Current and emerging intellectual property issues for business
Commission on Intellectual and Industrial Property, January 2001

Roadmap (download word file)

Current and emerging intellectual property issues for business

With knowledge-intensive industries forming an ever-greater part of the world economy, intellectual property has become a key issue for policy makers and businesses. Fast-moving developments in technology, business, politics and society pose new challenges for companies reliant on intellectual property and for the system itself. In constant movement, the field of intellectual property has never been so much in the public eye.

To help guide the business community and policy makers through this changing landscape and to alert them to emerging intellectual property issues, ICC has prepared an overview of the key current and emerging issues in different fields of intellectual property today. This report also lays the blueprint for ICC's future work in intellectual property and identifies areas for immediate action.

Developments influencing the evolution of intellectual property protection are described in an introductory chapter. This is followed by a "roadmap" which sets out the key cu rrent and emerging intellectual property issues, and related business and recommended government actions. This report is intended to be an evolving working document, and ICC would welcome any comments on and contributions to it.

ICC thanks the many experts who contributed to this report for their valuable input, and particularly the members of the working party and drafters of the different sections. We hope that this initiative will assist policy-makers and businesses in addressing the key intellectual property issues of today and in preparing for the issues of the future.

Maria Livanos Cattaui Secretary General ICC

Ashok Ganguly Chair, ICC Commission on Intellectual and Industrial Property

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Acknowledgement

ICC would like to thank the following persons who were key contributors to the project either as members of the working party or as drafters of individual sections. We also thank the many people who contributed their comments on various drafts.

Chair of working party
Thomas Pletscher, ECONOMIESUISSE - Swiss Business Federation

Secretary to working party
Daphne Yong-d'Hervé, ICC

Key contributors
Mike T. Barlow, BP Amoco Plc
Jacques Combeau, Consultant in innovation
Richard F. Fawcett, Bird & Bird
Douglas Gregory, IBM Europe, Middle East and Africa
Allen Greenberg, King & Spalding (representing the Coca Cola Company and others )
Gordon Harris, Wragge & Co.
Urho Ilmonen, Nokia Mobile Phones Ltd.
Michael Jewess, British Aerospace Plc
Michael K Kirk, AIPLA
Timo Kivi-Koskinen, IPEC Ltd.
Jyrki Nikula, Nokia Corporation
Timothy W. Roberts, Roberts & Co.
Lynne Saylor, Pfizer
Alessandra Silvestro, Time Warner Europe
Cindy H. Rose, The Walt Disney Company (Benelux) NV/SA

ICC would welcome any comments on this report.
Please send these to Daphne Yong-d'Hervé
Fax: +33-1 49 53 28 59; E-mail: Click here to send a mail.

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Introduction
Developments having an impact on intellectual property protection

Important economic, social, political and technological developments over the past few years have had a fundamental impact on how intellectual property is created, exploited and traded. This has put pressure on existing systems of intellectual property protection to adapt to accommodate these changes. Businesses reliant on the exploitation of intellectual property assets must, to remain competitive, ensure that the means available to them to protect their intellectual property are still effective in this evolving environment.
This introduction describes the main forces changing the intellectual property landscape today and their possible impact on the creation and exploit ation of intellectual property. Among these are:

1. The globalization of the economy
2. The development of new technologies
3. The growth in economic importance of non-technological business innovations and resources not protected by existing intellectual property regimes
4. The politicization of intellectual property issues
5. Changes in the ways businesses operate

1. The globalization of the economy
The increasingly international scale on which businesses operate and trade has led to a growing tension with the traditionally territorial nature of most legislation, including that governing intellectual property rights. This tendency is exacerbated by the development of electronic commerce which allows more companies to operate internationally.

