As unsuccessful efforts to pass the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA) demonstrated earlier this year, there is a global debate as to how to protect copyrighted material in an increasingly technological and globalized world. This debate considers, not only how to accommodate copyright owner rights in new technological media (such as online social networking), but also how material created in one country can qualify for affective international copyright protections and enforcement in another. Although these issues seem to be a recent development, the extent to which countries are willing to grant copyright protection to their works, and work from other countries, is an issue that has been around since the early 19th century.
Multilateral treaties such as the Anti-Counterfeit Trade Agreement (ACTA) and the Trans-Pacific Partnership Agreement (TPP) have become the new forum for international copyright protection reform debates. The TPP, a free trade agreement currently being negotiated between the U.S., Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam (and possibly Canada, Japan, Mexico, and Taiwan), may radically alter international protection for American copyrighted material. In its proposal for the TPP agreement, the United States has called for unprecedented copyright protections. These proposed protections include a complete prohibition on “grey goods” imports (see my previous posting on “grey goods”). It also proposes permitted fair use rights by unauthorized copyright users. This would give authors of copyrighted works the exclusive right to choose who can use or reproduce their works, as well as control the trade of their intellectual property to any TPP signatory country without any exceptions.
The TPP Proposal is controversial. It has drawn strong approval as well as criticism from TPP countries. Chile, for example, has threatened to withdrawal from TPP negotiations unless the TPP Proposal is “moderated.” Malaysia, however, which has long been considered a major copyright infringer, appears to have accepted the proposal’s terms. Although it remains to be seen whether the TPP will move past negotiations, Malaysia’s willingness to adopt the TPP proposal begs a question: Why is Malaysia a country traditionally considered a copyright protection pariah, now willing to adopt possibly the most stringent international copyright protection in the world?
There are several rationales to explain this apparent paradox. Modern trends such as globalization or external pressure from powerful IP proponent countries like the United States may help to explain Malaysia’s recent about-face. Others could argue that Malaysia’s shift towards greater international copyright protections represents a cultural sea-change. The adoption of Western ideals, such as Lockean beliefs of property self-ownership, over its Islamic and Confucian traditions could also explain the change in policy.
Perhaps the most likely explanation is that developing countries like Malaysia choose to adopt greater international copyright protections based on the realization that enhanced international copyright protections are needed to ensure their economy’s own growth. Malaysia’s approval of greater international copyright protections mirrors similar progressions of other nations such as South Korea, and even the United States.
Why Is this Important for Your Business?
Examining why developing countries, such as Malaysia, adopt greater international IP protections is important for your business to understand IP protection in a greater global context. North American businesses, much like their counterparts overseas, will often look for growth opportunities abroad in the midst of a stagnant economy. Developing countries possess substantial incentives for U.S. businesses as their emerging middle-classes become more able to afford imported goods and services. However, as these markets provide potential growth opportunities, many of them also pose substantial copyright protection concerns.
With a highly trained workforce and pro-business government policies, United States businesses have increasingly found Malaysia to be a growing market for their goods and investment. In 2011, the U.S. exported $14.2 billion worth of goods to Malaysia, a 37% increase from 2005. U.S. foreign direct investment (FDI) in the Malaysian market has also grown at a similar rate, with $3 billion in growth from 2007 to 2010, making the United States the largest investor in Malaysia.
Despite these trends, Malaysian copyright protection and enforcement has traditionally been a concern for American businesses and investors. The Office of the U.S. Trade Representative (USTR) and the International Intellectual Property Alliance (IIPA) have both criticized Malaysia for its lack of effective copyright protections and enforcement. This has led to lost profits for U.S. businesses. According to the latest statistics available (2010), the United States software industry, in particular, lost $207 million in profits in the Malaysian market due to piracy.
Understanding why developing countries such as Malaysia pursue increased international copyright protection not only helps businesses understand the foreign markets, but also what events trigger a country’s willingness to adopt enhanced international copyright protections. This can ultimately help U.S. businesses evaluate long-term IP protection risks and ensure that their foreign investment and ventures remain safe.
Our Own Path Towards International Copyright Protection
Malaysia’s recent efforts at strengthening international copyright protections are strikingly similar to the reforms implemented by other countries. One need not look further than our own history to see how industrial development, and resulting intellectual property concerns, led the United States towards acknowledging, and eventually advocating for, strong international copyright protections.
Although the United States has recognized copyright protection since its founding, it has not provided such rights to foreign works for a large part of its history. The U.S. Constitution established Congress’s power to establish copyright protections “to promote the progress of science and useful arts.” However, despite these protections, early Congresses felt that they should only extend to works created within the United States. In fact, the first U.S. Copyright Act, passed in 1790, permitted unauthorized importation and reproduction of works by creators from other countries.
