Janice Sim discusses the width of intellectual property theft
NAPSTER AND ITS SPAWN
One of the major copyright violation cases that has focussed the world’s attention on the term "intellectual property theft" is the case of Napster.
Napster, the famous (or rather, infamous) online music file sharing service was created in 1999 by Shawn Fanning, a teenage college dropout. Metallica, Dr. Dre and Madonna were among the victims of Napster’s copyright theft. The US$40 billion dollar music industry, concerned that illegal downloading of music from the addictive website would get out of hand, decided to pit its might against the website. As a result of copyright infringement claims by several music industry heavyweights, the website was shut down in 2001.
Evidently, the case did not end the issue of copyright infringement in cyberspace. In fact, a subsequent onslaught of Napster copycats followed. One cannot help but echo one of the arguments of the Napster attorneys that the shutting down of Napster would not stop the problem of online copyright infringement.
The scale of intellectual property theft is indeed beyond the imagination of many. The magnitude of intellectual property theft can only be appreciated when it is described in numerals.
In 2006, NTP, Inc., a Virginia-based patent holding company and Research in Motion (RIM), makers of the Blackberry mobile email system came to a US$612.5 million settlement to end the dispute on the alleged patent infringement by RIM of NTP’s wireless email patents. That amount is reportedly low as NTP stands to lose future royalties on its patents.
The dispute had threatened the discontinuance of the Blackberry systems in America. One cannot envisage the impact of such an occurrence, as the corporate world would be devastated not to mention the possibility of security threat to the US Federal government due to the vast usage of the device by government officials.
MP3s AND X-BOXes
Another ground-breaking patent litigation involving Alcatel-Lucent and Microsoft left the world aghast with the February 22, 2007 San Diego court's decision to award the former US$1.52 billion in damages with respect to several patents relating to MP3 and MPEG encoding and other technologies. However, in August 2007, Microsoft successfully appealed against the decision.
The subsequent attempt by Alcatel-Lucent to reinstate the award against Microsoft in the US Court of Appeals for the Federal Circuit was unsuccessful.
The above-referred case is not the only patent litigation between Microsoft and Alcatel-Lucent; their battle concerning the patents for touch-screen technology and Microsoft’s X-Box games console are among the major patent litigations in the United States of America.
THE IP THEFT PHENOMENON
It is naïve to think that intellectual property theft is confined to litigation between large corporations. In fact, intellectual property theft encompasses a whole spectrum of intellectual property, including copyrights, trade marks, patents, geographical indications and trade secrets.
It is a phenomenon that is happening every second - the toy that your child is playing with, the designer-labelled bag that your wife is carrying, the pharmaceutical drug that your husband is consuming - are all subjected to suspicion.
In 2006, the Department of Commerce of the United States estimated that loss through intellectual property theft exceeds US$250 billion annually while the International Chamber of Commerce puts the global fiscal loss at more than US$600 billion per year.
SLEEPING WITH THE ENEMY
Intellectual property in any corporation is vulnerable and is considered as fair game if the establishment fails to see the importance of protecting the same, not only from external intruders but most importantly from internal intruders as well.
Recently, one Biswahoman Pani of Worcester allegedly stole trade secrets worth more than US$1 billion from Intel Corp. The scenario is not unfamiliar. Pani reportedly gave notice of his resignation at Intel and informed his superiors that he was using a week of his vacation to look for a job.
It was later discovered to the horror of his former employer that he had taken a job at Intel’s rival, Advanced Micro Devices (AMD) and had been using his vacation time to download valuable trade secrets from Intel. If such a scenario could occur at Intel, it would not be a surprise to see the same in any other establishment of any scale.
Theft of trade secrets is often committed by employees or former employees. The FBI has acknowledged that the most dangerous threat often comes from within the establishment and it is no wonder that it is often deemed as a case of sleeping with the enemy.
