasure of electronic information related to Palarmara-Iribarne’s book along with the deletion and seizure of all electronic or tangible copies of the book. The court held that these actions implied the actual deprivation of the property in Palamara-Iribarne’s tangible assets related to the book, but it also held that deprivation of his property rights over his works “prevented him from publishing, disseminating, and marketing his creation, whereby he could neither obtain any economic proceeds from its publication nor benefit from the protection he was entitled to have over his works.”250 Additionally, “the erasure of the electronic information regarding the book prevented Mr. Palamara-Iribarne from modifying, reusing, or updating its contents, in case he wished to do so.”251 In both instances, it was “the right to use” rather than the right to exclude that was affected. Nevertheless, the IACHR came to the conclusion that a deprivation of the IPRs had taken place and that the State had violated the right to property as set out in Article 21 ACHR. The court noted that the right to property is not absolute and that deprivation must be based on reasons of public utility or social interest, subject to payment of just compensation, and restricted to cases and forms established by law. Since Palamara-Iribarne had not been awarded compensation by the State for the deprivation of the use and enjoyment of his property, the court concluded that Chile had violated the right of property set out in Article 21 ACHR.252

248

249 251 252

which safeguards the EU Member States’ preexisting rights and obligations and for presuming that IP rights are originally granted by virtue of EU law and not national law. Compare Griffiths, “Constitutionalsing or Harmonising?” 75, who admits that “Luksan is clearly marked by the Court’s harmonisation agenda.” See Chapter 7 (Section D.2.d). 250 Palarama Iribarne v. Chile, para. 106. Palarama-Iribarne v. Chile, para. 107. Palarama-Iribarne v. Chile, paras. 108 and 111.

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d International Investment Law: ICSID Awards In Philip Morris v. Uruguay, the ICSID Tribunal discussed whether the measures in the Uruguayan tobacco regulation constituted unlawful (indirect) expropriation, having first found that the claimants had property rights capable of being expropriated. Regarding the “80/80 Regulation,” limiting the space for display of trademarks to 20 percent of the cigarette packet, the Tribunal briefly stated that there was not even prima facie indirect expropriation since the Marlboro brand and other distinctive elements continued to appear on cigarette packets and were recognizable as such. These limits, the Tribunal held, “could not have a substantial effect on the Claimants’ business since it consisted only in a limitation imposed by the law on the modalities of use of the relevant trademarks.” The claim that the 80/80 Regulation breached Article 5 of the Switzerland-Uruguay BIT consequently failed.253 The single presentation requirement (SPR) precluding tobacco manufacturers from marketing more than one variety of cigarette per brand family was, on the other hand, subject to closer scrutiny. Prior to the imposition of the SPR in 2009, the claimants sold thirteen varieties within its six “brand families” – six varieties of the brand Marlboro; three varieties of Fiesta; two varieties of Philip Morris and Premier, respectively; and one variety only of the brands Galaxy and Casino. A disputed issue in this respect was whether the question of indirect expropriation should relate to each individual asset comprising the investment or whether the investment was to be considered as a whole.254 The Tribunal opted for the latter, holding that “in order to determine whether the SPR had an expropriatory character in this case, [the claimant’s] business is to be considered as a whole since the measure affected its activities in their entirety,” referring inter alia to the claimant’s attempt to countermeasure the regulation by involving its whole business in adjusting prices for its products.255 In any case, the Tribunal found that “the effects of the SPR were far from depriving [the claimant] of the value of its business or even causing a ‘substantial deprivation’ of the value, use or enjoyment of the Claimants’ investments, according to the standard that has been adopted for a measure to be considered expropriatory.” It was argued that the claimant’s business had grown more profitable since the introduction of the SPR. Although expert witness evidence was proffered to suggest that the business would have been significantly more profitable had the regulations not been introduced, the

253 255

Philip Morris v. Uruguay, para. 276. Philip Morris v. Uruguay, para. 284.

254

Philip Morris v. Uruguay, paras. 280–283.

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Tribunal held that there was no (indirect) expropriation as long as sufficient value remained. Here, the Tribunal referred to investment law decisions regarding other types of investments where a diminishing of profit compared to what the situation had been without the regulatory measure was not considered sufficient to confer an expropriatory character on the disputed measure as the impact had to be substantial for the measure to constitute an expropriation.256 According to the Tribunal, it could have ended the analysis there, with the finding of no (indirect) expropriation. Still, it found reason to state that the adoption of the SPR was a valid exercise of police power, implying that the measures would have been compatible with Article 5 of the BIT even if it had been considered indirect expropriation. The claimants in the case had argued that the existence of a public purpose did not, in itself, exempt the State from the obligation to pay compensation. The Tribunal disagreed, however, referring in particular to rules of customary international law and the so-called police powers doctrine.257 This doctrine had been applied in several cases to reject claims challenging regulatory measures designed specifically to protect public health, and the Tribunal noted that both the SPR and the 80/80 Regulation had been adopted in fulfillment of Uruguay’s national and international legal obligations for the protection of public health. Still, to comply with Article 5 of the BIT, the measures had to fulfill certain general conditions: (1) the action must be taken bona fide for the purposes of protecting public welfare, (2) the action must be nondiscriminatory, and (3) the action must be proportionate. The Tribunal found that both measures complied with these conditions, remarking inter alia that they were effective means to protect public health, that they were introduced as part of a larger scheme of tobacco control consisting of components difficult to disentangle. Additionally, evidence proved that the incidence of smoking in Uruguay had declined, notably among young smokers, and that the public health measures were directed to this and were capable of contributing to its achievement. In the Tribunal’s view, this was sufficient to defeat the expropriation claim.258 In Lilly v. Canada, the claimant had admitted – as pointed out earlier – that its claim depended on whether or not the utility (or promise) doctrine represented a dramatic change in domestic patent law.259 This was taken as a premise by the Tribunal, which consequently did not discuss whether the changed conditions for the grant of a patent would have constituted an 256 257 258

Philip Morris v. Uruguay, para. 286. Philip Morris v. Uruguay, paras. 291–295, with references. See further Philip Morris v. Uruguay, paras. 305–307. 259 See Chapter 7 (Section D,2,e).

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expropriation had Canadian patent law changed dramatically, rather than undergoing an evolutionary adjustment.260 In addition, the Tribunal found that the utility requirement was applied neither arbitrarily nor discriminatorily, so there were no violations of NAFTA Article 1105 requiring fair and equitable treatment of investments and Article 1110 on expropriation.261 An early comment on the decision suggested that “the ruling is in fact extremely dangerous for the public interest” in that “Eli Lilly lost its main claim for only one reason, it was not able to establish facts that . . . would be necessary in order for the claim to be successful” and that “[r]ather than closing the door to an interpretation of the law that would allow Big Pharma to sue for ‘expropriation’ where intellectual property norms are altered or reformed for legitimate legal and policy reasons, the tribunal . . . opened the door even wider.”262 This might be true, but as the ruling seems to be silent on the possible consequences of a finding of “dramatically changed” national patent law, it is difficult to draw conclusions beyond the outcome of the case. That is, that Canada did not violate the NAFTA investment rules by applying the utility doctrine as a ground for invalidating the patents in the case. A discussion of the possible consequences of such a scenario is any case beyond the scope of this study. 5 Conclusions As pointed out in the Introduction to this section, the examples of approaches to direct or indirect expropriation or takings of IPRs were not intended to provide a thorough analysis of all the problems that arise in this respect and reflect the particularities of each legal regime. Instead, my aim was to illustrate certain features of the handling of IPRs as assets protected from government intervention that seem to be common to all of the regimes discussed. First, the examples show that it is the established legal positions giving rise to legitimate expectations, and not the underlying “information” or “resource,” that are protected against government intervention under the various regimes,263 although the wording of the decisions is not necessarily entirely consistent in this respect. This confirms that the use of the property metaphor in relation to expropriation and takings is not tied to what deserves 260 262

263

Lilly v. Canada, para. 389. 261 Lilly v. Canada, paras. 416–442. See Rob Howse, “Eli Lilly v Canada: A Pyrrhic Victory Against Big Pharma,” International Economic Law and Policy Blog (March 26, 2017). Compare Peukert, “The Fundamental Right to (Intellectual) Property,” pp. 136–138, in relation to ECHR P1–1, Article 17 EU Charter and even the protection of property (Eigentum) in Article 14 of the German Constitutional Act.

