BEFORE THE U.S. INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR OFFICE OF MANAGEMENT AND BUDGET

Comments of the R Street Institute

RE: Development of the Joint Strategic Plan on Intellectual Property Enforcement

83 FR 46522

Docket No. 2018-19863

Nov. 13, 2018

In response to the Sept. 13, 2018 Federal Register notice requesting written submissions regarding the U.S. Intellectual Property Enforcement Coordinator (IPEC)’s fourth iteration of the three-year Joint Strategic Plan for intellectual property enforcement, the R Street Institute (“R Street”) submits these comments.

The R Street Institute is a non-profit, non-partisan public policy research organization that promotes free markets and limited, effective government. In addition to the Washington, D.C. headquarters, R Street has offices in Georgia, Texas, Ohio, California and Massachusetts. R Street works extensively on both state and national policy on a range of topics from intellectual property enforcement to trade. R Street’s interest in this filing is to ensure the U.S. intellectual property system remains flexible and accessible in the digital age.

Ever since its origins in the Defense Department’s ARPANET, the United States has been a leader in Internet technology. Today, however, the Internet and computer technologies have created new legal questions for policymakers, ranging from how to adequately distinguish between legally used and potentially infringing content on online platforms to whether the use of existing data sets for machine learning is transformative enough to be considered a fair use.

In addition, the Internet has become an invaluable tool for content creators who wish to produce and sell their individualized content without having to give up many of their legal rights to legacy, third-party entities seeking compensation to distribute their work. Indeed, through a model of allowing creators to place their content online and monetize that content through a variety of novel revenue models, the Internet has flourished. Consumers also benefit from this innovative and flexible way to acquire content legally rather than through piracy.

Accordingly, these comments will specifically discuss how the United States can combat infringement in a way that allows the Internet to remain open and unencumbered by onerous enforcement mechanisms. In particular, they discuss (1) the disruption and elimination of infringement networks within the United States and other countries; and (2) engagement and partnership with the private sector and other stakeholders.

In addition to answering the two prompts provided in the federal register notice, R Street has suggested a list of roundtable ideas for 2019. Also attached is a copy of R Street’s white paper from April 2018 that discusses cabining the roles of the International Trade Commission and intellectual property enforcement.

Disrupting and Eliminating Infringement Networks in the United States and in Other Countries

Article I, Section 8, Clause 8 of the Constitution, commonly referred to as the “progress clause,” gives Congress the power to issue patents and copyrights for a specific purpose: “to promote the progress of science and useful arts.” This section thus simultaneously recognizes the fundamental importance of intellectual property and emphasizes the limited nature of the rights provided.

As IPEC’s “Annual Intellectual Property Report to Congress” states, “intellectual property is the backbone of nearly every industry in the United States: it supports job growth, the arts, sciences, technology, and creates a time-limited framework for which innovators can flourish.” A creator may retain full control over their work, but U.S. copyright law provides for what is known as “limitations and exceptions” to copyright. The most notable of these limitations and exceptions is fair use. Limitations and exceptions are not “circumvention of copyright,” as they are sometimes simplistically mischaracterized, but rather are an integral part of copyright law by which creators can legally use copyrighted works to create new ones without being liable for infringement in a variety of ways—most importantly, by making so-called “transformative” uses of copyrighted works.

These limitations and exceptions are the basis of a workable copyright system that respects the First Amendment and promotes industry growth. One example of this is the use of machine learning when creating artificial intelligence (“AI”). The way AI learns is by ingesting “training data.” By analyzing this data, the AI can “teach” itself how to do new things such as recognize a voice (like Apple’s Siri), park a car (like General Motors’ “Park Assist”) or even create a painting (like the one auctioned at Christie’s in October). But in many cases, the content data sets will be subject to copyright protection, for example, when the training data is made up of novels or written works used to educate an AI on English grammatical structure. Thus, AI developers may be dependent upon the fair-use doctrine to train AI systems.

Fair use is important to the growth of the U.S. economy. In addition to AI, it is important for a variety of reasons, such as music, video and digital distribution. Musicians such as Kanye West depend heavily on sampling of others’ music to create new and transformative pieces; in the absence of fair use, only well-connected and established artists would be able to obtain the licenses necessary to make such culturally valuable works. And everyday users, such as moms who upload cute videos of their children dancing, rely on fair use so as not to be liable for hundreds of thousands of dollars in statutory damages because of music playing in the background.

To remain strong competitors within the international market, we must therefore have a robust and flexible system that allows for authors’ works to be protected and for new entrants to the marketplace. As such, R Street is discouraged by the United States-Mexico-Canada Agreement, which does not include fair use. Due to the nature of fair use as the backbone for the legal creation of transformative content, R Street believes that U.S. trade negotiators should push for a fair-use standard in USMCA, and calls upon IPEC to encourage the USTR to do so.

