Led by Prof. Adam Mossoff and C-IP2 Senior Fellow and Senior Scholar Prof. Jonathan M. Barnett, twenty-five law professors, economists, and former United States Government officials—including C-IP2 Advisory Board members the Honorable Andrei Iancu, the Honorable David J. Kappos, the Honorable Paul Michel, and the Honorable Randall R. Rader; Faculty Director Prof. Sean M. O’Connor; Senior Scholar Prof. Kristen Osenga; and Scholar Dr. Bowman Heiden—submitted a letter in response to a “call for evidence” on the licensing, litigation, and remedies of standard-essential patents (SEPs). The response discusses core functions of SEPs in the wireless ecosystem, the lack of evidence of Patent Holdup and Royalty Stacking, assumptions about SEPs and Market Power, the importance of the potential for injunctive relief even for FRAND, levels of licensing, and SEP licensing in SME markets. The letter is available here on SSRN.
Tag: EU
On July 5th, the European Parliament will vote on a draft of the Copyright Directive for the Digital Single Market that has major implications for the future of copyright law in the European Union and beyond. At the center of the debate is Article 13, a provision that would require online platforms that feature user-generated content to screen uploads for infringing material. It’s a measure that represents a significant update to standards of accountability in the digital age, and it’s one that’s now necessary to combat the continual devaluation of creative works and to ensure the survival of essential creative ecosystems.
In the weeks and months leading up to the vote, advocates for Article 13’s defeat have become increasingly vocal in their opposition to the proposal. An overwhelming amount of those attacking Article 13 have resorted to fear-mongering and misinformed hyperbole. Detractors’ claims include everything from the ridiculous—insisting Article 13 will outlaw memes—to the clichéd—that efforts to impose platform accountability amount to censorship and will “break the internet.”
Fixing Outdated Safe Harbors and the YouTube Value Gap
Chief among opponents’ complaints is that Article 13 would destroy the safe harbors that guarantee platforms will not be liable for infringing content uploaded without their knowledge. At the turn of the century, the Digital Millennium Copyright Act in the US and E-commerce Directive in Europe included safe harbor immunities as a way to encourage the development of the internet and the companies that were leading the way in online innovation. But these protections were never meant to be sweeping get-out-of-jail-free cards that encourage platforms to ignore infringing activity.
What’s become clear is that the immunities granted to tech giants through safe harbors haven’t properly incentivized them to stop profiting from illegal activity. These once-nurtured companies are now the most powerful and wealthy entities in the world, and business models based on the unauthorized distribution of protected works must be challenged.
Making matters worse is the fact that mechanisms meant to give creators and copyright owners a way to fight infringement have fallen short. Notice and takedown is an ineffective weapon against the incessant uploading of unauthorized content, and safe harbors allow online intermediaries to repeatedly turn a blind eye to—and profit from—massive amounts of copyright infringement occurring on their platforms.
The failure of procedures like notice and takedown are nowhere more apparent than on YouTube, where the futility of artists’ efforts to fight infringement has led to an inability to be fairly compensated for the exploitation of their works. When YouTube rose to prominence as the most popular streaming platform in the world—offering up free illegal streams of thousands of popular songs and movies—copyright owners quickly realized the law left them powerless to hold YouTube accountable for being a clearinghouse of stolen creative works.
This lack of control for creators combined with YouTube’s market dominance has created a “value gap” which leaves artists in a lose-lose predicament where they must choose between the meager compensation YouTube offers and nothing at all. Furthermore, legitimate streaming platforms are forced to compete with YouTube’s enormous and popular black market. Sadly, efforts similar to the current campaign against the EU Copyright Directive have enabled this market dysfunction to persist for over a decade.
A Campaign of Misinformation
Despite the Copyright Directive’s effort to clarify safe harbor qualifications and correct a glaring inequality, opponents of Article 13 insist content filtering provisions will result in censorship and destroy the internet as we know it. It’s a campaign that is recycling the same scare tactics and wild assumptions that seem to arise whenever there is an attempt to inject accountability in cyberspace.
