Microsoft
Response
to Patent Office Consultation on the Report of the Commission on Intellectual
Property Rights
Microsoft welcomes this opportunity to respond to the Patent Office
consultation on the Commission on Intellectual Property Rights (CIPR)
report entitled Integrating Intellectual Property Rights and Development
Policy. As a leading software developer with millions of customers
and thousands of industry partners, employees and contractors located
in developing nations, Microsoft has a vital interest in promoting
economic growth and sound intellectual property (IP) policies in the
developing world. Microsoft is also keenly aware of the challenges
facing developing nations and invests considerable resources in helping
developing world populations surmount these challenges.
The CIPR
report's basic premise - that copyright and other IP rights are antithetical
to the interests of the developing world - constitutes a dramatic
departure from established Government policy. If adopted, the report's
recommendations would seriously undermine developing world efforts
to become significant producers, rather than just consumers, of software
and other IP. Such a result would isolate developing nations from
many IP-based sectors of the global economy and reverse decades of
work by the UK and other nations to harmonise IP laws in order to
provide a basic, internationally consistent level of protection for
creative works and inventions.
Adoption
of the report's conclusions would also harm UK authors and inventors
by rendering their IP significantly more susceptible to piracy in
developing nations - piracy that would almost certainly infiltrate
developed world markets as well. As a result, UK firms would have
strong incentives not to distribute their works in the developing
world or to establish research facilities or other technology transfer
mechanisms in these markets.
Although
the CIPR report's conclusions encompass a broad range of issues and
industries, this response addresses only those conclusions that are
of greatest relevance to the software industry. Part I focuses on
the report's broader recommendations, while Part II addresses certain
specific proposals.
I.
Responses to CIPR Report's General Recommendations
·
Robust IP protection is critical to sustainable, long-term economic
growth in the developing world.
Although
the CIPR report accurately identifies certain root causes of developing
world poverty - such as inadequate access to financial resources,
lack of funding for education, institutional limitations, and underdeveloped
technological and scientific capabilities - the report errs in concluding
that weak IP protection will help solve these problems. Authors and
inventors depend on IP rights to protect the integrity and economic
value of their works. This is equally true for creators located in
the developing world. Without robust IP protection, developing-world
firms and entrepreneurs will lack the financial incentives to invest
in IP-based innovation on a sustained basis, as they will be unable
to recoup these investments in the marketplace. Strong IP protection
is also a critical driver of foreign and domestic funding for research
and development, technology transfer projects, and improvements to
telecommunications infrastructure, all of which are crucial to economic
progress in the developing world.
Where
developing nations have pursued IP education and enforcement efforts,
software firms and other industries that rely on innovation and IP
protection have often prospered. For instance, a recent International
Data Corporation study found that where developing nations strengthened
their IP laws and stepped up enforcement efforts - for example, in
Argentina, Brazil, Chile, China, Colombia, Costa Rica, Czech Republic,
India, Malaysia, Mexico, and South Africa - local information technology
industries experienced rapid growth, many at a pace that exceeded
the corresponding growth rates in several developed nations. Similarly,
a recent study of ten Eastern European countries found that, while
the software industry in these countries already generated 137,000
direct jobs and indirectly accounted for a further 575,000 jobs in
2000, those figures could more than double by 2004 if these countries
succeeded in reducing software piracy to the Western European rate
of 34 percent. These and similar data demonstrate that all nations,
regardless of their stage of development, can benefit from strong
IP protection.
The adoption
of weak IP regimes by developing nations, by contrast, would jeopardise
IP-based industries and investments and force developing world populations
to rely even more heavily on IP developed in other countries. Weak
IP regimes are also likely to prompt developing world inventors and
innovators to emigrate to jurisdictions with stronger IP protection
so as to maximise their opportunities to realise the full economic
value of their intellectual contributions. Such a "brain drain"
of the best and brightest from developing nations - which is already
a significant problem for many countries - will only exacerbate the
economic challenges facing the developing world.
