Martin Husovec | How Difficult Is It to Repeal New Intellectual Property Rights?

MARTIN: Today I'd to talk about something that might seem abstract, but I think it's very interesting; because it might inform our thinking about whether we should introduce new IP rights, and under which conditions we should perhaps introduce new IP rights.  

Essentially the background of this is that today, we still hope that the policy should be made based on evidence; and I'm pretty sure that people in Glasgow are very well aware of that, because Martin and the entire CREATe is at the forefront of pushing this idea that IP law - and copyright law in specific - should be based on the sound evidence. We shouldn't be introducing new IP rights when there's no evidence that they will do something good, or when there's evidence that will do something bad for society; and the question is, how far the evidence can take us? The question also is, what to do if evidence tells us that actually, the rights as we have legislated them do not really work, and we would preferably want to get rid of them; and how realistic it is to do that.  

Perhaps as a starting point, you all are aware that IP rights are understood - among citizens but also among policy makers - mainly as a a toolkit to achieve something; that is, to steer creativity, to stimulate innovation and perhaps also to distribute the benefits of innovation in a particular way through the market, by providing the tools to the creators and innovators, who can then take advantage of them and trade them on the market for money, and use the money to sustain an innovation. If you take the European look to the policy-making, I think it's fair to say that in the past - in the very early days - for the EU, IP was mostly conceived as an obstacle; namely as an obstacle to cross-border trade. We had many IP cases that were about someone having an IP right in Germany, someone else having an IP right in France, and they try to use these right to partition the markets; or even the same owner having the rights in two different countries, and trying to prevent the cross-border trade. As you know, the idea of the of the EU was to actually facilitate cross-border trade; so the first view was actually the one of the obstacles. That's why also when the legislation in this area was coming up, the idea was that we want to harmonise the differences between different legal systems, so that we can have smooth post-border trade. This has changed later, when together with the idea of of IP as an obstacle, we understood that IP rights are also about incentives; so with some directives such as biotech, it was recognised that what we are doing is introducing legislation to on one hand, steer innovation in a particular area; and also to remove the barriers in the European space.  

Now if you look at what is happening recently, it's all of these things; and on top, I would suggest that we also see that now the European legislature is also looking at a landscape (UNCLEAR) ‘wholly/only’ through the prism of incentives; also any situations where no obstacles really need to be removed. In other words, there are really no different approaches in the Member States (UNCLEAR) ‘they/that’ would somehow need to be harmonised and overcome by legislation, rather than legislature comes up with a new tool, with hope of some benefits that it tries to achieve. This is, I would suggest, the example- we see this with a couple of initiatives that came up in the last couple of years. This is a sort of shift; but what this does is - when I come back to evidence - is that when you come with new IP rights on the European level that are not really tested before on the national level, you have no idea what they will do. You have very little precedent; you have very little in terms of track record, so (UNCLEAR) it's a very black box that you are putting on the European level. Essentially my question is, if you do that then what? What can happen if you figure out later on that it was it was a bad idea?  

To get some some context, what rights I'm talking about; the example of this - where I would suggest that the EU came up with a unique legislative framework for the first time - was database rights, clearly motivated in the 90s by the idea that we should spur the database industry (this is how they called it back in the days), and that Europe is somehow lagging behind; and the way to do it is to introduce new exclusive rights. Of course, at the same time, to some extent there were already some ways how to protect a database, and this directive also prevents that fragmentation on the national level; but I would suggest the main way of looking at the database directive was, ‘Okay, we want to simulate certain type of activity in that case -  database creation - so that we can have brighter futures. ’ We'll discuss that in a second whether that happened, but the same thing, I think, is happening also with some other words that are being proposed/discussed such as data producers’ rights. You might have heard about the idea pushed by car manufacturers that they should get some right to the data that are collected by their machines; or news publishers’ right, the idea that publishers should also have some right in parallel to authors to their news publications; or sports organisers’ rights, the idea that those who organised sports events should perhaps have some exclusive rights, with respect to the actual events that are taking place in the same way as other IP owners.  Those are all ideas or proposals in different stages: the news publishers’ right is now in the package for the copyright reform; data producers’ right it was on fire but it's not anymore; and sports organiser’s right somehow ended up in the proposal, but is likely to be kicked out. My question here is how sticky these legislative choices; if the EU decides to have these, how sticky are they.  

Now what do I mean by sticky? Obviously whenever there’s a proposal for new IP rights, the first question you ask yourself; ‘Will benefit outweigh the costs? ’ Will the new creativity that I will gain thanks to these be outweighed by social cost that I will trigger by creating this new IP right? That's obviously the most important question that we always ask ourselves;  this is where a lot of this debate that you hear about - the Google tax for the news publishers - is ‘Is it a good idea? ’ Will it actually create more money for the news publishers, yes or no; and if it will create, at what cost for other people, citizens or other businesses?  

