Open Letter Supports Strong Copyright System

On March 14, 2017, the Copyright Alliance and CreativeFuture sent an open letter to elected officials expressing the intrinsic need for a strong copyright system that promotes and rewards creativity. The letter has been signed by over 70,000 creators, organizations, and individuals who support a strong copyright system that protects the rights of creators and entrepreneurs.

The letter asserts that freedom of speech and freedom of expression are fundamental to strong intellectual property rights, stating that efforts to diminish the rights of creators in the name of “free speech” are cynical and dishonest. While the letter clearly recognizes that the Internet has launched many creative platforms and has eased the distribution of copyrighted works, it has also been used to harm creativity with acts of online piracy. The letter welcomes enforcement of existing copyright laws and voluntary industry initiatives to help combat online piracy, but unfortunately, some organizations have tried to block these efforts in order to serve their own agendas.

Lastly, the letter states: “The creative community stands united in support of a copyright system that will continue to make the United States the global leader in the creative arts and the global paradigm for free expression.” With core copyright industries adding more than $1.2 trillion in economic activity to the U.S. GDP in 2016, it is clear that a strong copyright system encourages investment and innovation in the economy, ultimately benefiting consumers who value creative content.

Copyright protection is a bipartisan issue. Elected officials from both parties should work to preserve the creative economy and diminish online activities that harm creativity.

New IP Commission Report Shows Need for Strong IP Enforcement Efforts

On February 27, 2017, the Intellectual Property (IP) Commission released an update to its 2013 report entitled “The Theft of American Intellectual Property: Reassessments of the Challenge and United States Policy.” The report finds that the annual cost of counterfeit goods, pirated software, and theft of trade secrets to the U.S. economy is between $225 billion and $600 billion. Since the IP Commission’s 2013 report, the U.S. has suffered over $1.2 trillion in economic damages due to theft of American IP rights. It is important that Congress strengthen enforcement efforts and that more voluntary initiatives emerge to combat the growth of IP theft and to encourage more innovation, investment, and creativity in the U.S. economy.

According to the report, in 2015, the U.S. imported counterfeit and pirated goods valued between $58 billion and $118 billion, and the U.S. exported counterfeit and pirated goods worth approximately $85 billion. An OECD study also estimated the sum of counterfeit goods imported into the U.S. and exported from the U.S. to be valued around $145 billion.

The proliferation of pirated software is a major problem because of the ease of downloading software. The IP Commission’s report finds that the value of pirated software exceeded $52 billion worldwide in 2015, costing the United States approximately $18 billion in economic activity. Furthermore, theft of trade secrets is difficult to measure because many companies do not even know that their IP has been stolen. The report estimates that theft of trade secrets cost the U.S. between $180 billion and $540 billion in economic activity in 2015.

The IP Commission’s report also outlines a number of actions taken by Congress and the Obama Administration since the 2013 report to help stop the theft of IP. Most recently, as I wrote in a December 2016 blog, the Office of the IP Enforcement Coordinator published a report which set four goals for FY 2017-2019 with regard to strengthening protections of IP rights. The goals are the following: (1) enhance national understanding of economic and social impacts from trade secrets misappropriation and IP rights infringement; (2) minimize counterfeiting and IP-infringing activity online; (3) secure and facilitate lawful trade; and (4) enhance domestic strategies and global collaboration.

Enforcing protections of IP rights and stopping online piracy are the deficiencies of United States’ robust IP policy framework. Despite the U.S. still leading the world in terms of strong protections of IP rights, GIPC’s 2017 International Index cites one of the United States’ weaknesses as “inconsistent enforcement against counterfeit and pirated goods, especially goods sold online.” As FSF scholars have stated for many years, theft of IP directly harms job growth in creative industries and discourages further innovation and investment by entrepreneurs. On the other hand, voluntary and governmental enforcement efforts restore the entrepreneurial spirit of creators by upholding strong IP rights protections.

In a February 2017 blog, Seth Cooper and I recommended two potential actions by Congress that could help increase enforcement efforts with regard to copyright. First, Congress should reform the Digital Millennium Copyright Act’s “notice and takedown system” under Section 512 to lessen the burden on copyright holders to monitor infringements of their content. Second, Congress should modernize the U.S. Copyright Office by updating the administrative technologies in order to maintain a searchable database of copyright registrations, to monitor infringements of IP rights, and ultimately to enhance the economic value of copyrighted works.

