UIP2612 Intellectual Property Law Topic 1: Introduction Dr. Dennis W. K. Khong
[email protected] June 2016 Handout
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Reading
1. Tay Tay Pek Pek San, San, Intellect Intellectual ual Prop Property erty Law Law in Malaysia Malaysia (Sweet (Sweet & Maxwell Asia, 2013) ch 1. 2. Lionel Bently and Brad Sherman, Intellectual Property Property Law (4th edn, OUP, 2014) ch 1.
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Intr Introdu oduct ctio ion n
3. The phrase ‘intellectual property’ is used but not defined in the Intellectual Property Corporation of Malaysia Act 2002 (Act 617). 4. It is a nonnon-le lega gall coll collec ecti tiv ve term term to refe referr to diffe differe rent nt intan intangi gibl blee property rights, known as intellectual property rights (IPR) covering inter alia , (i) Copyrigh Copyright, t, (ii) Patents, Patents, (iii) Industrial Industrial designs, designs, (iv) Trade marks, (v) The tort of passing off, (vi) The tort of breach of confidence, confidence, and (vii) Other newer newer forms of rights. 5. In Malaysia, Malaysia, these IPRs are gov governed erned separately separately by: (i) (ii) (iii) (iv) (v) (vi) (vii)
Copyrigh Copyrightt Act 1987 (Act 332) Patents Patents Act 1983 (Act 291) Industrial Industrial Designs Designs Act 1996 (Act 552) Trade Marks Act 1976 (Act 175) Geographical Geographical Indications Indications Act 2000 (Act 602) Layout-De Lay out-Designs signs of Integrated Integrated Circuits Act 2000 (Act 601) Protection Protection of New Plant Plant Varieties Varieties Act 2004 (Act 634)
6. Additionally Additionally,, torts such such as passing passing off and breach of confidence are governed and developed through case law. 7. Some IPRs may overlap and cover the same subject matter, e.g. copyright in 3D objects and industrial designs, or trade marks and the tort of passing off. 1
8. Alternatively, the same object may have related aspects of it being covered by different IPRs, e.g. copyright for the source code and object code of the computer program, versus patent protection for computer software. Alternatively, non-disclosed aspects of a computer program, such as its source code, may be protected as confidential information. 9. In modern technological devices, hundreds, or if not more, thousands of different IPRs may be involved.
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Traditional Justifications for IPRs
10. Traditional justifications for intellectual property rights are based on two theories: (i) labour theory, (ii) personality theory. 11. The labour theory is premised on the idea that a labourer should be able to enjoy the fruits of his labour. Therefore, the creator of a new knowledge should own the right to his creation. 12. The personality theory is premised on the idea that the intellectual creation is an extension of the personality of its creator, just like a calf embodies the personality of its mother, and therefore belongs to its mother. 13. Both the labour theory and the personality theory are rhetorical devices to explain for intellectual property rights, but by themselves do no reflect the reality faced by creators.
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Economic Justifications for IPRs Nature of Information
14. The economic justification for intellectual property rights is related to the idea of investment and the need to recoup an investment. 15. It should be noted that all intellectual properties are informational in nature. According to economic theory, information has the characteristics of ‘public goods’: (i) non-rivalrous in consumption, (ii) non-excludability. 16. Non-rivalrous in consumption means that information can be used with unlimited number of people, for unlimited times, without degradation in quality or reduction in quantity. This is a good characteristics and makes information an ’infinite good’. 17. The second characteristics is non-excludability. This means that once information is released to the public, it is impossible or extremely difficult to prevent people from having access to it. The difficulty of exclusion means that non-payers may enjoy the same information without paying.