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(IP) protection but only to what actually enjoys it, which is logical given the purpose of rules protecting private property against government intervention. The observation is nevertheless important because it underscores the fact that the use of the property metaphor in these contexts cannot, and definitely should not, be used as an argument for justifying IP protection of the subject matter.264 What the use of the term “property” means in these contexts – whether we are talking about constitutional property, human rights protection, or investment protection – is that the law provides a legal position that is, to some extent, shielded from government intervention. The reminder that this is not tantamount to justifying the creation of the rights in the first place is perhaps more important for IPRs than for property in tangibles, since the justification for the existence of IPRs, as well as their scope, in many cases rests on more controversial grounds than it does for physical property. The tendency to self-referential use of the property metaphor in IP contexts, in the sense of “IPRs are worth protecting because they are property rights” is owed to the use of the property metaphor in relation to protection of established legal positions against expropriation and takings.265 Such self-referential use should be avoided and one way of doing so is to distinguish clearly between property as a justification and property as assets, in line with the argument made in this book. Second, a general tendency is for courts and tribunals to apply the same framework to IPRs as to other kinds of property. To be sure, one can discuss whether the US Supreme Court should have treated the disclosure of trade secrets as explicit (physical) takings or eminent domain instead of applying the Penn Central doctrine on regulatory takings in Ruckelshaus v. Monsanto,266 or whether the CJEU in Luksan should have considered the Austrian rule granting film producers primary exploitation rights as use restrictions by the film director rather than deprivation of rights.267 Furthermore, it is reasonable to assume that the concrete assessment of whether or not there has been an unlawful taking will always depend on the facts of the case, including the nature of the legal positions subject to scrutiny. Still, the general way of approaching the question of whether or not the claimants’ property (or

264

265 267

Compare Alexander Peukert, “Intellectual Property as an End in Itself?” (2011) 33 European Intellectual Property Review 67–71, 67, pointing to the tendencies to “self referential” understanding of modern IP law by way of a “property logic”; referring also to Thomas Dreier, “Prima¨r- und Folgtema¨rkte,” in Gerhard Schricker, Thomas Dreier, & Annette Kur (eds.), Geistiges Eigentum im Dienste der Innovation (Baden Baden: Nomos, 2001), pp. 51–81, 76. Compare Peukert, “Intellectual Property as an End.” 266 See supra fn. 209. See supra fn. 247.

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investments) has been affected and whether or not there is unlawful interference seems to apply to IPRs in the examples studied earlier. Third, the “weighing” of interests under various (indirect) expropriation rules to determine the lawfulness of the government intervention (including the question of the obligation to pay compensation) tends to take the individual interests of the right holder in securing his or her established legal positions (assets) into consideration, on the one hand, and public or general interests, on the other. This approach is necessary since protection against expropriation or takings is aimed at protecting reliance interests. On the other hand, the purpose of or justification for IPRs tends to be absent from the assessments we have looked at. Possible exceptions are the emphasis of the ECtHR in Paeffgen on the safeguarding of the trademark system and Ruckelshaus v. Monsanto, where the US Supreme Court – somewhat surprisingly given the utilitarian tradition of US IP law – referred to Locke and Blackstone when asserting that the notion of property extends beyond land and tangible goods and includes the products of an individual’s labor and invention (in this case trade secrets). The court did not, however, repeat this rationale when drawing the line between takings and non-takings. Generally, there is good reason to take the justification of IPRs into consideration when deciding whether or not government intervention interferes with private property and, if so, whether the interference was legitimate. Thus, the consequences of the alleged move from IP as incentives to innovate to the commodification and assetization of IPRs as a result of the regulation of IP in trade and investment treaties268 will, for example, depend on whether and to what extent such incentives are taken into account when deciding whether national regulation of IP law represents a (legitimate) expropriation.269 So far, however, neither the ECHR or EU Charter case law concerning human rights protection of property nor the awards of the ICSID Tribunals seem to expressly address the justification of IP law when assessing these issues.

E IPRs AS PROPERTY IN ASSETS V. OTHER FUNDAMENTAL RIGHTS

1 Introduction As seen in the previous discussion, the right to property has been widely recognized as a human or fundamental right. Mention has already been made of P1–1 ECHR, Article 17(1) of the EU Charter, and Article 21 ACHR. 268

See Chapter 4.

269

See Dreyfuss & Franklin, “From Incentive to Commodity,” 591–592.

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In addition, comparable property protection follows from Article 14 of the African Charter on Human and Peoples’ Rights (ACHPR).270 The predecessor of all these expressions of the right of property as a human right is Article 17 of the UN Universal Declaration of Human Rights (UDHR) 1948, which states that “[e]veryone has the right to own property alone as well as in association with others” and that “no one shall be deprived of his property.” It is disputed, however, whether this provision actually protects the right to own private property. During drafting, a compromise among delegates led to the omission of the proposed word “private” and its replacement by the phrase “alone as well as in association with others.”271 The tension at the time between Western ideas and the concerns of the Soviet Union and Latin American countries explains the need for a compromise solution.272 The scope of Article 17 UDHR will not be discussed further as the question raised here is that of the relationship between the right to property assets as a human right and other human or fundamental rights. Since the question is raised at the level of principle, to illustrate aspects of IPRs as property as assets, it is most appropriately discussed in contexts where there is case law to help illustrate each point. The current case law of the CJEU “balancing” the right to property against other fundamental rights is particularly helpful in this respect and will be used here. The relatively high number of cases before the CJEU on the issue in the past few years is symptomatic of the dual role of the court, both as interpreter of substantial IP law and with the competence to determine the scope of fundamental rights under the EU Charter.273 The situation is different for the ECtHR, which only determines the limits on domestic law set by the ECHR. Still, two quite recent cases on the balance between the right to IP as property under P1–1 ECHR and freedom of expression will also be mentioned here. Before briefly mapping out the cases, it is important to recall that both the CJEU and the ECtHR have confirmed that the EU Charter and the ECHR, respectively, only protect established legal positions and thus property as assets.274 To repeat the words of the CJEU, which adequately reflect the situation under P1–1 ECHR, “lawfully acquired possessions” protected as 270

271 272

273

274

African Charter on Human and Peoples’ Rights, 27 June 1981, 1520 U.N.T.S 217, in force October 21, 1986. See Yu, “The Anatomy of the Human Rights Framework,” 93. See Mary Ann Glendon, A World Made New: Eleanor Roosevelt and the Universal Declaration of Human Rights (New York: Random House, 2001), p. 182. See also Yu, “The Anatomy of the Human Rights Framework,” 93. See, for example, case C-227/10, Luksan, which is illustrative in this respect; see Chapter 7 (Section D.4.b). Compare Griffiths, “Constitutionalising or Harmonising?” 70. See Chapter 7 (Sections D.2.a and D.2.b).

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property under the Article 17(1) EU Charter are “rights with an asset value creating an established legal position under the legal system.”275 A possible description of the situation is that the protection of property as human rights is rights- or asset-based rather than interest-based.276 In this respect, there is a certain asymmetry between the right to property as a human right and other human rights,277 including human rights instruments that protect interests inherent in IPRs as in Article 27(2) UDHR and Article 15(1)(c) ICESCR (discussed in Chapter 5).278 The possible impact of this asymmetry will be discussed after a brief outline of the case law of the CJEU and the ECtHR regarding the interface between protection of IPRs as property and other fundamental rights. 2 CJEU Case Law on IP as Property v. Other Fundamental Rights The CJEU dealt with the interface between IPRs and other fundamental rights even before the entry into force of the Lisbon Treaty in December 2009, which gave the EU Charter of Fundamental Rights legally binding effect. In Laserdisken (2006), the question was raised as to whether the rule of so-called mandatory EU-wide exhaustion of the distribution right under Article 4(2) of the Infosoc Directive – which allowed the copyright holder to prevent parallel imports of copies of a work from territories outside of the EU – conflicted with freedom of expression as enshrined in Article 10 ECHR.279 The CJEU asserted, with reference to earlier case law, that freedom of expression “is a fundamental right the observance of which is ensured by the Community courts” and added that “[t]he same is true of the right to property, which is guaranteed by [P1–1] to the ECHR.”280 The CJEU found that Article 4(2) of the directive did not prima facie restrict freedom of expression but added that to the extent the provision might be capable of restricting the freedom to receive information, it followed from Article 10(2) of the ECHR that the freedoms guaranteed by Article 10(1) could be subject to certain restrictions justified in the public interest, due 275 276

277 278 279 280

Case C-283/11, Sky O¨sterreich, para. 34. Compare Peukert, “The Fundamental Right to (Intellectual) Property,” p. 136, who, with reference inter alia to the decision of the ECtHR in Marckx v. Belgium, application no. 6833/ 74, decision June 13, 1979, citing the preparatory works of the ECHR, points out that what P1– 1 ECHR is meant to guarantee is the right of property as a legal institution and not as an economic value or interest as such. Compare Peukert, “The Fundamental Right to (Intellectual) Property,” pp. 135–136. See to this effect also Yu, “The Anatomy of the Human Rights,” in particular 92–95. Case C-479/04, Laserdisken ApS v. Kulturministeriet, ECLI:EU:C:2006:549. C-479/04, Laserdisken, para. 62.