• The expansion of businesses into a growing number of markets has made it prohibitively expensive, and often impossible in practice, to obtain and enforce intellectual property rights in all the countries where infringing or counterfeit goods may be manufactured and widely sold. This is largely due to the territorial nature of intellectual property law which requires protection to be obtained, and enforcement proceedings to be taken, in each territory. While some progress has been made towards "internationalizing" the system, work still needs to progress on three fronts: international harmonization of substantive intellectual property law, streamlining of procedures for obtaining intellectual property rights on an international scale (which could include recognition of foreign grant procedures), and procedures to facilitate enforcement (e.g. by recognition of foreign court decisions).
  
  
• Issues concerning the applicable law and jurisdiction applying to intellectual property transactions and infringements will grow in relevance as businesses operate and trade on an increasingly international scale, especially with the development of electronic commerce. These issues arise in several areas, not exclusively in the area of intellectual property, and will have to be studied in a multidisciplinary context.
  
  
• With the progressive dismantling of trade barriers and the opening of markets through international trade agreements, the question arises whether the holder of an intellectual property right should still be allowed to control the distribution, into or within a country or region, of (genuine) goods which have been put on the market by the holder or with his consent. This is the vexed question of the exhaustion of intellectual property rights which could lead to so-called parallel imports.
  

  It is quite clear that the move towards a global economy has not yet resulted in the harmonization of market conditions throughout the various regions of the world. Completely freeing parallel imports despite widely different market conditions would constitute a severe limitation on the effectiveness of, and jeopardize consumer confidence in the guarantees provided by, intellectual property rights. As the relationship between competition and intellectual property issues continue to be analyzed within the World Trade Organizat ion, this question is likely to remain hotly debated.

2. The development of new technologies
The commercial application of new technologies - especially digital and communication technologies and biotechnology - has led not only to the development of new types of products and services, but also to new forms of distribution and methods of infringement. New technologies and business players are emerging so fast in the fields of electronic commerce and copyrighted works that unless traditional business, governmental and other organizations dealing with intellectual property rights pay attention, they will be overtaken by developments.

• The development of digital communication networks and their use to trade, distribute and market goods and services have necessitated a re-examination of fundamental intellectual property rules to see how they should be applied in this environment. The legal framework governing intellectual property activities over communication networks has yet to be clarified. Key questions that remain to be solved include: what constitutes infringement of a trademark or copyright over the Internet; which law(s) should be applicable to intellectual property transactions and such infringements; and in which jurisdiction can actions be brought.
  
  
• Information technology has also made it extremely difficult for businesses to control the use of their products, services and trademarks once they have been converted into digital form and transmitted over a network. Because of the ease of duplicating and modifying digital works, companies may have to rely on - in addition to legal protection - technical measures to control copying and infringement and to help in the management of licensing arrangements. Different business sectors have successfully reached agreement in the US on mutually acceptable arrangements concerning the responsibilities of intermediaries for on-line infringement and are working on finding a solution on this issue in the EU. In response to the digital environment, some intellectual property right-holders are also exploring new business models and ways of exploiting intellectual property.
  
  
• The success of biotechnology has also raised questions about basic concepts of patentability, when these are applied to life forms and biological material. The extent to which patented plant and animal species can be infringed by biological reproduction, e.g. replanting of seeds, remains controversial. In view of the politically and ethically sensitive nature of the subject matter, this has become a debate with repercussions far beyond its technical aspects. (see 4 below)
  

The emergence of new technologies (e.g. nanotechnology, convergences between biotechnology and information technology etc) will also have implications for intellectual property protection which may go beyond the issues being discussed today.

3. The growth in economic importance of non-technological business innovations and resources not protected by existing intellectual property regimes

• With the growth of service industries, new types of intellectual innovations are gaining in economic importance and companies look towards the intellectual property system to protect these. However, some of these new forms of intellectual property do not fall squarely wi thin existing systems of protection, and the latter have to be adapted, or new rights created, to accommodate these new innovations. These include information products (such as databases which do not qualify for copyright protection) as well as innovations and systems developed in services and other sectors (such as financial systems).
  

