7.1 Unlike patents and copyright, design was not explicitly mentioned in the Review’s Terms of Reference. This is surprising, given the economic importance of UK design and the strength with which a number of issues relating to this area of IP protection have been raised in evidence to the Review.
7.2 Design is a wide ranging concept covering a range of industries from fashion design (apparel) to industrial design. According to new estimates by Imperial College, design constitutes the largest contribution to overall intangible investment in the UK economy.1 In 2008 investment in design alone amounted to 1.6 per cent of Gross Domestic Product (GDP).2
Protection Available for Designs
7.3 Design right dates from the eighteenth century, and registered design right from the nineteenth. Since 2003 the EU wide Registered Community Design has been an alternative source of registered design protection in the UK. As well as these registered rights protection for designs is available through the (different) EU and UK unregistered design rights, and copyright also protects some designs.
Design Rights – a Patchwork of Protection
There are four different and to some degree overlapping forms of design right in the UK:
There are four different and to some degree overlapping forms of design right in the UK:
-
a registered right covering the UK available from the IPO;
-
a registered right covering the EU available from the Of ce of Harmonisation for the Internal
Market (OHIM);
-
an unregistered right covering the UK;
-
an unregistered EU right.
There are also circumstances in which copyright can protect designs, and ones in which trade mark protection is relevant. Within this patchwork are differences as to what forms of design are covered, how long the rights last, what is required to prove infringement, and what the penalties for infringement may be.
3.18 Beyond the EU there are two key global fora which specialise in IP: the World Intellectual Property Organisation (WIPO) and the Trade Related aspects of Intellectual Property rights (TRIPs) Council, which is part of the World Trade Organisation (WTO).
3.19 WIPO is the United Nations (UN) agency which administers most of the global IP treaties. In recent years, divisions between the developed and developing world have led to a general stalling of discussions on a range of issues. However, the current Director General, Francis Gurry, has shown a strong commitment to reforming the organisation, focusing it upon economic issues and improving its effectiveness since his appointment in 2008.
3.20 The TRIPs Agreement is one of the agreements underlying the WTO, and ties a number of the key provisions of international treaties into the WTO dispute resolution system, meaning that violation of those provisions can lead to trade sanctions within the WTO framework. Development issues have come to the fore in recent years, particularly at the beginning of the Doha trade round, when access to medicines for developing countries was a key issue in the trade talks.
3.21 With the basic structure of rights generally established by international treaties and in particular the TRIPs Agreement, attention in international negotiations – particularly Free Trade Agreements (FTAs) and most recently the Anti Counterfeiting Trade Agreement (ACTA) – has focused on effective enforcement of rights.
3.22 It is apparent from the sometimes heated nature of discussions in WIPO and the WTO that developing countries often feel the developed world is seeking to impose an approach to IP which serves the interest of advanced economies upon countries whose economies are at an earlier stage of development. The evidence based approach advocated in this review offers a better basis upon which to seek routes through these complex questions and con icts of interest.
3.23 The evidence suggests that developed economies such as the UK’s bene t from effective IPR regimes, and in particular from effective enforcement regimes, in markets for their goods. It also appears to be the case that for low income countries with a weak scienti c and technological infrastructure, stronger IP protection has little effect on their own economic growth and may even hinder it – while having no signi cant effect on the likelihood of developed country industry seeking to sell goods there. Access to infrastructure, nance and skills can be much more important to investment decisions in low income countries than the effectiveness of the IP regime. By contrast, for middle income and emerging economies such as China, improved enforcement regimes may yield better rewards both for domestic innovation and returns to foreign rms through foreign direct investment and technical cooperation.12
3.19 WIPO is the United Nations (UN) agency which administers most of the global IP treaties. In recent years, divisions between the developed and developing world have led to a general stalling of discussions on a range of issues. However, the current Director General, Francis Gurry, has shown a strong commitment to reforming the organisation, focusing it upon economic issues and improving its effectiveness since his appointment in 2008.
3.20 The TRIPs Agreement is one of the agreements underlying the WTO, and ties a number of the key provisions of international treaties into the WTO dispute resolution system, meaning that violation of those provisions can lead to trade sanctions within the WTO framework. Development issues have come to the fore in recent years, particularly at the beginning of the Doha trade round, when access to medicines for developing countries was a key issue in the trade talks.
3.21 With the basic structure of rights generally established by international treaties and in particular the TRIPs Agreement, attention in international negotiations – particularly Free Trade Agreements (FTAs) and most recently the Anti Counterfeiting Trade Agreement (ACTA) – has focused on effective enforcement of rights.
3.22 It is apparent from the sometimes heated nature of discussions in WIPO and the WTO that developing countries often feel the developed world is seeking to impose an approach to IP which serves the interest of advanced economies upon countries whose economies are at an earlier stage of development. The evidence based approach advocated in this review offers a better basis upon which to seek routes through these complex questions and con icts of interest.
3.23 The evidence suggests that developed economies such as the UK’s bene t from effective IPR regimes, and in particular from effective enforcement regimes, in markets for their goods. It also appears to be the case that for low income countries with a weak scienti c and technological infrastructure, stronger IP protection has little effect on their own economic growth and may even hinder it – while having no signi cant effect on the likelihood of developed country industry seeking to sell goods there. Access to infrastructure, nance and skills can be much more important to investment decisions in low income countries than the effectiveness of the IP regime. By contrast, for middle income and emerging economies such as China, improved enforcement regimes may yield better rewards both for domestic innovation and returns to foreign rms through foreign direct investment and technical cooperation.12
1.12 As advanced economies become ever more knowledge intensive, the stakes involved in
IP are rising. Profound and far from complete economic and technological changes mean that an appropriate and enabling IP framework has become one of the prerequisites for prosperity. IP related spending has come to dominate rms’ investment across the developed world while services now dominate these economies.9 UK rms spent £137 billion on intangible investment, or investment in IP, compared to £104 billion on xed assets in 2008 (see Figure 1.1).10 This investment in IP is worth 13 per cent of market gross value added (GVA), with almost half of it covered by IPRs.11 Global trade in patent and creative industry licences alone is now worth more than £600 billion a year, over ve per cent of all world trade - and rising.12
The Innovation Ecosystem
1.13 Small and young innovative rms are playing an increasing role in job creation. They represent only six per cent of UK rms with more than 10 employees but they have created 54 per cent of all new jobs since 2002,13 although churn amongst Small and Medium Enterprises (SMEs) remains high and their contribution to net employment is lower than this.14 At the same time, larger rms continue to play a crucial but changing role in innovation, with less emphasis on in-house R&D
IP are rising. Profound and far from complete economic and technological changes mean that an appropriate and enabling IP framework has become one of the prerequisites for prosperity. IP related spending has come to dominate rms’ investment across the developed world while services now dominate these economies.9 UK rms spent £137 billion on intangible investment, or investment in IP, compared to £104 billion on xed assets in 2008 (see Figure 1.1).10 This investment in IP is worth 13 per cent of market gross value added (GVA), with almost half of it covered by IPRs.11 Global trade in patent and creative industry licences alone is now worth more than £600 billion a year, over ve per cent of all world trade - and rising.12
The Innovation Ecosystem
1.13 Small and young innovative rms are playing an increasing role in job creation. They represent only six per cent of UK rms with more than 10 employees but they have created 54 per cent of all new jobs since 2002,13 although churn amongst Small and Medium Enterprises (SMEs) remains high and their contribution to net employment is lower than this.14 At the same time, larger rms continue to play a crucial but changing role in innovation, with less emphasis on in-house R&D
Figure 1.1 UK Business Investment, £bn
Source: NESTA (2011)
Review of Intellectual Property and Growth 12
and increased partnerships with smaller companies developing new technologies. These trends
are very apparent in, for example, the biotechnology and software sectors. Hence the relationship between SMEs and larger rms can be symbiotic: they provide each other with direct support for innovative thinking and work together on R&D. Larger rms then provide routes to new and emerging markets for smaller rms.
