The Insatiable Appetite

for Intellectual Property Rights

Sir Hugh Laddie*

The Place of IP Rights within the

Western Economic Model
Some years ago a major British newspaper published a cartoon by Patrick
Blower. It must have been near Christmas. It depicted the infant Jesus in
Marys arms in the manger and the three Magi bearing gifts. However a
lawyer had squeezed in front of the Magi and is showing Mary a draft
contract. At the bottom of the cartoon are the lawyers words Id like
to patent his face, it could be worth millions in merchandising. The
terminology may not be entirely accurate but the sentiment is pure 21st
Century. There can be few who have not heard of sports stars such as Tiger
Woods, David Beckham, or Roger Federer, or missed the media com-
ment on the huge amounts they can expect to earn from exploiting their
intellectual property (hereafter IP) rights. The discussion of IP rights in
news channels is not limited to merchandising rights like these. There is
frequent reference to new patented medicines and techniques, to the eter-
nal battle against counterfeiters of medicines, lms, designer goods, and
software, and to the disputes between services like Google and YouTube
and those that claim that their online services include unlicensed copies
which infringe third-party copyrights. IP rights are all around us and their
spread and importance has meant that awareness of them is no longer
restricted to a small band of lawyers and owners.
IP rights is the collective name given to a disparate group of property
rights, largely created by statute, which protect the creations of the human
mind. They include patents, which create monopolies to protect invent-
ive new products and processes, and copyright, which covers a diverse

* Professor of Intellectual Property Law and Director of the Institute for Brand and
Innovation Law, UCL. This paper is based on Sir Hughs Inaugural Lecture, given at UCL
on 4 December 2007.

Book 1.indb 401 12/11/2008 5:01:22 PM

 402 Sir Hugh Laddie

group of generally artistic creations such as literature, music, drawings

and paintings and, now, lms, software, records, and broadcasts. Then
there are various types of design right which, by and large, protect the
appearance of articles, database rights which, as their name suggests, pro-
tect databases, and trade marks which were created to protect the trading
names and livery under which goods and services are marketed. All of
these are exclusive rights. That is to say, they give the owner the power to
stop all others from using the invention, or copying the musical work, or
trading under the trade mark or one similar to it.
To understand the virtues of IP rights and to identify their vices, it
is necessary to have some understanding of how these exclusive rights
t into the free market economy which exists here and in most other
countries.
The Western economic model is based on competition. It is competi-
tion which normally delivers better and cheaper goods and services to the
consumer. Competition is the whip which drives traders to oer more for
less to their customers. It is easy to see how this system works in practice.
Anyone who visited India a decade ago will have been charmed by the
sight of the hundreds of Ambassador cars on Indian roads. These vehicles,
copied from the British 1948 Morris Oxford, were rst produced by
Hindustan Motors Limited in 1957 and, for four decades, rattled round
India in substantially unchanged form. They were wonderfully nostalgic.
As one watched them going past in clouds of smoke and dripping oil, it
brought back memories of what British-made cars used to be like. Fifty
years ago people would look at mass-produced British cars and say that
every bit that fell o was best British craftsmanship. Why had Indian
Ambassador cars survived while their British twin had died out a long
time ago? The Indian government in eect banned foreign cars, so there
was no competition. Why should Hindustan Motors Limited put eort
and resources into new designs or new technology and plant when the
customer had no choice?
Any visitor to India now would be struck by the dierence. The roads
are now choked with cars from Europe, the USA, and Japan. Hindustan
Motors now makes a car based on Mitsubishi designs and technology,
although it still sells small numbers of Ambassadors based on an advertising
message which is high on nostalgia and low on technology. So competition
drives traders to do better and to oer their customers more. If they dont
they will lose market share and prots to competitors who do. In our sys-
tem, competition is king. It is the enemy of corporate complacency. This
does not necessarily make it popular with traders. So where do IP rights t
into this? After all, they appear to undermine the very basis of our economic

