IP rights, market ecology and sustainability: strategic directions post-COVID-19
Importance of IP for sustainable growth
Intellectual property has always been a key factor in economic development and sustainable growth, which must be based on the free market. In fact, only the free market – of which intellectual property is one of the cornerstones – has demonstrated its ability to ensure, through a clear definition of property rights and the price system, the best use of natural resources, which is key to (sustainable) development.
The essential remedy to the apparent public inefficiency at protecting the environment – amply demonstrated by the failure of any country that has tried to tackle this problem using top-down impositions and the short-term logic that now commonly underpins political action and is inevitably conditioned by electoral deadlines – is represented by the market mechanisms through which it is possible to encourage compliance with environmental rules and select the most cost-effective measures to implement them effectively and widely.
Among these incentives, intellectual property plays a crucial role which has been recognised for decades. It is sufficient to think that, alongside the agreement establishing the World Trade Organisation (which since 1995 has guaranteed an international trading system based on the free market economy), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), containing the minimum standard of IP rights protection in all signatory countries, was signed because it was considered useful – indeed necessary – for the proper working of the market itself.
Necessary because, on the one hand, it creates the right incentives for the abovementioned development by, for example, granting exclusive exploitation rights to the author of a newly patented – and therefore disclosed – invention, thus encouraging the creation of new solutions for the problems that are emerging, including the increasingly important matter of sustainability.
On the other hand, the fundamental principles of intellectual property, which include rules on unfair competition, are always based on the dynamic between exclusivity and competition and thus force market operators to comply with certain principles (eg, ethical principles) and prevent, for example, anti-competitive practices that lead to the creation of monopolies in which the incentive for innovation is minimised.
The protection of intellectual property thus becomes an asset that allows the market – and specifically entrepreneurs – to efficiently manage the available resources, the positive and negative externalities of their economic action and allow rapid and concrete responses in order to achieve sustainable development according to a pro-competitive approach.
In this context, intellectual property requires those parties that intend to adopt this approach to comply with the law and respect the rights of others, while at the same time providing them with the means and incentives to do so. In other words, entrepreneurs, but also public organisations and associations that want to invest in the widespread and commonly perceived need for a greener world, should find support from IP rules.
IP rights for technical innovation and communication tools serving the environment
The protection of technical innovation, and therefore the incentive to implement new technical solutions compatible with the protection of the environment, is one of many – but certainly among the most important – means to encourage sustainable development through intellectual property.
Undoubtedly, the exclusive right to exploit new inventions (but also software or databases protected under copyright and neighbouring rights) represents a fundamental incentive to innovation, since the patent system guarantees, on the one hand, that only the patent holder can have the right to implement their invention (giving them a right of exclusivity, which, moreover, in many cases, they should exploit through generalised licensing policies, as typically happens for patents that become standards) and, on the other hand, that the conceptual content of the patented invention becomes public domain, from the first day of publication of the relevant application, thus increasing competition and ensuring a fruitful diffusion of information for competitors and researchers, both private and public.
Therefore, innovation must spread. This happens above all through another fundamental, if not constitutive, element of technical progress: communication, which in turn focuses on a further category of IP rights (ie, distinctive signs). At present, distinctive signs – in particular trademarks – represent a real communication vehicle, as they transmit a message whose sender is the owner and whose recipients are those that interact with its distinctive signs. In this way, especially for innovations but also and more generally for all of the features of a product or service (particularly its sustainability), trademarks indicate the commercial origins of products or services and give the public the opportunity to appreciate and associate a particularly innovative ‘quid’ to one company rather than another. As such, a quid can become an additional value on the market, orienting the purchasing habits of consumers and encouraging companies to compete to provide said value (eg, environmental sustainability).
The communication between consumers and businesses via trademarks benefits both sides. For example, businesses are encouraged to invest in communicating the positive aspects of their products (eg, sustainability) in response to evolving consumer needs. Further, such communication allows businesses to achieve a competitive advantage, which is reflected in their growing competitiveness.
In a nutshell, IP rights – specifically, distinctive signs – provide companies that operate in a sustainable way the ability to obtain, among other things, recognition and therefore economic returns on their investment in sustainability, which also encourages them to act in a more environmentally friendly way. Moreover, the balance between exclusivity and the protection of competition and consumers is ensured by the rules that penalise business communications that are likely to deceive the public (eg, revoking a trademark that has been attributed to deceptive meanings).
Ignoring this aspect is the basis of the fundamental error of so-called ‘plain packaging’ policies relating to, for example, smoking products: any system that does not allow the exclusive origin of products to be sufficiently distinguished drastically reduces competition in the relevant sector and, above all, discourages manufacturers from optimising their products (eg, by making cigarettes less toxic or carrying out stricter quality controls). As innovation and communication must go hand in hand, companies must have appropriate strategies for the coordinated management of their trademarks, patents and know-how.
Environmental sustainability and IP rights:
concrete examples A company’s trademarks are not the only important aspect of supporting environmental sustainability. Of equal importance are the ecological quality trademarks of qualified entities carrying out controls on manufacturing processes, which are made by companies authorised to use them through typical co-branding operations that involve the use of company trademark combinations.
