Is IP Ultimately Not About Rights But About Trust?

The challenge of weaving IP into an MBA class is two-fold. First one must distill IP down to workable didactic components that are both compact and student-usable. Secondly the course must take great care to remember that it is not "IP law lite", but a free-standing inquiry into the ways that IP expresses itself in issues of management and strategy. I want to focus on the first component of this challenge: how do I present IP on the basis of generalizable categories while at the same time transmitting at least some of the particularity of each of the IP rights? The manner by which I have attempted to accomplish this is by describing two basic categories of IP rights.

The first is comprised of patents, copyright, trade marks and designs. Each of these rights is, more or less, a right that is good against the world and the validity of each does not depend upon any particular issue of personal trust between parties vis-à-vis such IP right. In contrast stand rights in trade secrets and know-how. Here, the key to the right is the personal relationship between parties between whom the know-how has been disclosed. Unless the "owner" of the know-how does not need to share the know-how with any other person, he will have to deal with the circumstances of its disclosure to employees and various third parties. Unlike the first category, here the issue of trust is paramount since, at the end of the day, in the absence of trust between the parties, no disclosure of the know-how can reasonably take place.

The upshot, under this formulation, is that the two categories are distinguished by the factor of trust, which is effectively irrelevant for the first category but essential for the second.

This conception of IP rights and trust was robustly challenged as a result of an encounter that I had last week with a senior official of a prominent international organization. The position set forth by my colleague was both simple and powerful. From the point of view of commercialization, all IP rights ultimately are embedded within a broader set of arrangements that ultimately rest on the issue of trust and goodwill. A patent may be granted or a copyright work may be created but, for such an invention or work to have commercial significance, there must be a sense of trust in the commercial value of the right by all persons who come into contact with it.

This is true, he argues, whatever the IP right; the issue of trust is not limited to know-how and trade secrets. What is important is that all persons in, e.g., the channel of distribution or the chain of supply, must believe in the quality of the products or services being provided or sold. A patent is therefore important not because it is valid but because it contributes to a supportable sense of trust regarding the goods or services.

Stated otherwise, in the hierarchy of IP rights, at least from the commercial point of view, it is goodwill that stands at its pinnacle. For this goodwill to have commercial value, there must be trust in the goods and services that are being provided. To become bogged down in the proprietary aspects of IP rights is to fail to appreciate the broader commercial context in which IP rights exist.

I am not certain if I fully accept the view of my colleague. What is true, however, is that it does force me to re-evaluate how to understand IP when the focus is on commercialization rather than legal creation and protection of the right. From such an angle, it may well be that I need to take trust into account in a different and more comprehensive way.

While I ponder all of this, I recall the following incident that occurred last week afer the meeting with my colleague. One of the great challenges in being the owner of any MP3 player is finding a quality set of durable earphones. I thought I had found my answer when in April I purchased an up-scale set of ear buds, sold under a well-known brand, with the kind of packaging and documentation one would expect from this brand. The earphones worked fine, but the soft cover fell off after three months and the further layer of cover fell off two months later.

I don't know how many patents, if any, are embodied within these ear buds, whether there is a protectable design or copyright, and whether protected know-how was brought to bear on the product. What I do know is that I face the prospect of purchasing yet another set of earphones and that I will shun, Typhoid-Mary like, any product in this space sold under this brand. The brand owner has lost me as a customer, now and for the foreseeable future. Because, at the end of the day, IP ultimately may not be about rights but about trust.

IP rights in the Court of Appeal, but not as we know them ...

Every so often a case comes along that deals with intellectual property, but not in a way that the IPKat can easily recognise or understand.  One such case is Office of Communications v Information Commissioner [2009] EWCA Civ 90, 20 February 2009, a decision of the Court of Appeal, England and Wales (Lords Justices Waller, Thomas and Richards).

This case arose from a set of facts that might initially seem to the casual observer to have little to do with IP at all.  The Office of Communications (Ofcom), the independent regulator for the UK communications industries, operated the Sitefinder mobile phone base station website, Sitefinder being a database that was set up as a result of recommendations made in the Stewart Report 2000 following public concern as to the potential risks to health which might be occasioned by electro-magnetic radiation emitted from mobile telephones.

The Information Manager for Health Protection in Scotland, in the course of some epidemiological investigations it was conducting involving electromagnetic radiation, asked Ofcom for some information it held concerning location, ownership and technical attributes of mobile phone cellular-based stations, to be provided in searchable format. Ofcom accepted that the information held on the website was 'environmental information' for the purposes of the Environmental Information Regulations 2004, SI 2004/3391, which implemented Directive 2003/4 on public access to environmental information, but said that, since the requested information was already available on its website, Regulation 6(1)(b) of the Regulations did not require it to provide that data in another other format.

On an internal review of its own decision, Ofcom upheld its refusal to disclose the requested information, citing Regulations 12(5)(a) and (c) of the 2004 Regulations. Under Regulation 12(5) a public authority might

'refuse to disclose information to the extent that its disclosure would adversely affect—(a) international relations, defence, national security or public safety ... (c) intellectual property rights ... '.