By not providing legal protections for foreign works, the U.S. became an international copyright pariah. As foreign authors could not obtain copyright protection under American law, the pirating of books, artwork, and musical performances became rampant. The United States’ failure to extend legal protections for foreign works eventually placed it in opposition to several of its major trade partners. For example, France had already promoted international copyright protection by the mid-19th century. Foreign heads of state, and even acclaimed foreign authors such as Charles Dickens, pleaded with the U.S. Government to extend copyright protections to foreign work, but to no avail.
It was not until American authors had achieved critical acclaim overseas, that U.S. lawmakers seriously considered the importance of international copyright protections. The 19th century saw classical American authors such as Walt Whitman and Herman Melville attain international acclaim and gain a foreign audience. As American authors became internationally acclaimed, their publishers demanded international copyright protections. United States copyright law did not extend abroad and widespread pirating of foreign works in the United States made copyrighted material less competitive price-wise, compared to the cheaper foreign pirated works. In the late 1890s, the U.S. finally began to extend legal protections for foreign works on a limited basis. It would take nearly another century, until 1988, when foreign intellectual property would qualify for protection under the same conditions as American works under the Berne Convention.
Despite this slow progression, the United States is now arguably the most vocal proponent for international copyright protections. In addition to publishing, the United States’ entertainment and technology industries have substantial copyright portfolios that generate billions in revenue annually. To expand revenue from such portfolios, industry organizations such as the Motion Picture Association and the Recording Industry Association of America have been at the forefront of lobbying for greater international copyright protections. Although the benefits of international copyright protections seem to be obvious in today’s world, it wasn’t until the international surge of popularity of the great American authors in the 19th century that the United States became a proponent of international copyright protection.
A Not-so-different Korean Story
South Korea’s adoption of greater international copyright protections shows similarities to that of the United States. Korean society has historically not acknowledged legal protections for created works. Its Confucian tradition considered ideas and thoughts to be a part of the public domain, in order to emphasize societal advancement and provide widespread access to education. South Korea did not formally establish copyright protections until the middle of the 20th century, and it is believed that South Korea’s intellectual property laws are a product of foreign influence.. Despite attempts at reforms, South Korean copyright protection and enforcement was inadequate until quite recently. In fact, in 1987, the USTR described South Korea’s copyright protections as “virtually non-existent,” due to failure to provide adequate legislation and enforcement measures. As a result, the USTR and IIPA had, until a few years ago, routinely criticized South Korea for failing to uphold copyright protection for domestic and foreign works.
South Korea did, however, begin to change its perception towards international copyright protection when its own copyrighted material became victim of piracy. As the South Korean economy has transformed over the past half-century (from being predominately agrarian to one of the most modernized in Asia) South Korean intellectual property has increasingly become victim to many forms of copyright piracy. Due to government initiatives over the past decade, South Korea has developed arguably the most widespread and fastest broadband internet access in the world. This has resulted in unprecedented growth of copyright piracy in South Korea. In 2007 and 2008 alone, movie and musical copyright infringement in South Korea increased by 52% and 312% respectively. This resulted in over $1 billion in losses for both South Korean and foreign businesses. South Korean works have also been increasingly infringed abroad, particularly in China. Officials from the Korean Copyright Commission (KCC) reported that in 2011, 80% of China’s main Internet portals used for unauthorized file sharing had Korean copyrighted works.
As Korean artists, writers, and businesses have lost substantial revenue from copyright piracy, South Korea has increasingly realized the importance of upholding and enhancing international copyright protection to ensure protection for its works. In the past couple of years, the South Korean government has passed substantial copyright legislation reforms, increased enforcement efforts, and agreed to expanded international copyright. Further, South Korea has also begun to assertively protect its works abroad. For example, the KCC has recently opened offices in several countries such as China, the Philippines, the United States and Vietnam, to combat the pirating of Korean copyrighted material. As a result, South Korea has been removed from the lists of countries classified by the IIPA and USTR for international copyright protection concerns.
Although more than a century apart and on different continents, South Korea’s recent efforts to expand international copyright protections were compelled by a similar motive as was the United States. South Korea’s recent promotion of enhanced international copyright protections could be the result of external pressure from the United States and other trade partners to boost IP protection. However, having been criticized by the United States for decades for having deficient copyright protections and enforcement without making any significant copyright reforms, shows the limitations of external pressure. It is more likely that South Korea’s own interest in protecting its intellectual property (similar to the United States in the 19th century) led to the recent expansion of international copyright protections.
Malaysia Following Suit
Despite different cultural foundations and history, Malaysia’s recent acquiescence toward expanded international copyright protections can be best understood by looking at United States and South Korea as models. Although Malaysia inherited the U.K.’s copyright laws upon independence, Malaysian copyright protection and enforcement has, until recently, been inadequate. Over the past two decades, commentators have criticized Malaysian copyright law for providing insufficient enforcement measures, as well as weak restrictions on grey goods and unauthorized reproductions. Further, general unawareness about copyright piracy and the perceived ineffectiveness, of domestic copyright protections, particularly by the Malaysian business community, has reinforced this perception. A 2007 study of Malaysian online businesses found that 60% of businesses surveyed were unaware of copyright piracy. Perhaps due to a combination of inadequate laws and overall unfamiliarity, Malaysia has been regularly criticized by the USTR and IIPA.
