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Rochelle Dreyfuss and Susy Frankel, From Incentive to Commodity to Asset: How International Law is Reconceptualizing Intellectual Property, 36 Mich. J. Intl. L. 4 (2015).

In this article Professor Rochelle Cooper Dreyfuss of NYU Law School and Professor Susy Frankel of Victoria University of New Zealand tackle how international dynamics have shaped domestic intellectual property law and make an authorial appeal for policy reform through domestic and international institutions. In so doing, Professors Dreyfuss and Frankel exemplify the strong engagement with cutting edge conceptual and theoretical issues which Professor Erin Delaney and I hope will be the hallmark of our new Jotwell section.

Their article presents an elegant argument about current intellectual property debates. In the nineteenth century, intellectual property law was exclusively about incentives promulgated by national governments for domestic innovation and creation. International intellectual property treaties from the nineteenth century supplemented these national incentives through harmonization of legal rules to staunch leakage of works across borders through piracy. In contrast, the 1994 TRIPS Agreement, as part of the regime of free trade under the WTO, transformed intellectual property into a commodity. While trade traditionally has entailed the movement of goods, the WTO envisions a world in which patents, copyrights, and trademarks are themselves the object of cross border exchange. And more recently, with the negotiations over ACTA and TPP, intellectual property has transformed from a commodity to be traded to an asset in which companies invest to realize a return. Each shift has made intellectual property rights more privatized with little scope for consideration of the public interest and for the exercise of national sovereignty.

In support of their argument, Professors Dreyfuss and Frankel point to two examples: the shifting role of the working requirement for patents and the investment disputes over plain packaging regulation for tobacco products in Australia.

The working requirement is a legal doctrine that invalidates a patent if the owner does not practice the patented invention within the granting country. This requirement, dating back to nineteenth century patent treaties, made possible domestic employment and the creation of national industry from the patent grant. During the twentieth century, most countries repealed their statutory working requirements under the rationale that the requirements interfered with investment decisions of the patent owner and served protectionist ends. This shift in attitude reflects the metamorphosis of patent law from a tool for national regulation to a species of private property useful as a tool for private investment.

Australia’s battle with tobacco companies challenging national rules for plain packaging of tobacco products also illustrates the changing role of intellectual property. Tobacco companies have challenged the rules as interfering with their investment in trademarks and brands. In arbitration, the companies have alleged the violation of bilateral investment treaties between the sovereign and the corporations. Although these claims have not been successful, the assertions show that trademarks, in particular, have taken on an unexpected role. Originally touted as a means to protect consumers in their buying decisions, trademarks are now seen as investment assets from which companies can recoup profits through commercial sales.

Professors Dreyfuss and Frankel persuasively identify the trajectory of intellectual property from seeds of national innovation to fruit of private bounty. They also identify possible solutions for adjudicators, legislators, and trade negotiators as they advocate for the treatment of intellectual property in various international fora. Specifically, advocates need to realize that the countries and domestic interests they represent may be on different sides of the owner-user antagonisms as technologies change and economies develop. The historical account that Professors Dreyfuss and Frankel give provides important context for ongoing legal and policy debates.

Two examples from the Dreyfuss and Frankel paper offer hope for a deviation from the pessimistic path traced by the authors. In the United States, the Supreme Court’s 2006 decision in eBay v Mercexchange revisited the standard for injunctive relief in patent cases, holding that injunctions are not obligatory and subject to judicial discretion. Although the precise manner of exercising that discretion is still controversial, the limitation on injunctive relief makes it more difficult for patent owners to use patent infringement as a cudgel to protect their private investments. Furthermore, in 2011, the United States introduced the defense of prior user rights into patent law through the America Invents Act. Prior user rights allow companies that have practiced a patented invention prior to the patent grant a defense from infringement. Since the defense favors those who actually commercialize an invention, the defense is a form of working requirement, creating incentives for the use of an invention.

This article invites scholars and those directly engaged in formulating domestic and international intellectual property law to reconceptualize IP rights. This argument for reconceptualization comprises two parts: the rethinking of traditional narratives, and the rethinking of theories of international trade. On the first point, it may be that we can still learn from traditional narratives. In my 2014 book chapter “The Idea of International Intellectual Property,” I look more closely at the ideas of Locke, Hegel, and Rawls, three scholars often discussed in support of intellectual property rights. While these thinkers have helped to shape debates about intellectual property rights within the US and other countries, my book chapter addressed the implications of their ideas of rights for international regimes. In fact, traditional arguments about domestic IP rights, when framed in a global context, do map onto many of the points Professors Dreyfuss and Frankel identify in the transformation of intellectual property into a commodified asset. These authors, especially Rawls, may also offer some guidance on how to redirect this momentum.

On the second – the workings of international trade – Professors Dreyfuss and Frankel emphasize the theory of comparative advantage to explain why innovative countries should specialize in exporting innovation intensive products to less innovative countries (a conclusion that forms the foundation for the TRIPS Agreement). But the theory of comparative advantage is a complex one. At its heart is the notion that some countries can produce certain products more efficiently than other countries. Because of these efficiency advantages, countries should specialize according to their relative advantage and trade among themselves.

The theory is compelling if not intuitively obvious. And identifying the sources of comparative advantage is the key to understanding the theory’s application. Classical economists saw the advantage as arising from technological differences. But these technological differences remained unexplained. Furthermore, to talk about innovative countries is not helpful in explaining comparative advantage since innovation is a dynamic concept while comparative advantage is a static one. Even if a country could invest, perhaps through IP policy, perhaps through subsidies, in improving its comparative advantage, the question remains how a country would select its targets for improvement.

Empirical studies of trade suggest specific theories of comparative advantage (such as the Heckscher-Ohlin theory based on factors of production and natural resources) fail to acount fully for trade patterns. And the one theory that seems to be empirically robust, the theory of intra-industry trade, does not rely on comparative advantage at all. Instead, it explains patterns of trade between countries by the logic of variety. National consumers like goods from other countries because of the variety they provide. Trade between countries entails movements of goods with different characteristics moving across borders. American car manufactures export trucks and utility vehicles overseas and import luxury cars and fuel efficient vehicles, to take one example. Among available economic theories of international trade, the intra-industry trade theory seems to best fit the data, but it leaves unexplained basic questions like where consumer demand for variety originates. Nevertheless, the theory of intra-industry trade might provide a compelling explanation for the importance of intellectual property in international trade, especially as a source of product variety through innovation, design, creativity, and branding.

Professors Dreyfuss and Frankel have provided scholars with a provocative article for future research and discussion. One nagging question is whether the shifts they describe are reversible. I suspect that entropy wreaks havoc for intellectual property policymakers. But I hesitate also to be completely pessimistic. Although one cannot turn back the clock, we as thinkers must confront the challenge to design how the next phase of intellectual property law better incorporates policy issues beyond private ownership and investment. How the conversation continues is up to us and is part of the purpose for identifying and talking thoughtfully about things we like (lots), such as this important article by Professors Dreyfuss and Frankel.

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Cite as: Shubha Ghosh, Reviving the Original Scope of Intellectual Property, Internationally, JOTWELL (January 12, 2016) (reviewing Rochelle Dreyfuss and Susy Frankel, From Incentive to Commodity to Asset: How International Law is Reconceptualizing Intellectual Property, 36 Mich. J. Intl. L. 4 (2015)), http://intl.jotwell.com/reviving-the-original-scope-of-intellectual-property-internationally/.