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inter alia to the principle of proportionality.281 In the present case, the alleged restriction on the freedom to receive information was justified in light of the need to protect copyright as property.282 The CJEU did not elaborate further on the reasons why the restriction was justified; the court merely asserted this to be the case.283 Most subsequent cases dealing with the right to property versus other fundamental rights concern the enforcement of copyright in the digital environment. The Promusicae case, decided two years after Laserdisken, but still before the enactment of the Lisbon Treaty, concerned a request from a collective rights organization for a court order against an Internet service provider (ISP) that would oblige the latter to disclose information about subscribers who had used a peer-to-peer file-sharing program (Kazaa).284 The question for a preliminary ruling from the Spanish court was whether relevant EU legislation, in light of Articles 17 and 47 of the EU Charter (the latter prescribing the right to effective remedies), should be interpreted as requiring Member States to lay down an obligation to communicate personal data in the context of civil proceedings. As to the impact of the fundamental rights, the CJEU replicated its decision in Laserdisken, holding that the fundamental right to property included intellectual property rights such as copyright and that this right, along with the fundamental right to effective judicial protection, constituted general principles of (EU) community law.285 On the other hand, the court emphasized that regarding the question at stake in the case, a third fundamental right was involved, namely, the right to protection of personal data and hence of private life, as set out in Articles 7 and 8 of the EU Charter and Article 8 ECHR. When reconciling the protection of property and the right to an effective remedy against the right to respect for private life, the court emphasized that the Member States had to rely on an interpretation of the relevant directives – the Data Protection Directive, the E-

281 282 283

284

285

See Article 10(2) ECHR and C-479/04, Laserdisken, para. 64. C-479/04, Laserdisken, para. 65. Compare Tuomas Mylly, “The Constitutionalization of the European Legal Order: Impact of Human Rights on Intellectual Property in the EU,” in Geiger (ed.), Handbook on Human Rights and IPRs, pp. 103–131 (chap. 7), 110, who claims that there was “no substantive argumentation between the applicable norm and the conclusion reached, . . . [that] [t]he judgment was based on an absolute, taken for granted primacy of the right to property over freedom of speech, the latter being generally subject to limitations . . . [and that] [t]he signal given by the CJEU was thus the immunity of copyright protection against freedom of speech.” Case C-275/06, Productores de mu´sica de Espan˜a v. Telefo´nica de Espan˜a SAU, ECLI:EU: C:2008:54. C-275/06, Promusicae, para. 62.

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Commerce Directive, and the Copyright Directive286 – which demanded that a fair balance be struck between the various fundamental rights. The authorities and the courts of the Member States further had an obligation to make sure that the directives were not interpreted in a way that would conflict with these fundamental rights.287 The court gave no guidance as to how the balance was to be struck, however, nor did it consider the extent to which the Member States could allow the disclosure of personal information to protect IPRs as property rights. In Scarlet Extended (2012), the CJEU repeated the requirement of striking a fair balance between the right to IP as property and other fundamental rights (in this case, the freedom to conduct business, the freedom to receive information, and the right to protection of personal data) while concretizing the implications.288 The Belgian collective organization for musical composers, SABAM, brought proceedings against the ISP, Scarlet Extended, claiming that the ISP must take measures to bring an end to copyright infringements committed by its customers, including by installing systems to filter information and block customers using peer-to-peer software without the permission of right holders. The first instance court ordered an injunction. This case concerned the interface between data protection, copyright, and e-commerce law and the impact of fundamental rights in this respect. On the fundamental rights aspect, the CJEU referred to Article 17(2) of the EU Charter on the protection of intellectual property and the holding in Promusicae that “the protection of the fundamental right to property, which includes the rights linked to intellectual property, must be balanced against the protection of other fundamental rights.”289 In this respect, the court found that an injunction requiring the installation of the contested filtering system involved monitoring all electronic communications made through the network and that this “would result in a serious infringement of the freedom of the ISP concerned to conduct its business” contrary to Article 16 of the EU Charter.290 Moreover, it would infringe the customers’ right to protection of personal data pursuant to Article 8 of the EU Charter, since the filtering system would involve a systematic analysis of all content and the collection and 286

287 288 289

Directive 2002/58/EC of the European Parliament and of the Council of July 12, 2002, concerning the processing of personal data and the protection of privacy in the electronic communications sector, OJ 2002 No. L 201, p. 37; Directive 2000/31/EC of the European Parliament and of the Council of June 8, 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market, OJ 2000 No. L 178, 1; Directive 29/2001/EU (“Infosoc”). C-275/06, Promusicae, para. 68. Case C-70/10, Scarlet Extended SA v. SABAM, ECLI:EU:C:2011:771. C-70/10, Scarlet Extended, para. 44. 290 C-70/10, Scarlet Extended, paras. 45–49.

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identification of users’ IP addresses, as well as their freedom to receive information (Article 11 EU Charter). The reason is that the “system might not distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communications.” Consequently, adopting the injunction “would not be respecting the requirement that a fair balance be struck between the right to intellectual property, on the one hand, and the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information, on the other.”291 Here, the CJEU drew quite concrete conclusions from the balancing exercise, without really explaining why the other fundamental rights should outweigh the right to protection of property.292 In other words, it is obvious that the court is of the opinion that the filtering system goes too far in restricting the other freedoms, but the balancing paradigm merely expresses this result rather than involving a real weighing of interests. In subsequent cases, the CJEU has also applied the balancing paradigm. Netlog, for example, concerned a claim for an injunction requiring the installment of a filtering system, in this case imposed on a social media platform.293 Again, the question was how the three directives on data protection, e-commerce, and copyright were to be interpreted in light of the right to property and other fundamental rights. The court struck a fair balance in favor of the intermediary (Netlog) on the basis that installment of the filtering system would violate the freedom to conduct business as well as the rights to data protection and freedom of information with reference both to Promusicae and Scarlet Extended.294 Just as in the previous case, the CJEU emphasized that the monitoring resulting from the filtering system had no limitation in time, was directed at all future infringements, and was intended to protect not only existing but also future works. It concluded that in adopting the injunction, the national court would not be respecting the need to strike a fair balance between the right to intellectual property and the other fundamental rights, again without actually explaining why, beyond postulating that the measures would infringe the other fundamental rights.295 On the other hand, in UPC Telekabel, the CJEU found, striking the same fair balance, that an injunction forcing an access provider to block access to specific websites on the basis of Article 8(3) of the Infosoc Directive did not 291 292

293 294

C-70/10, Scarlet Extended, paras. 50–53. Compare Griffiths, “Constitutionalising and Harmonising?” 74, who – in my opinion – correctly characterizes the court’s application of the Charter in Scarlet Extended as “little more than window dressing.” Case C-360/10, SABAM v. Netlog NV, ECLI:EU:C:2012:85. C-360/10, Netlog, paras. 41–47. 295 C-360/10, Netlog, paras. 48–52.

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violate the fundamental rights of freedom to conduct business and freedom of information, provided that further specified conditions were fulfilled.296 The conditions being that (1) the measures taken do not unnecessarily deprive Internet users of the possibility of lawfully accessing the information available and (2) the measures have the effect of preventing unauthorized access to the protected subject matter. The court undertook a detailed analysis of the effect of the measures on the freedom to conduct business and on freedom of information,297 again, however, without really explaining why in this case the protection of property should prevail over both in the balancing exercise. In McFadden, concerning a provider of a public Wi-Fi connection, the CJEU discussed in detail what the provider could be expected to do to prevent copyright infringements by third-party use of his network, in light of the fair balance to be struck between the protection of IPRs and the freedom to conduct business and freedom of information.298 The CJEU held that only three measures could be taken, namely, examining all communications passing through an Internet connection, terminating the connection, and password protecting it. The court found that only the password requirement struck a fair balance between the fundamental right to intellectual property and the right to freedom to conduct the business of a provider supplying the service of access to a communication network and the right to freedom of information on the part of the recipients of the service. In Coty Germany, the CJEU dealt with the same basic problem as in Promusicae, namely the disclosure of information regarding possible infringers, only in the context of trademarks and the sale of physical goods. In this case, the court made a more concrete assessment of the impact of the fair balance.299 A firm (Coty Germany), which held an exclusive license to the perfume brand Davidoff, bought a bottle of perfume branded Davidoff at an online auction. The firm paid the sum due to a bank account number provided by the seller, only to receive confirmation that the bottle was a counterfeit product. The firm contacted the bank for the name and address of the holder of the bank account that had been used for the payment, but the bank refused to provide the information invoking 296

297 298

299

Case C-314/12, UPC Telekabel Wien GmbH v. Constantin Film Verleih and others, ECLI:EU: C:2014:192, see para. 64 and the conclusion. C-314/12, UPC Telekabel, paras. 51–63. Case C-484/14, Tobias McFadden v. Sony Music Entertainment Germany GmbH, ECLI:EU: C:2016:689. Case C-580/13, Coty Germany GmbH v. Stadtsparkasse Magdeburg, ECLI:EU:C:2015:485. See the criticism of the decision by Martin Husovec, “Intellectual Property Rights and Integration by Conflict: The Past, Present and Future” (2016) 18 Cambridge Yearbook of European Legal Studies 239–269.

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banking secrecy in full accordance with national law. When deciding whether Article 8 of the Directive on Enforcement of IP Rights (IPRED),300 on the right to information in relation to IP infringements, precluded national legislation that unconditionally allowed banking secrecy to be invoked in such situations, the CJEU again referred to the fair balance to be struck between the fundamental rights to IP as property and to an effective remedy, on the one hand, and the fundamental right to data protection, on the other.301 The court admitted that Article 8(1) of the IPRED did not recognize an autonomous right to information that individuals may exercise directly against the infringer,302 but it noted that it nevertheless imposed an obligation on Member States to ensure that information be obtainable by way of a court order. National law permitting an unlimited and unconditional refusal to disclose would frustrate the right to information and consequently also the fundamental rights to an effective remedy and to property. Such rules would seriously impair the effective exercise of the fundamental right to intellectual property to the benefit of the right to protection of personal data and consequently would not constitute a fair balance.303 To be sure, the noted cases are not the only decisions where the CJEU has balanced IP and other rights or interests,304 but here we have concentrated on the cases where the court expressly refers to the protection of IP as property under Article 17 of the EU Charter and its balancing against other fundamental rights set out in the Charter.