A recent article by a leading European IP law expert takes many of these accusations to task, pointing to language in Article 13 that ensures a balancing of rights and interests through the introduction of exceptions and limitations by Member States “irrespective of whether the value gap proposal is adopted or not.” Article 13 clarifies that systems to prevent misuse or undue limitations to the exercise of exceptions must be adopted by Member States to ensure fundamental rights and freedom of expression are not compromised. The inclusion of carve outs and provisions that empower Member States to prohibit any behavior approaching censorship renders these doomsday “end of the internet” allegations baseless.
Additionally, the article explains that the current legal framework developed by the Court of Justice of the European Union (CJEU) has already been moving towards addressing the value gap, and Article 13 “would not represent a dramatic shift from the way in which the law has developed up till now.” The article points out that safe harbor protections under Article 14 of the E-Commerce Directive are only available to passive service providers who act as true intermediaries, and that hosting services who make unauthorized communications to the pubic are already precluded from safe harbor immunity.
So why would organizations who support tech giants spread misinformation and falsehoods about the contents of Article 13 and its repercussions? Unfortunately, it’s a strategy they’ve employed again and again whenever there is an initiative to implement responsibility and accountability online. By taking a reasonable bill or legislative effort and painting it as an attack on fundamental rights and freedom of expression, they have been able to drum up hysteria and knee-jerk reactions from those who may not fully understand the issues. It’s a formula that has worked to defeat sensible reform in the past, but it must be called out for what it is.
Accountability and Respect for Creation
Artists and representatives of the creative industries have weighed in on the proposals, explaining that content filtering isn’t just about protecting their livelihoods, but ensuring that the next generation of creators can flourish in a system that values and respects their contributions. A recent article criticizing Article 13 complained that there is no incentive for the public to welcome the implementation of content filtering. But this argument misses the point. Increasing accountability for internet giants who profit from infringement is an opportunity for the public to show that it values creative works, artists, and those responsible for bringing creative content to consumers.
It’s also an opportunity for the public to hold accountable companies and organizations that routinely behave as if they are above the law. When it comes to issues of increased accountability for their actions, internet giants have been able to trick the public in the past with misinformation campaigns similar to the one being waged against the Copyright Directive, but there is a growing tide of frustration with these deceptive practices, and the public should wake up and demand change.
As the European Parliament goes to vote on the Copyright Directive, it’s essential that parliament members, stakeholders, and the public understand what’s at stake. Recent events around the world have challenged notions of what is expected from the tech giants that have become the gatekeepers of the digital age, and it’s past time that they face responsibility for enabling and profiting from the theft of creative works. The future of creativity depends on it.
The European Union recently decided to support the productive labors of designers by extending legal protections of their works in all areas of copyright, design, and patent law. Just as past legislation in the United States extending copyright terms was attacked with histrionic allegations that this was merely rent-seeking behavior by politically powerful corporations, the EU’s extension of protections for designs have come under similar attack. In the US, the specter of Disney trying to keep “the Mouse” alive has become a stale trope trotted out in opposition to any sensible copyright protections. Thus, it is not a surprise that the same trope is being used to attack the EU’s new law. In both cases, the attack misses its target because it is rooted in a false assumption about why property rights are secured to innovators and creators.
First, a word about the change in European Union law. This law is important both in making creators’ rights more effective throughout the EU and in bringing those rights closer in harmony with EU intellectual property (IP) law as a whole. As of July 28, 2016, the Copyright, Designs and Patents Act extends the copyright for a designer’s work from 25 years to 70 years. (A six-month grace period in the UK has been granted to allow retailers to clear their stock of works that might be in question under the new Act.)
According to David Woods, a British lawyer, the EU’s changes aligned its copyright laws with those governing literature and music, providing uniform legal protections for all products of creative labors. Further, as Mr. Woods properly points out, “[t]he intent of the change to the legislation is to stop ‘exact’ copies of existing industrially designed artistic works”—a measure that he predicts will result in the closure of websites producing bargain basement, mass-produced copies of furniture, “as after all, this was their business model.” In sum, the legislation is directly aimed at illegal internet operations whose deliberate “business model” is to steal the fruits of the labors of those working in the design industries.