In short,
the CIPR report fails to recognise the extent to which nations at
every level of development need robust IP regimes to generate creativity,
innovation and employment opportunities. As knowledge-based industries
continue to grow and prosper, respect for IP will be an increasingly
essential element for sustainable, long-term economic growth in the
developing world.
·
Strong IP protection is essential to integrating the developing world
fully into the global economy.
The ultimate
goal of any realistic effort to eradicate developing world poverty
must be to integrate developing nations as fully as possible into
the global economy. The explosive growth of the Internet has, in many
ways, made this goal more achievable, as the Internet facilitates
collaboration between firms and workers located in different countries
and allows developing world businesses to distribute digital content
and provide online services to customers anywhere at virtually no
cost. Such a global digital marketplace will emerge, however, only
if built upon a bedrock of strong, harmonised IP rules.
The CIPR
report's support for weak IP protection, by contrast, invariably perceives
developing nations as consumers of software and other IP, rather than
as active producers of such IP. This is a short-sighted perspective
that will only reinforce developing nations' reliance on technologies
developed elsewhere. A country that does not protect IP domestically
ensures that local software developers and other innovators will be
unable to sell their own IP for a profit and accumulate the funds
necessary to build strong domestic businesses, let alone enter foreign
markets. Without the incentives to creativity offered by robust IP
protection, countries with weak IP regimes will be unable to attract
foreign technologies or retain innovative talent, leaving them few
alternatives but to become piracy havens with little to offer on the
global marketplace but cheap imitations of existing technologies.
The CIPR
report itself recognises that many mechanisms besides weak IP protection
exist for promoting developing world access to and use of IP. These
mechanisms - which Microsoft fully supports - include the use of tax-based
and other incentives by developed-world governments to facilitate
technology transfer to developing nations, the provision of additional
public funding to promote scientific and technological capabilities
in the developing world, and the implementation of laws that would
encourage unfettered access to the results of publicly funded research.
Each of these mechanisms is preferable to weak IP laws because each
would promote developing world access to and utilisation of IP in
a manner that did not simultaneously destroy the economic incentives
for local IP-based innovation.
·
Support for strong IP protection is a cornerstone of international
law as well as UK trade and development policy.
The vital
link between IP protection and economic growth constitutes a pillar
of UK and EU trade and development policy. Several EU legal instruments
- including the Software Directive, the Database Directive, the recently
enacted Copyright Directive, the proposed Directive on software patents,
and many others - reflect the high priority given to IP protection
throughout the EU. Likewise, UK legislation and practice has traditionally
recognised the importance of strong IP protection. The CIPR report's
recommendations, if adopted, would encourage developing nations to
implement IP regimes that are incompatible with existing rules governing
IP protection and enforcement in the UK, which would serve only to
frustrate, rather than facilitate, technology transfer and trade between
the UK and the developing world.
Adoption
of the CIPR report's recommendations would also undermine years of
effort by the Government to promote internationally harmonised IP
rules. The WTO TRIPS Agreement, the WIPO Copyright Treaty and Performances
and Phonograms Treaty, and countless other trade agreements and international
legal instruments to which the UK is a party reflect the tremendous
resources the Government has invested in promoting international trade
and development through harmonised IP rules. Adoption of the CIPR
report's recommendations would violate the spirit, if not also the
letter, of many of these international legal instruments and place
Government policy on this issue at odds with that of many of the UK's
most important trading partners.
· Weak IP protection will not solve the challenges facing the
developing world.
The CIPR
report's basic hostility to IP appears to be grounded in the belief
that weak IP laws are necessary to ensure adequate developing world
access to protected works and inventions. At least with respect to
software, this position is doubtful as an empirical matter. In many
developing nations, Microsoft and many other software firms already
offer their products to educational institutions and other key customer
segments at very low cost. Moreover, the use of unlicensed software
in many of these countries already exceeds 50 percent, and in several
nations that figure is closer to 70 or even 90 percent. Thus, it seems
unlikely that further scaling back IP protection will have any significant
impact on the use of software or other protected works in the developing
world.
