In the post-industrial world, where factories can be dis-and-reassembled almost anywhere, machinery, workers and real estate itself have become fungible. The new wealth of nations is measured in less tangible sums, comprised of ideas and theories and numbers and words whose value lies in the secrets they unlock to creating further opportunity in a digital age.
In the realm of business the battles over ownership, profit and future rights are no less fierce for their intangible nature. Recent battles between Apple and Samsung, Google and Microsoft, and a host of other tech giants illustrates the scale of the issues at stake - and the sums that could change hands on the outcome. When it comes to trade, the distinctions are even sharper. China has made explicit its intention to convert from an economy dependent on brawn - the cheapness of its labor - to one based on brains - the output of its educated and industrious populace. The release of the latest iPhone underscores the the urgency of that transition: although the actual hardware is made in China, almost 80% of the profit goes to Apple in California.
Nations, understanding the importance of rules and laws in determining who wins these often arcane arguments, are attempting to impose their interpretations on others, the US and Europe most aggressively. Developing nations are pushing back, arguing, not unreasonably, that they have had neither the time nor the resources to develop the educational and legal systems required to adequately defend themselves. They are no more willing to surrender their access to the future than are the developed nations disposed to concede their advantage.
This contest is becoming a fulcrum for global leverage. And to the victors will go a great many spoils. JL
Alan Beattie comments in the Financial Times:
The early-modern European pioneers of global trade ventured abroad with “letters patent” from their monarchs and sent back royalties for the use of the sovereign’s name. These days, royalties accrue to the rising barons of the global economy: the makers of internet technology, pharmaceuticals, music and films. Global trade, once a matter of ports, trucks and container ships, is increasingly a question of patents, trademarks and copyright. The US, the imperial capital of intellectual property (IP) rights, now earns almost as much in royalty and licence fee payments from abroad as from its famed farm exports – and the net surplus in royalties for the US last year was twice as big as for agriculture. But the global spread of IP rules, with Washington as their most enthusiastic advocate, has met resistance. Critics charge that, through its attempts to write IP rules into trade agreements, the US is promoting a one-sided – even dysfunctional – IP rights culture around the world. Keith Maskus, an expert IP and trade at the University of Colorado, says: “There is a lot of truth to the claim that the US has exported its IP law – and the pathology of its IP law.” Intellectual property has been an established if controversial part of trade deals since the early 1990s, when Washington succeeded in writing the Trips (trade-related aspects of intellectual property rights) agreement into WTO law. Trips, to the anger of some developing countries dependent on generic pharmaceutical production, forced WTO members to enact a minimum level of patent, copyright and trademark protection. Many nations argued this was onerous and the move also disturbed some orthodox free-trade economists, who noted that granting a monopoly right like a patent is a very different principle to lowering import tariffs to liberalise commerce. As the software, technology and entertainment industries have grown, and the digitisation of media and the internet have integrated global markets, the US – continually lobbied by the likes of Disney, Universal and Microsoft – has pushed for ever tougher rules. For them, it is about rule of law: for some developing countries, and campaigners already sceptical of trade pacts, it is another power-grab by rich-world companies. Strong opposition to IP from developing countries kept the issue out of the global “Doha round” of WTO trade talks, launched in 2001. But with the Doha round in effect dead, the US has pursued the issue in smaller deals where it has relatively more clout. Chief among them is the Trans-Pacific Partnership (TPP) with eight other Asia-Pacific countries, for which talks were launched in 2010 and which the US wants to turn into a global template for future pacts. It is hard to assess progress in the TPP talks: apart from occasional leaked copies, the negotiating documents are largely kept secret. But there is no doubt that IP, and particularly copyright, is controversial. The US administration insists that it is only trying to extend principles that already exist in American law, trading off incentives for producers with access for users. “It is important to make clear that we are looking for a balanced copyright ecosystem,” a US official says. Even that is too much for some. The US, under continual lobbying from the entertainment industries, has relatively stringent laws on copyright. Its Digital Millennium Copyright Act of 1998 placed more onus on online service providers such as YouTube or eBay to take down copyrighted material, shielding them from liability for posting unlicensed photos or video only if they followed a precise set of rules. It also criminalised attempts to circumvent the digital locks used to protect against copyright infringement, such as “jailbreaking” cellphones to allow them to run unapproved applications. The provisions in US law for “fair use” of copyrighted material – for example for teaching or research – are relatively tight. Internet companies: a weak voice in lobbying trade talks Debates over intellectual property rights, free speech and the internet are hardly new or exclusive to international trade pacts. Earlier this year the US Congress staged a fierce argument over two proposed bills – the Stop Online Piracy Act (Sopa) and the Protect IP Act (Pipa). According to their opponents, the bills sought to turn search engines and media sites into IP police by preventing them doing business with, linking to or providing internet service for websites selling pirated material. To continue reading, click here Susan Aaronson, professor of international affairs at George Washington University, says: “The US has a limited idea of fair use, which we largely delegate to companies. This is not how it is done in other countries.” While lower-income nations in the TPP, such as Vietnam, often have straightforward rule-of-law IP problems like counterfeiting, even TPP members with more advanced