Engagement and Partnership with the Private Sector and Other Stakeholders

R Street agrees with IPEC that piracy in the digital age is a serious problem. And we are encouraged by the efforts taken by the office to combat it. However, there are many ways to enforce copyrights and we believe that more legal opportunities to consume content will lead to a decrease in piracy. Indeed, we do not agree with divisive tactics, such as targeting a single user whose IP address is associated with uploads of infringing content, that are being taken by the legacy entertainment industry. While their calls for strengthened enforcement are not without merit, their approach is haphazard and will not serve the ultimate goal of allowing creators to protect their works. Instead, it invites copyright infringement by sending rogue online pirates further underground.

To consumers, digital piracy is but one method of obtaining digital goods—a method that, if not for the industry’s consistent refusal to lead with innovative business models, would often be economically substituted for legal means. Other innovators have created digital platforms to offer a wide variety of ways consumers can legally access copyrighted materials such as movies and music. In turn, this has curbed piracy and created new ways artists can receive payment for their goods online.

A study conducted for the digital streaming service YouTube found that since the advent of this ad-based platform, piracy has substantially decreased and new, independently created content has increased. Furthermore, as users embrace YouTube as a platform for discovery, content creators have seen steady increases in ticket, merchandise and fan-club sales. Unlike twenty years ago, when an artist was expected to acquire wealth through their record and ticket sales, they can make up much of the cost through a multitude of third-party means. Furthermore, and most important to this filing, the study found that if the service did not exist, 85 percent of time spent on the platform would then be used on illegal platforms promoting infringing content. It also found that piracy would increase by 29 percent.

R Street agrees that digital piracy is a problem. And IPEC should use legal enforcement mechanisms to curb it. However, R Street cautions against taking a stringent approach that thwarts the emergence of new, private and legal platforms. As shown, if legal options are available and accessible, consumers will use them.

Roundtables

R Street would like the Office to consider instituting public and private partnership roundtables and would like to encourage these roundtables to be live-streamed for those who cannot participate. Roundtables allow the government to take input from outside groups and, in turn, for outside groups to get to know policymakers and share their expertise.

Below is a list of roundtable ideas for your consideration:

  • How can the United States encourage other countries to adopt a model similar to fair use, thereby obtaining the many economic and innovative benefits of the fair-use economy?
  • How should the United States think about data localization when it comes to intellectual-property enforcement?
  • How can the United States think about patent policy as a way to promote generic pharmaceuticals?
  • How can the United States balance the jurisdiction of Article III courts and the International Trade Commission for patent litigation?
  • Given the importance of fair use to artificial intelligence and machine-learning technology, does the United States need to review how flexible this standard is when it comes to artificial intelligence?

Preserving the Role of the Courts through International Trade Commission (ITC) Patent Reform

Attached is a white paper entitled “Preserving the role of the courts through ITC patent reform” from R Street’s Technology and Innovation Policy Associate Fellow, Bill Watson. In it, Watson describes how Article III courts are perfectly capable of hearing nearly all patent cases involving imports, thus making the ITC’s patent powers largely redundant. Having two litigation venues with different rules and remedies is bad for the United States’ patent system and Congress can fix this problem by limiting the ITC’s jurisdiction to cases where federal courts are not able to adjudicate due to jurisdictional or personal-service issues. The U.S. economy is dependent upon a balanced patent system, and reining in the jurisdiction of the ITC will help us maintain market dominance in the technology and manufacturing sectors.

The key points of the paper are:

  • While the ITC’s broad powers to block infringing imports may be useful in some circumstances, most Section 337 investigations duplicate, and even interfere with, the work of federal courts. Most ITC cases are brought against U.S. companies or large multinational ones that can easily be sued in court.
  • Having a separate litigation venue outside the federal court system has frustrated congressional and judicial oversight of U.S. patent law. For example, recent reforms meant to prevent abusive litigation had no effect on the ITC, making the agency a more-attractive venue for patent trolls.
  • Section 337 should be amended to ensure that the ITC’s patent powers are available as a gap-filler when courts cannot act—not as an alternative to them.

For more information on R Street’s ITC reform project, please visit https://www.itcpolicy.com.

The R Street Institute thanks IPEC for providing the opportunity to submit these comments. If there are any remaining questions relating to the matters presented herein, the undersigned would be happy to provide further information as necessary.

Respectfully submitted,

 

Sasha Moss

Federal Affairs Manager

smoss@rstreet.org