Voluntary initiatives also can have a large impact on combatting theft of IP online. The Copyright Alert System, TAG, and the Donuts-MPAA initiative all help notify large Internet companies when pirated content or counterfeit goods are being advertised or sold on their websites or networks. These types of initiatives often can have a substantial impact on reducing online piracy because websites and advertisers (in addition to the IP rights holders) have a monetary incentive to report IP rights violations.

A group of think tanks, organizations, and individuals recently submitted a letter to the Trump Administration and the 115^th Congress asking them to continue to promote strong protections of IP rights. IP-intensive industries comprise roughly 38% of all activity and 30% of all jobs in the U.S. economy. Strong protections and enforcement of IP rights are necessary for creators and entrepreneurs to continue to provide consumers with innovated goods and services and to encourage investment and growth throughout the U.S. economy.

Increase Economic Prosperity by Strengthening IP Rights Protections

By Seth L. Cooper and Michael J. Horney

On February 8, 2017, the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) released the fifth edition of the International IP Index. Entitled “The Roots of Innovation,” the Index scored the IP systems of 45 countries, representing over 90 percent of the world’s gross domestic product (GDP). Scores were derived from several specific factors pertinent to IP rights protections, allowing policymakers to better understand where their countries stand in comparison to their peers.

The International IP Index should prompt U.S. policymakers to strengthen our IP rights system. Although the U.S. ranked high in the Index, the Index nonetheless identified IP rights enforcement as one of the areas in which improvements need to be made. Lackluster Index scores for IP rights systems in certain foreign countries should also spur U.S. trade negotiators to seek stronger protections for Americans’ IP rights overseas. By bolstering IP protections, the U.S. will further benefit from the correlations between strong IP rights and overall economic innovation and investment. 

Scores in the Index were based on six key categories, including: patent rights, copyrights, trademarks, trade secrets and market access, and enforcement, as well as membership and ratification of international treaties. Those categories encompassed numerous indicators of a strong IP system, including: industrial designs term of protection, availability of legal measures to obtain redress for unauthorized use of industrial design rights, regulatory and administrative barriers to the commercialization of IP assets, and transparency and public reporting by customs authorities of trade-related IP infringement.

Because scoring for this year’s Index was based on 35 indicators, instead of 30, a weighted-score was calculated (by Michael Horney) to determine whether countries’ protections of IP rights were stronger or weaker than what was calculated in last year’s Index. Of the 38 countries included in the last Index, twenty improved their weighted-scores in this year’s Index.

For the fifth consecutive year, the United States had the highest score. The U.S. IP system rated 32.62 (out of 35). The United Kingdom and Germany followed with scores of 32.39 and 31.92, respectively. The countries with the lowest scores were India, Pakistan, and Venezuela at 8.75, 8.37, and 6.88, respectively.

However, the United States’ weighted-score, which takes into account five new indicators, actually decreased compared to the prior Index. The U.S. fell to 10th place in patent protections after previously being tied for first. A reason for this drop is that the patent opposition system in the U.S. adds substantial costs and uncertainty to the economy. The U.S. also needs to improve its enforcement efforts to combat counterfeit and pirated goods. Certainly, Congress can help step up enforcement by reforming and updating the Digital Millennium Copyright Act’s “notice and takedown system” under Section 512. Modernizing the U.S. Copyright Office and giving it authority for addressing Section 512 matters as well as small claims for infringement – as provided in the Goodlatte/Conyers proposal – would also bolster IP protections.

Moreover, the relative lack of IP rights protections in several other countries, as reflected in the Index, reinforces the need for U.S. pursuit of treaties or agreements to better secure protections for American IP rights holders internationally. In January, President Trump withdrew the U.S. from the Trans-Pacific Partnership (TPP) agreement, which the Index regarded as pro-IP. But there is no reason to think that TPP provisions regarding IP rights prompted the withdrawal. Rather, the U.S. should seek new bi-lateral or multi-lateral agreements, including ones more narrowly focused on strengthening protections for American IP rights holders in foreign countries. And as more countries adopt strong protections for IP rights through trade agreements, the global economy will grow substantially. Mutual gains from international trade are much higher when more nations adopt and enforce laws that protect IP rights.

