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We submit this statement in support of IIPA’s petition to review South Africa’s GSP eligibility in light of South Africa’s failure to provide “adequate and effective protection” to intellectual property as required by the GSP statute and, in particular, profound concerns with draft legislation that will, if enacted, further erode the protection of intellectual property in South Africa for U.S. and South African creators alike.

While we support IIPA’s petition, we note at the outset our reluctance to take such a position: We believe that trade sanctions are harmful to the country imposing them (and on which they are imposed, of course), and, as far as possible, should be avoided. Both the U.S. and South Africa benefit from the GSP that currently affords South African producers unilateral, tariff-free access to U.S. markets for some goods. As such, we caution that the USTR should withdraw South Africa’s GSP designation only as a last resort.

But we also believe that both the United States and South Africa share a strong interest in sustaining creators through adequate and effective protection of intellectual property, thereby promoting economic development and the production of culturally diverse materials. And, unfortunately, removal of GSP is one of the few tools available to the U.S. to protect the interests of U.S. creators of intellectual property in global markets. The USTR is legally obliged to faithfully discharge its congressional mandate by taking action to defend U.S. intellectual property in accordance with various trade laws, including by ensuring that GSP beneficiary countries provide adequate and effective protection within the meaning of the statute.

In submitting this statement, we are mindful that South Africa’s President has not yet signed into law the Bills that motivated the IIPA’s petition. If he does so, South Africa would fail to meet the conditions for GSP eligibility and USTR will be obliged to revoke all or some of its GSP benefits. We note, however, that numerous local actors have voiced concerns regarding the constitutionality of the proposed legislation and the harm that it will to do to the community of creators in South Africa. It is possible that President Ramaphosa will heed these concerns, reject the draft legislation and send it back to Parliament for reconsideration, with directions to adapt or remove its numerous provisions that conflict with South Africa’s Constitution and the country’s international treaty obligations. So doing could result in a text more consistent with South Africa’s (and the U.S.’s) cultural and economic interests. Most importantly from the perspective of this submission, by rejecting the draft legislation President Ramaphosa would at the very least defer any action on the part of USTR to revoke South Africa’s GSP eligibility.

In short, we argue that:

• Protection of intellectual property both in the U.S. and in South Africa is mutually beneficial;
• Duty-free imports from South Africa to the U.S. benefit the citizens of both countries, and those citizens will suffer as a result of the partial or full withdrawal of GSP benefits from South Africa;
• GSP withdrawal is nonetheless required if South Africa does not adequately and effectively protect U.S. intellectual property;
• South Africa’s copyright laws currently do not effectively protect the rights of artists; and
• Two Bills recently passed by South Africa’s Parliament, and championed by U.S.-based evangelists of “fair use,” would further weaken the effectiveness of copyright protection.

This excerpt from the beginning of Netflix’s The Great Hack shows the goal of the documentary: to provide one easy explanation for Brexit and the election of Trump, two of the most surprising electoral outcomes in recent history.

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Underpinning many policy disputes is a frequently rehearsed conflict of visions: Should we experiment with policies that are likely to lead to superior, but unknown, solutions, or should we should stick to well-worn policies, regardless of how poorly they fit current circumstances?

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Thousands of patents underpin the technologies that power the digital economy. Coordination among firms developing and implementing these novel technologies has notably been facilitated in large part by Standards Developing Organizations (SDOs). Despite the evident benefits of standardization in general and SDOs in particular, certain aspects of these processes have come under severe scrutiny from scholars, antitrust authorities and courts. These critics argue that the standardization space suffers from two crippling market failures, namely “patent holdup” and “royalty stacking”. They thus conclude that opportunistic firms will squeeze their rivals’ profits, harming consumers and stifling innovation in the process. However, recent empirical scholarship strongly suggests that patent holdup and royalty stacking rarely, if ever, occur in the standardization space.

Against this checkered backdrop, our paper argues that standardization is an emergent phenomenon, where parties have strong incentives to design institutions and contractual relationships that mitigate the scope for opportunistic behavior (including patent holdup and royalty stacking). The paper explores how these incentives have likely enabled firms to avoid severe market failures. We argue that ignoring these complex market dynamics may cause antitrust authorities and courts to do more harm than good (notably by exacerbating patent holdout behavior). The paper then reviews recent regulatory interventions and questions whether this has indeed been the case. Finally, we suggest that antitrust authorities and courts should draw inspiration from acclaimed scholarship regarding both the evolution of cooperation and the management of common-pool resources.

Summary

We would like to thank you for the opportunity to comment on these important and timely issues. In the preamble to this Notice of Inquiry (“NOI”) the NTIA notes that is responsible for “protecting and promoting an open and interoperable internet, advocating for the free flow of information, and strengthening the global marketplace for American digital products and services.” We agree with the implicit assumption of this statement that it is possible to both promote an open Internet as well as protect the interests of American creators.

With this in mind, we would like to offer some comments on how best to assess the oft-asserted tension between policies that purport to maximize freedom online and those that seek to protect the interests of rightsholders.

It is undeniable that, in some cases, the unfettered flow of information can contribute to the infringement of the intellectual property rights of American citizens and companies, and that this is contrary to NTIA’s mission to promote the marketplace for American digital products and services. But it is also undeniable that the protection of intellectual property rights can promote both the creation of information and its dissemination. Our intellectual property laws reflect the congressional and judicial balancing of these dynamics: There is little reason to think that the legislative and legal principles that determine when content or its distribution is illegal offline apply any less when content is distributed online.

The flow of information is, in fact, never “unfettered.” When considering the free flow of information online, the goal should be the same as it is offline: to increase the flow of legitimate information and to decrease the flow of illegitimate information.

Properly considered, there is no novel conflict between promoting the flow of information and protecting intellectual property rights online. While the specific mechanisms employed to mediate between these two principles may differ — and, indeed, while technological change can alter the distribution of costs and benefits in ways that must be accounted for — the fundamental principles that determine the dividing line between “legal” and “illegal” content and its distribution offline can and should be respected online.

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In an ideal world, it would not be necessary to block websites in order to combat piracy. But we do not live in an ideal world. We live in a world in which enormous amounts of content—from books and software to movies and music—is being distributed illegally. As a result, content creators and owners are being deprived of their rights and of the revenue that would flow from legitimate consumption of that content.

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The Internet is a modern miracle: from providing all varieties of entertainment, to facilitating life-saving technologies, to keeping us connected with distant loved ones, the scope of the Internet’s contribution to our daily lives is hard to overstate. Moving forward there is undoubtedly much more that we can and will do with the Internet, and part of that innovation will, naturally, require a reconsideration of existing laws and how new Internet-enabled modalities fit into them.

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ICLE Associate Director for Innovation recently debated Sasha Moss of the R Street Institution on the nature of copyright law, its constitutional foundations, and the proper contours of its function in the modern economy. Video of the event is embedded below