The CIPR
proposals specifically targeted at weakening IP protection for software
seem equally unlikely to promote developing world prosperity. For
instance, the report's recommendation that developing nations permit
reverse engineering of software beyond that necessary for interoperability
would place these nations' legal regimes at odds with those in the
EU and many other nations, but - apart from removing legal obstacles
to piracy - would do little to promote innovation or economic growth.
Similarly, the report's proposal that developing nations promote the
use of software licensed under terms that prohibit IP owners from
charging royalties would provide few significant benefits to local
users, but would make it exceedingly difficult for a local software
development industry to take root or prosper.
The real
challenge facing developing world populations is not access to software
or other protected works, but learning how to use these resources
effectively to become more productive, efficient and competitive.
Microsoft, like many leading IT companies, donates substantial sums
each year to IT training and education programs in the developing
world. To the extent developed nations and donor institutions seek
to promote developing world growth, they should focus on expanding
developing world access to training and education programs, not on
restricting the ability of creators to protect their works against
piracy.
II.
Responses to Specific Proposals
·
The CIPR report's hostility to digital rights management technologies
is misplaced and is contrary to international and EU law.
The CIPR
report urges developing nations not to enact legislation protecting
DRM technologies. Yet as the UK and other signatories to the WIPO
Copyright Treaty have recognised, legal protection for DRM technologies
is critical to protecting the rights of authors and performers in
the digital environment and to the continued growth of e-commerce.
DRM tools already provide the technical foundation for new online
distribution models that will substantially increase the diversity
of online content and the range of price/usage offerings available
to developing world consumers. Moreover, IP-based firms and entrepreneurs
in the developing world - particularly those that lack the resources
to distribute their works in foreign markets through offline distribution
channels - will increasingly need to rely on DRMs to protect their
own valuable IP against theft. In short, DRM technologies will prove
increasingly vital to e-commerce growth and IP protection in developed
and developing nations alike.
As even
a casual survey of online "hacker" sites reveals, however,
virtually any DRM technology is ultimately vulnerable to circumvention.
Although the CIPR report repeatedly seeks to invoke non-infringing
rationales for developing countries to withhold legal prohibitions
against circumventing DRM protections, the clear and undeniable fact
is that most circumvention tools are used for one and only one purpose
- to facilitate piracy. The CIPR report's suggestion that developing
nations should nonetheless permit the circumvention of DRM technologies
simply ignores this obvious truth and would place developing world
legal provisions on this issue in direct opposition to the rules set
forth in the WIPO Treaties, the EU Copyright and Software Directives,
and UK law.
·
Failure to provide effective enforcement procedures and remedies will
promote piracy rather than creativity.
In addition
to recommending the adoption of weak IP laws, the CIPR report also
advises developing nations to scale back their IP enforcement efforts.
The report specifically recommends that developing nations devote
fewer resources to criminal enforcement and restrict the availability
of civil injunctive relief against suspected IP infringers. As governments
worldwide have recognised, however, IP rights are meaningless if they
are not enforced. Thus, both the WIPO Copyright Treaty and the TRIPS
Agreement require countries to implement enforcement procedures that
permit effective action against infringement, including criminal remedies
and effective procedures that deter piracy.
The availability
of injunctive relief and criminal remedies are particularly vital
to the software industry. Software developers often rely on civil
ex parte injunctive procedures to identify infringers before they
have the opportunity to erase or delete evidence of their illegal
activities. And because civil procedures in many developing nations
are time-consuming, cost-prohibitive, and largely ineffective against
professional criminals, software developers are often forced to rely
on criminal prosecutions by public authorities to deter rampant piracy
of their products. Thus, the primary impact on developing nations
that adopt the CIPR report's recommendations on scaled-back IP enforcement
efforts will be to create additional incentives for piracy - to the
detriment of these nations' own inventors, creators, and IP-based
industries.
* * * * *
Microsoft
appreciates this opportunity to respond to the Patent Office consultation
on the CIPR report. Questions regarding this response may be directed
to Matt Lambert, Director of Government Affairs, Microsoft Ltd, 10
Great Pulteney Street, London W1R 3DG or mlambert@microsoft.com.