1.14 Another shift in the innovation ecosystem is the increasing internationalisation of research – in 2007 the top 50 European corporate R&D spenders spent $51 billion of their $117 billion total R&D spend overseas.15 This shift in the landscape changes the pattern of how rms have to manage their still largely nation-speci c IPRs and indicate the importance of policy makers taking an international approach to IP systems.
The Increasing Impacts of Transaction Costs
1.15 IP transaction costs have risen as rights users navigate an ever more densely populated landscape of increasingly subdivided rights. This presents a risk analogous to the problem
familiar in the world of planning, where small ownership interests can block value generating large developments. In the patent world, a surfeit of property rights can mean that the transaction cost of acquiring permission to innovate or create new work is prohibitively high. Research shows that in certain technology elds this can cause a kind of gridlock with innovation delayed or even prevented.16 Michael Heller, an American law professor, coined the phrase “tragedy of the anticommons” to describe this situation,17 which he says has resulted in signi cant blockages in areas such as medical research.18
1.16 In the copyright area transaction costs can create similar problems. Digital technologies have brought large reductions in the cost of copying, storage and distribution for words, music, images
and all forms of data. This has the effect of making transaction costs around rights a much more signi cant element in the business equation and so, potentially, a likelier barrier to licensing and follow on innovation.
The Transforming Effects of Digital Technology
1.17 Digital technology is probably the most important and transformative technology of our time. Because digital is fundamentally an information and communication technology (ICT), intellectual property rights lie at its heart. Not only has ICT adoption and use been among the strongest drivers
of growth,19 but it has pushed content and communication technology into new uses, meaning the IP system has become part of people’s daily lives.20 This has transformed us all into regular, if not daily, copyright creators and allows rms to capture information on customers and transactions in ways that help them experiment in real time with business models and marketing approaches.21 Digital also gives rms the opportunity to market themselves locally, nationally and internationally at relatively low cost, reaching previously inaccessible customers. These are already unprecedentedly global markets, even though the internet has yet to be used directly by two thirds of the world’s population.22
are very apparent in, for example, the biotechnology and software sectors. Hence the relationship between SMEs and larger rms can be symbiotic: they provide each other with direct support for innovative thinking and work together on R&D. Larger rms then provide routes to new and emerging markets for smaller rms.
1.14 Another shift in the innovation ecosystem is the increasing internationalisation of research – in 2007 the top 50 European corporate R&D spenders spent $51 billion of their $117 billion total R&D spend overseas.15 This shift in the landscape changes the pattern of how rms have to manage their still largely nation-speci c IPRs and indicate the importance of policy makers taking an international approach to IP systems.
The Increasing Impacts of Transaction Costs
1.15 IP transaction costs have risen as rights users navigate an ever more densely populated landscape of increasingly subdivided rights. This presents a risk analogous to the problem
familiar in the world of planning, where small ownership interests can block value generating large developments. In the patent world, a surfeit of property rights can mean that the transaction cost of acquiring permission to innovate or create new work is prohibitively high. Research shows that in certain technology elds this can cause a kind of gridlock with innovation delayed or even prevented.16 Michael Heller, an American law professor, coined the phrase “tragedy of the anticommons” to describe this situation,17 which he says has resulted in signi cant blockages in areas such as medical research.18
1.16 In the copyright area transaction costs can create similar problems. Digital technologies have brought large reductions in the cost of copying, storage and distribution for words, music, images
and all forms of data. This has the effect of making transaction costs around rights a much more signi cant element in the business equation and so, potentially, a likelier barrier to licensing and follow on innovation.
The Transforming Effects of Digital Technology
1.17 Digital technology is probably the most important and transformative technology of our time. Because digital is fundamentally an information and communication technology (ICT), intellectual property rights lie at its heart. Not only has ICT adoption and use been among the strongest drivers
of growth,19 but it has pushed content and communication technology into new uses, meaning the IP system has become part of people’s daily lives.20 This has transformed us all into regular, if not daily, copyright creators and allows rms to capture information on customers and transactions in ways that help them experiment in real time with business models and marketing approaches.21 Digital also gives rms the opportunity to market themselves locally, nationally and internationally at relatively low cost, reaching previously inaccessible customers. These are already unprecedentedly global markets, even though the internet has yet to be used directly by two thirds of the world’s population.22
Review of Intellectual Property and Growth 13
1.18 Because copyright governs the right to own and use data and information, as well as the output of authors, musicians, photographers and lm makers, copyright law is now of primary interest to players across the whole of the knowledge economy, not just those involved in the creative industries. Digital technologies are based on copying, so copyright becomes their regulator: a role it was never designed to perform.
Services and the New Innovation Process
1.19 The services which provide most jobs in advanced economies are being changed in other ways by digital technology. Innovations in the insurance industry, for example, rely upon improved data from medicine, demographics and pro ling of individual customer lifestyles. Risk calculations applied to premiums for farmers and event organisers rely upon improved data analysis of weather patterns. Sophisticated assessment of safer cars and better roads can be factored into motor insurance judgments. Understanding these connections and computing the related business risks requires knowledge of what happens at boundaries between systems and the ability to analyse large quantities of data from what, until recently, were separate industries and sectors.
1.20 Collaborative and more “open” distributed innovation processes are especially important because services are not produced in the laboratories and factories of the industrial R&D arena where they can be tested and optimised. Services are usually produced at the point at which they are consumed: the act of consumption rather than invention is the focal point for innovation.
1.21 New services are therefore developed using a “market facing” approach, often connected
to information databases generated by people and organisations that articulate and express their requirements and demands as they experience the innovation. This is sometimes described as a more democratic approach to innovation, where companies trial different approaches – such as beta versions of web pages – and respond to user feedback. It also, however, frequently relies upon the ability to analyse large and complex volumes of data copied between machines, potentially raising multiple copyright issues.
1.22 The nature of services innovation implies that answers to technical problems will not lie exclusively within research institutions or companies with proprietary R&D cultures and the means to manage and protect IP. Instead, they will emerge through integration of ideas from a wide range of organisations, some of whom may consider managing IPR to be an unacceptable obstacle in a high value business, raising further challenges to traditional concepts of ownership of IP.
The Next Wave – Cloud Computing and the Internet of Things
1.23 The next wave of digital technologies and services is likely to create opportunities and disruptions in a very broad range of industries. The internet of things – billions of devices and components with an internet address, enabling them to communicate in massive sensing systems – coupled with cloud computing, will underpin more sophisticated applications, and thereby a host of new services: digital wallets will replace cheques and credit cards; personalised electronic adverts will compete with static hoardings; transport, electricity, power and water systems will provide a continuous
Services and the New Innovation Process
1.19 The services which provide most jobs in advanced economies are being changed in other ways by digital technology. Innovations in the insurance industry, for example, rely upon improved data from medicine, demographics and pro ling of individual customer lifestyles. Risk calculations applied to premiums for farmers and event organisers rely upon improved data analysis of weather patterns. Sophisticated assessment of safer cars and better roads can be factored into motor insurance judgments. Understanding these connections and computing the related business risks requires knowledge of what happens at boundaries between systems and the ability to analyse large quantities of data from what, until recently, were separate industries and sectors.
