University of Toronto Law School Faculty Blog

Profs. Trebilcock and Iacobucci - "Patent protection, the new mother of invention"

This commentary was first published on the Globe and Mail website on September 22, 2009.

After years of effort, a Toronto startup company called i4i invented an important piece of technology to dramatically enhance software programs, such as Microsoft Word. Recognizing its potential, i4i obtained a U.S. patent to protect, and hopefully prosper from, the invention. The company also began marketing the technology as a separate product that worked with Word. A Texas court ruled last month that in 2003, Microsoft began to bundle i4i's patented technology in its dominant software without i4i's knowledge or consent. The smaller company was successful in establishing willful patent infringement, winning damages for the past and an injunction to protect i4i in the future. Microsoft strongly objects to these remedies, arguing at trial that i4i is analogous to a banker seeking a bailout. This analogy is entirely inapposite, and the remedy the court awarded is entirely appropriate in light of its finding of infringement.

Patents are essential to the modern system of innovation. Once produced, information can be transmitted at zero cost. In the absence of patent protection, would-be inventors become vulnerable to competition that would drive the value of their discovery to zero, leaving them with no compensation for the costs of producing that information in the first place. Patent protection allows inventors the benefit of limited competition for a limited time period, giving them an incentive to invest without concern about their innovation's appropriation by others.

Ariel Katz: Substitution and Schumpeterian Effects Over the Lifecycle of Copyrighted Works

I have posted a new paper on SSRN.  The paper, titled Substitution and Schumpeterian Effects Over the Lifecycle of Copyrighted Works, develops the following two key insights. First, copyrighted works are affected by two types of competitive forces: substitutive competition and Schumpeterian competition. Second, the relevant magnitude of each of these competitive forces changes at various points over the lifecycle of copyrighted works. The earlier stages of a work's lifecycle are dominated by substitution effects, whereby many other works can function as very close substitutes. As the work develops to a full product, to which many other inputs have been added, it becomes less easily substitutable. This process intensifies as network effects of various kinds secure successful works' market position and render them less vulnerable to competition from close imitations. The competitive threat to which such works may be exposed becomes more Schumpeterian in nature: competition from other works which offer something new, and potentially preferable. Generally, copyright law unequivocally discourages merely substitutive competition, but is much less interested in discouraging Schumpeterian competition. This paper's time-based analysis provides both a justification to this distinction, as well as grounds to evaluating various existing rules and doctrines. It suggests that broader copyright protection (perhaps broader than the current) may be desirable at the early stages of works' lifecycle, whereas narrower protection (perhaps narrower than the current) may be justified as later stages.
The paper is freely available here; comments are welcome.

Collectivizing Rights; Privatizing Taxation: The Unarticulated Function of Copyright Collectives

The recent proposal from the Songwriters Association of Canada to fully legalize peer-to-peer file sharing of music by adding a $5 monthly charge to the cost of Internet access (and similar proposals floating south of the border) has brought renewed attention in the role of levies and tariffs collected by copyright collectives in Canada.  I am now beginning a research project that looks at the broader implications of the expansion of collective administration of copyrights and the use of levies and tariffs.  Since the topic is current, I thought I'd use the blog not only for sharing some of my initial thoughts, but hopefully, to solicit some ideas that will help me to shape them.  Therefore, I'm posting below the description of the project and the questions  it seeks to answer.  Comments on or off the blog will be highly appreciated.  Here it is:

New Articles Available Online: On Competition Law and Intellectual Property, and on Patents and Phramaceuticals Regulation

Two articles of mine have been recently published and are available online.  The first article, published in 49 Arizona Law Review is Making Sense of Nonsense: Intellectual Property, Antitrust, and Market Power.  Here's the abstract:

While the economic rationale for intellectual property ("IP") rights rests on the concepts of "monopoly" or "market power," the U.S. Supreme Court, in Illinois Tool Works v. Independent Ink, has recently joined a "virtual consensus" among antitrust commentators believing that no presumption of market power should exist in antitrust cases involving IP. This Article critically analyzes this consensus, and clarifies the relationship between IP and market power, shows why IP rights often do confer market power in the antitrust sense, but also explains why acknowledging this should not necessarily lead to oversized application of antitrust law to IP.