Ofcom was concerned that disclosure of the national dataset in a readily comprehensible and searchable form would compromise the security of sites, called TETRA sites, which provided the police and emergency service radio network, and that they would adversely affect the intellectual property rights of mobile network operators (MNOs).

Ofcom applied to the Information Commissioner under section 50 of the Freedom of Information Act 2000 for an assessment of that decision. The Commissioner ordered Ofcom to make the disclosure sough, finding that Regulation 12(5)(a) didn't apply and that there was no adverse effect on IP rights that might trigger the Regulation 12(5)(c) exception.

Ofcom then appealed unsuccessfully to the Information Tribunal, which found that the Regulation 12(5) exceptions were engaged but that, in each case, the public interest in maintaining the exception did not outweigh the public interest in disclosing the information. Following a further failed appeal to the High Court, Ofcom appealed further to the Court of Appeal.

At this stage the Court was asked whether

(i) the tribunal had erred, when carrying out the public interest balancing exercise under the Regulations, by looking at each applicable exception separately and declining to consider whether the aggregate public interest in maintaining the exceptions outweighed the public interest in favour of disclosure;

(ii) the tribunal had erred by taking into account, as an aspect of the public interest in disclosure, the 'benefit' arising from the use of the information for epidemiological research even though such use might breach the IP rights of the MNOs;

(iii) whether the tribunal was entitled to find that the public interest in maintaining the exception in Regulation 12(5)(c) did not outweigh the public interest in disclosing the names of the MNOs, as distinct from the disclosure of the remainder of the requested information.

Faced with this truly knotty problem, in which IP rights had been placed at the heart of the dispute but no IP owners were represented, The Court of Appeal (in a judgment delivered by Richards LJ, the other judges concurring) allowed the appeal in part. In its view,

(i) (Allowing Ofcom's appeal on this ground only) Tte exceptions under Regulation 12(5) should be considered together rather than separately, when balancing the public interest for or against disclosure;

(ii) The legislative scheme involved a weighing of pros and cons, with a presumption in favour of disclosure and in the context of a strong legislative policy of promoting access to, and dissemination of, information. Where use of information in breach of IP rights had beneficial as well as adverse consequences, the proposition that only the adverse consequences could be taken into account ran wholly counter to that scheme;

(iii) Since an adverse effect on IP rights was the subject of a specific exception under Regulation 12(5)(c), it was obvious that breaches of such rights should be taken into account both in determining the application of the exception and in assessing the public interest in maintaining the exception. It was equally obvious that regard should be had not just to the immediate effect of disclosure but also to its wider consequences, including subsequent use of the information disclosed;

(iv) the tribunal was entitled to take into account, when carrying out the public interest balancing exercise, the benefit from use of the information in epidemiological research even if that use would be in breach of the database rights of the MNOs. Together with other public interest considerations, those beneficial consequences fell to be weighed in the balance against the adverse effect on the rights of the MNOs;

(v) It was open to the tribunal to find that the public interest in disclosure of the environmental information had extended to disclosure of the names of the MNOs. The public interest facts referred to in the Directive (these being a greater awareness of environmental matters, a free exchange of views, more effective participation in environmental decision-making and a better environment), being broad and intangible in nature, did not depend upon direct evidence linking disclosure of the information with specific benefits.

The IPKat notes that, while the IP rights at stake in this case were principally Europe's sui generis database rights, the provisions might equally have repercussions for confidential information. As Richards LJ said at paragraphs 57 and 58:

"Where information is stored in a database, then it is possible in principle for the realisation of the benefits of disclosure of that information to depend entirely on the post-disclosure manipulation of that database. If third parties enjoy relevant database rights which would be infringed by such manipulation of the database, then on Ofcom's case the benefits would have to be excluded from consideration altogether and there would be nothing left in the public interest side of the balance to weigh against the public interest in maintaining the exception. It would follow that there could be no order for disclosure. Yet that outcome would be wholly at odds with the legislative policy. This may be an extreme example (though I suspect that it may become an increasingly real one in practice), but it provides an illustration of why in my view the case put forward by Ofcom cannot be right.

It is also interesting to consider, by way of comparison, the case of confidential information falling within regulation 12(5)(e). In that case the very act of disclosure is likely to destroy the confidentiality of the information and to prevent the bringing of a claim for breach of confidence to prevent or restrict post-disclosure use of the information, so that any benefit arising from such post-disclosure use can unquestionably be taken into account as part of the public interest in favour of disclosure. It would be surprising if the position were fundamentally different in relation to information protected by intellectual property rights within regulation 12(1)(c) just because in their case the rights happen to remain enforceable after the information has been disclosed. Again I do not think that such a difference of outcome can be the legislative intention".

Merpel adds: have I missed anything, or has this dispute rumbled on for all this time and risen all the way to the Court of Appeal without anyone spotting it? 

Mobile phones and health: the World Health Organization's view here