THREAT ON PUBLIC HEALTH, SAFETY AND SOCIETY
The Interpol has recently published a Guide to Intellectual Property Crime and Investigations and has recognised that intellectual property crime is a serious international problem that costs society US$100s of billions annually. The impact is not confined to the economic spectrum, but the Interpol has highlighted the ramification socially in terms of public health and safety, loss of revenue to governments and damages to businesses.
The most discernible type of counterfeiting is that of counterfeit luxury products. However, the most dangerous type of counterfeiting is counterfeit products that put the purchasers at risk. Counterfeit food, drugs, vehicle parts and toys are among the most dangerous type of intellectual property theft.
Often consumers do not choose to purchase counterfeit food or drugs. Consumers have many reasons for purchasing counterfeit luxury products but none when it comes to purchasing counterfeit food or drugs. Unscrupulous producers of counterfeit food or drugs do not only endanger the lives of unknowing consumers but also put genuine business owners at risk legally and in terms of their reputation and sales, which ultimately boils down to the value of their intellectual property as well.
Intellectual property theft does not affect business owners and the government solely but it encompasses a wider social paradigm often unnoticed by the general public who are the end users of the intellectual property.
It is estimated that intellectual property theft has caused the loss of hundreds of thousands of jobs worldwide. This has a direct impact on foreign investment, loss of employment and tax revenues.
The rise of the counterfeit industry has turned away bona fide investors and has created what is deemed as a “black” economy in which the welfare of employees is the least priority of the employers. The Interpol has reported that the creation of such an economy has an even wider social impact on the society and the government, for example, in the form of corruption and extortion.
The connection between organised crime and intellectual property crime is inter-linked, as criminal activities are often facilitated via intellectual property crime and the funds that these crimes generate. It is indeed a vicious cycle. As consumers, we are directly supporting the funding of these crimes by buying counterfeit goods and inadvertently supporting the various social issues surrounding it, for example exploited labourers and child labourers.
INTELLECTUAL PROPERTY THEFT – SERIOUS BUSINESS
A major newspaper columnist recently highlighted what she deemed is becoming a culture in the Malaysian public, that is, of the seemingly ever-present DVD peddlers. Their entrepreneurship never ceases to amaze us, from operating a stall in the market, to having a sizable operation in shopping malls to becoming mobile salespersons.
At the risk of being deemed as supportive of this business venture, the columnist went on to observe the immortalisation of the DVD peddlers in a major advertising campaign and the effort these peddlers took to know their products and business tactics in order to target the right market.
Intellectual property theft in any form is in danger of becoming a norm in our society unless we understand the implications of supporting the theft of intellectual property. From downloading pirated software and songs to buying counterfeit bags, the majority of us perceive these as minor acts that would not hurt the major corporations who own the intellectual property.
From no costs at all to paying a fraction of the retail price, consumers think nothing of saving their own pockets first without appreciating the scenes evolving behind the production of these products and the destination of the funds from the theft.
DO WE REALISE THE IMPORTANCE OF INTELLECTUAL PROPERTY?
Intellectual property is defined as a creation of the mind.
The protection of intellectual property is still widely debated as it is closely linked to public policy issues. However, the root of the rights issues also boils down to the encouragement of technological innovations which is essential to the economy.
Economists estimate that two-thirds of the value of major corporations in the United States can be traced to intangible assets. It can be as simple as the design of a soft drink bottle to as complicated as the process patents of pharmaceutical products: intellectual property ranges from the value of a brand to the products that a company produces.
Infringers are reaping the benefit of all these by the act of stealing. It is a very profitable business, with no overheads for innovation, research and development and marketing, these thieves are merely riding on the goodwill and innovation of legal businesses.
The corporate world must begin to realise the importance of protecting their assets. It has dawned upon the Malaysian Government that the need to educate its citizens on this issue is extremely crucial as the country struggles with numerous intellectual property issues, starting from the infamous DVD peddlers to major corporations accused of stealing the innovations of another. In the Asian perspective, the Chinese Government has been put under the spotlight regarding this issue ever since the start of its laissez faire economy.
The ultimate tip to business owners – initiate an assessment of your intellectual property and get to know how to protect the same now.
JANICE SIM (