Discussion: IP at Regulation’s Turning Point

With Americans electing a new president last week, change is the topic du jour. This is only compounded by the recent financial crisis, which led the chairman of the Federal Reserve to proclaim, “there are no atheists in foxholes and no ideologues in financial crises“. Shortly thereafter, a bi-partisan coalition passed a bailout bill that authorized $700 billion in funding to help financial institutions, tied to limits in executive pay and assistance for homeowners. Both the Republican and Democratic candidates stated that greater regulation will be a key ingredient in fixing the world’s largest economy. Commentators are speculating that this is the end of a 30-year era of deregulation. Could IP be caught in the wave?

With ongoing concerns about IP infringement, it is possible that we’ll start to see stronger IP regulation. Arguably, this has already happened. Almost a decade ahead of the financial crisis, Time magazine reported a “crisis of content” due to unauthorized copying on the Internet. This prompted similar calls for rescue from Congress. One notable piece of legislation was the Digital Millennium Copyright Act from 1998, which criminalized the evasion of digital locks that control unauthorized copying. France followed suit with its own legislation, with Canada’s version waiting in the wings. But with major players such as Apple and Walmart abandoning these content controls, this solution may not be the way forward. Groups such as the RIAA still identify unauthorized copying as a major problem, and a new wave of regulation may be aimed at protecting IP.

Intellectual property also faces threats from abroad. The trade gap between America and rapidly developing countries is cause for alarm. As Westerners rely more and more on developing countries for inexpensive goods, information industries such as software, biotech, and media will become important economic engines at home. This cannot happen if trading partners ignore IP rights in software, art, and technology. An estimated 9 out of 10 DVDs sold in China are illegal copies. If this trade disparity cannot be resolved in negotiations, Western industries may call for stronger trade protections at home.

Much will depend on how the current economic woes are viewed. This recession might reveal the need for innovations and new products, now more than ever. Not only will innovation make industry more competitive, but valuable intellectual properties may help secure financing from cautious lenders. Government may try to promote this with stronger incentives for inventors. The Obama administration has promised greater investment in research, and new tax credits for R&D. Perhaps stronger IP protections would encourage innovation too, but these would have an impact long after the recession is over.

On the other hand, governments may regulate in ways that focus directly on individuals, rather than industries. Telecommunications companies have been bracing themselves for net neutrality regulation supported by now President-elect Obama. This would stop service providers from shaping certain kinds of Internet traffic, particularly music and movie downloads. The new administration also promises to bring broadband technology to all parts of the country by restructuring its funds and incentives. This may set the tone for broadband service around the world.

With diseases such as AIDS reaching a crisis-level in many regions of the world, we may see regulation that compels patent holders to license cheap versions of their life-saving drugs. Another solution may involve limiting IP protection, making it easier for other producers to make generic versions of patented drugs that they can sell for less than the patent holder. Would this involve adding more caveats to current IP regulation, or actually reducing regulation in terms of time and scope? Whichever approach it is, it could theoretically be justified in a new era of social activism in the marketplace. (Deregulating IP in the era of new regulation seems less odd if you recall the DMCA being passed at the height of deregulation. Perhaps IP is unique, and thus destined to ignore larger trends.)

Predicting how IP regulation will evolve depends on a lot of factors. It depends on whether the current IP system has failed consumers or creators, industries or individuals, or all of the above. It depends on whether the coming economic shift is a return to pragmatism, or a new era of social activism. And it depends on whether this is indeed a turning point for the economy, or merely a speed bump that will soon be behind us.