6
The Main Trends of Intellectual Property Regimes

Institutional factors clearly play a key role in explaining the development of common practices in intellectual property and their links with innovation, all the more so as in most countries and for most types of intellectual property there has been a general trend towards extension since the beginning of the 1980s. At first sight and in approximate terms, it is convenient to refer to a trend towards strengthening, even if this interpretation is debatable, as is shown further on. Both political and jurisprudential, the reinforcement in question corresponds in particular to an extension of the protection provided by intellectual property rights, especially in terms of field covered and term. It also involves judicial changes concerning rulings that are more favorable to the entitled parties than before. The development of these intellectual property regimes, which correspond to the advent of a “pro-patent era”, first started in the United States before gradually spreading all over the world.

6.1. A reinforcement trend deriving mostly from America

History is marked by alternating phases of reinforcement and weakening of intellectual property rights regimes especially in relation to patents. Thus, in the middle of the 19th Century most European countries saw the beginning of an anti-patent movement that approximately lasted until the 1870s, a period dominated by the notions of free-trading. In France, for example, a law passed in 1844 narrowed the range of patentability for drugs. The Netherlands went as far as abolishing their patent law in 1869. In Switzerland, the only industrial European country that was lacking a patent law at the time, several bills that aimed to introduce such a law failed between 1849 and 1863. There followed a new period, which lasted nearly until the First World War, globally in favor of the patent system in a context of relative rejection of the ideas of free competition. Japan introduced its first patent law in 1872, which was abolished in 1873, only to adopt a new law in 1885. The Netherlands reintroduced a law on patents with a decision taken in 1910, which became effective in 1912 [MAC 58]. Germany and then Switzerland finally instituted a patent system in 1877 and 1888 respectively [GUE 07]. A new turnaround took place in the United States from the inter-war years to the 1970s, which was a period globally marked by the courthouses’ relatively critical stance on patents, which hardly encouraged companies to resort to them [ZIE 03].

The last major turning point, marked by a general reinforcement of the patent regime and responsible to a large extent for the current situation, dates back to the 1980s and took place mostly in the United States, resulting from the need to reassert economic power in the face of the competition coming from Japanese companies. It derives from a series of political choices and legal decisions that led to stronger enforcement conditions and the extension of patentability to new fields. We should underline that although the scope of what is patentable is framed quite narrowly by laws in many countries – especially in Europe – it is governed more substantially by the case law of courthouses in other countries, among which the United States. This is why one of the main elements of this turning point leading to a pro-patent policy was the creation of the Court of Appeals for the Federal Circuit (CAFC) in 1982, so that this specialized jurisdiction could unify the country’s case laws and make them more predictable in these matters.

At the beginning of the 1980s, similarly, American courts progressively extended the scope of patentability to include new fields. Thus, the Supreme Court extended it to new biotechnological inventions in 1980 with its ruling in the Diamond versus Chakrabarty case, which involved genetically modified bacteria. It also paved the way for the patentability of software algorithms thanks to its 1981 rulings in the Diamond versus Diehr and Diamond versus Bradley cases. The CAFC supported the patentability of business methods and seemed to have given up ipso facto on any limitation on the field of software-related inventions after the verdict it delivered in 1998 in the State Street Bank and Trust versus Signature Financial case, which involved commercial applications based on software and financial services. This resulted in a large number of patents filed for marketing techniques and ways of conducting online transactions [GRA 03]. The expansionist tendency of American courts, according to which “everything under the sun and created my Man” should be patentable, remains in any case highly controversial [BES 08]. It has suffered some setbacks in the last few years, as we have previously seen in relation to the Myriad Genetics case.

In the last few decades, the prevailing trend has been to reinforce patent holders’ rights. This is illustrated by the fact that the percentage of cases won by patent holders has increased over the last few decades. Among patents whose rights have been considered valid and infringed, the share of those upheld on appeal rose from 62% between 1953 and 1978 to 90% for the period going from 1982 to 1990 [GAL 02]. Other empirical elements gathered by [HAL 01] confirm this basic remark: American courts have become more “pro-patent”. Besides, the USPTO was transformed at the beginning of the 1990s into a “profit center”, in principle to make it possible to process more patent applications and reduce the costs entailed by their examination procedure. Furthermore, the Bayh-Dole Act of 1980 resulted in a greater involvement of universities in patenting activities [GRE 10].

6.2. A trend which is also present in Europe and Japan

The major change that has taken place in the political and legal framework of the United States has entailed significant consequences in the rest of the world. Naturally, the American patent system has several unique features. However, the United States turns out to be keen on spreading its ideas about the scope of patentability all over the world. This trend became visible especially during the negotiations that took place in preparation for the Substantive Patent Law Treaty (SPLT) between 2001 and 2006 at the World Intellectual Property Organization (WIPO) [CGP 06]. As [BES 08] explain, other countries– especially Japan and European countries – are thus pressured into adjusting to the American system and have been led to relax some restrictions that limited the patentability of software. Besides, issues concerning the infringement of patent rights are global. This is especially due to the fact that patents covering significant inventions are usually filed in all the main markets, so that the entitled parties may choose where they wish to take legal steps. As a result, the United States tends to be chosen for the settlement of the disputes in question, given that the settlement of a given dispute in this country often leads to some arrangements in other parts of the world. Thus, European companies initiate more legal action in the United States than in any other country in Europe apart from Germany.