  Providing the right information at the right time has become an increasingly important and growing business. At present there are virtually no rules regarding the "right" to information. The EU's directive on protection of databases is one step towards the protection of information, but it still does not answer the question: should there be proprietary rights to information? While some would argue that strong protection of information services and products is necessary to protect the large investments made to create, compile and organize information, others fear that trade in data and information could be stifled if information was no longer easily accessible because of over-wide protection.
  

  Business methods, whether in service or other industries, have generally been protected as trade secrets. However, the increasing use of software to implement business systems and the development of electronic commerce business models have led companies to attempt to formally protect these, for instance, through patents.
  

  Existing intellectual property rights are not generally amenable to such innovations and a review of the applicability of intellectual property rights to valuable non-technological business innovations has to be undertaken. Until now, solutions have been found either by creating new, specific sui generis, types of rights or through a broader interpretation of what can be protected under traditional intellectual property rights. The protection of databases, as recently enacted in the European Union, is an example of the first approach. The broader availability of patent protection for computer-related inventions, as recently adopted in the US and Japan, is an example of the second approach. Recent cases in the US have also widened the range of patentable inventions to include those involving the application of a mathematical algorithm to implement a business method by a computer program.
  

• Increasing commercial interest in plant and animal species in industrialising countries, and in traditional cultural expressions and medicinal remedies, have raised questions of ownership of such resources, previously assumed to be in the public domain. Intellectual property rights are being used to define proprietorship of these resources, sometimes inappropriately. Collective ownership has been claimed by some communities over such resources and it remains to be seen whether the intellectual property system is appropriate for such situations.
  

  As such resources become increasingly valuable, the question of how, and whether, they can be protected by intellectual property rights becomes more acute.

4. The politicization of intellectual property issues
Long considered a technical issue, intellectual property policy has now entered the political arena and is often held up to public scrutiny, obliging its defenders to justify its raison d'être.

This is due in part to the increasing econ omic importance of intellectual property, the introduction of intellectual property concepts in communities and countries previously unfamiliar with them, and misunderstandings over the use of intellectual property rights in connection with culturally and socially sensitive material previously assumed to be in the public domain (e.g. genetic material, traditional remedies etc). A tension between the commercial interests of the proprietor of the intellectual property and the interests of the public in sensitive areas such as health, ethics, development, the environment and consumer protection has also sometimes been perceived in certain communities.

• The growing economic importance of intellectual property has made it an important issue in trade relations between states. This has in turn sometimes had the unwanted effect of creating the perception in some countries importing intellectual property (mainly industrializing nations) that intellectual property protection only benefits intellectual property producers. While this is not a new problem, it has not disappeared and will continue to undermine efforts to strengthen intellectual property protection worldwide.
  
  
• Companies, especially in the pharmaceutical and agri-food industries, are increasingly turning to new sources - such as genetic material, traditional remedies, little known plants and animal species - in their search for new products, and have used intellectual property rights to protect innovations resulting from such research. This has provoked emotional debates over the concept of "ownership", through intellectual property rights, of public domain resources. Business will have to resolve tensions with parties staking claims to these resources (such as local communities, indigenous peoples), as well as with parties who consider that such resources should stay in the public domain.
  
  
• Specific areas in which tensions have been perceived in some quarters between intellectual property rights and other interests include:
  
  Internet: As the development of digital networks provides access to an ever-increasing wealth of information and cultural goods, the question of providing universal access to such wealth is likely to become acute. Despite a general recognition that intellectual property protection is an important pillar for the development of electronic commerce, some voices still call for a limitation of intellectual property rights, primarily copyright and neighbouring rights, and trademark rights in the context of domain names.
  
  Environment: As biological resources become scarcer and more valuable, the debate over the control of these resources is likely to become more intense, and there is a growing movement for the recognition of communal rights over traditional knowledge and genetic resources.
  
  Health: Health authorities, under growing pressure to reduce health spending, have sometimes seen intellectual property rights as an element hindering this objective.
  Ethics: As biotechnology develops and enters into increasingly sensitive areas, this will continue to fuel the debate over whether certain types of biotechnological innovations should be given legal protection.
  