3 ECtHR on the “Balancing Paradigm” In two cases from the ECtHR, the court dealt with the question of whether national IP (copyright) law conflicts with freedom of expression as set out in Article 10 ECHR and did so by balancing the latter provision with the 300

301 302

303 304

Directive 2004/48/EC of the European Parliament and of the Council of April 29, 2004, on the enforcement of intellectual property rights, OJ 2004 No. L 157 p. 32 and OJ 2004 No. L 195 p. 16. C-580/13, Coty Germany, paras. 31–35. The provision reads: “Member States shall ensure that, in the context of proceedings concerning an infringement of an intellectual property right and in response to a justified and proportionate request of the claimant, the competent judicial authorities may order that information on the origin and distribution networks of the goods or services which infringe an intellectual property right be provided by the infringer” (emphasis added). C-580/13, Coty Germany, paras. 36–42. See an overview of such cases, including also the well-known balancing of free movement of goods and services and IPRs, in Husovec, “IPRs and Integration by Conflict,” 244–252.

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protection of property under P1–1 ECHR.305 In Ashby Donald v. France, three fashion photographers had been convicted in France for violation of the French Copyright Act for having published photographs of a fashion show without the consent of the fashion house. The photographers brought the case before the ECtHR inter alia with the claim that France had violated Article 10 ECHR. It is to be remembered in this context that Article 10(2) states that the exercise of the freedom of expression may be subject to such formalities, conditions, restrictions, or penalties as are prescribed by law and are necessary in a democratic society in the interest of, among others, the rights of others. Thus, the copyright/freedom of expression interface is subject to a necessity test. The ECtHR noted this and referred to case law where the necessity requirement had been applied in other contexts. It insisted that freedom of expression is one of the essential foundations of a democratic society and one of the most important requisites for society’s progress and the development of each individual. The adjective “necessary” implies, according to the court, a “pressing social need.” At the same time, Contracting States enjoy a certain margin of appreciation in assessing the existence of such a need, while still remaining subject to European control as exercised by the ECtHR.306 The court recalled that the margin of appreciation may vary based on different factors and is wide with regard to commercial expression. Moreover, it recalled that where the aim pursued is that of the “protection of the rights and freedoms of others” and where these rights and freedoms are guaranteed by the Convention or its protocols as such, their protection may lead states to restrict other rights or freedoms enshrined in the Convention. The court admitted that the balancing of interests was difficult to do and so states must be given an important margin of appreciation in this respect. Particularly interesting in this context was the court’s explicit reference to the fact that interference with the right to freedom of expression was, in this instance, aimed at protecting the copyright of fashion designers. The court also referred to the property protection in P1–1 ECHR, concluding that this, in combination with the fact that the expression in

305

306

Ashby Donald v. France, application no. 36769/08, decision of January 10, 2013; Neij and Kolmisoppi v. Sweden, application no. 40397/12, admissibility decision February 19, 2013. For further analyses and comments on the two decisions, see Christophe Geiger & Elena Izyumenko, “Copyright on the Human Rights’ Trial: Redefining the Boundaries of Exclusivity Through Freedom of Expression” (2014) 45 International Review of Intellectual Property and Competition Law 316–342; Dirk Voorhoof, “Freedom of Expression and the Right to Information: Implications for Copyright,” in Geiger (ed.), Handbook on Human Rights and IP, pp. 331–353 (chap. 17). Ashby Donald v. France, para. 38.

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question was commercial, led to a particularly wide margin of appreciation.307 We will come back to this in the next section. In an admissibility decision pronounced only a month later, the ECtHR in Neij and Kolmisoppi v. Sweden again reached the conclusion that the right to freedom of information in Article 10 ECHR was not violated since the interference was necessary to secure IP as property.308 The applicants had been convicted in Swedish courts for complicity in copyright infringements for having run the peer-to-peer file-sharing website The Pirate Bay. The applicants brought the case before the ECtHR claiming that the conviction restricted their freedom of speech. The court found that there was indeed an interference with Article 10(1) ECtHR, since the applicants had created the means for others to impart and receive information. The court quickly ascertained that the interference was prescribed by law and pursued a legitimate aim but discussed at length whether the “interference was necessary in a democratic society.” The court stated that the necessity test could not be applied in absolute terms but depended on various factors, “such as the nature of the competing interests involved and the degree to which those interests require protection in the circumstances of the case.” In this case, the court was “called upon to weigh, on the one hand, the interest of the applicants to facilitate the sharing of the information in question and, on the other, the interest in protecting rights of the copyright-holders.”309 Again, the ECtHR stressed, “[a]s to the weight afforded to the interest of protecting the copyright-holders,” that IP is protected under P1–1 and added that this “provision does not depend merely on the State’s duty not to interfere, but may require positive measures of protection.”310 The court also reiterated the fact that the State benefitted from a wide margin of appreciation in cases such as this one where it “had to balance two competing interests which were both protected by the Convention” and a particularly wide one at that since “the safeguards afforded to the distributed material in respect of which the applicants were convicted cannot reach the same level as that afforded to political expression and debate.” With the Swedish authorities under an obligation to protect the property rights of the right holder, the ECtHR found “weighty reasons for the restriction of the applicants’ freedom of expression.” Moreover, the Swedish courts had advanced relevant and sufficient reasons to consider the 307 308 309 310

Ashby Donald v. France, paras. 39–40. Application no. 40397/12, decision February 19, 2013. Neij and Kolmisoppi v. Sweden, sect, D, para. 2. Neij & Kolmisoppi v. Sweden, sect. D, para. 3, with reference to O¨neryıldız v. Turkey (Grand Chamber), application no. 48939/99, decision November 30, 2004, para. 134.

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applicants’ activities as criminal and the penalty imposed (prison sentence) was not considered disproportionate. Consequently, the court found the interference to be “necessary in a democratic society” in accordance with Article 10(2) ECHR.311 4 Discussion It follows from the brief outline of CJEU and ECtHR case law on the interface between the fundamental right of property and other fundamental rights that a balance(ECtHR) or a fair balance (CJEU) must be struck. The approach confirms, in line with the cases that were discussed under the expropriation/ takings heading, that protection of property in the ECHR as well as the EUCHR is far from being absolute and must be “weighed” against other rights. On the other hand, it is in effect less clear what is to be balanced. Both the CJEU and the ECtHR in the previously mentioned cases express the balancing paradigm using fundamental rights – the right to protection of property must be balanced against the rights to freedom of expression or information, freedom to conduct business, protection of personal data, and so on. As follows from the earlier case survey, this balancing produces quite concrete results. For example, in the cases on ISP responsibility before the CJEU, the right to property prevails in some cases and other rights in others, and this is true also in the ECtHR cases on property v. freedom of information. However, there are no real explanations (in particular in the CJEU cases) as to why the property protection right prevails in some cases or yields in others, besides the court postulating that the rules or rulings in question violate one or another of the fundamental rights on the basis of the facts. In the ECtHR cases, the fact that property is protected as a fundamental right under P1–1 ECHR is used as an argument to widen the margin of appreciation of Contracting States; In Neij and Kolmisoppi v. Sweden, the court speaks about “two competing interests” that have to be balanced, without, however, detailing which interests are protected under P1–1 of the Convention. This speaks to the asymmetry that was briefly pointed out in the Introduction to this section. While the interests inherent in other fundamental rights, which may be weighed against the right to IP as property, correspond to the rights themselves in that the rights to freedom of information, the right to personal data and freedom to conduct business safeguard just these interests, the right to protection of property (including IP) is two faced. On the one 311

Neij & Kolmisoppi v. Sweden, sect. D, paras. 4–8.

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hand, the right to protection of property includes (ex ante) interests justifying the establishment of the rights and, on the other, it includes (ex post) reliance interests concerned with the protection of established legal positions. Although there could be a link between the two, in the sense that right holders’ expectations related to their property are considered legitimate only insofar as they reflect the justification for the right,312 the case law of the ECtHR and the CJEU shows no signs of problematizing their relationship when balancing the right to property against other fundamental rights.313 Thus, in light of the fact that P1–1 ECHR and Article 17 of the EU Charter protect “rights with an asset value creating an established legal position under the legal system,”314 the protection seems ultimately to relate to the ex post reliance interest. In this respect, the “fundamental difference between the right to property and other individual freedoms” is that “[t]o hold opinions and to receive and impart information and ideas, to live a private life, to conduct a business . . . [are] human activities . . . conceived of as preceding state activity,” while “[t]he right to property protects neither human activities and properties nor valuable goods as fruits of human labour as such,” but “guarantees the existence and individual enjoyment of certain legal institutions, namely, property rights with sufficient basis in the legal order.”315 In this regard, there is an important difference between human rights protection of interests that may be inherent in, although not necessarily limited to, IPR protection and human rights protection of property. The former refers to the rights set out in Article 27(2) UDHR and Article 15(1)(c) ICESCR that were discussed in Chapter 5 (Section C): the right to the protection of the moral and material interests resulting from any scientific, literary, or artistic production of which one is the author. These rights are formulated at the same “level” as the other fundamental rights in that they express the interests at stake, although the content of the concept “material interest” is both vague and disputed.316 Thus, a balancing of rights between these and other fundamental rights makes sense, although it is not necessarily clear how the balance is to be struck.