In European countries and Japan, consequently, patent systems have also been reinforced since the 1980s. Naturally, the trend to extend the scope of patentability has been more limited here than in the United States. Over the last few decades, while the patents that protected software as such have multiplied in the United States, the relevant legislation has been more restrictive in Europe and Japan, where laws only authorize patentability for certain computer-implemented inventions, provided that they include a technical component and present a “technical effect”. As an example, the famous Amazon patent on “1-Click Ordering” has not been declared valid in Europe.

In Europe, the consolidation of the patent system also involves the organization of common institutions in terms of patents. To this end, a patenting system on a European scale was created after the European patent Convention (called the Munich Convention) had been signed in 1973. The EPO was created in this period to receive patent applications and regulate the examination and grant procedure. However, the European patents in question are merely titles that represent a bundle of national rights that the entitled party must register in as many countries as they wish. The following step involves instituting a unitary patent (also called “Community patent”) which will automatically provide protection in all the signatory countries thus making it possible to simplify the administrative procedures and reduce the processing time of patent applications. Even though a convention on the Community patent was signed in Luxembourg in 1975, progress towards this community patent was halted for a long time especially due to discussions about the linguistic system (the issue of translations). After several decades of negotiations, however, significant progress has been made in this respect. Since a European agreement signed in 2013, which is being ratified, the most significant development has involved the creation of a unified jurisdiction headquartered in Paris (Court of First Instance) but with three specialized branches in London, Munich and Paris. This jurisdiction should be able to unite case law on patent-related issues, given that currently a court in one of the countries taking part in the European patent system may, for example, invalidate a patent regarded as valid in another signatory country. The recent decision of the United Kingdom to leave the European Union, however, adds another difficulty, if only because the agreement signed in 2013 can in principle enter into force only on condition that at least thirteen countries have ratified it, among which France, Germany…and the United Kingdom.

Obstacles are less significant in a unitary state such as Japan, which in 2005 instituted a centralized jurisdiction specialized in patents in the shape of a “High Court of intellectual property” in order to guarantee that litigation about intellectual property is dealt with more rapidly and effectively. The creation of this specialized court of appeal is in line with a series of measures taken as part of a strategic plan launched by Japan in 2002 aimed at making this country “a nation founded on intellectual property”. In relation to Japan, this strategic choice may be analyzed both as an echo of the measures taken in the United States since the 1980s and a response to the emergence of Chinese competition [CGP 06].

6.3. Which multilateral framework should we consider, especially in relation to the needs of developing countries?

Apart from the institutions already in place on a national or regional scale (for example, the EPO), the trend towards the strengthening of intellectual property regimes can also be seen in the context of ad hoc multilateral organizations, especially the WIPO, which was created in 1970 and annexed to the United Nations in 1974. It establishes the framework for the elaboration of treaties aiming to harmonize the intellectual property systems – beyond mere patents – of different countries while taking into consideration in particular the specific needs of developing countries, in whose favor it is taking awareness-raising and training measures.

The WTO, thanks to its famous TRIPS agreement concluded in 1994, represents the other foundation of the multilateral system in question. The WTO is all the more influential in relation to all the aspects of global trade linked to intellectual property rights as these agreements have a coercive force. It can count on a Dispute Settlement Body (DSB) that can enforce international law among member states. The implementation of the TRIPS agreement contributed to the global reinforcement of patent systems through a form of top-down harmonization, whereas before most countries were still abiding by their own rules. Naturally, there is a reasonable degree of flexibility for the applications of the TRIPS agreement, which focuses on minimum standards and grants substantial leeway for adjustments on the scale of the different signatory countries. In line with these agreements, for example, there is an exemption system in favor of less-advanced countries, and the 11-year transitional period they were initially given has already been extended several times. In relation to this topic, a decision taken in 2015 allows these countries to put off the implementation deadline set by the agreements until 2033.

Large and emerging countries can undoubtedly derive some benefits with more ease. China, which has been a member of the WTO since 2001, has in any case officially given national priority to the protection of intellectual property since 2008. It is a country of superlatives not only for the art of copying but also for innovation, as is shown by the fact that it now represents the leading country in the world in terms of filed patents, industrial design rights (see Chapter 7), as well as utility patents. This country somehow plays both sides: its counterfeiting activity floods the world with its products and its technological leadership ambition contributes to a craving for industrial property titles. Thus, the Chinese case by no means represents the whole group of developing countries.

