Managing IPR - Economic & Legal Aspects of Intellectual Property
Managing
Intellectual Property Series
Economic & Legal Aspects of Intellectual Property
By:
Priyanka Sardana
Advocate, Supreme Court, Trade Mark & Patent Attorney
&
Vijay Sardana
It is important for any creation
to be protected under the law so that inventor must have incentive to use his
or her creativity for the benefit of the society and for his or her personal
benefit as well within the provisions of overall legal system prevalent in the
society. While extending legal protection it is important to understand the
scope of the intellectual property within the overall legal framework and
economic implications of the objective of the subject under consideration.
Scope of intellectual property rights
Intellectual
property may be analyzed in terms of its subject matter, the actions it
regulates in respect of the subject matter, the duration of particular rights,
and the limitations on these rights. Intellectual property law is
conventionally categorized according to subject matter: inventions, artistic
expression, secrets, semiconductor designs, and so on. Intellectual property
law regulates what people may legally do with these inventions,
expressions and so on. The regulations regarding each subject matter area tend
to form distinct bodies of law; the rules permitting reproduction without
license of patented inventions and copyrighted expression are entirely
independent of one another.
Legal aspects of
Intellectual Property
Intellectual property rights are generally
divided into two categories: those that grant exclusive rights only on
copying/reproduction of the item or act protected (e.g. copyright or copyleft)
and those that grant not only this but also other exclusive rights. The
difference between these is that a copyright would prevent someone from copying
the design of something, but could not stop them from making that design if
they had no knowledge of the original held by the copyright holder. A patent,
on the other hand, can be used to prevent that second person from making the same
design even if they had never heard of or seen the original. Patent rights can
thus be more powerful, and generally harder to obtain and more expensive to
enforce.
There are also more specialized varieties of
so-called sui generis intellectual property rights, such as circuit
design rights, plant breeder rights, plant variety rights, industrial design
rights, supplementary protection certificates for pharmaceutical products and
database rights.
IP law will regulate
others from unauthorized use
Generally,
the action regulated by intellectual property law is unauthorized reproduction.
However, as indicated above, some rights go beyond this to grant a full suite
of exclusive rights on a particular idea or product. One can say that
intellectual property rights grant the holder the ability to stop others doing
something (i.e., a negative right), but not necessarily a right to do it by
themselves (i.e., a positive right). For example, the holders of a patent on a
new ingredient may be able to prevent others selling it, but in most countries
cannot sell it themselves without a separate permission or authorization from a
food regulatory authority under food laws.
IP laws permits
rightholders to sue the infringer
In must of
the cases, intellectual property rights are nothing more than the right to sue
an infringer, it means that the interested people will approach the rightholder
for permission to perform the acts covered by the rightholder’s exclusive
rights. The granting of this permission is termed licensing, and Intellectual
property licenses may be used to impose conditions on the licensee, generally
the payment of a fee or an undertaking not to engage in particular forms of
conduct. In many jurisdictions the law places limits on what restrictions the
licensor (the person granting the licence) can impose. In the European Union,
for example, competition law has a strong influence on how licences are granted
by large companies.
IP laws permits
rightholders to issue a permission / licence
A license is
‘permission’ to do something, in contract form. Therefore a license is only
required for activities which fall under the exclusive rights in question. The
intellectual property laws of certain countries provides for certain activities
which do not require any license, such as reproduction of small amounts of
texts, sometimes termed fair use. Many countries’ legal systems afford
compulsory licenses for particular activities, especially in the area of patent
law.
Economic aspects of
Intellectual Property
A government
for a limited period of time awards many intellectual property rights. Such
rights are justified as a reward for creating intellectual works.
Economic
theory typically suggests that a free market with no intellectual property
rights will lead to too little production of intellectual works relative to an
efficient outcome. Thus by increasing rewards for authors, inventors and other
producers of intellectual capital, overall efficiency might be improved.