Indeed, the Index emphasized how “IP provides the living and growing roots that stimulate innovation and bolster growth,” since economies with “the strongest IP systems stand to reap the greatest economic rewards.” Across all countries, the Index found several noteworthy correlations between strong IP protections and economic innovation and creativity:

• Resources dedicated to innovation: Economies that provide a robust IP environment are more likely to embrace policies that create a complete innovation “ecosystem” by investing in other key building blocks, such as human capital and technological infrastructure.

• R&D and creative activities: Economies that exhibit a steady buzz of innovation and creativity are, with few exceptions, those that have established strong IP environments – both generally and for specific high-tech sectors. The opposite is also true: on the whole, those economies with relatively weaker IP environments do not tend to experience the levels of R&D and release of new content that economies with more secure and stable IP environments do.

• Access to technologies and creative content: A strong relationship exists between IP protections and greater access to end products and services that make novel technologies and content available to consumers.

• A dynamic economy: IP is strongly related to measures of foreign direct investment, business and industrial growth, jobs, and GDP, ultimately providing the basis for reinvestment of resources as the virtuous cycle begins anew.

The Index concluded that strong protections of IP rights incentivize investment in R&D, innovation, and creative content because they ensure entrepreneurs have opportunity to earn a return on their labors. And as economies with strong IP rights regimes grow and prosper, new goods and services are brought to market, making consumers the ultimate beneficiaries.

The International IP Index provides U.S. policymakers a useful tool for assessing how to improve our nation’s IP systems and enhance innovation and creativity in the 21st Century economy. 

New White House Report Promotes Enforcement of IP Rights

On December 12, 2016, the White House’s Office of the U.S. Intellectual Property Enforcement Coordinator (IPEC) published a report entitled “Supporting Innovation, Creativity and Enterprise: Charting a Path Ahead,” which promotes strengthening the enforcement of IP rights in the U.S. and abroad for the next three years.

The IPEC submits a joint strategic plan to Congress every three years under the Pro-IP Act of 2008. The Pro-IP Act outlined the following objectives for the joint strategic plan:

• Reduce counterfeit and infringing goods in domestic and international supply chains;

• Identify unjustified impediments to effective enforcement action against the financing, production, trafficking, or sale of counterfeit or infringing goods;

• Support the sharing of information to curb illicit trade;

• Disrupt domestic and international counterfeiting and infringement networks;

• Strengthen the capacity of other countries to protect and enforce intellectual property rights;

• Establish with other governments international standards and policies for the effective protection and enforcement of intellectual property rights; and

• Protect intellectual property rights overseas by enhancing international collaboration and public-private partnerships.

With those objective in mind, the joint strategic plan for FY 2017-19 sets goals including: (1) enhance national understanding of economic and social impacts from trade secrets misappropriation and IP rights infringement; (2) minimize counterfeiting and IP-infringing activity online; (3) secure and facilitate lawful trade; and (4) enhance domestic strategies and global collaboration.

IPEC Daniel Marti should be commended for the new report. Not only does it recognize the impact that strong protections of IP rights has had on U.S. GDP ($6.6 trillion value added), but it addresses key ways that IP rights can be strengthened including: curbing illicit efforts with innovative enforcement techniques; increasing the ability of consumers to recognize illegal content and goods; and using trade agreements to promote strong global IP rights.

Utilizing various means to enforce rights enables artists and creators to earn a return on their labor and incentivizes innovation and economic activity around the world.

New Proposal Would Modernize the Copyright Office's Outdated Technology

On December 8, 2016, the House Judiciary Committee Chairman Bob Goodlatte and Ranking Member John Conyers proposed to modernize the U.S. Copyright Office for the 21^st Century. The proposal would allow the Copyright Office to have autonomy over its budget and technology needs. The proposal also would allocate to the Copyright Office the necessary funds for information technology modernization, enabling the Copyright Office to maintain a “searchable, digital database of historical and current copyright ownership information.”

The Copyright Office is long overdue for technology modernization and FSF scholars have made multiple statements regarding this need. (See here, here, and here.) Modernization is necessary for our copyright system to achieve its important purposes of protecting artists’ and creators’ rights to earn a return on their labor and to facilitate market transactions in copyrights in a way that promotes “the Progress of Science and useful Arts.”

We commend Chairman Goodlatte and Ranking Member Conyers for their proposal and hope it quickly passes through the House of Representatives.