312

313 314 315 316

See, for example, Merges, Justifying Intellectual Property, p. 183, repeating what “countless observers have argued,” namely, that “if there is a pervasive understanding that property rights can be adjusted after the fact and at the margin to take account of changes in circumstances and urgent social needs, this understanding will naturally be incorporated onto the settled expectations of the right holders.” Compare the conclusion in Chapter 7 (Section D.5). Sky O¨sterreich para. 34. See Chapter 7 (Section D.2.c). Peukert, “The Fundamental Right to (Intellectual) Property,” pp. 135–136. See, for example, Yu, “Reconceptualizing Intellectual Property Interests,” 1083–1092.

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A balancing between the right to property, in the sense of securing established legal positions, and the other fundamental rights – in accordance with the case law of the CJEU and the ECtHR – is, however, conceptually more problematic. It is to be recalled that human rights protection of the right to property is not tantamount to recognizing the interests inherent in establishing the right in the first place as a human right. For example, considering the asset rationale for protecting legal positions as possessions under P1–1 ECHR and Article 17 of the EU Charter, it is beyond doubt that domestic sui generis database rights established in accordance with Article 7 of the EU Database Directive are protected as property under these provisions. These rights being solely grounded in investment considerations, most likely on utilitarian grounds,317 it is hardly accurate to presume that the interests behind database protection have “human rights value” as such.318 What is protected is the legal position established by the legislature and thus the legitimate expectations inherent in this position. The fact that protection under P1–1 ECHR and Article 17 of the EU Charter applies not just to physical persons but also to corporations – the Anheuser-Busch decision of the ECtHR on the protection of an application for Budweiser trademark registration being the most obvious example319 – also shows that it is the reliance interest, rather than the underlying interests justifying IP protection, that carries human rights value. The reliance interest is hardly comparable, however, with freedom of expression, for example; balancing the two comes close to “weighing without a scale.”320 It is not surprising then that neither the CJEU nor the ECtHR properly explains why one interest prevails over the other(s) in cases concerning conflicts between IP protection and other fundamental rights, instead simply postulating the outcome. Peukert, following similar observations, has suggested that a different methodology should apply when resolving the interface between (IP as) property protection and other fundamental rights.321 The unique structure inherent in the fact that property rights are the result of state activity while also being 317

318

319

320 321

See the EU Database Directive, Directive 96/9/EU, recitals 10–12, pointing to the need to encourage investments in European databases. Compare Geiger, “Implementing Intellectual Property Provisions,” pp. 669–772; Yu, “The Anatomy of the Human Rights,” 92–95. See J. Janewa OseiTutu, “Corporate ‘Human Rights’ to Intellectual Property Protection?” 55 Santa Clara Law Review 1–51, 5–6; Geiger, “Implementing Intellectual Property Provisions,” p. 669. Compare Peukert, “The Fundamental Right to (Intellectual) Property,” p. 135. See Peukert, “The Fundamental Right to (Intellectual) Property,” pp. 139–141. For a critical view on the balancing paradigm, see also Griffiths, “Constitutionalising or Harmonising?” 74, calling it “vacuous and unhelpful.”

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protected from interference by public authorities distinguishes, it is argued, the right to property from all other individual freedoms. This implies that “conflicts between the right to property and for example the freedom of expression cannot be resolved by weighing or balancing as if they were of equal rank and structure, . . . [n]or is there a principal priority of either the fundamental right to property or conflicting fundamental rights and freedoms.”322 Instead a justification approach is required, one that distinguishes between the ex ante and ex post perspectives. Ex ante, the legislature must justify the interference with fundamental rights that follows from the creation of the IP right; ex post, interference with property rights after the creation of the right must also be justified. The justification paradigm introduces, it is argued, “a differentiated hierarchy of norms, which allows one to identify a basic rule (property or freedom of expression, respectively) on which a court can rely unless there are lawful, legitimate and proportionate reasons not to do so.”323 The approach requires “reasoning as to why the IP expansion/enforcement or limitation is capable of furthering the legitimate aim, whether it is necessary or whether there are less intrusive means to achieve the end, and finally, whether the measure is reasonable. Only at the very last level may all interests be weighed.”324 Following up on the justification approach, which seems conceptually more consistent than the balancing paradigm when dealing with the interface between IP and other fundamental rights, it is important to underscore the distinction between the justification for the creation of IP rights and the protection accorded to IPRs as assets once created. Only the latter is per se protected as human rights under the ECHR and the EU Charter. In my opinion, the fact that IP is protected as property under P1–1 ECHR and Article 17 of the Charter gives minimal or no guidance when it comes to determining the scope of IPRs in light of other fundamental rights. What it means is that the IP holder is protected in securing his or her legitimate expectations created by the IPRs. Thus, a more relevant question than that of how a fair balance between the right to property and other fundamental rights is to be struck is what the legitimate expectations of the right holder are in light of the other fundamental rights. In this regard, the justification of the IPRs in question, including the type of IPR at stake, should not be irrelevant.

322 323

324

Peukert, “The Fundamental Right to (Intellectual) Property,” p. 139. Peukert, “The Fundamental Right to (Intellectual) Property,” p. 140, supporting the approach with the argument that the “methodology is well established in the practice of constitutional courts.” Peukert, “The Fundamental Right to (Intellectual) Property,” p. 141.

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For example, concerning the economic rights in copyright, it could be argued under EU law, in accordance with recitals 2 and 4 of the Preamble to the Infosoc Directive,325 that the right holder does not have any legitimate interest to enjoy rights that go beyond what is necessary to stimulate the development and marketing of new products and services and that a potential conflict with other fundamental rights may only occur to the extent that this is not the case. In other words, the protection of IP would only be justified in such instances. IP protection that does not go beyond its justification may, on the other hand, be shielded against interferences by other fundamental rights. A counterargument that might be raised is that the economic interests inherent in the incentive argument are not per se of human rights value.326 However, the extent to which other fundamental rights are interfered with should also be relevant here. Thus, even though the justification of the relevant IPRs is not of human rights value, the fundamental rights protection of IPRs as legitimate expectations could prevail over other fundamental rights in situations where interference with the latter is not excessive. Such a framework for handling the interface between the fundamental right to property and other fundamental rights would produce more consistent reasoning than the current balancing paradigm. This does not necessarily mean that the final result reached will be different, but the approach should make the results more readily understandable. For example, in Scarlet Extended, one might hold, on the one hand, that exclusive rights to musical compositions are likely to stimulate the creation of musical works and that obligations on the part of the ISP are necessary to secure such incentives, but that, on the other hand, filtering systems interfere with the fundamental rights to personal data to an extent that goes beyond the IP holders’ legitimate expectations concerning its property. This would provide a far more concrete, transparent, and thus more predictable legal reasoning than the postulate of fair balance. Likewise, in Neij v. Kolmisoppi, the ECtHR could have emphasized that peer-to-peer file sharing, without any form of compensation, is likely to hamper the incentive to create musical works, while emphasizing (as the court did) the fact that the interference with freedom of information was relatively benign given that the receivers of the information could get it from other (legal) sources and that the expression was commercial and not, for example, political. Consequently, the Swedish legislation and court decisions secured the right holders’ legitimate expectations while respecting the need to protect the rights of others. Again, this kind of reasoning is more transparent 325 326

See Chapter 5 (Section C) supra, particularly text accompanying fn. 68. Compare the General Comment no. 17 to ICESCR; see Chapter 5 (Section C) supra fn. 74.

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and sophisticated than the postulate of striking a fair balance between two competing interests. The proposed approach would not need to base the decision on a wide “margin of appreciation” due to the fundamental right to property; this would simply follow from the reasoning that giving priority to the right to property was sufficiently justified in this case. In any case, the protection of property on human rights grounds neither is nor should it be an argument in itself for stronger IP protection. The fact that the ECtHR seems to “accord human rights protection to the whole gamut of intellectual property rights regularly recognised”327 does not mean that the rationale for protecting IPRs is based on human rights as such. It only means that the legitimate expectations created by existing IP law must be secured, nothing more, nothing less. As long as legislators refrain from creating legal positions that give rise to such expectations, there are no property interests – in the sense of property as assets – to protect. This follows clearly from the case law of the ECtHR and must also be implied from the statement of the CJEU that Article 17(1) of the EU Charter “applies to rights with an asset value creating an established legal position under the legal system.”328 Since the declaration in Article 17(2) that “Intellectual Property shall be protected” is linked to property protection in Article 17(1), as has been suggested here,329 it cannot be used as an argument to strengthen IP protection. On the contrary, it may – at least theoretically – in certain cases be held that a lack of IP protection implies a violation of everyone’s right to the protection of the moral and material interests resulting from a scientific, literary, or artistic production, contrary to Article 27(2) UDHR and Article 15(1)(c) ICESCR. But this is because these interests enjoy human rights protection and not because of the human rights protection of property (IPRs) as assets.