Book 1.indb 402 12/11/2008 5:01:22 PM

 The Insatiable Appetite for IP Rights 403

success. They hinder competition by creating areas of exclusivity. What

are they supposed to deliver which justies this subversion of the free
market?
In most cases the economic function of IP rights is to provide an
incentive to produce goods and services which otherwise would not exist
or would take many more years to reach the market. They make up for a
defect in the competitive system by supplying an incentive where other-
wise there would be none. A familiar example, and one to be returned
to later in this article, is the use of patents to create an incentive for the
development of new pharmaceuticals. It costs hundreds of millions
of Euros and some years to discover, test, and bring to market new
pharmaceuticals. However, with modern technology it is easy to copy
these products exactly, on a large scale and very cheaply. Unless a system
is in place which allows for the recovery not only of the cost of research
and development but also of a signicant prot on top, no investor will
put money into research and development for new pharmaceuticals. The
patent system allows the researcher a limited period during which his
invented new drug will be free of competition so that he can charge a
price which will allow him not only to recoup the money invested in
R&D but also to make a prot. Absent that, we would have few new
pharmaceuticals. Experience demonstrates that government funding
or charitable donations, unfortunately, will not ll the gap. During the
Communist era, the Soviet Union, though blessed with numerous rst
class scientists, produced few major new drugs.
The same economic incentive justies the existence of most other
IP rights. Copyright is there to encourage creative people to create.
Computer software can take man-years to write and debug, but can be
copied at virtually no cost and in seconds. If copyright did not exist, it is
likely that much current commercial software would not exist either. The
same considerations apply to lms. Which entrepeneur is going to pour
millions of Euros into the production of a lm if it can be copied at next
to no cost and with impunity?
IP rights act as a ne touch on the tiller of the free market. They are
there to generate products, developments, new art, and science for the
public benet in those areas where the harsh hand of competition would
otherwise strangle such creations at birth. IP rights are the carrot to
competitions stick. Their purpose is not to displace competition but to
modify it, to create sucient economic incentive to justify the labour and
investment in new products or art but, after that incentive has worked its
magic, to allow the normal forces of competition to have their way. It is
for that reason, for example, that patents only last for 20 years. After their

Book 1.indb 403 12/11/2008 5:01:22 PM

 404 Sir Hugh Laddie

expiry the inventions they cover are free for all to use. The only signicant
exception to this is in the area of trade marks. They can exist indenitely
but that is because they are not designed to create new products but rather
to protect a trader from attack by others who may want to draw away
customers by deception. For as long as the trade mark owner remains in
trade, he will need protection against this most ancient type of identity
theft.
The public pays a price for IP rightsa higher cost for goods and
servicesbut that price is justied by benets it brings in the shape of
goods and services we would not otherwise have and a market in which
consumers can rely on the provenance of the goods and services they buy.

The Steady Spread of the IP Gospel

On any basis, IP rights appear to be a success story. However measured,

they are on the move. Over the last 30 years the number of patents and
trade marks applied for and granted has grown year-on-year. New types
of IP rights are being created. For example recently in Europe a database
right was created to encourage the development of new databases. In
the UK there are at least four dierent and overlapping types of design
protection for industrial articles and three of them are new. The duration
of some rights, for example copyright and patents, has been extended. To
help this along, administrative bodies like the UK Intellectual Property
Oce and the European Patent Oce have made great eorts to reduce
the cost, time, and diculty involved in acquiring these rights. In the case
of trade marks, one of the most important grounds upon which, of their
own motion, trade mark oces can refuse to register a trade mark has
now been removed. It is easier, cheaper, and faster to obtain a registered
trade mark than ever before.
The simple approach is to think that if IP is good, more IP is better.
Surely also it is better if these right are easier, cheaper, and faster to obtain
and all should be encouraged to understand their benets. Consistent with
this there is ever-greater promotion of IP rights. For example if one logs on
to the BBCs website and goes to the webpage reserved for the childrens

Directive 96/9/EC of the European Parliament and of the Council on the legal
protection of databases [1996] OJ L77/20, 27.3.96, transposed into UK law by the
Copyright and Rights in Databases Regulations 1997, SI 1997/3032.
See the information provided by the UK Intellectual Property Oce at <http://www.
ipo.gov.uk/design/d-decisionmaking/d-law.htm> (accessed 1 September 2008).
See The Trade Marks (Relative Grounds) Order 2007, SI 2007/1976.