Now this is not what I asked whether these rights are sticky, obviously.  What I'm interested in is, can we undo these legislative choices if we have decided for them in the past; and if so, how difficult is it? Even at this question you can look from two different ways. One is looking at it from a political economy perspective; essentially asking is it feasible that the legislature will ever decide in a political climate that there will be a political will to abandon some rights; and won't there be a strong lobbying against imposition of such rights? That's one of the ways that you can look at that; but that's not the one that I'm interested. What I'm interested in is a very easy of, if you put this right in the legal system, that legal system has some institutional as well as legal safeguards; and those will prevent change for better or worse, which might make it difficult for you to actually undo your ‘hoices fully or will make it subject to some constraints.  

Let me be more concrete; let's first look at the institutional setup and how that can limit what the legislature can do. Here, think about this experiment that we have started with in 1996; the directive about the legal protection law databases was passed in the EU and the idea was, as I said, we should boost the database industry. Now this directive was since evaluated twice - whether it introduced the benefits that we have talked for - and consistently in the first and second evaluation, the picture that is emerging is essentially, the siu generis database rights are one of the rights that was created to actually spur this investment in this area did not bring any substantial benefit to society, but at the same time it did not harm the industries either. You can see the EU based on the evidence that they got are actually admitting - which doesn't happen that often - that the experiment itself didn't really work out. We instituted this IP right that most of the world doesn't have, and it doesn't seem to bring much; at least, there’s no evidence that it does. At the same time, they find that (UNCLEAR) there's’’not much harm’ for this new right either, and hence they decide not to repeal.  

Now this can become intuitive because, you would ask yourself, ‘Well’ if it turned out that it's not working, it would be natural to respond by us repealing it; why keep it if it's not working? ’ I was kind of triggered by this, wondering ‘What does it tell us about the system if you actually even admit in public that a right is not working, but then you're not ready to take a step to actually repeal it? ’ and when you start thinking about the institutional setup I think this starts making more sense, though it paints a little bit of a warning picture. Namely, that if you think about the EU - and many things in the EU are having us through directives; not everything, but many things are harmonised through directives, which is the case also of the database directive and a contract reform that is upcoming which might bring the news publishers’ right. Now these directives are directives to the member states, and member states then have to implement the laws in order to effectuate change. You have the EU obviously composed of the member states, telling the member states; and the member states pass the law and tell the citizens, and then the citizens adjust. The problem of that is, in case we want to repeal the rights, that means obviously you can always repeal the European part - you repeal the directive - but if you repeal the directive it doesn't do much, because you just repealed the directive; you repeal and take away the European identity, and the national laws that were there to implement the directive will stay in place.

Essentially you're not changing anything, you just remove the European identity and the (UNCLEAR) ‘laws of the’ State; the national laws are still in there, which is essentially the explanation why the database directive story so far played out the way it did. This was because they could have repealed the directive, but they wouldn't do too much to the national laws; the national laws would stay in place. Now obviously you can say the EU could also tell the Member States to repeal the national laws that were passed to implement the directive, right? Obviously they could, but the only situation where this would make sense is if the EU would also say that you should repeal them and not pass anything (UNCLEAR) ‘aligned’; essentially pre-empt any legislation that would look like the protection that is abolished. But that is a tricky thing, because what you would have to say is essentially that you are, as a member state, not allowed to create an IP right - sort of a negative legislation; ‘We don't have that, it doesn't exist’ - but if you will do that, it would have to argue that it's actually harmful for the member states to have it. And of course you have to provide evidence; and as you know, you could exercise a competence but it's subject to subsidiarity and proportionality, so (UNCLEAR) would have to chip in the evidence that on the EU level it should be prohibited that this kind of protection should not exist on the national level. That's a hell of a lot of trouble to me; and that's why I think it's actually unlikely that you would have a legislation that would negatively prevent the member states from heaping protection in a particular area. That's why the tendency would be that actually, you keep what you have; perhaps you transform it, as I'll get to it in a second.  