F CONCLUSIONS ON IPRs AS ASSETS

When discussing the use of the term property or the property metaphor in relation to IPRs as assets, as we have done here, we have referred to the treatment of IPRs as established legal positions subject to transfers and securitizations and as objects protected against governmental interference. This has served to make a certain number of points. One important point is that a distinction between the justification and structuring of IPRs and the treatment of IPRs as assets is necessary to avoid drawing false conclusions from the use of the property metaphor. As 327 329

See Beiter, “The Right to Property,” 717. See supra fns. 138 and 139.

328

See supra fn. 142.

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regards the relationship between the justification and the asset aspects, it is important to note that the property label or stamp used on IPRs as assets does not in itself justify the existence or the actual scope of the rights. Thus, the fact that IPRs are considered property, pursuant to P1–1 ECHR or Article 17 of the EU Charter or other similar instruments, is not a valid argument in favor of granting new IPRs, extending the term of protection, or preferring a specific interpretation of existing IP rules. Similarly, property status, in the sense of IPRs as assets, does not imply that existing IP rules are immune from criticism: introducing a database sui generis or extending the term of protection of phonogram producers in the European Union may, nevertheless, be a mistake. In other words, policy discussions about the legitimacy of (certain) IPRs cannot be countered with the argument that IPRs are property (assets) and consequently legitimate. To be sure, established legal positions imply that they give rise to certain claims, that they may be capitalized on by way of transfers or securitization (given that the legal positions are transferrable), and that they enjoy a certain degree of protection against changes to the status quo. On the other hand, as has been pointed out, the grounds for justifying the IPRs (such as the incentive function of creational IPRs), including their limits, should be a valid argument when determining the scope of protection against interference in the established legal positions. Further, the flexibility inherent in the various norms implies that protection from interference is far from absolute. A general observation regarding the treatment of IPRs as assets is that it to some extent follows general frameworks for the treatment of assets, irrespective of the justification and the structuring of the rights. Thus, general rules on contract and the transferring of property rights, securitization, insolvency, and so on are likely to be applicable, but the extent to which this is the case will depend on domestic law and legal traditions in different jurisdictions.330 At some point, special considerations related to the particular justification or structuring of the various kinds of IPRs normally kick in and require special solutions: for example, the inalienability of moral rights in continental European copyright law or rules on the protection of security interests against third-party interests by registration of the rights in a special IP registry.331 As demonstrated in Section D, the general frameworks for protection against (direct and indirect) expropriation and takings seem to a large extent to be applicable, although the character of the rights is certainly relevant when assessing the lawfulness of governmental intervention. In sum, it is plausible to 330

See Section B.

331

See Sections A and B.

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say that the degree of potential carry-over effect from general property rules is greater when it comes to the asset aspect than was the case for the justification and structural aspects. On the other hand, the justification and structure may – and should – lead to differences in the treatment of IPRs as assets, so caution must be exercised when drawing conclusions from the use of the property metaphor, or term, even in these contexts.

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8 Final Conclusions

This book is based on the premise that the term property or the property metaphor is used in relation to what today is commonly known as intellectual property in transnational and international discourse and contexts. Detaching the term from specific national jurisdictions, with their respective legal traditions, it becomes particularly ambiguous. Nevertheless, because of its widespread use and the associations it is capable of creating, it is important to remain aware of its possible connotations. We have discussed three aspects of the possible resemblances between IPRs and property in tangibles: justification of the rights, structuring of the rights, and the rights as assets. In each case, similarities have led property theorists to include IPRs in property analyses, but caution is called for in legal practice. Here, the argument has been made that the considerable differences with regard to the possible justification grounds, as well as the structuring of the rights, imply that from a legal point of view little is gained from drawing real property analogies. On the other hand, the use of the property metaphor may make more sense when referring to IPRs as assets because the term is used here in a broad sense and is not particularly tied to resemblances with property in tangibles. One problem with such use, however, is that the property term, because of its strength and the associations it calls to mind, easily becomes selfreferential. And since the property in tangibles association is unavoidable as long as the term, or metaphor, is used, there is a risk of drawing false analogies. Having said that, differences implicit in what is here referred to as justification and structure imply that considerable caution should be exercised when drawing material conclusions from the use of the property term or metaphor, even when used in the meaning of property as assets. It is important to remember that use of the term property does not in itself mean strong or absolute protection, in particular when used in transnational

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or international contexts.1 Thus, use of terms such as “propertization” to describe the tendency toward rights expansion (beyond what is considered properly justified) may have the reverse effect of that desired in that it may legitimize the belief that IPRs are absolute rights. Rather, a belief that IPRs should not be granted unless properly justified, and that the scope of the rights should be adjusted accordingly, is – it is argued here – better served by underscoring the elusiveness of the property metaphor and the limited guidance it provides with respect to the further content and scope of the rights. It may seem then that we are back to where we started. Still, it is important to be aware of the different connotations of the use of the property metaphor, not least in light of the fact that the protection of property is considered a fundamental right in various international conventions. Everything that may be said about property in IP law has evidently not been said here. Nevertheless, the book serves as a reminder of various property aspects of intellectual property and their possible implications.

1

See text accompanying Chapter 1, fns. 11–13.

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Index

takings and expropriation rules and, 180–182 transfers and securitization of, 131–138 assignment of IP, transfers and securitization and, 131–138 avoiders, IP boundaries and, 99

abstraction levels in IP, 100–101 in copyright, 101–106 patent law, 106–109 trademark/trade names law, 109–111 achievement, in intellectual property, 51–55 actiones in personam, 43–46, 123–125 actiones in rem, 43–46, 55–60, 123–125 African Charter on Human and Peoples’ Rights (ACHPR), 182–184 Alexander, Gregory, 18–19 alienability, of intellectual property rights, 127–131 American Convention on Human Rights (ACHR) Article 21, 155–157, 165–167, 177 analog distribution, copyright protection and, 115–121 Anheuser-Busch, Inc. v. Portugal (Grand Chamber), application no. 73049, 146–153, 159, 171–177, 192–197 Aristotle, 39–41 Ashby Donald v. France, application no. 36769/08, 189–192 assets, intellectual property rights as, 68–71, 126–199 alienability vs. inalienability of, 127–131 American Convention on Human Rights Article 21, 155–157 CJEU case law on fundamental rights vs., 184–189 fundamental rights vs., 182–197 international investment law and, 157–161 justification of rights and, 192–199, right to exclude or right (privilege) to use and, 161–167 structuring of property rights and, 197–199

balancing paradigm European Court of Human Rights case law and, 189–192 fundamental rights vs. IPR and, 184–189 justification of rights and, 192–197 takings/expropriations violations and, 174, 175–177 Balan v. Moldova Application no. 19247/03, 146–153, 174–175 behavioral economics, 20 Bentham, Jeremy, 15–21 Berne Convention for the protection of artistic works, 87–92 copyright law and, 115–121 takings/expropriations violations and, 175–177 use/exploitation concept and, 112–114 Bettina Z case, 105–106 bilateral international treaties (BITs), 157–161 Birks, Peter, 56 n. 51 boundaries of IP, 95–100, 131–138 British Statute of Queen Anne, 114 n. 64 builders, IP boundaries and, 99 bundle of sticks approach common law and, 5–6 copyright law and, 121–123 property theory, 43–46 Burk, Dan, 107–108 business-related intellectual property, 51–55 justification of rights and, 95

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220

Index

Calabresi, Guido, 24–26, 127–131 Campbell v. James 104 U.S. 358 (1882), 142–146 Canon Kabushiki Kaisha and Metro GoldwynMayer Inc., 109–111 carry-over effect, IPR as assets, 126–127 Cervantes, Miguel de, 114 n. 64 charity proviso, labor theory and, 31–33 civil law, unitary property concepts, 5–6 Coase Theorem, 23–24 Commerce Directive (EU), 184–189 competing interests principle, fundamental rights vs. IPRs as assets and, 192–197 concrete object, vs. legal object, 55–60 conditio sine qua non perspective, copyright law, 119 conduct-related IP, 66–67 constitutional property, 4–5 control of use concept, 171–177 takings/expropriation violations as, 175–177 copied material copyright law and, 115–121 transferability of, 138–141 copyright protection abstraction levels in, 101–106 alienability in, 127–131 economic and moral rights in, 84–85, 192–197 exploitation and, 114–121 property rights and, 184–189 takings clause and, 142–146 use/exploitation concept in, 111–123 Coty Germany GmbH v. Stadtsparkasse Magdeburg, ECLI:EU:C:2015:485, 188–189 Court of Justice of the European Union (CJEU), 4–5 Deckmyn case, 105–106 digital distribution rights cases, 115–121 European Union Charter of Human Rights Article 17, 153–155 ‘function test’ of, 121–123 fundamental rights vs. IPRs, case law involving, 184–189, 192–197 ‘Metall auf Metall’ case, 51–55 takings/expropriations violations and, 175–177 creational intellectual property, 51–55, 95 creative labor, IP rights and, 80–84 Data Protection Directive (EU), 184–189 Deckmyn case, 105–106 Demsetz, Harold, 15–21