On the
other hand, intellectual property law could in some circumstances lead to
increased transaction costs that outweigh these gains. Another consideration is
that restricting the free reuse of information and ideas will also have costs,
where the use of the best available technique for a given task or the creation
of a new derived work is prevented.
This debate is vital for sectors like food and health care.
IP laws offer exclusive rights to sell or use or
licence
Intellectual property rights such as copyrights and patents give
the holder an exclusive right to sell, or license, the right to use that work.
As such, the holder is the only seller in the market for that particular item
of intellectual property, and the holder is often described as having a
monopoly for this reason. However, it may be the case that there are other items of
intellectual property that are close substitutes.
For this reason, many prefer that intellectual
property rights be described as exclusive
rights rather than monopoly
rights. What is your opinion on this issue?
IP laws offer right to claim damages
If the market
for the rights to some intellectual property is perfectly competitive, then the rights to that intellectual property
will generally be worthless. This is because in a perfectly competitive market,
sellers are price
takers and can sell to as many people as they like at the
prevailing price in the market. It costs little or nothing to grant someone the
right to use a copyrighted work or patent, so the optimal behaviour for the
seller is to sell as many licenses as possible, whatever the price is, forcing
the price towards zero. Thus intellectual property rights, to be valuable, must
give the holder some market power (the ability to influence price)
in the market for rights to use that intellectual property.
An example may be a
patent covering an idea where another idea, which is in the public domain,
provides the same utility and no one is likely to accidentally stumble on and
use the patented idea. If someone were to re-invent the patented idea and use
it unaware a patent exists, the patent holder can claim damages.
If patented product leads to damages for the user. In the same manner. Should user have right to claim damages from patent holder, because he is not getting the result as per the claims if used as per recommendated of patent holder?
IP Law encourages
financial incentive to the innovator
The case for
intellectual property in economic theory is substantially different than the
case for tangible property. Consumption of tangible property is rivalrous. For
example, if one person eats an apple, no other person can eat it; if one person
uses a plot of land to build a home, that plot is unavailable for use by
others. Without the right to exclude others from tangible resources, a tragedy of the
commons can result. Intellectual property does not share this feature.
For example, an indefinite number of copies can be made of a copyrighted book
without interfering with the use of the book by owners of other copies. Therefore,
the rationale for intellectual property rests on the incentive effects. A more
elaborated view
of capital suggests that the three most common property instruments
applied provide exclusive rights to use different things: copyright
covers creative works and expressions of ideas, patent covers ideas with industrial
application and trademark covers means to uniquely identify a producer or other
source of reputation. Without intellectual property rights (or subsidies),
there would be no direct financial incentive to create new inventions or works
of authorship.
Challenges to
Intellectual Property
Technological Challenge
to Intellectual Property
Technological advances
constantly destabilize intellectual property rights. Today’s’ great advances in
computing, telecommunication, biotechnology, biological sciences, and so on
require very considerable investment indeed in order to be made, but very often
taken over by others quickly, efficiently and cheaply. This makes the case for
some IP protection very hard to resist. This also explains why corporate are
demanding more and more protect for new form of intellectual property like
database compilations, multi-media works, new form of electronic distribution,
DNA manipulation, genetic engineering, etc.
Political Challenge to
Intellectual Property
On one hand the demand for
increased protection has arisen at the same time level of suspicion and
criticism of intellectual property protection. The demand for foreign
investment and new products by consumers are forcing intellectual property
regime in developing economies.
At the same
time based on the ideology and need for freer access to technical and
educational materials, for self sufficiency and independent initiatives for
national business concerns governments are curbing the growth of monopolies
through Anti-trust laws, Competition policy, Compulsory Licence requirements,
curbs on royalties payments, licences to operate or ownership rights, etc
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[1]
Advocate and Patent Attorney, Supreme Court of India, New Delhi
Email: priyankasmathur@gmail.com
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