Some thoughts on intellectual property rights

slf posted this comment in relation to the Odex posting:

"I wonder if you will share your opinion on the extent in which companies ought to go to enforce their IP rights.

It appears that Odex's aim to stop illegal downloading has definitely
succeeded especially with the media attention. (Though, illegal behaviour can never be totally erradicated.)

The ongoing lawsuit and flying in experts from the US will surely drive up enforcement costs which would in turn have to be obtained from settlements costs. Doesn't this sound like a vicious cycle?

Your views and legal perspective are really needed for a community in confusion.Your views and legal perspective are really needed for a community in confusion."

Well, here are some thoughts.

My own views on IP are complex. I have been specialising in the related areas of Internet, technology, IP and media law for the past 6.5 years or so. Most IP lawyers in Singapore hold (or at least publicly espouse) very IP owner-centric views, because that is what they are used to doing since it's hard to make a living from specialising in IP unless you act for IP owners.

I'm not quite the same. My views are a lot more nuanced, even if the realities of newspaper quotes do not do full justice to those subtle nuances. It may be because of my own personal background as a huge music fan (just not so much nowadays due to lack of time), who had in the past availed himself of the "joys" of Napster.

That somewhat more "liberal" side of me has obviously been tempered by growing up, becoming more mature, and yes, having more money which allows me to buy original stuff and to make a statement -- if only to myself -- through how I spend my money (e.g. I like ordering CDs from record labels directly). (Having said that, I must emphasise that I do not believe that high prices justifies infringement, but I do believe that IPR owners should respond to the market signal to cut prices when excessive prices are accompanied by low sales, whether due to infringement or people simply choosing not to buy.) Learning about the law and being in the position that I am has also led me to take a more balanced view of things.

I don't think you can really take a one-size-fits-all approach to the question of "extent in which companies ought to go to enforce their IP rights", because different IP owners will have different models. For instance, in software, you have the proprietary vendors, and then you have the open source vendors. I think each company should -- must -- have the right to enforce their IPRs to the maximum extent permitted by the law.

The real question is what the law should permit. And here is where I do feel that the policy discourse in Singapore is imbalanced. It is thoroughly dominated by rights owners. I have struggled in the past, to try to re-focus the debate on the real objective of IP law, which is not to enrich IPR owners through economic rents by continual expansion of already existing IPRs, but to strike an appropriate balance so as to most effectively incentivise the creation of new IPRs. I have reproduced below two commentaries written by me, that were published in TODAY last year.

Only lately have we started to see some more attempts to inject some balance into the debate -- see, for instance, Burton Ong's recent article in The Straits Times on the potential applicability of the Section 35 fair dealing defence. I really doubt if any court will buy that argument, but it's good just to see fresh voices apart from the usual chorus of voices about the importance of protecting IPRs, the evils of downloaders, the systematic labelling of all infringers as "pirates" even though historically that term has been applied only to criminal commercial distributors and not end-user infringers, etc.

So those are some of my views on IPRs in general.

slf commented about the media coverage on the Odex case having stopped, or at least dramatically reduced, downloading. In principle, if the downloading is infringing (and in this case I do believe that most, if not all, cases of downloading are indeed infringement in terms of what the law says), then I would say that the cessation of such downloading is good. It is a pity that it was accomplished in this manner, and I have stated elsewhere that I will neither support nor condemn Odex's actions (provided that those actions are lawful and duly-authorised, which presumably they are), but I do not believe that a situation of rampant infringement is ultimately good for anyone in the long run.

Some might argue that the inability to download means that one will go without one's fix of anime. My response: "So?" Once upon a time, I would cheered at the thought of free content for all. But that's not a sustainable business model. Anime fans will figure something out -- after all, didn't they also manage to watch anime before the days of P2P networks? It was harder, that's all. But not impossible. Ultimately, it's the same question that confronts anyone with limited resources: how do you apply your resources in the best way to satisfy your wants? I don't think "I want a free lunch" is a defensible response.

As for flying in the owner of BayTSP driving up enforcement costs, that is correct. But costs in lawsuits is a very tricky business in our system. A successful plaintiff is, in general, entitled to recover part of his legal costs (including enforcement costs) from the defendant. The costs recovered typically range from half to two-thirds of the plaintiff's actual costs, so a successful plaintiff in litigation will normally still be out-of-pocket on costs. The costs recovered must also be reasonable. So if the plaintiff had acted unreasonably and spent excessively in winning its case, then it would incur a lot more out-of-pocket costs.