What else do Canada and Israel have in common (copyright related)?

In my latest post I noted that Canada and Israel share a common copyright heritage. Here's a trivia question: What else, copyright related, do Canada and Israel have in common?

Answer below...

What Can Canada Learn from Israel about Copyright Reform?

A bill entitled Bill entitled "An Act to amend the Copyright Act" is likely to be handed down next week.  While the bill itself is probably drafted already, its content will be deliberated in Parliament.   Therefore, Canadian policymakers may wish to consider looking at the new copyright act which the Knesset, the Israeli parliament, passed last month (downloadable here, in Hebrew; English translation now available here).  There are at least two reasons to look at Israel's new act:  one is to consider the approach taken by the Israeli legislators to many copyright issues that are relevant to Canada.  A second reason is that despite the geographic distance, the two countries share a common copyright heritage.  Until last week, Israel's copyright law was principally based on the UK Copyright Act of 1911, the same statute after which Canada's first home-made copyright act was modeled in 1921. 

Tea and oranges that come all the way from China

Had Suzanne heard the news in recent months she'd probably think twice before serving Leonard Cohen tea and oranges that came all the way from China.  With reports about recalled toys, pet food poisoning and the FDA ban on certain imports of seafood from China, there is no exotic romance in such tea and oranges anymore.  No wonder American politicians and government officials step in to protect consumers against such safety dangers.  As Hillary Clinton said "I don't want to eat bad food from China or have my children having toys that are going to get them sick."  Nor do I. 

Access Copyright and Misleading Copyright Notices

Earlier this week, the CCIA, an association of computer and communication companies, including Google, Microsoft and Yahoo, filed a complaint with the US Federal Trade Commission accusing several professional sports leagues, book publishers and other media companies of misleading and threatening consumers with overstated copyright warnings (such as the FBI warnings available on many DVDs).
This practice of overstated and misleading warnings is not, of course, a US invention.  Canadian copyright owners are not shy of the practice.  An especially annoying example is one that I just came across in the university context.

Euro Excellence v. Kraft

In 1994, when the member states of what would later become the World Trade Organization sat to draft the TRIPs Agreement they could not agree on the question of parallel importation and the extent to which IP law should regulate it and eventually decided not to decide and let each country decide its own policy. It seemed that in Euro-Excellence v. Kraft the same thing happened to the justices of the Supreme Court of Canada. They too could not agree on what Canada’s copyright law says on the issue.

If I have to summarize in one word yesterday’s Supreme Court’s decision in Euro Excellence v. Kraft it will be “mess”. The decision might have solved the current dispute between Euro Excellence and Kraft but provides very little guidance for future disputes.  Moreover, a majority of the Court based their respective decisions on technical grounds, presenting the question merely as one of statutory interpretation. (You can read reports on the decisions in the blog posts of Michael Geist, Howard Knopf and Norman Siebrasse).

Copyright Board's New Ringtone Decision

The Copyright Board issued yesterday its decision certifying SOCAN's Tariff 24 for ringtones.   The Board set a base rate of 6% of the price paid by the subscriber for the ringtone (net of any network usage fees) with a minimum of $0.06 per ringtone.  The main legal controversy before the tribunal was whether the delivery of ringtones is "communication to the public" but I don't want to comment on that here.  Instead, I want to comment on a more fundamental issue, and ask why should the royalties be set by a tribunal at all?  Why wouldn't copyright holders and ringtone suppliers enter into voluntary agreement and decide who should pay and how much?  Ordinarily, prices are determined by the "market".  Why then are these prices set in a strange way in which one seller (SOCAN) proposes prices and then, over a period of three years lawyers, prominent economists and other experts try to convince a tribunal what those prices should be?