1.20 Collaborative and more “open” distributed innovation processes are especially important because services are not produced in the laboratories and factories of the industrial R&D arena where they can be tested and optimised. Services are usually produced at the point at which they are consumed: the act of consumption rather than invention is the focal point for innovation.
1.21 New services are therefore developed using a “market facing” approach, often connected
to information databases generated by people and organisations that articulate and express their requirements and demands as they experience the innovation. This is sometimes described as a more democratic approach to innovation, where companies trial different approaches – such as beta versions of web pages – and respond to user feedback. It also, however, frequently relies upon the ability to analyse large and complex volumes of data copied between machines, potentially raising multiple copyright issues.
1.22 The nature of services innovation implies that answers to technical problems will not lie exclusively within research institutions or companies with proprietary R&D cultures and the means to manage and protect IP. Instead, they will emerge through integration of ideas from a wide range of organisations, some of whom may consider managing IPR to be an unacceptable obstacle in a high value business, raising further challenges to traditional concepts of ownership of IP.
The Next Wave – Cloud Computing and the Internet of Things
1.23 The next wave of digital technologies and services is likely to create opportunities and disruptions in a very broad range of industries. The internet of things – billions of devices and components with an internet address, enabling them to communicate in massive sensing systems – coupled with cloud computing, will underpin more sophisticated applications, and thereby a host of new services: digital wallets will replace cheques and credit cards; personalised electronic adverts will compete with static hoardings; transport, electricity, power and water systems will provide a continuous
Review of Intellectual Property and Growth 14
real time update of their performance and user status. Firms will offer us advice and services built on analysis of this kind of data – assuming IP law allows them to copy and manipulate it.
1.24 The convergence of technologies is likely to increase the range of context aware, location based services available to and about citizens. In some cases digital content may be transferred
from one system to another automatically as people or businesses interact using digital devices. Improvements in machine to machine learning, for example, may create the possibility for further automation in transfer of content. Interactions may therefore become implicitly as well as explicitly monitored and measured. This data will form new and valuable content to be traded within and between systems in the delivery of new services. Data on context and activities transferred to adjacent systems may be repurposed and traded, giving rise to a range of issues relating to copyright.
1.25 These issues are already visible – as the Review goes to press, concerns are being raised by the discovery that the Apple iPhone tracks and stores its location continuously, giving a complete picture of its user’s movements for later retrieval, with legal justi cation in a short paragraph in a long “terms of use” agreement.23 Questions of IP, privacy, and security are converging in ways that will, over time, present sharp challenges to the current legal framework.
The Work of the Review
1.26 The full shape and impact of this coming revolution in innovation models is, by de nition, unknowable.
1.27 The point is that the UK’s system of IP will be tested by some version of these scenarios and it will need to be ready to adapt. The challenge is to make sure that the IP framework is exible enough to facilitate, rather than obstruct, the capacity for digital technology to deliver growth. This needs to
be accomplished in a way that simultaneously protects, as far as possible, the position of existing communities of rights holders, notably the extraordinary diversity of individuals and rms which make up the UK’s highly successful creative industries.
1.28 Digital technology has already generated enormous turbulence among creative businesses. That is certain to continue, until digital business models establish themselves around a new settlement for the terms and conditions on which digital goods and services are priced in global digital markets. As digital’s full impact extends across the rest of the economy, it is impossible to imagine that the line between IP protection which merits public support and that which does not will remain static.
1.29 The Review has set itself the challenge of identifying 10 recommendations to ensure that
UK policy on IP moves in a direction which will enable the necessary adaptation to take place. The explicit goal of all the recommendations in this review is to support dynamic UK businesses, within and beyond the creative sector, which will deliver innovation, growth and jobs in the years to come.
1.24 The convergence of technologies is likely to increase the range of context aware, location based services available to and about citizens. In some cases digital content may be transferred
from one system to another automatically as people or businesses interact using digital devices. Improvements in machine to machine learning, for example, may create the possibility for further automation in transfer of content. Interactions may therefore become implicitly as well as explicitly monitored and measured. This data will form new and valuable content to be traded within and between systems in the delivery of new services. Data on context and activities transferred to adjacent systems may be repurposed and traded, giving rise to a range of issues relating to copyright.
1.25 These issues are already visible – as the Review goes to press, concerns are being raised by the discovery that the Apple iPhone tracks and stores its location continuously, giving a complete picture of its user’s movements for later retrieval, with legal justi cation in a short paragraph in a long “terms of use” agreement.23 Questions of IP, privacy, and security are converging in ways that will, over time, present sharp challenges to the current legal framework.
The Work of the Review
1.26 The full shape and impact of this coming revolution in innovation models is, by de nition, unknowable.
1.27 The point is that the UK’s system of IP will be tested by some version of these scenarios and it will need to be ready to adapt. The challenge is to make sure that the IP framework is exible enough to facilitate, rather than obstruct, the capacity for digital technology to deliver growth. This needs to
be accomplished in a way that simultaneously protects, as far as possible, the position of existing communities of rights holders, notably the extraordinary diversity of individuals and rms which make up the UK’s highly successful creative industries.
1.28 Digital technology has already generated enormous turbulence among creative businesses. That is certain to continue, until digital business models establish themselves around a new settlement for the terms and conditions on which digital goods and services are priced in global digital markets. As digital’s full impact extends across the rest of the economy, it is impossible to imagine that the line between IP protection which merits public support and that which does not will remain static.
1.29 The Review has set itself the challenge of identifying 10 recommendations to ensure that
UK policy on IP moves in a direction which will enable the necessary adaptation to take place. The explicit goal of all the recommendations in this review is to support dynamic UK businesses, within and beyond the creative sector, which will deliver innovation, growth and jobs in the years to come.
Review of Intellectual Property and Growth 24
3.24 The UK recently13 announced that it would be appointing IP attachés in a number of countries including China and India, re ecting the importance to the UK of sound IP frameworks in these countries, as well as in assisting IP intensive UK rms to exploit new markets. Deployment of evidence-based positions in global negotiations can move parties further from entrenched positions, towards an overriding objective of developing a mutually bene cial world trade in intangibles. This represents a high strategic priority for the United Kingdom.
The Patent Cooperation Treaty
3.25 One area where the international patent system is not functioning well enough is the operation of the Patent Cooperation Treaty system. This system, administered by WIPO, provides a single point of entry to the patent systems of 142 contracting states via a single application. Applications are sent to one of a number of patent of ces which have been designated as “International Search Authorities” for a search to determine if the invention claimed is novel or inventive. The results of the search
are then sent, along with the application, to the individual of ce of the country the applicant wants
protection in, for grant or refusal.
3.26 In theory, this system offers a highly ef cient way of processing patent applications; in particular, by providing a way of only requiring one search worldwide. Unfortunately, as documented by WIPO,14 national of ces have proved reluctant to commit themselves to relying on the international searches, on the grounds that they doubt the quality of the examinations meets their own standards.