In recent years, however, Malaysia has becoming increasingly aware of the need for copyright protection reforms, both at home and abroad. The recent growth of the Malaysian entertainment industry has been one of the catalysts for this change. Since 2000, the Malaysian entertainment industry experienced spectacular growth, by over 10% annually most years, which is nearly double the growth rate of other Malaysian industries. This growth has been coupled with the expanded piracy of Malaysian works. Malaysian film and music works have been increasingly made available through illegal content sharing. This has had caused fundamental damage to these industries as recent reports estimate that piracy has reduced the Malaysian music industry’s annual revenue, in particular, in half over the past 15 years.
As Malaysian industries have experienced significant growth and become victim to increased copyright piracy, both the Malaysian government and industry organizations have sought greater protections for their intellectual property. This year, the Malaysian legislature implemented long-awaited reforms to the Malaysian Copyright Act. The Malaysian government has also sought expanded international copyright protections. In addition to accepting the United States proposal in TPP negotiations, Malaysia has sought expanded international copyright protections in several ongoing FTAs, such as bilateral agreements with Australia and the European Union.
Such efforts have been complemented by Malaysian industry organizations, which have made concerted efforts to boost copyright protection awareness and provide enhanced means to accommodate international copyright protections. Over the past two years, Malaysian industry organizations have increasingly funded public awareness campaigns to boost consciousness of copyright piracy. They have even begun discussing the establishment of a copyright bank and valuation system in order to help businesses monetize and become aware of copyrighted works already in existence.
As demonstrated by the United States in the 1800s, and more recently, South Korea and Malaysia, countries will adopt enhanced international copyright regulations when their own industries become developed and are threatened by unauthorized use of intellectual property. If your business is contemplating business ventures abroad, it is worth your while to determine whether the country has sufficient copyright protections, and if not, whether they have the industries and incentives to adopt enhanced international copyright in the near future. If the country is trending towards industries where lack of IP laws would cause a substantial loss in revenue, you may able to look forward to eventual protections in a historically risky and unprotected market. Since it appears economics is a major predicting factor in how IP is an will be protected, partnering with nationals in higher risk countries might help to align otherwise disparate economic interests as well – but that is a different topic.
Special thank you to recent law graduate Lucas Michels. Mr. Michels just graduated law school from Gonzaga Law school and is studying for the bar exam.
ABOUT COPYRIGHT COW™
Copyright Cow™ is the Blog and alter-ego-Blogger name for Timothy B. McCormack, a well established and successful Seattle-based intellectual property, technology and business lawyer.
Copyright Cow™ -- Defending the American Dream!
The Copyright Cow Blog focuses on the untold stories of the second largest export of the United States – intellectual property and technology – through the lenses of law, economics (freaky-economics) and society.
Intellectual property is comic books, cartoon characters, the “Book of Life” embodied in the Human Genome, medicine, technology, movies, websites, and, for example, the business of producing and distributing milk (a Copyright Cow favorite).
The Copyright Cow BLOG is not only for your local dairy farmer / rancher in Washington state. It is also for the CEOs of Microsoft, Boeing and Getty Images. Although Copyright Cow is a great read for any business owner, it is also good for mothers and fathers, teachers and students and anyone who wants to know more about the legal and economic forces shaping 21st century America.
The law can decide, who lives and who dies; who eats and who starves. Who gets the latest HIV medication and who does not? Who owns the critical intellectual property that, literally, holds the key to life and death for over 50 million people?
What about the economic and social forces that help to shape the law and also result in both prosperity and misfortune?
With the help of Copyright Cow, we will all be better prepared to answer these questions, shape a better future and hopefully be a little happier! With your help, the reader, Copyright Cow can continue to help defend the American Dream!
This blog provides is not intended to give legal advice and is not a substitute for the same; if the reader has a concern they should contact a knowledgeable attorney.
ABOUT TIMOTHY B. McCORMACK
Timothy B. McCormack, attorney at law, and Seattle based technology and copyright lawyer writes the blog to help educate and raise awareness of some of the most important economic and legal issues of our time – intellectual property. Timothy B. McCormack founded McCormack Intellectual Property Law PS www.McCormacklegal.com and represents artist, photographers and companies like Getty Images. Learn more about Timothy B. McCormack here: http://www.mccormacklegal.com/blog/our-team/timothy-b-mccormack and here: http://www.risenshinemovie.com/resumes and here: http://www.facebook.com/pages/McCormack-Intellectual-Property-PS/365433561994