In such cases, the market and intellectual property can serve sustainability purposes and bring concrete benefits to consumers and businesses. Rights holders that associate their trademarks with collective or certification trademarks (or with individual trademarks for multiple use, which are also subject to the obligation of truth) allow consumers to immediately recognise a certain quality or geographical origin of all or some of their products or services. These qualities are guarantee by collective or certification trademarks without the company trademark having to change its ‘general’ message. The latter can benefit from the added value derived from those specific qualities (eg, sustainable production), which are communicated to consumers by association. Such co-branding practices benefit companies by associating products with, for example, innovative and environmentally friendly manufacturing processes, which can be highlighted in the minds of consumers and thus become more valuable.
Another concrete example of how useful the combination of innovation and communication can be achieved concerns the use of company trademarks by environmental associations. Under existing trademark law, environmental associations that learn of an environmental innovation being transposed onto a product or service for which a particular trademark is used can permit such use within the limits of actual descriptive need; however, they must evaluate such use without bias and report the results in relation to ecological compatibility and the truthfulness of the messages that the owner company disseminates in relation thereto. In this way, once again, companies will be encouraged to adopt procedures and create products that are as environmentally friendly as possible to avoid negative publicity from such associations.
Therefore, intellectual property also makes it possible to enhance the role of environmental associations in moralising business communication, which, as mentioned above, is consistently done through distinctive signs and first and foremost through trademarks. Moreover, it is important to bear in mind the guarantee given by the abovementioned principle of truth, which operates for all distinctive signs and with which a trademark must always comply and carry a truthful message (ie, that is not deceptive or misleading) or else be revoked (and incur compensation for damages in favour of competitors and even deceived consumers, for whom class action are available).
Finally, as a consequence of the above, the importance of the fight against IP infringements is also clear: an infringer, unlike the owner of an original trademark, has no interest in guaranteeing the quality rather than the eco-sustainability of their product, since any blame will be placed entirely on the trademark owner. On the contrary, such carelessness often reduces production costs and increases profits at the expense of consumers and the environment.
COVID-19: lessons for IP rights and sustainability
The COVID-19 crisis should be a lesson in how to better handle resources and force societies to reclassify their values and needs. More concretely, market operators will have to know how to anticipate demand, in the sense of being able to grasp those signals that allow them (as far as possible) to anticipate and understand the trends of societies that are discovering the advantages of remote working, reconciling production needs with personal and family needs and realising the potential therein (eg, remote working and remote access to databases saves time and creates more
opportunities for leisure activities, which are crucial in an age when time is precious). The difficult but dutiful task of companies is ‘predicting’ the future and ensuring that their products and services meet the demands of consumers in the post-COVID-19 economy. Important considerations will include reduced travel (and the resulting reduction in pollution) and greater attention to safety and data protection, particularly in the telecoms sector.
In future, IP rights will play a significant role in encouraging the study and adoption of effective solutions, especially through combining innovation and communication, and enhancing ‘performance competition’ among market players. The regulation of trade secrets will also be decisive in the post-COVID-19 economy to ensure that information whose value lies in its (naturally relative) secrecy is protected, since the legal requirements for such protection under Article 39 of the TRIPs Agreement are now substantially harmonised internationally. If correctly understood, in fact, these rules (which cover not only technical information, but also commercial information,
starting with Big Data) are not opposed to patent law, but rather complementary thereto. On the contrary, the fact that without patents all innovations could be protected only as trade secrets – to the extent that it is possible to keep them confidential both technically and contractually – reinforces the importance of maintaining and developing the patent system. The future patent system must not only circulate such innovations while protecting against their practical exploitation, but also encourage:
use of an intellectual creation’s ‘heritage’;
new innovation and knowledge;
sustainable development that is open to criticism; and
the development of alternative environmentally friendly solutions.
When it comes to protecting trade secrets, contractual clauses requiring that information be kept confidential until it becomes generally known or easily accessible are absolutely necessary. Further, confidentiality agreements have become even more important in the context of remote working: in the latter case it is important to specify that it must be expressly authorised by the employer and provide that the person in charge must use only personal computers or other portable computer devices made available by the employer exclusively for professional purposes. In any case, such persons should be unable to host data or confidential company information on local disks, as the relevant files must be saved exclusively on company servers, to which the portable device allows
access, and home or other networks other than the company network to which the portable devices provided by the employer must connect in order to be operational and have the same security standards as the company network, so as to avoid the risk of loss of personal data and/or disclosure of confidential company information.
From every angle, intellectual property is one of the great engines of the contemporary world, which not only fosters (and must continue to foster in the post-COVID-19 economy) progressive developments in relation to technology and quality of life, but also carries the ‘antibodies’ needed to protect the environment. Intellectual property can not only incentivise companies from a moral standpoint, it can also encourage innovative needs-based solutions which, when communicated and protected, produce further innovation and reveal additional needs (eg, sustainability) on the path of technological, civil and human progress.
For further information on this topic please contact Cesare Galli at IP Law Galli by telephone (+39 02 5412 3094) or email (email@example.com). The IP Law Galli website can be accessed at www.iplawgalli.it.