The Patent Cooperation Treaty
3.25 One area where the international patent system is not functioning well enough is the operation of the Patent Cooperation Treaty system. This system, administered by WIPO, provides a single point of entry to the patent systems of 142 contracting states via a single application. Applications are sent to one of a number of patent of ces which have been designated as “International Search Authorities” for a search to determine if the invention claimed is novel or inventive. The results of the search
are then sent, along with the application, to the individual of ce of the country the applicant wants
protection in, for grant or refusal.
3.26 In theory, this system offers a highly ef cient way of processing patent applications; in particular, by providing a way of only requiring one search worldwide. Unfortunately, as documented by WIPO,14 national of ces have proved reluctant to commit themselves to relying on the international searches, on the grounds that they doubt the quality of the examinations meets their own standards.
7.4 Like copyright and patents the economic argument for design protection rests on the provision
of an incentive to innovation whose social bene ts exceed the associated costs. It is improbable that
a design rights framework optimised to support innovation and growth would feature a multiplicity of
overlapping rights.
7.5 Levels of design registration are very low, particularly given the size of the design industries and their success. Around 8,000 – 9,000 UK designs are registered annually, split roughly 50/50 between IPO and OHIM registrations.3 We surmise that the public registration systems do not fully meet users’ needs both from these low levels of registration and from the existence of what is in effect a competing register created by the private sector. In their evidence to the Review Anti Copying
in Design (ACID) reported that around 30,000 designs are added to their electronic database annually,
providing an audit trail to substantiate design ownership should the designer’s rights be infringed. This state of affairs – multiple alternative design rights and registers – suggests unnecessary complexity, borne out by our ndings about SME experience of the IP system, discussed in Chapter 9.
Evidence
7.6 Design evidence submitted to the Review was predominantly concerned with protection and enforcement issues. The discrepancy in levels of protection between design right (protecting technical design) and copyright (protecting artistic designs such as illustrations) was highlighted. This applied both in terms of duration and availability of rights and their enforcement. ACID in particular was concerned that SME designers’ products were routinely copied by major High Street retailers. Unlike copyright, which is supported by criminal sanctions and is therefore of interest to police and trading standards of cers, design rights only offer civil sanctions.
7.7 A point made by several designers was the problem of having to tender for contracts with designs which they had little chance of being able to protect, frequently nding their best ideas simply taken without compensation. The designers concerned had invested time and money in developing these designs but either could not afford to take enforcement action or found the law inadequate
to do so. This re ected a broader concern over the costs of litigation, and scepticism that design
rights could be effectively enforced that has been corroborated in research being conducted for the IPO. This work suggests opinion is divided as to whether registering designs will help protect them from infringement.xviii The development of the Digital Copyright Exchange, set out in Chapter 4 of this review, may well be relevant to the design sector and every effort should be made to include design interests in the creation of this Exchange.
7.8 In general, research is limited on design rights, and the issue is complicated by the wide range of industries involved. Different industries have different levels and types of needs from the
IP framework, and they are not yet fully understood. For example, the fashion industry lives with a high rate of appropriation of their designs. They do, however, frequently pursue infringement of their trade marks (i.e. counterfeiting). Controversially, some argue that copying in the fashion industry may actually promote innovation in that once a design is copied this spurs the fashion houses that created the original to move on and design something new.4
7.1 Unlike patents and copyright, design was not explicitly mentioned in the Review’s Terms of Reference. This is surprising, given the economic importance of UK design and the strength with which a number of issues relating to this area of IP protection have been raised in evidence to the Review.
7.2 Design is a wide ranging concept covering a range of industries from fashion design (apparel) to industrial design. According to new estimates by Imperial College, design constitutes the largest contribution to overall intangible investment in the UK economy.1 In 2008 investment in design alone amounted to 1.6 per cent of Gross Domestic Product (GDP).2
Protection Available for Designs
7.3 Design right dates from the eighteenth century, and registered design right from the nineteenth. Since 2003 the EU wide Registered Community Design has been an alternative source of registered design protection in the UK. As well as these registered rights protection for designs is available through the (different) EU and UK unregistered design rights, and copyright also protects some designs.
technology if IP law is to enable rather than inhibit the technology’s potential to contribute to growth. 7.9 Design has an important contribution to make to growth, and it is unsatisfactory that we
start from such a low base of understanding in considering how best to optimise the IP framework
to support this growth. The Review has received a good deal of evidence about the dif culties
designers encounter in enforcing their rights. Knowledge of the relationship between design rights,
and innovation and growth, is inadequate to draw wider conclusions about the implications of these
dif culties for growth or for improvements in design rights and enforcement.
7.5 Levels of design registration are very low, particularly given the size of the design industries and their success. Around 8,000 – 9,000 UK designs are registered annually, split roughly 50/50 between IPO and OHIM registrations.3 We surmise that the public registration systems do not fully meet users’ needs both from these low levels of registration and from the existence of what is in effect a competing register created by the private sector. In their evidence to the Review Anti Copying
in Design (ACID) reported that around 30,000 designs are added to their electronic database annually,
providing an audit trail to substantiate design ownership should the designer’s rights be infringed. This state of affairs – multiple alternative design rights and registers – suggests unnecessary complexity, borne out by our ndings about SME experience of the IP system, discussed in Chapter 9.
Evidence
7.6 Design evidence submitted to the Review was predominantly concerned with protection and enforcement issues. The discrepancy in levels of protection between design right (protecting technical design) and copyright (protecting artistic designs such as illustrations) was highlighted. This applied both in terms of duration and availability of rights and their enforcement. ACID in particular was concerned that SME designers’ products were routinely copied by major High Street retailers. Unlike copyright, which is supported by criminal sanctions and is therefore of interest to police and trading standards of cers, design rights only offer civil sanctions.
7.7 A point made by several designers was the problem of having to tender for contracts with designs which they had little chance of being able to protect, frequently nding their best ideas simply taken without compensation. The designers concerned had invested time and money in developing these designs but either could not afford to take enforcement action or found the law inadequate
to do so. This re ected a broader concern over the costs of litigation, and scepticism that design
rights could be effectively enforced that has been corroborated in research being conducted for the IPO. This work suggests opinion is divided as to whether registering designs will help protect them from infringement.xviii The development of the Digital Copyright Exchange, set out in Chapter 4 of this review, may well be relevant to the design sector and every effort should be made to include design interests in the creation of this Exchange.
7.8 In general, research is limited on design rights, and the issue is complicated by the wide range of industries involved. Different industries have different levels and types of needs from the
IP framework, and they are not yet fully understood. For example, the fashion industry lives with a high rate of appropriation of their designs. They do, however, frequently pursue infringement of their trade marks (i.e. counterfeiting). Controversially, some argue that copying in the fashion industry may actually promote innovation in that once a design is copied this spurs the fashion houses that created the original to move on and design something new.4
7.1 Unlike patents and copyright, design was not explicitly mentioned in the Review’s Terms of Reference. This is surprising, given the economic importance of UK design and the strength with which a number of issues relating to this area of IP protection have been raised in evidence to the Review.
7.2 Design is a wide ranging concept covering a range of industries from fashion design (apparel) to industrial design. According to new estimates by Imperial College, design constitutes the largest contribution to overall intangible investment in the UK economy.1 In 2008 investment in design alone amounted to 1.6 per cent of Gross Domestic Product (GDP).2
Protection Available for Designs
7.3 Design right dates from the eighteenth century, and registered design right from the nineteenth. Since 2003 the EU wide Registered Community Design has been an alternative source of registered design protection in the UK. As well as these registered rights protection for designs is available through the (different) EU and UK unregistered design rights, and copyright also protects some designs.