According to several analyses, the TRIPS agreements penalize most of these countries. They have a priori two markedly different effects on their trade: on one hand, they increase the power market of innovative companies but, on the other, they penalize local imitators. The different studies focusing on this topic, especially those reviewed by [GRE 10], allow us to discern several types of effects. In terms of direct consequences, first of all, the assessments available point out that the main countries that “produce” intellectual property derive some profits in terms of innovation and R&D, increasing their net intellectual property income (license fees). On the other hand, the TRIPS agreements entail an increase in costs for countries that are net importers of goods and services involving elements protected by intellectual property. In terms of indirect effects, then, optimistic observers think that the TRIPS agreements benefit those countries that can actually enforce intellectual property rights, since they encourage the conclusion of license agreements. They may also entail an increase in foreign direct investment (FDI) towards Southern countries, thus resulting in more technological transfers.

However, more critical observers think that these arguments are not very sound. According to them, the TRIPS agreements force less developed countries to use a corpus of rules that was not used by either Japan in the 1950s–1960s, the United States in the 19th Century, or the United Kingdom in the 18th Century. Thus, [LES 01] reminds his compatriots that the United States started protecting the copyright of non-residents only in 1891: “We were born a pirate nation.” Countries like Germany and Switzerland did not adopt any national law on patents when they were net technology importers, so as to make the most of the foreign technologies they could freely obtain [QIA 07]. According to these detractors, the potential license agreements created should hardly generate substantial profits for Southern countries, and even the potential increase in FDI would only have ambiguous effects on the host countries. Moreover, some transnational companies engage in “biopiracy” by unashamedly patenting some drugs or other products based on the traditional knowledge of these countries. Similarly, some economists think that the flexibility provided by the TRIPS agreements is hardly effective in practice, especially in relation to the aforementioned arrangements that regulate the costs paid by developing countries to access drugs of vital importance [STI 08].

Thus, the TRIPS agreements are some of the most controversial international agreements. However, what is the alternative to the multilateral framework? For large countries, which have the most to gain from the strengthening of intellectual property systems, the alternative currently involves the multiplication of bilateral trade treaties including each time a clause on intellectual property, which often runs the risk of representing a fool’s bargain for the Southern countries in question [CGP 06].

6.4. A reinforced copyright regime as well

Whether we consider the multilateral legal framework or the scale of the countries, we should finally mention the special case of copyright and neighboring rights. Even in this sector, the general trend is towards reinforced protection, both in terms of scope and term. In this specific case, the scope of protection has been extended to include a growing number of distinct elements. Judging by the case law of different European countries, copyright now covers objects like satellite images and every type of information goods. In Europe, admittedly, measures have been taken to take into consideration the specific features of the objects considered. Specific arrangements have also been implemented to include software and databases, especially with the EU directives of May 14, 1991 and March 11, 1996 respectively. Let us consider an example. The term of the sui generis protection right created for databases lasts only 15 years, rather than 70 years after the author’s death as is the case for actual copyright. In relation to this last point, we should recall that in the United States the legal protection set for copyright originally lasted 14 years in 1790 and could be renewed for the same amount of time. It was then gradually extended in 1831, 1909, 1962, 1976 and 1998 [GRE 10].

In this last case, with the Sonny Bono Copyright Term Extension Act of 1998, this American decision was undoubtedly a response to specific interests linked to Disney. However, this extension partially results from a sort of transatlantic one-upmanship, as Europeans had started a form of top-down harmonization with a directive in October 1993 by extending this term from 50 to 70 years post mortem, while the latter term was already in place in countries like Germany and Portugal. In any case, the decision to extend the protection term through authorship rights or copyright was taken both in Europe and the United States without any preliminary study on its potential consequences. However, it is quite controversial. As [LES 01] and [POS 05] explain, it is highly doubtful whether such an extension constitutes a significant incentive for the authors’ creativity by means of an increase in the anticipated revenues of their works. On the other hand, since this reform can be retroactively applied not only to future works but also those that have already been created, the increased negative effect on third parties that want to access these works is far from negligible, such that it is highly doubtful if such a reform can have a globally positive effect in net terms.

Apart from this specific case, what is the reason behind the reforms that have in the last few decades reinforced protection through copyright or patents? The digital revolution, which makes copying easier, may be an initial explanation. The second, which is put forward by [POS 05] as well as [BOL 08], is based on the existence of an asymmetry between the entitled parties and the potential users or copiers of the creations in question: for the former, despite being much less numerous, it is individually more important to extend their rights than for the latter to suffer from a reduction of theirs. One might as well say that the weight of lobbies is significant and often determining.

This last major phase of strengthening for intellectual property regimes, which started at the beginning of the 1980s, is in many respects unprecedented. At first sight, it gives an impression of excess and some signs suggest that it may have reached its limits. We should underline its symptoms and consider its meaning in order to make an assessment and analyze the consequences it ultimately entails for innovation.

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