  Development: Some industrialising economies have argued that intellectual property rights prevent their access to technology which could help thei r economic development. While not new, the argument still resonates in certain countries and among some groups and could have an impact on future intellectual property negotiations.
  
  Competition policy: As a growing number of countries adopt policies to regulate economic competition and protect consumers, as the debate over parallel importation intensifies, and as international standards become more important in a globalized economy, tensions between competition and intellectual property policy are likely to grow.
  
  Consumers: A gulf still exists between the perceptions of rightholders and consumers concerning intellectual property rights. Despite efforts to raise consumer awareness of intellectual property protection, consumers continue to buy counterfeit and pirated goods, and to reproduce copyright works themselves. As communications become more efficient and the knowledge economy gains in importance, pressure by consumers for the "right" to information is increasing, and made more acute when the demand is from consumers in the industrializing world.

This increasing politicization of intellectual property issues means that business has to focus on developing an effective communications strategy concerning intellectual property issues, and on encouraging education about the importance of intellectual property for society. This is essential if it is to garner the support of the public, and ensure that gains made to strengthen protection are not whittled away due to political opposition. Public support for intellectual property rights would also greatly alleviate enforcement problems made more acute by new technologies and globalization.

5. Changes in the ways businesses operate

• Intellectual property has long been used by businesses as a basis for producing and marketing goods and services. However, there is growing recognition that it is a valuable asset in itself that can bring in revenue thorough licensing, improve a company's balance sheet, increase stock value or obtain leveraging. While evaluation techniques have been developed, it would be desirable to ensure a degree of international coherence in this field.
  
  
• Product life cycles in many industries (e.g. information technology sector) are shortening. The length of time and amount of investment required, to obtain intellectual property rights, especially patents, can be disproportionate to the life of the product. Requirements such as the need to mark products with "patent pending" also become impracticable when products have short life cycles and use many different technologies subject to different patents (see below), especially when these products are miniaturized.
  
  
• In the network economy, the question arises how the interests of various parties can be balanced. These parties include infrastructure builders, system developers, service providers, information providers etc., who are increasingly interdependent. Each player's activities seem to increasingly overlap with his neighbour's activities, and this makes it difficult to define each party's rights and responsibilities.
  

  With modern technology, it is possible that several different technological solutions and licences are required to enter a pa rticular market. At the same time, these technologies, protected by patents or other intellectual property rights, are usually standards (or at least de facto standards) in the field. One of the most typical examples is the Internet, and technologies and services associated with it. The convergence of telecommunications will bring even more challenges to this field, since the traditional borderlines between computer networks and telephone networks are disappearing.
  

  When further new standards are introduced, the following issues can arise:
  a) access to markets: the holder of a standard-related patent may be in a position to prevent others from entering the market by refusing to license its technology;
  b) conditions of access: lack of transparency in royalty levels for standards and de facto standards make it difficult for other players in the field to calculate the cost of entry into the market;
  c) how intellectual property rights are used when choosing standards from different technologies: it is increasingly important to agree on common rules, but to what extent can intellectual property rights be used for this?
  

• The complexity of products, specialization and reorganization of production in order to benefit from economies of scale, are leading to increasingly decentralized production. Outsourcing, co-operation and collaboration become more important. The partners involved are therefore often separate legal entities in different countries. Adequate protection of intellectual property is crucial to enable the free exchange of R&D results, creativity and inventiveness among such independent partners in different jurisdictions.
  

  Such adequate protection is of special importance to small research companies specialised in the development of new technologies (frequent in the biotech industry) as well as suppliers in developing countries (e.g. software companies in India).

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This brief introduction indicates that the intellectual property landscape is evolving rapidly. An overview of the key current and emerging intellectual property issues which have - or will have - an impact on business can be found in the attached "road-map" which is intended to provide an evolving framework and guidelines for businesses and policy makers in this area.

Roadmap (download word file)