Design Rights – a Patchwork of Protection
There are four different and to some degree overlapping forms of design right in the UK:
There are four different and to some degree overlapping forms of design right in the UK:
- a registered right covering the UK available from the IPO;
- a registered right covering the EU available from the Of ce of Harmonisation for the Internal
Market (OHIM); - an unregistered right covering the UK;
- an unregistered EU right.
There are also circumstances in which copyright can protect designs, and ones in which trade mark protection is relevant. Within this patchwork are differences as to what forms of design are covered, how long the rights last, what is required to prove infringement, and what the penalties for infringement may be.
3.18 Beyond the EU there are two key global fora which specialise in IP: the World Intellectual Property Organisation (WIPO) and the Trade Related aspects of Intellectual Property rights (TRIPs) Council, which is part of the World Trade Organisation (WTO).
3.19 WIPO is the United Nations (UN) agency which administers most of the global IP treaties. In recent years, divisions between the developed and developing world have led to a general stalling of discussions on a range of issues. However, the current Director General, Francis Gurry, has shown a strong commitment to reforming the organisation, focusing it upon economic issues and improving its effectiveness since his appointment in 2008.
3.20 The TRIPs Agreement is one of the agreements underlying the WTO, and ties a number of the key provisions of international treaties into the WTO dispute resolution system, meaning that violation of those provisions can lead to trade sanctions within the WTO framework. Development issues have come to the fore in recent years, particularly at the beginning of the Doha trade round, when access to medicines for developing countries was a key issue in the trade talks.
3.21 With the basic structure of rights generally established by international treaties and in particular the TRIPs Agreement, attention in international negotiations – particularly Free Trade Agreements (FTAs) and most recently the Anti Counterfeiting Trade Agreement (ACTA) – has focused on effective enforcement of rights.
3.22 It is apparent from the sometimes heated nature of discussions in WIPO and the WTO that developing countries often feel the developed world is seeking to impose an approach to IP which serves the interest of advanced economies upon countries whose economies are at an earlier stage of development. The evidence based approach advocated in this review offers a better basis upon which to seek routes through these complex questions and con icts of interest.
3.23 The evidence suggests that developed economies such as the UK’s bene t from effective IPR regimes, and in particular from effective enforcement regimes, in markets for their goods. It also appears to be the case that for low income countries with a weak scienti c and technological infrastructure, stronger IP protection has little effect on their own economic growth and may even hinder it – while having no signi cant effect on the likelihood of developed country industry seeking to sell goods there. Access to infrastructure, nance and skills can be much more important to investment decisions in low income countries than the effectiveness of the IP regime. By contrast, for middle income and emerging economies such as China, improved enforcement regimes may yield better rewards both for domestic innovation and returns to foreign rms through foreign direct investment and technical cooperation.12
3.19 WIPO is the United Nations (UN) agency which administers most of the global IP treaties. In recent years, divisions between the developed and developing world have led to a general stalling of discussions on a range of issues. However, the current Director General, Francis Gurry, has shown a strong commitment to reforming the organisation, focusing it upon economic issues and improving its effectiveness since his appointment in 2008.
3.20 The TRIPs Agreement is one of the agreements underlying the WTO, and ties a number of the key provisions of international treaties into the WTO dispute resolution system, meaning that violation of those provisions can lead to trade sanctions within the WTO framework. Development issues have come to the fore in recent years, particularly at the beginning of the Doha trade round, when access to medicines for developing countries was a key issue in the trade talks.
3.21 With the basic structure of rights generally established by international treaties and in particular the TRIPs Agreement, attention in international negotiations – particularly Free Trade Agreements (FTAs) and most recently the Anti Counterfeiting Trade Agreement (ACTA) – has focused on effective enforcement of rights.
3.22 It is apparent from the sometimes heated nature of discussions in WIPO and the WTO that developing countries often feel the developed world is seeking to impose an approach to IP which serves the interest of advanced economies upon countries whose economies are at an earlier stage of development. The evidence based approach advocated in this review offers a better basis upon which to seek routes through these complex questions and con icts of interest.
3.23 The evidence suggests that developed economies such as the UK’s bene t from effective IPR regimes, and in particular from effective enforcement regimes, in markets for their goods. It also appears to be the case that for low income countries with a weak scienti c and technological infrastructure, stronger IP protection has little effect on their own economic growth and may even hinder it – while having no signi cant effect on the likelihood of developed country industry seeking to sell goods there. Access to infrastructure, nance and skills can be much more important to investment decisions in low income countries than the effectiveness of the IP regime. By contrast, for middle income and emerging economies such as China, improved enforcement regimes may yield better rewards both for domestic innovation and returns to foreign rms through foreign direct investment and technical cooperation.12
1.12 As advanced economies become ever more knowledge intensive, the stakes involved in
IP are rising. Profound and far from complete economic and technological changes mean that an appropriate and enabling IP framework has become one of the prerequisites for prosperity. IP related spending has come to dominate rms’ investment across the developed world while services now dominate these economies.9 UK rms spent £137 billion on intangible investment, or investment in IP, compared to £104 billion on xed assets in 2008 (see Figure 1.1).10 This investment in IP is worth 13 per cent of market gross value added (GVA), with almost half of it covered by IPRs.11 Global trade in patent and creative industry licences alone is now worth more than £600 billion a year, over ve per cent of all world trade - and rising.12
The Innovation Ecosystem
1.13 Small and young innovative rms are playing an increasing role in job creation. They represent only six per cent of UK rms with more than 10 employees but they have created 54 per cent of all new jobs since 2002,13 although churn amongst Small and Medium Enterprises (SMEs) remains high and their contribution to net employment is lower than this.14 At the same time, larger rms continue to play a crucial but changing role in innovation, with less emphasis on in-house R&D
IP are rising. Profound and far from complete economic and technological changes mean that an appropriate and enabling IP framework has become one of the prerequisites for prosperity. IP related spending has come to dominate rms’ investment across the developed world while services now dominate these economies.9 UK rms spent £137 billion on intangible investment, or investment in IP, compared to £104 billion on xed assets in 2008 (see Figure 1.1).10 This investment in IP is worth 13 per cent of market gross value added (GVA), with almost half of it covered by IPRs.11 Global trade in patent and creative industry licences alone is now worth more than £600 billion a year, over ve per cent of all world trade - and rising.12
The Innovation Ecosystem
1.13 Small and young innovative rms are playing an increasing role in job creation. They represent only six per cent of UK rms with more than 10 employees but they have created 54 per cent of all new jobs since 2002,13 although churn amongst Small and Medium Enterprises (SMEs) remains high and their contribution to net employment is lower than this.14 At the same time, larger rms continue to play a crucial but changing role in innovation, with less emphasis on in-house R&D
Figure 1.1 UK Business Investment, £bn
Source: NESTA (2011)
Review of Intellectual Property and Growth 12
and increased partnerships with smaller companies developing new technologies. These trends
are very apparent in, for example, the biotechnology and software sectors. Hence the relationship between SMEs and larger rms can be symbiotic: they provide each other with direct support for innovative thinking and work together on R&D. Larger rms then provide routes to new and emerging markets for smaller rms.
1.14 Another shift in the innovation ecosystem is the increasing internationalisation of research – in 2007 the top 50 European corporate R&D spenders spent $51 billion of their $117 billion total R&D spend overseas.15 This shift in the landscape changes the pattern of how rms have to manage their still largely nation-speci c IPRs and indicate the importance of policy makers taking an international approach to IP systems.