This copyright legislation secures to creators their highly-valued furniture design and thwarts piracy. As in the protection of all property rights, this spurs creativity and sustains livelihoods of professional creators. This is an example of how securing property rights of all types is a key requirement in a growing innovation economy and flourishing society.
Who could object to this? Surprisingly, some ersatz advocates for property rights, such as some libertarian academics like Alex Tabarrok. Tabarrok recently attacked the new EU design law with the tread-worn criticism that one hears from ideologically committed IP skeptics: “The point” of the revamped EU regulations, he declares, is “not to spur creativity but to protect the rents of a handful of people whose past designs turned out to have lasting value.” (One can hear the echoes of the rhetorically appealing, but false, claim that Disney was solely responsible for capturing Congress in keeping Mickey Mouse under legal wraps.)
In the abstract and without regard to recognizing how property rights function in the free market, Tabarrok’s criticism might seem plausible. But there’s a key mistake in it. The fallacy over which Tabarrok stumbles is assuming that the sole purpose of copyright is only to spur the creation of new works—no more, no less. According to Tabarrok, copyright is merely a carrot dangled in front of creators, who like Pavlov’s dog are supposed to be sparked into creative activity. Certainly, this is a function of IP rights, as it is with all property rights—promising to secure the fruits of productive labors, whether in a farm, books, or inventions, spurs people to create more of these valued assets.
But, like all property rights, copyright is not merely an incentive to create. All property rights serve the central function of securing to their owners the free use and disposition of the property, which is what leads to contracts and other exchanges in the free market that enhance everyone’s lives. Thus, copyright is vital to sustaining creators’ rights in reaping the rewards of their creative and valuable labors—when the works are disseminated in the market and purchased by consumers for their enjoyment and use.
Ironically, Tabarrok hints at this when he says, in what is meant to derogate copyright extension, that “the actual argument for copyright runs—We have lots of popular designs and we need to keep selling them at a high price.” Indeed, the argument for copyright as such could be restated in the same way: “we have lots of popular designs and we should be allowed to sell them at the price they command in the market,” irrespective of whether that price seems “high.”
Tabarrok looks to support his argument with the example of mid-century design classics, such as Charles Eames chairs and Arco lamps. These works have become familiar to the public through the sale of replicas sold by furniture retailers, such as Design Within Reach in the US and Swivel in the UK. Another classic example is the Barcelona chair, an exquisite and iconic work designed by Ludwig Mies van der Rohe. While the officially licensed version of the Barcelona chair sells at the Conran Shop in the UK for around £5,755, a replica can be found on websites such as Swivel for around £455.
The stark difference in price illustrates vividly why high-level furniture and “lifestyle” designers such as Sir Terence Conran, and fashion designers such as Stella McCartney, support the new EU law: their professional livelihood—their ability to benefit from specialization and division of labor, which Adam Smith taught us is the key to a flourishing free market—rests on their ability to profit from the fruits of their creative labors in a commercial economy. Their right to sell their designs at the prices they seek in the marketplace does not preclude the design and dissemination of new, original articles of design that are inspired by the inimitable works of the mid-century moderns referenced by Tabarrok. But their property rights should preclude the sale of pirated knock-offs, which bring nothing to the table in terms of originality, inspiration, or hard work and are simply cheap copies.
It is not surprising that Tabarrok and others of his ilk continue to resort to ill-founded and unsubstantiated attacks upon IP rights on the dubious grounds that at some point these rights do not directly encourage innovation. This is highly misleading, because the same can be said about all property rights. This rhetorical move also makes it seem like Tabarrok is on the “pro” side of creation and innovation, which is dissembling rhetoric at its best.
Tabarrok’s critique, however, rests on a misconceived view of the function of property rights as solely incentivizing creation. Patents and copyrights are property rights, and like all property rights, they do not merely incentivize creation and innovation. They serve the important function of enabling creators to earn a livelihood from their productive labors by securing to them the same rights of all property owners to control the conditions in which their property is sold in the marketplace. This reflects the longstanding economic principle that a growing free market and flourishing society requires securing to property owners the fruits of their labors – surely a central tenet of libertarianism!