This is actually something that you might first think is inherent in the federal model, but it's not; actually in the European model,’we also have regulations. Regulations speak to citizens directly, so you’re not having to meet (UNCLEAR) of the state, you can speak directly to the citizens. There's no implementation stage, which means that if you remove the regulation you remove the underlying implementation too. Obviously if there's a regulation as you can see here, if there was ever ever any national law that might have conflicted with the regulatio’, it's preempted; because there was European law saying something different, so (UNCLEAR) cases. Now if you repeal the regulation, obviously that law there was there will not be anymore pre-emptive because European law is not anymore there. You don't necessarily remove the fragmentation, but the important difference is that unlike in the situation of the derivative, the natural implementations that were created just because of this European law are not there. You essentially force the member states to come up with something, and then you, ‘Ah, not anymore needed’, but you didn't force them to repeal. But with regulation on the other hand, you tell them, ‘This is necessary; we’ll doing it directly and then you remove it’; and then of course member states can proactively come up with some policy, but you can see that it requires action - as opposed to in the directive scenario, inaction creates the fragmentation - so that's a very different set up. In this case, obviously if you remove the regulation, then the member states can deviate; and obviously if you want to prevent deviation, you run into the same problem with competences, as we have discussed just a while ago with the (UNCLEAR) .

Regulations are usually perceived as a bigger interference, because you prescribe directly how it should look as opposed to say the direction; but if you look at the policy-making today, directives are as restrictive as regulation. It's really just a matter of form very often; but if you think about it, what this tells you is that it would actually make a lot of sense if the evidence for an IP right is weak. And if you nevertheless decide to experiment with a new IP right that is untested,’then you should rather bring it to the market through the regulation than use directives from which you cannot scale back so easily. You use regulation and impose it through regulation; the news publishers’ right, for instance. If you go through the directive as its course of action now, it's very unlikely that it will be removed, because even if the European identity will be removed, the National identities have to be introduced now to comply; and then the national member states would have to scale back if they want to remove it from the system’ So you will have much more fragmentation, because at the moment to remind you, there are two member states that have some some form of publishers’ right. Now interestingly enough, there's an argument on competence to be made that regulations actually even are required as a form of legislation, in case you're dealing with a situation when there is little obstacle at the national level. So the little experimentation at the national level - (UNCLEAR) ‘’ou don’t really smoothen the differences’ but you actually are rolling a new policy - there's an argument to be made that on competence, you actually should be required to use regulation, because there's no defragmentation; but I won't bore you with with that, if you’re interested you can look it up or speak to me later.  

Insight number one from this is what I call Status Quo Inertia; essentially if you experiment and it's very questionable what the results will be, you should really do it through regulations, because what you risk if you do it through the directives - as the case of database directive, or maybe soon the press publishers in the digits (UNCLEAR) market - is that the effective repeal of these laws will be prevented by the fact that it will be very hard to coordinate repeal at the national level, even if there is a political will both on the European level and national level to actually get rid of this right. The opposite insight is, if you are a lobbyist and you want to keep a right in the system, go for directive instead of regulation; because you force the solution on all the member states without unanimity, and it will be very hard to get from this, not only because of this but also the second part that I will tell you in a second.  

This status quo inertia is really interesting, because the EU really has a trouble to coordinate repeal because of subsidiarity and also because of the way that things are legislated; and because of the fact that pre-empting some form of IP rights on the national levels just (UNCLEAR) ‘for saying’ is something that is not easy to do. But if you overcome this hurdle, there is another one; and that is, obviously we have legal safeguards for good reasons. Rule of law tells us that if someone promises you something for 50 years or 70 years after you die, the legal system is your device to make sure that there is some sort of protection against the legislature completely changing its mind. If you want to see that in action, you can think about the standardised packaging cases; you might know that in the UK very recently, there was a high-profile challenge against the law that is for enforcing standardised packaging. One of the grounds of that complaint was that what standardised packaging of tobacco products is doing, it’s depriving tobacco companies of their property that is their trademarks, because it takes it away by essentially making it not very useful when you want to market your tobacco products. We're trying to use IP rights - the fundamental right to IP; the human rights to intellectual property - to actually prevent the change, which in this case was standardised packaging.  The other avenue where this is happening is investment law - which is not within the national system, but it’s on the international system - where the same argument about expropriation is taking place. Because if you prove expropriation in the international investment treaties, then the states can be responsible to pay some damages for the legislative change they have introduced on the national level. Changing your perspective on what IP rights should look like can trigger protection investment law, which means that the state will be obliged to pay money to some right holders; or it can trigger eternal constitutional challenges as to fundamental rights, human rights to intellectual property. We can see that happening - and this is the first high-profile example - as you might know, in this particular case the tobacco companies weren’t very successful; and the reason for that is because judges did not sign with tobacco companies on the argument that they are deprived, de facto deprived of their trademark. Their argument was ‘We are de facto deprived of trademarks, because we cannot use them directly on the products in a way we want to’; and trademark law in their view should essentially guarantee that possibility. Now the judges say, 'Well, this is not necessarily deprivation of property; you can still use trademarks in other contexts. ’ What it is is a control of property - which is a less serious interference with property - which has a different treatment in the human rights law, because it doesn't trigger compensation in particular.  That's where in this case, the judges eventually clarified that this is just control of property; which very recently the Court of Justice (UNCLEAR) ‘presided’ on a very similar case, also saying it's just control of property, and there if it's not disproportionate, it’s completely justified. But what you see is trajectory; of using fundamental right to intellectual property as a way undermine the autonomy of the legislature, to make its choices. If you look at Article ’17-2/72’ of the EU charter which is the source of this, it doesn't say much. It says ‘Intellectual property shall be protected’ - that's paragraph Two and paragraph One - then it says something about protection of other types of property; and in particular, what it says is that in case you expropriate property, then you should provide timely and fair compensation.  