Book 1.indb 404 12/11/2008 5:01:22 PM

 The Insatiable Appetite for IP Rights 405

programme Balamory, one will nd a games section which includes,

amongst others things, an invention game. Children are encouraged to
create inventions out of household items and each is awarded a certicate
for being a great inventor. It is not only the BBC that does this. The UK
Intellectual Property Oce website has a section on education, including
packs for teaching IP concepts to 14- to 16-year-olds. In 2007, for the
rst time, it also ran a competition for primary-school children, called the
Cracking Ideas competition, which is linked to the National Curriculum
and encourages children to innovate. The rst winners were 10-year-olds
from East Allington Primary School in South Devon with a machine
designed to wake up children who are bored in class. What is particularly
interesting is that the material supplied to schools by the UK IPO in
support of this competition told the children about the value of IP laws
and introduced them to the concepts of patents, copyright, designs, and
trade marks. Similar educational material can be found on the US Patent
Oce site and, no doubt, on other national patent oce sites as well.
Industry also has also been anxious to spread the IP gospel. No doubt
bearing in mind the Jesuit saying give me the child until he is seven and I
will give you the man, the Entertainment Software Alliance in the United
States has developed a programme for use with children as young as 5
to teach them what copyright is and why it needs to be enforced. The
Motion Picture Association of America joined with the Los Angeles-area
Boy Scouts to create a merit patch for respecting copyrights. Scouts are
encouraged to visit a lm studio to see how many people might be put out
of work by unlicensed lm copying.
In an era when simple statistics and sound bites drive policy and debate,
it is easy to portray this success as unqualied. More rights, greater spread,
longer duration, easier acquisition, and more widespread appreciation of
them all show that the system is growing. But there are some, mostly but
not exclusively outside industry, who express concern. The debate between
those in favour of more and stronger IP rights and those who oppose this
or even ask for a reduction has become ever more strident. Every new IP
right or extension of existing rights creates new assets. It is only natural
that traders should want more assets and less competition. The loss to the
public in fencing o more of what is in the public domain is diuse, but

See <http://www.bbc.co.uk/cbeebies/balamory/games/embedded_games/archie_game.
shtml> (accessed 1 September 2008).
See <http://www.ipo.gov.uk/education.htm> (accessed 1 September 2008).
See <http://www.theesa.com/gamesindailylife/index.asp> (accessed 1 September 2008).
See <http://www.mpaa.org/press_releases/boy%20scouts%20press%20release.pdf>
(accessed 1 September 2008).

Book 1.indb 405 12/11/2008 5:01:22 PM

 406 Sir Hugh Laddie

the benets to the rights owners of doing so is direct and substantial. It

is therefore no surprise that serious money supports those lobbying for
greater and stronger rights. The language of the debate has become ever
more extreme. As William Patry, the renowned copyright authority in the
United States, explained only recently in a public lecture, demonizing
your opponent is the norm. Nowhere is this more apparent than in the
use of the spectre of organized crime and terrorism to support greater IP
rights. For example in June 2006, Lord Sainsbury, then Parliamentary
Under Secretary of State for Science and Innovation, addressed a confer-
ence in London. His talk was entitled Protecting Intellectual Property;
Pirates, Fakes and Organised Crime. It is no doubt true that criminals
and terrorists are attracted to any high-prot businessand businesses
covered by IP rights will be within that groupbut the suggestion
appears to be made that increasing IP rights and the ferocity with which
they are enforced is a weapon in the war against organized crime and
terrorism. That argument is overstated. Indeed, if one were to look at
this with cold logic, it is apparent that you could stop organized crimes
and terrorists interest in, for example, counterfeiting designer goods and
pharmaceuticals if you took the high prot out of these products, for
example by abolishing IP rights. This is not meant to be a suggestion
for a way forward. But it does illustrate that whether or not IP rights
are expanded, restricted, or kept the same is a question which deserves
measured analysis rather than hysteria. If IP-protected goods trigger the
attention of criminals and terrorists, it is only a reection of a basic truth
about such goods, namely that they are likely to be more expensive and to
generate a bigger prot than those that are not protected and which have
to meet the rigours of full competition.