I've explained the above principles to set the context for private settlements. Settlements are, technically, purely a matter of private contract between the settling parties. So the amount of costs to be paid is, in theory, something to be agreed. Unfortunately, in many infringement cases (and I do not know if this is true of Odex), the IPR owner will demand costs but will not quantify them, and the alleged infringer simply has no choice but to either accept them or not. But the principle ought to be the same as in litigation, i.e. unreasonable costs should not be reimbursable, since the IPR owner would not have been able to recover those costs in the first place if it had gone to litigation.

The above is the theory. I accept that actual practice, including in this case, may be quite different. People confronted by Odex will still have to weigh for themselves what course of action they want to take, bearing in mind their own personal circumstances. I only hope to equip the public with some tools to ask the right questions, so as to achieve as fair a result as possible.

Protect, don't stifle

Laws safeguarding intellectual property should not obstruct the creation of new ideas

Wednesday • October 18, 2006

Siew Kum Hong

I HAVE always thought that the policy discourse on intellectual property (IP) law in Singapore was dominated by rights owners, to the near-exclusion of other stakeholders. So it was gladdening to note the Chief Justice's words at a recent legal conference: "We should strive towards the principled development our IP laws so as to continually strike a fair and equitable balance between the interests of all stakeholders in this brave, but wonderful, new world of intellectual property."

The Chief Justice cited the example of "patent trolls", entities who acquire extensive patent portfolios for the primary purpose of obtaining licence fees from companies who may potentially infringe the patents. Unfortunately, there are other instances of IP law being used or extended in ways that may not be balanced. For instance, digital content, such as films, music and software, is frequently delivered using digital rights management (DRM) technology. DRM is underpinned by legislative provisions that outlaw the circumvention of the technological measures used, with certain limited exceptions. (The Intellectual Property Office of Singapore recently conducted a public consultation on whether to add further exceptions.)

But this prohibition is unrelated to the question of whether the intended use of the protected content is permitted. This means that the owner of a digital work can prevent others from using it in ways that the law would otherwise deem appropriate and non-infringing.

For instance, if done properly, existing software can be reverse engineered to create new, competing software. But DRM can be circumvented only to achieve interoperability between software. This means that society has lost the right to reverse engineer DRM-ed software to create new software, even if the same activity may be permissible for non-DRM-ed software. What we can and cannot do becomes controlled by IP owners, not the law.

Patents present another hotly contested issue. Traditionally, software could be patented only as part of some sort of system or machine, and business methods could not be patented. But a 1970s case in the United States basically opened the floodgates in terms of what can be patented in the US. This has led to all manner of dubious software and business method patents in the US, such as Amazon.com's infamous "1-click" patent covering online purchases on a website using only one mouse click.

While Europe continues to prohibit software and business method patents, despite continual efforts to permit software patents, such patents are registrable in Singapore after explicit prohibitions against them were removed in 1995. However, there remains some doubt as to whether the courts will enforce such patents even if they are registered.

This is important, because software and business method patents can be very broad in their application and can cover very fundamental ideas. New technologies can easily infringe software patents, especially if they cover an efficient way of solving a problem. Similarly, business method patents may cover obvious and commonly-used operational processes.

These developments have taken place in an environment where IP owners are constantly clamouring to expand their rights, arguing that having more and broader rights is always good. This is especially so in Singapore, where there are no civil society groups focused on such issues.

And yet, IP law is not just about owners' rights. Instead, it aims to enrich society as a whole (and not just IP owners) by striking an optimal balance between rewarding rights owners and encouraging the creation of more IP, which often requires building on existing IP. It is, therefore, crucial not to veer too far to either side.

Unfortunately, the discourse is often dominated by rights owners engaged in rent-seeking behaviour — that is, trying to increase the value of their existing IP portfolio in ways that do not necessarily or clearly encourage the creation of new IP. For instance, the term of copyright was recently extended from the author's life plus 50 years to life plus 70 years, but does this really increase the incentive for creating new works?

Globally, there is a growing awareness of the dangers of imbalances in IP law. For instance, Australia is considering changes to their provisions on the circumvention of technological measures such as DRM, to link offences to actual infringement of the protected digital work. The British Library recently released a manifesto calling for an update of the United Kingdom's laws, to avoid it becoming, in its chief executive's words, "an ass". Unfortunately, Singapore's hands are largely tied, because many recent changes are mandated by the US-Singapore Free Trade Agreement.