deprivation, takings/expropriation violations as, 175–177 digital content, copyright and, 115–121, 184–189 Dima v Romania Application no. 58472/00, 146–153 Directive on Enforcement of IP Rights (IPRED), 184–189 dissemination rights, copyright law and, 121–123 distribution rights mandatory EU-wide exhaustion of distribution and, 184–189 peer-to-peer file sharing and, 115–121 domain names Protocol 1 Article 1 (P1–1) (ECHR) and concept of, 151–153 takings/expropriations violations and, 171–177 domestic law assets characterization of IPR and, 197–199 international investment agreements and, 157–161 takings/expropriation rules under, 161–167, 171–177 Dr. Zhivago case, 101–106 eBay v MercExchange, 78–80, 86–87 economic rights, 84–85 copyright and, 192–197 economic structures, utilitarian justification of property, 76–80 economies of scale, utility paradigm and, 15–21 ‘80/80 Regulation,’ 178–180 ‘either or solution,’ distribution rights, 115–121 entitlements, property rights and, 24–26 Environmental Protection Agency (EPA), 101–106, 168–171 Epstein, Richard A., 33–35, 95–100 EU Charter of Fundamental Rights, 165–167, 175–177 EU Copyright Directive (‘Infosoc Directive’), 87–92 file sharing and, 115–121 fundamental rights vs., 184–189 mandatory EU-wide exhaustion of distribution and, 184–189 parodies and, 105–106 eudaimonia, 39–41 EU Database Directive, 192–197 EU law, distribution rights in, 115–121 European Commission of Human Rights (ECommHR), 146–153

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Index European Convention on Human Rights (ECHR) intellectual property and, 4–5 mandatory EU-wide exhaustion of distribution and, 184–189 taking and expropriation under, 146–153, 165–167 European Copyright Directive (“Infosoc Directive”), Recital 10, 80–84 European Court of Human Rights (ECtHR) fair balance perspective and case law of, 189–192 fundamental rights vs. IPRs as assets and, 182–184, 192–197 intellectual property and, 4–5 Protocol 1 Article 1 (P1–1) (ECHR) and, 146–153 takings/expropriations rules and, 165–167, 171–177 European Intellectual Property Office Guidelines (EUIPO), 109–111 European Patent Convention, Article 69, 107–108 n. 45 European Union Charter of Human Rights, Article 17, 153–155 EU Trade Secrets Directive, 51–55 ex ante perspective, justification of rights and, 192–197 exceptions, in copyright law, 121–123 exclusive rights, in intellectual property law, 63–66 exhaustion doctrines, IP-protected subject matter, 138–141 ex post perspective, justification of rights and, 192–197 expropriation of intellectual property rights, 141–182 ACHR Article 21 and violation of, 177 international investment law and, 178–180 protected subject matter and, 142–161 Protocol 1 Article 1 (P1–1) (ECHR) and, 171–177 right to exclude or right (privilege) to use and, 161–167 unlawful expropriation, cases involving, 167–180 externalities, utility paradigm and, 15–21 fair balance perspective European Court of Human Rights case law and, 189–192

221

fundamental rights vs. IPR and, 184–189 takings/expropriations violations and, 174, 175–177 fair use criterion abstraction levels and, 101–106 use/exploitation concept and, 112–114 Filmer, Robert, 28–33 first sale doctrines, IP-protected subject matter, 138–141 freedom of expression, IPR vs., 189–192 free-riding, 15–21 creational IP and, 95–100 full referral international investment model, 157–161 function test, copyright law and, 121–123 fundamental rights vs. IPR CJEU case law and, 184–189 ECtHR case law and, 182–184 fair balance perspective and, 192–197 fungible property, 38–39 personality and, 84–85 government action, Protocol 1 Article 1 (P1–1) (ECHR) and concept of, 151–153 GS Media BV v. Sanoma Media Netherlands BV et al., ECLI:EU:C:2016:644, 115–121 Hand, Learned (Judge), 95–100, 101–106 Hardin, Garrett, 15–21 Hargrave, Francis, 18–19 Hegel, Georg Friedrich, 35–39 on economic and moral rights, 84–85 personality rights, 130–131 Heller, Michael A., 47 n. 18 Hohfeld, Wesley N., 43–46 nontransferability of rights and, 127 n. 2 Horne v. Department of Agriculture, 576 U.S. ___ (2015), 14–275, 142–146 host country, IPR protection in, 157–161 human flourishing, 38–39 “Immaterialgu¨tertheorie” (Immaterial Goods Theory), 47–51 inalienability of property rights, 24–26 intellectual property, 127–131 information/information law, intellectual property and, 61–63 input/output, of IP, 61–63 “intangible good” approach, IP boundaries and, 99–100

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222

Index

intangible object approach, 46–51. See also tangibility American Convention on Human Rights Article 21 and concept of, 155–157 asset intangibility, 69 n. 7 creative labor and, 80–84 object function in intellectual property and, 123–125 Scandinavian perspective, 47–51 takings clause and, 142–146 transfers and securitization and, 131–138 intellectual property alienability vs. inalienability, 127–131 boundaries of, 95–100 costs vs. benefits, 23–24 intangibility of, 46–51 labor philosophy, 28–35 limits of property metaphor, 93 structural particularities, 51–55 takings and expropriation issues, 141–182 transfer of IP-protected subject matter, 138–141 utilitarian justification, 15–28 International Centre for Settlement of Investment Disputes (ICSID), takings/ violations agreements and, 157–161, 178–180 international copyright law alienability restrictions, 131 justification of property rights and, 87–92 transfers and securitization and, 131–138 International Covenant on Economic, Social and Cultural Rights (ICESCR), 87–92 international investment agreements (IIAs), 157–161 takings/expropriations violations and, 178–180 international investment law, intellectual property and, 157–161 internet copyright law and file sharing on, 115–121 IPRs vs. fundamental rights and, 184–189 justification of rights alienability restrictions and, 131 categories of justification, 86–87 intellectual property and, 75–76, 192–197 international context, 87–92 structure of rights and, 95 utilitarian grounds, 76–80

Kaldo-Hicks criterion, utility paradigm and, 15–21 Kant, Immanuel, 3 n. 8, 35–39 on economic and moral rights, 84–85 on personality rights, 35–39, 130–131 Karnell, Gunnar, 51 n. 31 Kinetic Concept case, 108–109 Kohler, Josef, 47–51 Koktvedgaard, Mogens, 48–51, 57 n. 53 labor theory intellectual property and, 35, 80–84 property and, 18–19, 28–35 Labour (Zemer), 29–30 “Lara’s Child” (Molin), 101–106 Laserdisken ApS v. Kulturministeriet, ECLI: EU:C:2006:549, 184–189 law and economics movement, 18–19 legal object concept, 47 n. 18 concrete object vs., 55–60 “legal things” concept, 47 n. 18 Legislative Guide on Secured Transactions, 131–138 legitimate expectations principle takings and expropriation rules and, 168–171, 180–182 trademark protection and, 146–153 Lemley, Mark A., 107–108 liability property rights and, 24–26 utilitarian justification of property, 76–80 libertarianism, property rights under, 21 Liberty of the press (Zemer), 29–30 licensing agreements alienability vs. inalienability of IPRs and, 127–131 takings/expropriations violations and, 174 transfers and securitization and, 131–138 Lilly v. Canada case, 157–161, 179–180 limitations, in copyright law, 121–123 Lisbon Treaty (2009), 184–189 Locke, John, 13–15, 80–84 alternative interpretations of, 33–35 international IP law and, 90–92 moral desert theory of, 28–33 Macaulay (Lord), 18 n. 24 Madison, James, 18 n. 24 margin of appreciation, fair balance principle in IPR and, 189–192

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Index Martin Luksan v. Petrus van der Let, ECLI:EU: C:2012:65, 175–177, 180–182 materiality, distribution rights and, 115–121 Melamed, Douglas, 24–26, 127–131 Melnychuc v Ukraine Application no. 28743/03, 146–153 MercExchange, L.L.C. v. eBay, Inc., 500 F Supp. 2d 556, 572, 129–131 ‘Metall auf Metall’ case, 51–55 mixing metaphor in labor theory, 28–33 modularity in property law, 26–28 utilitarian justification of property, 76–80 Molin, Alexander (pseud.), 101–106 monopolies IPs as, 60–61 on patents and trademarks, 55–60 moral desert, Locke’s theory of, 28–33 moral rights, 84–85 multilateral trade agreements, 157–161 natural law theory, property and, 28–33 necessity requirement, fair balance principle in IPR and, 189–192 negative rights takings and expropriation and, 161–167 use/exploitation concept and, 112–114 neighboring rights, 51–55 utilitarian justification of property, 76–80 Neij and Kolmisoppi v. Sweden, application no. 40397/12, 189–197, net utility, of intellectual property, 13–15 Nichols v Universal Pictures, 101–106 non-practicing entities (NPEs), 129–131 non-scarcity paradigm. See scarcity/nonscarcity paradigm North American Free Trade Agreement (NAFTA), 157–161 object function in intellectual property, 55–60 intangibility and, 123–125 property as assets and, 68–71 objects and things, Hegel’s concept of, 37 ownership alienability vs. inalienability of IPRs and, 127 n. 2 personality and personhood and, 35–39 unitary property concept, 5 n. 18 Paeffgen v Germany, Application nos. 25379/04, 21688/05, 21722/05 and