The Increasing Impacts of Transaction Costs
1.15 IP transaction costs have risen as rights users navigate an ever more densely populated landscape of increasingly subdivided rights. This presents a risk analogous to the problem
familiar in the world of planning, where small ownership interests can block value generating large developments. In the patent world, a surfeit of property rights can mean that the transaction cost of acquiring permission to innovate or create new work is prohibitively high. Research shows that in certain technology elds this can cause a kind of gridlock with innovation delayed or even prevented.16 Michael Heller, an American law professor, coined the phrase “tragedy of the anticommons” to describe this situation,17 which he says has resulted in signi cant blockages in areas such as medical research.18
1.16 In the copyright area transaction costs can create similar problems. Digital technologies have brought large reductions in the cost of copying, storage and distribution for words, music, images
and all forms of data. This has the effect of making transaction costs around rights a much more signi cant element in the business equation and so, potentially, a likelier barrier to licensing and follow on innovation.
The Transforming Effects of Digital Technology
1.17 Digital technology is probably the most important and transformative technology of our time. Because digital is fundamentally an information and communication technology (ICT), intellectual property rights lie at its heart. Not only has ICT adoption and use been among the strongest drivers
of growth,19 but it has pushed content and communication technology into new uses, meaning the IP system has become part of people’s daily lives.20 This has transformed us all into regular, if not daily, copyright creators and allows rms to capture information on customers and transactions in ways that help them experiment in real time with business models and marketing approaches.21 Digital also gives rms the opportunity to market themselves locally, nationally and internationally at relatively low cost, reaching previously inaccessible customers. These are already unprecedentedly global markets, even though the internet has yet to be used directly by two thirds of the world’s population.22
are very apparent in, for example, the biotechnology and software sectors. Hence the relationship between SMEs and larger rms can be symbiotic: they provide each other with direct support for innovative thinking and work together on R&D. Larger rms then provide routes to new and emerging markets for smaller rms.
1.14 Another shift in the innovation ecosystem is the increasing internationalisation of research – in 2007 the top 50 European corporate R&D spenders spent $51 billion of their $117 billion total R&D spend overseas.15 This shift in the landscape changes the pattern of how rms have to manage their still largely nation-speci c IPRs and indicate the importance of policy makers taking an international approach to IP systems.
The Increasing Impacts of Transaction Costs
1.15 IP transaction costs have risen as rights users navigate an ever more densely populated landscape of increasingly subdivided rights. This presents a risk analogous to the problem
familiar in the world of planning, where small ownership interests can block value generating large developments. In the patent world, a surfeit of property rights can mean that the transaction cost of acquiring permission to innovate or create new work is prohibitively high. Research shows that in certain technology elds this can cause a kind of gridlock with innovation delayed or even prevented.16 Michael Heller, an American law professor, coined the phrase “tragedy of the anticommons” to describe this situation,17 which he says has resulted in signi cant blockages in areas such as medical research.18
1.16 In the copyright area transaction costs can create similar problems. Digital technologies have brought large reductions in the cost of copying, storage and distribution for words, music, images
and all forms of data. This has the effect of making transaction costs around rights a much more signi cant element in the business equation and so, potentially, a likelier barrier to licensing and follow on innovation.
The Transforming Effects of Digital Technology
1.17 Digital technology is probably the most important and transformative technology of our time. Because digital is fundamentally an information and communication technology (ICT), intellectual property rights lie at its heart. Not only has ICT adoption and use been among the strongest drivers
of growth,19 but it has pushed content and communication technology into new uses, meaning the IP system has become part of people’s daily lives.20 This has transformed us all into regular, if not daily, copyright creators and allows rms to capture information on customers and transactions in ways that help them experiment in real time with business models and marketing approaches.21 Digital also gives rms the opportunity to market themselves locally, nationally and internationally at relatively low cost, reaching previously inaccessible customers. These are already unprecedentedly global markets, even though the internet has yet to be used directly by two thirds of the world’s population.22
Review of Intellectual Property and Growth 13
1.18 Because copyright governs the right to own and use data and information, as well as the output of authors, musicians, photographers and lm makers, copyright law is now of primary interest to players across the whole of the knowledge economy, not just those involved in the creative industries. Digital technologies are based on copying, so copyright becomes their regulator: a role it was never designed to perform.
Services and the New Innovation Process
1.19 The services which provide most jobs in advanced economies are being changed in other ways by digital technology. Innovations in the insurance industry, for example, rely upon improved data from medicine, demographics and pro ling of individual customer lifestyles. Risk calculations applied to premiums for farmers and event organisers rely upon improved data analysis of weather patterns. Sophisticated assessment of safer cars and better roads can be factored into motor insurance judgments. Understanding these connections and computing the related business risks requires knowledge of what happens at boundaries between systems and the ability to analyse large quantities of data from what, until recently, were separate industries and sectors.
1.20 Collaborative and more “open” distributed innovation processes are especially important because services are not produced in the laboratories and factories of the industrial R&D arena where they can be tested and optimised. Services are usually produced at the point at which they are consumed: the act of consumption rather than invention is the focal point for innovation.
1.21 New services are therefore developed using a “market facing” approach, often connected
to information databases generated by people and organisations that articulate and express their requirements and demands as they experience the innovation. This is sometimes described as a more democratic approach to innovation, where companies trial different approaches – such as beta versions of web pages – and respond to user feedback. It also, however, frequently relies upon the ability to analyse large and complex volumes of data copied between machines, potentially raising multiple copyright issues.
1.22 The nature of services innovation implies that answers to technical problems will not lie exclusively within research institutions or companies with proprietary R&D cultures and the means to manage and protect IP. Instead, they will emerge through integration of ideas from a wide range of organisations, some of whom may consider managing IPR to be an unacceptable obstacle in a high value business, raising further challenges to traditional concepts of ownership of IP.
The Next Wave – Cloud Computing and the Internet of Things
1.23 The next wave of digital technologies and services is likely to create opportunities and disruptions in a very broad range of industries. The internet of things – billions of devices and components with an internet address, enabling them to communicate in massive sensing systems – coupled with cloud computing, will underpin more sophisticated applications, and thereby a host of new services: digital wallets will replace cheques and credit cards; personalised electronic adverts will compete with static hoardings; transport, electricity, power and water systems will provide a continuous
Services and the New Innovation Process
1.19 The services which provide most jobs in advanced economies are being changed in other ways by digital technology. Innovations in the insurance industry, for example, rely upon improved data from medicine, demographics and pro ling of individual customer lifestyles. Risk calculations applied to premiums for farmers and event organisers rely upon improved data analysis of weather patterns. Sophisticated assessment of safer cars and better roads can be factored into motor insurance judgments. Understanding these connections and computing the related business risks requires knowledge of what happens at boundaries between systems and the ability to analyse large quantities of data from what, until recently, were separate industries and sectors.
1.20 Collaborative and more “open” distributed innovation processes are especially important because services are not produced in the laboratories and factories of the industrial R&D arena where they can be tested and optimised. Services are usually produced at the point at which they are consumed: the act of consumption rather than invention is the focal point for innovation.
1.21 New services are therefore developed using a “market facing” approach, often connected
to information databases generated by people and organisations that articulate and express their requirements and demands as they experience the innovation. This is sometimes described as a more democratic approach to innovation, where companies trial different approaches – such as beta versions of web pages – and respond to user feedback. It also, however, frequently relies upon the ability to analyse large and complex volumes of data copied between machines, potentially raising multiple copyright issues.