The Chief Justice has acknowledged that "a large proportion of the wealth generated in today's economy assumes the form of IP". But that only makes it imperative to consider all voices and all interests when framing IP laws, to ensure that an appropriate balance is struck. Otherwise, we risk rewarding existing IP owners at the expense of possible future creation of IP.

The writer is a corporate counsel commenting in his personal capacity. He was previously a practising lawyer specialising in technology and intellectual property law.


Criminal downside of copyright laws

Copying from a CD I bought to my iPod shouldn't be a crime

Thursday • November 30, 2006

Siew Kum Hong

Last month, the police raided the homes of seven alleged illegal music downloaders, under a provision of the Copyright Act that took effect in January last year. The section was a landmark development in Singapore copyright law, because it massively expanded the scope of criminal activities.

Almost two years on, perhaps it's time to take stock.

A copyright infringement is a civil wrong — that is, a copyright owner can use a civil lawsuit to enforce his rights, typically through damages and an injunction. An infringement may also be a criminal offence at the same time.

Simplistically speaking, before January last year, infringements in the course of trade, such as distributing or offering for sale articles that the person knew, or ought to have known, were infringing, were criminal offences.

But Section 136(3A) changed that. It outlawed "wilful" copyright infringement that was "significant" or for a "commercial advantage". The trade element is unnecessary.

The other criminal provisions of the Copyright Act require some form of distribution of infringing articles — Section 136(3A) does not. So, someone who downloads a large number of MP3 files without distributing any MP3s to others, could be committing an offence. That is the key difference from the case of the two people who operated an Internet Relay Chat server distributing MP3s.

This provision was mandated by the United States-Singapore Free Trade Agreement. The stated objective was to deter businesses from using pirated software. But the section's broad wording in terms of "infringement" may catch seemingly innocuous behaviour.

Take, for instance, MP3 players such as iPods. To fill your iPod, you can buy digital downloads or you can rip MP3s from your own CDs. But it is not entirely clear whether the latter infringes the copyright.

I may own a physical CD but I only have a licence to play the songs on it for personal purposes. It is unclear whether this licence allows me to make a digital copy of a song for personal use. In fact, CDs used to carry a warning that "unauthorised copying is prohibited", although this is not as common nowadays.

While a defence called "fair dealing" may apply to ripping MP3s from a CD that one owns, it is considered unfair if it adversely affects the potential market for or the value of the copyrighted works in question.

By ripping an MP3, am I adversely affecting the market for the digital download of that song? What about 100 of them, or even 15,000, to fill the capacity of a 30GB iPod? But should ripping MP3s from the CDs I own be considered a crime in the first place?

Equally pernicious are the potential consequences for innovative technology. The hottest web properties right now include YouTube and MySpace. Yet, the posting of copyrighted materials on these sites has made them targets of infringement claims (although YouTube recently announced a slew of licensing deals with record labels, in the wake of its acquisition by Google).

It is not clear whether these services are protected under copyright law. If not, then the scale of their operations would almost certainly mean that, if they had been located in Singapore, they would have run foul of Section 136(3A). The company officers could be personally liable for the offence as well.

Many disruptive new technologies have been targeted by copyright owners. Radio, film, television and audio and video-cassette recorders had their turns in the last century. More recently, peer-to-peer networks such as Napster, Grokster and Kazaa have found themselves at the losing end of copyright lawsuits in the US and Australia.

But those were civil lawsuits, where the risk was purely financial. With Section 136(3A), there is a risk of criminal sanctions. People may risk losing their shirts in a promising new technology, but probably not losing their freedom. Technopreneurs with groundbreaking technologies will avoid setting up shop in Singapore, if that could expose them to jail time.

The fundamental question is whether copyright infringements without a trade element — however significant the degree — should be criminalised. Should the criminal process be used like this, essentially to enforce civil rights?

For instance, in the US, the legal weapon of choice against downloading is civil lawsuits, of which tens of thousands have been filed. Why is Singapore different?

Using the criminal process to combat intellectual property infringements is popular with rights owners because it is easier and cheaper for them. But it is not necessarily better for society as a whole and we need to be careful when considering requests for more criminal sanctions.

While we await the outcome of the ongoing police investigations arising from the raids, let us ask ourselves: Has Singapore as a whole benefited from this law?

The writer is a corporate counsel commenting in his personal capacity.