Monday, 6 July 2020

Intellectual property and consumer welfare

Intellectual property laws exist as an exception to the basic principle that monopolies are bad. Well, that's how they found their way into English and UK law, starting with a carve-out from the Statute of Monopolies (1624) that allowed patents to be granted ‘for the term of 14 years or under hereafter to be made of the sole working or making of any manner of new manufactures within this Realm to the true and first inventor’. That being the case, shouldn't intellectual property laws be justified exclusively in competition law terms?

Competition or antitrust laws continually grapple with justifications for restrictions on competition, and therefore are a logical place to look for justifications for intellectual property - legally-granted monopolies of greater (patents) or lesser (copyright) potency. The problem is that competition law is a set of legal rules that embodies economic principles, and the two mix like oil and water: legal rules are ideally certain, while economic principles vary according to who is expounding them.

Recently, by which I mean for the last several decades, competition law has sought to maximise consumer welfare, as this article explains: it explains this in order to criticise alternative populist approaches to competition law, but I'm not planning to get into that here, I'll save it for another day. The point is that when seeking justifications for intellectual property laws, and when considering the policy that should inform changes in the law (and the application and enfordement of the existing law), should the sole guiding principle be consumer welfare?

Framing the law protecting inventions and creations as part of the law of property muddies the waters. If copyright law were framed as a right to prevent unfair competition arising from copying of one's own creations (short-circuiting the creative process), or patent law as a right to prevent unfair competition by working a protected invention, there might be no such conceptual problem: but by founding these important rights in property theory we have lost sight of the consumer welfare justification. Perhaps we are in the realm of natural rights and John Locke rather than that of Jeremy Bentham and Utilitarianism (which seems to my mind very closely related to the consumer welfare model).

Is there a copyright in a folding bike?

A folding bikes' drama has been taking place in EU Court of Justice in December 2018, under the case number C-833/18. (Peter posted about the AG's opinion back in February: No copyright protection for design dictated by function - Advocate General.)

As a background, the famous Brompton bicycle had a patent for its functional design, which has subsequently fallen into the public domain. The Brompton bike's functional shape allowed it to take three different positions: a folded position, an unfolded position, and a standing straight position.

Following the expiry of Brompton's patent, Get2Get began marketing a very similar bike - the Chedach bicycle. Just like Brompton, it could be folded into three different positions and generally looked very similar.

In November 2017, Brompton brought an action against Get2Get for copyright infringement, as well as the owner's non-pecuniary rights. Brompton asked for an order that Get2Get should cease its infringing activities and withdraw its Chedach bikes from the market.

Here is a test for you - can you spot 10 differences?

Image not found
Image not found 
vs.
 Image not found
Image not found

In its defence, Get2Get said that the appearance of Chedach bike was such only to ensure it could be folded into the said three positions and that the technical constraint itself dictated the appearance of the bikes.

Therefore, the argument in question was whether the three positions of Brompton bikes could be protected by copyright law as a shape.

The case was originally considered in the Companies Court in Liége (Belgium). Generally, shape copyrights enjoyed protection unless used purely to obtain a technical result. The same was true for the design rights (Article 8, Regulation (EC) No 6/2002). Brompton's case, however, fell into the grey area as it was not clear, whether such technical results could be obtained by other means than using shapes.

The questions, that the Belgian court posed in front of CJEU were as follows:

''(1)      Must EU law, in particular Directive [2001/29], which determines, inter alia, the various exclusive rights conferred on copyright holders, in Articles 2 to 5 thereof, be interpreted as excluding from copyright protection works whose shape is necessary to achieve a technical result?

(2)      In order to assess whether a shape is necessary to achieve a technical result, must account be taken of the following criteria:


  1. The existence of other possible shapes which allow the same technical result to be achieved?
  2. The effectiveness of the shape in achieving that result?
  3. The intention of the alleged infringer to achieve that result?
  4. The existence of an earlier, now expired, a patent on the process for achieving the technical result sought?


Cutting our story short, after careful consideration of the relevant articles and case law (most importantly, its earlier decision in Cofemel, C-683/17), CJEU found that functional shapes are eligible for copyright protection if they are original works, resulting from the author's own intellectual creation, which will be for national courts to decide in future cases. The courts will now need to take into account the four points test above for assessing functional shape copyrights. The courts should also take account of "all the relevant aspects of the case, as they existed when that subject matter was designed, irrespective of the factors external to and subsequent to the creation of the product".

Although the decision in Brompton's case goes in line with an earlier ruling in Cofemel, one can argue, that the protection of technical design ideas could be detrimental to technical progress and industrial development (para 27 in the Judgment).

The biggest argument in Brompton's case, in my opinion, was the fact that there were already other bicycles on the market that used Brompton's folding positions but differed from it in appearance. This on its own demonstrated the creative choices in the shape of the bikes and, therefore, the originality for the sake of copyright protection.

For more opinions on the topic and further coverage, check IPKat and Kluwer Copyright Blog.







 

blogger templates | Make Money Online