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18. In the context of information, enjoying without paying whereas others may have to pay for the same is known as ‘free-riding’ or ‘free-loading’. Free-riding is a sign of ‘market failure’, meaning a market for information without further laws, regulations or legal enforcement, will not by itself lead to the socially desirable outcome. 19. Thus, due to the ‘public goods’ characteristics, production of (new) information suffers from a market failure, i.e. the amount of (new) information produced is below what is socially optimal (desirable). This is because the production of new information is expensive (high fixed cost), but the reproduction of addition copies of the information is cheap (low marginal or variable cost). 20. By granting an intellectual property right to its creator, in the form of an exclusive right, the owner will be able to prevent competitors who uses his intellectual property without incurring the high fixed cost of creation. Without this competiton, the owner can then sell their products comprising the intellectual property rights at a price higher than a competitive price with free-riding competitors, and with that additional profit, will be able to recover the high fixed cost and reinvest any surplus in future research and developement (R&D). 21. Generally, all IPRs can be economically grouped into two categories: (1) To solve the market failure in creating new inventions or creations: (i) Copyright (ii) Patents (iii) Industrial designs (iv) Confidential information and trade secrets (v) Layout-designs of integrated circuits (vi) Plant varieties (2) To solve the market failure in investing in reputation/quality: (i) Trade marks (ii) Passing off of a business’s goodwill (iii) Geographical indications (iv) Domain names 4.2
Incentive to Create
22. Intellectual property rights can be considered as a legally sanctioned means to prevent unauthorised/un-consented reproduction of protection information for the benefit of the rights-holder. Thus, the rights-holder will, in theory, be able to recoup his high fixed cost by selling his products at a price higher than just his reproduction cost. 23. Consider the case of a music CD. The cost of a blank CD-R is about 50 sen, and the cost of electricity to record music onto the CD-R is a fraction of a sen. This must be the lowest cost of reproduction of a CD. However, the fixed cost of recording the music and paying for the various production processes amounts to tens or hundreds of thousand ringgit. If a music producer is forced, by competition from 3
‘pirates’ to sell at the cost of CDs, he will never be able to recover his fixed cost, and thus, there will be less incentive to record music at the first place. 24. New information such as inventions and scientific discoveries are useful for society because this is how society and economies developed exponentially in since the industrial revolution. Civilisations prospers because of new inventions in the arts and sciences. 25. Therefore, intellectual property rights such as copyright, patents and design rights make the use of information in specific contexts a property rights in the hands of the rights-owners. With this, they may then legally exclude non-payers from using those information, and those who do so without consent are liable to criminal punishments and civil infringement suits. 4.3
Incentive to Invest in Reputation
26. A second group of information are not inventions or creations per se , but symbols or insignia of trade which connotes a certain leval of reputation of the business. The type of intellectual property rights which falls into this category includes trade marks, geographical indications and the tort of passing off. 27. Unlike the first category above, the incentive here is the incentive to invest in building a reputation so that consumers may safely rely on a trade mark to infer the potential quality and source of a product. 28. This second type of information may also be succeptible to free-riding by counterfeiters who sell similar goods using the trade mark owners’ mark. As producing quality products is more expensive than producing cheaper but inferior quality products, counterfeiters have incentive to free-ride on the quality associated to the marks, which robs the trade mark owners’ investment in quality. 29. Additionally, counterfeiters also free-ride on advertising efforts and costs of a trade mark owner or his users. 30. When trade marks are not protected, business have little incentive to invest in product quality because it could be free-rided by counterfeiting competitors. The effect is that the market will have few high quality products.
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Other Political Justification
31. Sometimes, new forms of IPRs have been argued to be created, even though it does not solve any of this market failure problem, e.g. protection of ancient ‘cultural property’. These forms of IPRs are mainly used as a protectionist device or to transfer wealth from the right to the poor (e.g. aboriginal communities). 32. In essence, intellectual property law has to strike a balance between the rights-holder’s ability to recoup and profit from his investment, and the public’s right to enjoy and disseminate information relating to the protected creation.
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6 Characteristics of Intellectual Property Rights 33. Although intellectual properties are essentially information, different types of intellectual property rights have different characteristics and legal requirements. 34. These characteristics can be classified as: (i) (ii) (iii) (iv) (v) (vi) (vii)
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Subject matter Registration requirement Publication requirement Duration of protection Scope of protection Availability of an independent creation defence Other excetions and defences
Recap
35. In this topic, we cover: (i) (ii) (iii) (iv) (v)
Different types of intellectual property rights (IPRs) Sources of law and legislation for IPRs Informational nature of IPR protection Two economic justifications for IPRs Characteristics of IPRs
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