Monday, October 13, 2008

IP in the Times of the Crunch

Some 20 years ago the English translation of Nobel Prize winner Garcia Marquez work El Amor en los tiempos del colera (Love in the Time of Cholera) was greeted with all the expectation and enthusiasm that a translation of a great (superb?) novel was supposed to generate. And it did not disappoint its fans. The novel dealt with universal issues as love as disease (both emotional and physical), aging and death and suffering for love and ones’ love, having the cholera as literal background in the form of the speciality of the main character’s husband and as metaphorical tread that assimilated love as a cholera-like disease.
It was also in 1988 that the world of IP saw some developments that planted the seeds for current situations that spread around the globe in following years, and also with pandemic proportions. In the Uruguay Round of GATT the parties failed to reach and agreement on the topics that the then proposed Agreement on Trade Related Aspects of Intellectual Property Rights, TRIPS, should have, and was one of the last times that the developing countries would stick together and refuse to agree to a legal instrument too focused on the rights holders side of the equation and not on the users of intellectual property rights, which implied going to the Montreal meeting the following year without any agreement. In the domestic side, the UK Parliament passed the Copyright, Designs and Patents Act 1988, which reformed intellectual property rights in the UK in quite radical form, doting right holders with more and stronger rights. The twenty years that followed have been a never-ending story of giving more and stronger rights to rights holders and one of a modification of the collective unconscious from the realization that IP rights are a state-given privilege towards the fictitious situation where they are recognized as almost real property.
All that comes together when twenty years later we are going through a period where a credit crisis of pandemic proportions seems to propagate and affect the weak and the strong as a cholera epidemic would do. In time of the crunch everyone gets affected, even those that have taken care of their health and have made preparations for it. It could be argued that, as with the cholera, those that are stronger and fitter stand better chances to survive it, but it seems unlikely that even them would leave the situation unscathed. And this refers to IP rights holders too.
One of the first victims of the credit pandemic is greed and the twisted ethics that it is fine to make any amount of profits without caring of the social impact of the business/economic decisions. In addition to the sensation of having been ripped off by banks and bankers (many times, if not most, this sensation matches the reality), since it is society the one that will have to bail out those that have lived as if there were no future and spending dozens of thousands in champagne per night (a gross generalization but there have been plenty of cases like that) it seems only fair that from now on (at least for a long while) every business decisions would have to be vetted for social impact more than for profitability (in any case society will pay for the losses anyway). This will clearly affect IP rights holders and it is very likely that society would look for the social value of a right and, expectedly, request stronger evidence from those claiming that stronger IP rights do encourage innovation and creativity resulting in a benefit to society. It seems that after bailing out those that have been claiming that they were leading society in wealth creation, society will be right to expect that anyone looking for using the law to extract profits that its business model does not seem to guarantee anymore should give very compelling evidence on that respect. So, if the first casualty is greed the second would/should be the current low standard of proof for claims of social benefit from those ripping fortunes with help from the law.
Another likely effect on the IP rights holders from the current crisis could be seen in the risk-aversion that investors will have to show from now on. There are several reasons for this but we could focus on the losses that investors may suffer for taking risks and the potential lawsuits from institutional investors even when the investment has been sound. IP rights were used by rights holders as both defensive and offensive weapons and many companies would recognize having a vast number of, for example, patents, in order to force competitors to negotiate non IP rights issues with the threat of litigation. In a risk-adverse scenario, investors would run away from companies that base their business strategy in litigation (or the threat of), which would imply that IP rights holders will have to do what IP rights were supposed to encourage: be creative and innovative if they want a market advantage and not using IP rights to stifle creativity and innovation in the market.
The credit crunch may also mean that resorting to litigation becomes the very last resort. Many companies will have to sharpen their pencil to make sure that they can survive in a cash-dry environment and putting a lot of it into a lawsuit and lawyers’ fees may not seem very advisable. It is also unlikely that companies will be able to get financing as the one available until not long ago to bear the financial cost of litigation. It could be suggested that the crunch may induce companies to defend their IP rights even in stronger fashion, but that logic may hit the wall of a new reality where cash is rationed for anything outside the core operations of a firm.
Finally, the summits that we are seeing between the leaders of developed countries, which will soon probably incorporate some of the most advanced developing countries, are been heralded as leading towards a Bretton Woods II and including topics of finance and trade. It seems implausible that, based on the previous reasons, governments would scorn one group of greedy businesspeople to keep giving a carte blanche to other one (and the impact of the later goes from access to knowledge to public health).
In time of the cholera it is important to stay clean and healthy and you may still fall ill; and in time of the crunch it is likely that you may fall ill even while being clean, but to get the necessary help you may need to look cleaner than pristine, and there the IP rights holders have a lot of work to do…

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