223

21770/05, 151–153, 171–177, 180–182 Palamara-Iribarne v. Chile, decision 22 November 2005, 155–157, 165–167, 177 Pangea Property Partners AS (PPP), 109–111 Pareto optimality, utility paradigm and, 15–21, 23–24 parodies, abstraction in copyright law and, 105–106 Pasternak, Boris, 101–106 patent protection abstraction levels in, 106–109 justification of rights and, 86–87 monopolies and, 55–60 personal property and, 78–80 Protocol 1 Article 1 (P1–1) (ECHR) and concept of, 146–153 takings clause and, 142–146 use/exploitation concept and, 112–114 patent trolls, 129–131 peer-to-peer file sharing distribution rights and, 115–121 fundamental rights vs. IPR and, 189–192 Pen˜alvin, Eduardo, 18–19 Penn Central doctrine, 168–171, 180–182 Penner, James E., 55–61, Perfect 10 Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007),1162, 115–121 personal data, intellectual property rights vs. protection of, 184–189 personality rights alienability and, 130–131 property rights and, 35–39 personal property fungible property and, 37 patents and, 78–80 personhood fungible vs. personal property, 84–85 property rights and, 35–39 Peukert, Alexander, 48–51, 192–197 Philip Morris Brands Sa`rl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7, 159–160, 164–165, 178–180 Philosophy of right (Hegel), 37 Pigou, A. C., 18–19 plain packaging regulations, 161–167 pluralism, property rights and, 39–41 police powers doctrine, takings/expropriations violations and, 179

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224

Index

positive rights, takings and expropriation and, 161–167 possessions, concept of European Union Charter of Human Rights Article 17 and, 153–155 Protocol 1 Article 1 (P1–1) (ECHR) and concept of, 146–153 takings/expropriations violations and, 171–177 prior tempore potior in jure (first in time, greater in right) principle, copyright law and, 123–125 privacy rights, intellectual property rights vs., 184–189 private property defined, 4 IPRs as assets and, 182–197 labor theory and, 28–33 takings clause and, 142–146 privilege of use, takings/expropriation rules and, 161–167 privileges system, 114–121 Productores de mu´sica de Espan˜a v. Telefo´nica de Espan˜a SAU, ECLI:EU:C:2008:54, 184–189 propertization, 200–201 IP expansion and, 3–4 property rights American Convention on Human Rights Article 21 and, 155–157 asset status, 68–71 European Union Charter of Human Rights Article 17, 153–155 freedom of expression and, 192–197 intellectual property in context of, 1–9 IPRs as assets and, 182–197 liability and inalienability of, 24–26 modularity in, 26–28 personality and personhood, 35–39 Protocol 1 Article 1 (P1–1) (ECHR) and, 146–153 structuring of, 42–43, 66–67 “thingness” in, 43–46 transnational context, 3–4 proportionality IPRs vs. fundamental rights and, 184–189 property rights and, 80–84 takings/expropriation violations, 175–177 protected subject matter expropriation/takings rules and, 142–161 interface with copies of, 138–141 Protocol 1 Article 1 (P1–1) (ECHR), 146–153

European Union Charter of Human Rights Article 17, 153–155 fair balance principle and, 189–192 property rule under, 157–161 takings/expropriations violations and, 171–177 public goods, utility paradigm and, 15–21 public interest principle, takings/ expropriations violations and, 174 Rawls, John, 33–35, 80–84 real property copyright law and concept of, 121–123 intellectual property as, 13–15, 76–80 justification of rights and, 86–87 takings clause and, 142–146 reliance interest fundamental rights vs. IPR and, 192–197 international investment model, 157–161 remuneration rights, in intellectual property law, 63–66 res communes, labor theory and, 33–35 res nullius, labor theory and, 33–35 resource concept, intellectual property and, 13–15, 61–63 right of exclusion, takings/expropriation rules and, 161–167 rights of others principle, fair balance principle and, 189–192 right to use, takings/expropriation rules and, 161–167 Ross, Alf, 47–51 Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), 142–146, 165–167, 168–171, 180–182 Scandinavian legal realism, 7–9 intangibility of intellectual property of, 47–51 scarcity/non-scarcity paradigm, 61–63 legal object impact, 131–138 transfers and securitization and, 137–138 utilitarian justification of property, 76–80 Scarlet Extended SA v. SABAM, ECLI:EU: C:2011: 771, 184–189, 196–197 securitization of IPRs, legal object impact, 131–138 “server test,” digital copyright and, 115–121 Sherwin, Emily, 69 n. 7 SIA AKKA LAA v. Latvia, application no. 562/05, 174 similarity test, trademark protection and, 109–111 single presentation requirement (SPR), 164–165, 178–180

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Index Sky O¨sterreich GmbH v. O¨sterreichischer Rundfunk, ECLI:EU:C:2013:28 , 153–155 Smith, Adam, 18–19, 26–28 Smith Kline, Case No. 12633/87, 146–153 social welfare, labor idea of IP and, 80–84 spoilage, waste proviso on, 31–33 structure of property rights, 42–43, 51–55, 66–67 economic rights, 114–121 intellectual property and, 192–197 justification of rights and, 95 sufficiency proviso, labor theory and, 31–33 sui generis rights EU Database Directive and, 192–197 labor idea of IP and, 80–84 takings rules ACHR Article 21 and violation of, 177 intellectual property rights and, 141–182 international investment law and, 178–180 protected subject matter and, 142–161 right to exclude or right (privilege) to use and, 161–167 Ruckelshaus v. Monsanto Co. as violation of, 142–146, 168–171 violations, cases involving, 167–180 takings violations, Protocol 1 Article 1 (P1–1) (ECHR) and, 171–177 creative labor and, 80–84 of intellectual property, 13–15 IP-protected subject matter, transferability of, 138–141 object function in IP and, 55–60 peer-to-peer file sharing and, 115–121 utilitarian justification of property, 15–21 technology, copyright and, 115–121 temporary copying, use/exploitation concept and, 112–114 territoriality, international investment agreements and, 157–161 ‘thingness’ in property rights, 43–46 third parties fundamental rights vs. IPR and, 187–188 IP boundaries and, 99 Timothy S. Vernor v. Autodesk Inc. 621 F 3d 1102, 138–141 Tobias McFadden v. Sony Music Entertainment Germany GmbH, ECLI: EU:C:2016:689, 187–188

225

trademarks abstraction levels and, 109–111 ICSID tribunal awards and, 159–160 negative rights concerning, 161–167 Protocol 1 Article 1 (P1–1) (ECHR) and, 146–153 takings/expropriations violations and, 171–177, 178–180 use/exploitation concept and, 112–114 utilitarian view of, 21–23 “trade-offs,” in IP regimes, 63–66 Trade Related Aspects of Intellectual and Property Rights (TRIPS) exclusive and remuneration rights, 63–66 trademark rules in, 161–167 use/exploitation concept and, 112–114 trade secrets labor theory and, 31–33 legal protection of, 51–55 Protocol 1 Article 1 (P1–1) (ECHR) and concept of, 151–153 takings rules and, 142–146, 168–171 utilitarian view of, 21–23 Trade Secrets Act 1905, 170 tragedy of the commons, 15–21 creational IP and, 95–100 transactors, IP boundaries and, 99 transferability alienability vs. inalienability of IP and, 127–131 copied material vs., 138–141 IP-protected subject matter, 138–141 legal object impact, 131–138 Trans-Pacific Partnership (TPP) Agreement, 87–92, 157–161 Two Treatises of Government (Locke), 28–33 UK Copyright Act 1911, 115 n. 68 unfair competition, labor theory and, 31–33 unified property theory, boundaries of IP and, 95–100 unitary property concepts, 5–6 United Nations Commission on International Trade Law (UNCITRAL), 131–138 United States, copyright law in, 115–121 Universal Declaration of Human Rights (UDHR), 87–92, 182–184 unregistered IPRs, 131–138 UPC Telekabel Wien GmbH v. Constantin Film Verleih and others, ECLI:EU: C:2014: 192, 187–188

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226

Index

US Constitution, takings clause in, 141–146, 168–171 UsedSoft GmbH v. Oracle, ECLI:EU:C:2012: 407, 115–121, 138–141 use/exploitation concept in IP, 111–123 US Patent Act, utilitarian justification of property, 78–80 utilitarian justification of property, 15–28, 76–80 alienability and, 130–131 costs vs. benefits, 23–24 property doctrine vs. liability and inalienability of, 24–26

trademarks and trade secrets, 21–23 tragedy of the commons vs. free riding, 15–21 utility (promise) doctrine, 179–180 WCT, distribution rights in, 115–121 welfare, Pigou’s analysis of, 18–19 WIPO Copyright Treaty (WCT), 87–92 Zemer, Lior, 29–30 Zoltek Corp. v. United States, 442 F.3d1345, 1353, 168–171

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