So if you think about our ‘comments’, getting rid of rights, there are really two different scenarios that you can imagine. If you look at this timeline here, first scenario is there's a right that is granted today and will last fifteen years; so it will expire in fifteen years. If I granted a right if you create a work today, and I want to repeal your right to that work, and I promise that you will get your right for 15 years - the first repeal is after 15 years. If I say I'm repealing any rights that would be there would arise from tomorrow - so today is the last day when you get some form of protection - in that case, what you're dealing with is sort of a new process. You’re just saying 'Well, as of today I'm not giving any more protection on this’l obviously that means that you have to tolerate in the system all the rights that were already granted, today or before today. If the protection was 15 years, you have to wait for 15 years until the last right will expire; that's a long time. If it's (UNCLEAR) ‘making’ a right, that might be 70 years after the death of the author, so that can be a pretty long period to wait. That's why a future-oriented repeal - so the repeals that will happen only for future situations and no more promises - is run unlikely, because it's not very useful. You can do it, but essentially you're admitting that it's not too acute to remove IP rights from your system, because you're willing to tolerate it for quite some quite some time to come now. What is more likely to happen is that you want to actually interfere in the system, and you want to say ‘Well, I know I have promised you for 15 years this new sui geners database trade, but nevertheless I now want to change my promise and I want this to end in two years - so effectively you just (UNCLEAR) ‘seven’ years, in this case they shorten your right for some period - obviously in this case, you are interfering with your past promises. It's pretty clear that you will trigger protection through Article 72.  

Now, the current situation is that when it comes to the future orientated repeals - so just changing your mind for the future - as you can imagine there is very little; the legislature is limited, because it's changing for the future. What you have to keep in mind here is that there are international treaties, international public (UNCLEAR) force you as a member state or as a state to actually have particular rights. But when it comes to some rights they're not in the international public law necessarily; sui generis database right is an example where the EU could just abolish it, and there will be no ‘trips’ forcing a different outcome on the member states. If you overcome that, in some countries there is an argument that certain essence of rights shouldn't be taken away by the legislature at all. In particular, Germany is an example, and the concept of constitutional guarantee - which essentially says, for instance, for copyright owners; it says that certain core of copyright law shouldn’t be taken away by the legislature, and has to be respected - so the legislature has this broad margin, (UNCLEAR) structured carpet law, but there's a certain essence that shouldn’t be taken away. On the European level, we don't have a case law articulating that - which doesn't mean that a Court Of Justice cannot come up with that, because you can (UNCLEAR) tradition of the Member States, and Germany is not involved in doing this - but if it does so, I think what should happen is that we have differentiation. Because it's different to guarantee some core of copyright protection to authors, and it's different to guarantee a core if there should be any to database producers, which is a pure investment protection. We can, I think, assume that for the future-orientated repeals, really I think the legislature is rather an open field.  

Now for the (UNCLEAR) repeals, obviously Article 17-2 kicks in, and that means that you have to make a case that what you're doing is in the public interest; and since you're repealing the right, possibly compensate.  

I think here essentially we have three strategies of how you can approach this. The first strategy is you can say ‘Well, I'll just wait’ as legislature, which is essentially saying ‘I’m not coming back on the promises that I made, but I'm not promising anything new. As of today there won't be any rights, but all those rights that were promised will expire as I promised initally. ’ That's the first strategy; as I said I think it might work, for instance, for things like sui generis database rights with there doesn't seem to be evidence that it’s doing anything to the market. Perhaps you're fine with repealing that right and keeping the rights that were promised upcoming 15 years, and in 15 years it will expire; but obviously there's acute need for change, because you actually see that (UNCLEAR) ‘you’ introduced news publishers’ right, and it's doing - it’s not that it doesn't do any benefit to the news publishers, but is actually harming, then perhaps what you want to do is to repeal, immediately, with a very small transfer period. But if you want to do that, obviously you're depriving someone of property, and in that case you have to compensate.