economies, such as Chile, would have to make sweeping changes under the US proposals. Chile, which last rewrote its copyright law in 2010, has relatively strong protection for internet service providers and users against action for copyright infringement, and would prefer that the TPP simply reaffirm existing treaties such as Trips. Instead, the US has pressed Chile to tighten its rules, placing it on its “priority watch list” for IP violations along with nations such as Russia, China and Venezuela, and pushed the issue hard in TPP. Leaked negotiating documents have shown the TPP countries far apart on copyright, with Chile’s resistance to US pressure shared by others including New Zealand, Malaysia and Vietnam. Reports suggest Chilean officials have mused publicly about whether it is worth participating in the TPP, given that its exports already have good access to the US market through a bilateral trade deal. Even those who broadly support the US IP regime say the Obama administration’s negotiating strategy risks exporting an unbalanced version. In the US, so-called “limitations and exceptions” to copyright have been carved out through case law and administrative decision, with powerful internet and telecoms companies acting as a counterweight to the entertainment lobby (see sidebar). The Librarian of Congress, for example, has exercised a right to issue temporary exemptions from the digital lock circumvention rules for certain types of material, such as DVD clips used for university teaching. Matthew Schruers, vice-president for law and policy at the Computer & Communications Industry Association (CCIA), is concerned that the countervailing forces in the domestic debate have less sway in trade talks. “The US gives lip service to limitations but they tend to be optional, whereas the obligations are compulsory,” he says. “If you only export half a law, you can expect a bad reaction.” The US administration says it has taken such concerns into account, though it took a long time to articulate them. This July, more than two years into the talks, the US trade representative’s office (USTR) publicly released the outlines of a proposal to enshrine limitations and exceptions to copyright law in the TPP. Campaigners were instantly suspicious, not least because actual texts, as ever, remained confidential. “This proposal could actually make things worse by subjecting existing exceptions to a new and restrictive test,” says Carolina Rossini of the Electronic Frontier Foundation, an internet rights campaign group. US officials say such concerns are unwarranted and that they have no intention of changing the rules governing so-called “small exceptions” in international treaties. These protect copyrighted material in quotations, news reporting and teaching. USTR also defends its secrecy policy, saying it has conducted “unprecedented outreach ... while maintaining a level of confidentiality necessary to preserve the strategic ability of US negotiators to strike a strong agreement”. Yet the precise details of the talks remain largely closed from the public, stoking suspicion about the version of IP law that the US is trying to foist on its trading partners. Moreover, whatever the original intent of the negotiators, the experience of IP in past trade agreements counsels caution. Australia, another TPP country, has discovered how IP rules in international pacts can turn a domestic policy area of cherished sovereignty like public health into an unexpected battleground. Last year Australia passed a law requiring all cigarettes to be sold in plain olive-green packaging to discourage smoking. Canberra has been embroiled in legal fights with the global tobacco lobby ever since, cigarette manufacturers claiming the action violates IP rights by assaulting the value of their trademarks. Last month Australia’s high court dismissed a constitutional challenge on those grounds by manufacturers. But Canberra still faces litigation in international forums. Ukraine, Honduras and the Dominican Republic have started cases against Australia at the WTO, arguing that the plain-packaging rules break the Trips agreement. Philip Morris, like other tobacco companies, is working with the Dominican Republic on its case, including covering some of the governments’ legal costs, as is common practice in WTO litigation. The company has also aroused particular irritation in Australia by bringing a separate claim of unfair expropriation using the “investor-state” litigation mechanism, which allows a company to sue a government directly, in an Australian bilateral investment treaty with Hong Kong. Philip Morris shifted its holdings from Australia to Hong Kong shortly before launching the case to give it legal standing under the treaty – raising concerns that foreign companies have more rights in Australia than domestic businesses. Philip Morris defends both that manoeuvre – which predated the introduction of the plain packaging bill, though not the government’s promise to legislate – and the substance of the complaint. “This is an IP issue because nobody has produced any credible evidence to demonstrate that plain packaging would benefit public health,” the company says. Australia’s government, in a sharp break with the country’s tradition – and to the concern of Australian companies operating abroad – now says it will refuse to sign future treaties with investor-state provisions, and has demanded an exemption from a proposed such mechanism in the TPP. Whether the WTO and investment treaty litigation against Australia will succeed is unclear. Refusing to allow tobacco companies to use their branding is not the same as the government stealing trademarks by copying them for its own use. But the case underlines the potential for IP rules in trade deals to arouse fierce dissent. Luke Nottage, a law professor at Sydney University, argues that the Australian government’s decision is an overreaction, and says that it could simply rewrite investment treaties to exclude IP assets. But he notes: “IP is an area where national interests are strong and often in conflict ... it is overtaking other issues like services agreements in its ability to create controversy.” As the global economy shifts online and more of its value-added comes from research and design rather than fields and factories, few doubt the need for rules allowing the creators of valuable content to be properly rewarded. But acceptance and adoption of those laws may depend on their flexibility over time and between different countries. For now, a widespread suspicion remains that such rules are mainly being written by their beneficiaries.
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