1.22 The nature of services innovation implies that answers to technical problems will not lie exclusively within research institutions or companies with proprietary R&D cultures and the means to manage and protect IP. Instead, they will emerge through integration of ideas from a wide range of organisations, some of whom may consider managing IPR to be an unacceptable obstacle in a high value business, raising further challenges to traditional concepts of ownership of IP.
The Next Wave – Cloud Computing and the Internet of Things
1.23 The next wave of digital technologies and services is likely to create opportunities and disruptions in a very broad range of industries. The internet of things – billions of devices and components with an internet address, enabling them to communicate in massive sensing systems – coupled with cloud computing, will underpin more sophisticated applications, and thereby a host of new services: digital wallets will replace cheques and credit cards; personalised electronic adverts will compete with static hoardings; transport, electricity, power and water systems will provide a continuous
Review of Intellectual Property and Growth 14
real time update of their performance and user status. Firms will offer us advice and services built on analysis of this kind of data – assuming IP law allows them to copy and manipulate it.
1.24 The convergence of technologies is likely to increase the range of context aware, location based services available to and about citizens. In some cases digital content may be transferred
from one system to another automatically as people or businesses interact using digital devices. Improvements in machine to machine learning, for example, may create the possibility for further automation in transfer of content. Interactions may therefore become implicitly as well as explicitly monitored and measured. This data will form new and valuable content to be traded within and between systems in the delivery of new services. Data on context and activities transferred to adjacent systems may be repurposed and traded, giving rise to a range of issues relating to copyright.
1.25 These issues are already visible – as the Review goes to press, concerns are being raised by the discovery that the Apple iPhone tracks and stores its location continuously, giving a complete picture of its user’s movements for later retrieval, with legal justi cation in a short paragraph in a long “terms of use” agreement.23 Questions of IP, privacy, and security are converging in ways that will, over time, present sharp challenges to the current legal framework.
The Work of the Review
1.26 The full shape and impact of this coming revolution in innovation models is, by de nition, unknowable.
1.27 The point is that the UK’s system of IP will be tested by some version of these scenarios and it will need to be ready to adapt. The challenge is to make sure that the IP framework is exible enough to facilitate, rather than obstruct, the capacity for digital technology to deliver growth. This needs to
be accomplished in a way that simultaneously protects, as far as possible, the position of existing communities of rights holders, notably the extraordinary diversity of individuals and rms which make up the UK’s highly successful creative industries.
1.28 Digital technology has already generated enormous turbulence among creative businesses. That is certain to continue, until digital business models establish themselves around a new settlement for the terms and conditions on which digital goods and services are priced in global digital markets. As digital’s full impact extends across the rest of the economy, it is impossible to imagine that the line between IP protection which merits public support and that which does not will remain static.
1.29 The Review has set itself the challenge of identifying 10 recommendations to ensure that
UK policy on IP moves in a direction which will enable the necessary adaptation to take place. The explicit goal of all the recommendations in this review is to support dynamic UK businesses, within and beyond the creative sector, which will deliver innovation, growth and jobs in the years to come.
1.24 The convergence of technologies is likely to increase the range of context aware, location based services available to and about citizens. In some cases digital content may be transferred
from one system to another automatically as people or businesses interact using digital devices. Improvements in machine to machine learning, for example, may create the possibility for further automation in transfer of content. Interactions may therefore become implicitly as well as explicitly monitored and measured. This data will form new and valuable content to be traded within and between systems in the delivery of new services. Data on context and activities transferred to adjacent systems may be repurposed and traded, giving rise to a range of issues relating to copyright.
1.25 These issues are already visible – as the Review goes to press, concerns are being raised by the discovery that the Apple iPhone tracks and stores its location continuously, giving a complete picture of its user’s movements for later retrieval, with legal justi cation in a short paragraph in a long “terms of use” agreement.23 Questions of IP, privacy, and security are converging in ways that will, over time, present sharp challenges to the current legal framework.
The Work of the Review
1.26 The full shape and impact of this coming revolution in innovation models is, by de nition, unknowable.
1.27 The point is that the UK’s system of IP will be tested by some version of these scenarios and it will need to be ready to adapt. The challenge is to make sure that the IP framework is exible enough to facilitate, rather than obstruct, the capacity for digital technology to deliver growth. This needs to
be accomplished in a way that simultaneously protects, as far as possible, the position of existing communities of rights holders, notably the extraordinary diversity of individuals and rms which make up the UK’s highly successful creative industries.
1.28 Digital technology has already generated enormous turbulence among creative businesses. That is certain to continue, until digital business models establish themselves around a new settlement for the terms and conditions on which digital goods and services are priced in global digital markets. As digital’s full impact extends across the rest of the economy, it is impossible to imagine that the line between IP protection which merits public support and that which does not will remain static.
1.29 The Review has set itself the challenge of identifying 10 recommendations to ensure that
UK policy on IP moves in a direction which will enable the necessary adaptation to take place. The explicit goal of all the recommendations in this review is to support dynamic UK businesses, within and beyond the creative sector, which will deliver innovation, growth and jobs in the years to come.
Review of Intellectual Property and Growth 24
3.24 The UK recently13 announced that it would be appointing IP attachés in a number of countries including China and India, re ecting the importance to the UK of sound IP frameworks in these countries, as well as in assisting IP intensive UK rms to exploit new markets. Deployment of evidence-based positions in global negotiations can move parties further from entrenched positions, towards an overriding objective of developing a mutually bene cial world trade in intangibles. This represents a high strategic priority for the United Kingdom.
The Patent Cooperation Treaty
3.25 One area where the international patent system is not functioning well enough is the operation of the Patent Cooperation Treaty system. This system, administered by WIPO, provides a single point of entry to the patent systems of 142 contracting states via a single application. Applications are sent to one of a number of patent of ces which have been designated as “International Search Authorities” for a search to determine if the invention claimed is novel or inventive. The results of the search
are then sent, along with the application, to the individual of ce of the country the applicant wants
protection in, for grant or refusal.
3.26 In theory, this system offers a highly ef cient way of processing patent applications; in particular, by providing a way of only requiring one search worldwide. Unfortunately, as documented by WIPO,14 national of ces have proved reluctant to commit themselves to relying on the international searches, on the grounds that they doubt the quality of the examinations meets their own standards.
The Patent Cooperation Treaty
3.25 One area where the international patent system is not functioning well enough is the operation of the Patent Cooperation Treaty system. This system, administered by WIPO, provides a single point of entry to the patent systems of 142 contracting states via a single application. Applications are sent to one of a number of patent of ces which have been designated as “International Search Authorities” for a search to determine if the invention claimed is novel or inventive. The results of the search
are then sent, along with the application, to the individual of ce of the country the applicant wants
protection in, for grant or refusal.
3.26 In theory, this system offers a highly ef cient way of processing patent applications; in particular, by providing a way of only requiring one search worldwide. Unfortunately, as documented by WIPO,14 national of ces have proved reluctant to commit themselves to relying on the international searches, on the grounds that they doubt the quality of the examinations meets their own standards.
7.4 Like copyright and patents the economic argument for design protection rests on the provision of an incentive to innovation whose social bene ts exceed the associated costs. It is improbable that a design rights framework optimised to support innovation and growth would feature a multiplicity of overlapping rights.
7.5 Levels of design registration are very low, particularly given the size of the design industries and their success. Around 8,000 – 9,000 UK designs are registered annually, split roughly 50/50 between IPO and OHIM registrations.3 We surmise that the public registration systems do not fully meet users’ needs both from these low levels of registration and from the existence of what is in effect a competing register created by the private sector. In their evidence to the Review Anti Copying
in Design (ACID) reported that around 30,000 designs are added to their electronic database annually,
providing an audit trail to substantiate design ownership should the designer’s rights be infringed. This state of affairs – multiple alternative design rights and registers – suggests unnecessary complexity, borne out by our ndings about SME experience of the IP system, discussed in Chapter 9.
Evidence
7.6 Design evidence submitted to the Review was predominantly concerned with protection and enforcement issues. The discrepancy in levels of protection between design right (protecting technical design) and copyright (protecting artistic designs such as illustrations) was highlighted. This applied both in terms of duration and availability of rights and their enforcement. ACID in particular was concerned that SME designers’ products were routinely copied by major High Street retailers. Unlike copyright, which is supported by criminal sanctions and is therefore of interest to police and trading standards of cers, design rights only offer civil sanctions.
7.7 A point made by several designers was the problem of having to tender for contracts with designs which they had little chance of being able to protect, frequently nding their best ideas simply taken without compensation. The designers concerned had invested time and money in developing these designs but either could not afford to take enforcement action or found the law inadequate
to do so. This re ected a broader concern over the costs of litigation, and scepticism that design
rights could be effectively enforced that has been corroborated in research being conducted for the IPO. This work suggests opinion is divided as to whether registering designs will help protect them from infringement.xviii The development of the Digital Copyright Exchange, set out in Chapter 4 of this review, may well be relevant to the design sector and every effort should be made to include design interests in the creation of this Exchange.
7.8 In general, research is limited on design rights, and the issue is complicated by the wide range of industries involved. Different industries have different levels and types of needs from theIP framework, and they are not yet fully understood. For example, the fashion industry lives with a high rate of appropriation of their designs. They do, however, frequently pursue infringement of their trade marks (i.e. counterfeiting). Controversially, some argue that copying in the fashion industry may actually promote innovation in that once a design is copied this spurs the fashion houses that created the original to move on and design something new.4
xviii Preliminary research for the IPO conducted by Imperial College.
7.5 Levels of design registration are very low, particularly given the size of the design industries and their success. Around 8,000 – 9,000 UK designs are registered annually, split roughly 50/50 between IPO and OHIM registrations.3 We surmise that the public registration systems do not fully meet users’ needs both from these low levels of registration and from the existence of what is in effect a competing register created by the private sector. In their evidence to the Review Anti Copying
in Design (ACID) reported that around 30,000 designs are added to their electronic database annually,
providing an audit trail to substantiate design ownership should the designer’s rights be infringed. This state of affairs – multiple alternative design rights and registers – suggests unnecessary complexity, borne out by our ndings about SME experience of the IP system, discussed in Chapter 9.
Evidence
7.6 Design evidence submitted to the Review was predominantly concerned with protection and enforcement issues. The discrepancy in levels of protection between design right (protecting technical design) and copyright (protecting artistic designs such as illustrations) was highlighted. This applied both in terms of duration and availability of rights and their enforcement. ACID in particular was concerned that SME designers’ products were routinely copied by major High Street retailers. Unlike copyright, which is supported by criminal sanctions and is therefore of interest to police and trading standards of cers, design rights only offer civil sanctions.
7.7 A point made by several designers was the problem of having to tender for contracts with designs which they had little chance of being able to protect, frequently nding their best ideas simply taken without compensation. The designers concerned had invested time and money in developing these designs but either could not afford to take enforcement action or found the law inadequate
to do so. This re ected a broader concern over the costs of litigation, and scepticism that design
rights could be effectively enforced that has been corroborated in research being conducted for the IPO. This work suggests opinion is divided as to whether registering designs will help protect them from infringement.xviii The development of the Digital Copyright Exchange, set out in Chapter 4 of this review, may well be relevant to the design sector and every effort should be made to include design interests in the creation of this Exchange.
7.8 In general, research is limited on design rights, and the issue is complicated by the wide range of industries involved. Different industries have different levels and types of needs from theIP framework, and they are not yet fully understood. For example, the fashion industry lives with a high rate of appropriation of their designs. They do, however, frequently pursue infringement of their trade marks (i.e. counterfeiting). Controversially, some argue that copying in the fashion industry may actually promote innovation in that once a design is copied this spurs the fashion houses that created the original to move on and design something new.4
xviii Preliminary research for the IPO conducted by Imperial College.
Review of Intellectual Property and Growth 65
Conclusions
7.9 Design has an important contribution to make to growth, and it is unsatisfactory that we start from such a low base of understanding in considering how best to optimise the IP framework to support this growth. The Review has received a good deal of evidence about the dif culties designers encounter in enforcing their rights. Knowledge of the relationship between design rights, and innovation and growth, is inadequate to draw wider conclusions about the implications of these dif culties for growth or for improvements in design rights and enforcement.
7.10 We conclude with an example which highlights the risks associated with the current thinly evidenced and reactive approach to policy. Digital technology is altering the nature of design. It has radically altered the way in which many designs are produced, and the development of fabrication through “3D printing” can be expected to have a substantial impact. This development alone may be suf cient to require reconsideration of the interactions in law between copyright and design.
In Chapter 10 we discuss the reactive character of the IP policy machinery. We hope that 3D
reproduction does not become a case study in the shortcomings of this approach. The copyright
issues associated with 3D reproduction need to be addressed before it becomes a widely used
7.9 Design has an important contribution to make to growth, and it is unsatisfactory that we start from such a low base of understanding in considering how best to optimise the IP framework to support this growth. The Review has received a good deal of evidence about the dif culties designers encounter in enforcing their rights. Knowledge of the relationship between design rights, and innovation and growth, is inadequate to draw wider conclusions about the implications of these dif culties for growth or for improvements in design rights and enforcement.
7.10 We conclude with an example which highlights the risks associated with the current thinly evidenced and reactive approach to policy. Digital technology is altering the nature of design. It has radically altered the way in which many designs are produced, and the development of fabrication through “3D printing” can be expected to have a substantial impact. This development alone may be suf cient to require reconsideration of the interactions in law between copyright and design.
In Chapter 10 we discuss the reactive character of the IP policy machinery. We hope that 3D
reproduction does not become a case study in the shortcomings of this approach. The copyright
issues associated with 3D reproduction need to be addressed before it becomes a widely used
7.10 We conclude with an example which highlights the risks associated with the current thinly
evidenced and reactive approach to policy. Digital technology is altering the nature of design. It has
radically altered the way in which many designs are produced, and the development of fabrication
through “3D printing” can be expected to have a substantial impact. This development alone may
be suf cient to require reconsideration of the interactions in law between copyright and design.
In Chapter 10 we discuss the reactive character of the IP policy machinery. We hope that 3D
reproduction does not become a case study in the shortcomings of this approach. The copyright
issues associated with 3D reproduction need to be addressed before it becomes a widely used
technology if IP law is to enable rather than inhibit the technology’s potential to contribute to growth.
In Chapter 10 we discuss the reactive character of the IP policy machinery. We hope that 3D
reproduction does not become a case study in the shortcomings of this approach. The copyright
issues associated with 3D reproduction need to be addressed before it becomes a widely used
technology if IP law is to enable rather than inhibit the technology’s potential to contribute to growth.
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