The Undesirable Consequences of the

Drive for Greater IP Rights
A calm look at the way IP rights are obtained and enforced in practice
suggests that something is wrong. The drive for more IP rights has
produced startling results. Consider rst trade marks.

W. Patry, Metaphors and Moral Panics in Copyright, the 2007 Stephen Stewart
Memorial Lecture, 13 November 2007.
Available at <http://www.berr.gov.uk/pressroom/Speeches/page30604.html> (accessed
1 September 2008).

Book 1.indb 406 12/11/2008 5:01:22 PM

 The Insatiable Appetite for IP Rights 407

Trade Mark Addiction

Trade marks are addictive. Each registered trade mark creates an area of
exclusivity in the use of the mark, whether it be a word or a logo, in relation
to particular goods or services. One of the participants in the trade mark
feeding frenzy must surely be the Royal Mail. It has well over a thousand
registered trade marks covering most categories of goods and services.
Among this deluge of exclusive rights it has secured registration of the
words Postbox, Postman, Post Boy, Post Lady, Post Mistress, The
Post Oce Postcode, Mail Van, Mail Man, Letter Box, and Sorted.
It is dicult to see why one trader should have any form of exclusive
rights to these common expressions or what the Royal Mail hopes to
achieve by owning them.
However the problems with the trade mark system go further. Before
our law was harmonized with that of our European Union neighbours,
our domestic legislation included a denition of a trade mark which
required it to be used or proposed to be used in relation to goods for the
purpose of indicating a connection in the course of trade between the
marked goods and the proprietor. Furthermore it was only possible to
obtain registration of a trade mark if the applicant had, and declared he
had, a bona de intention of using it as a trade mark. These provisions
were hardly surprising. After all, trade marks were to be owned by those
in trade for the purpose of protecting that trade. The potential disadvan-
tages of allowing the registration of marks without an intention to use
were pointed out by Romer J over a hundred years ago when he said:
One cannot help seeing the evils that may result from allowing trade marks to
be registered broadcast, if I may use the expression, there being no real inten-
tion of using them, or only an intention possibly of using them in respect of
a few articles. The inconvenience it occasions, and the costs it occasions, are
very large, and beyond that, I cannot help seeing that it would lead, in some
cases, to absolute oppression, and to persons using the position they have got
as registered owners of trade marks, which are not really bona de trade marks,
for the purpose of tracking in them, and using them as a weapon to obtain
money from subsequent persons who may want to use bona de trade marks in
respect of some classes, in respect of which they nd these bogus trade marks
registered.

See the trade mark and copyright notice at <http://www.royalmail.com/portal/rm/

content2?catId=5700002&mediaId=400226> (accessed 1 September 2008).
Trade Marks Act 1938 s. 68(1).
Ibid s. 17.
In re J. Batt & Cos Trade Marks (1898) 15 RPC 262.

Book 1.indb 407 12/11/2008 5:01:22 PM

 408 Sir Hugh Laddie

Consistent with this, our domestic law prohibited the stockpiling of

ghost marks. However a requirement of a bona de intention to use
forms no part of the denition of trade marks contained in the new
European legislation or our domestic legislation derived from it. The
consequence is that it is now possible for someone to stockpile trade
marks in which he has no trading interest whatsoever. The only sanc-
tion is that after ve years of non-use the registration for such a mark is
susceptible to revocation.
It has not taken industry long to see the opportunities that this
creates. For example a certain well known car manufacturer has secured
registration of a series of marks, starting with the words A-Class and
going through all, or substantially all, the letters of the alphabet up to
Z-Class, with the word class spelt both in the English and German
way and every mark in the series Class-A to Class-Z for cars and
accessories. What, one may ask, is the benet which consumers can be
expected to receive from this? The fact that obtaining registered marks
is now being made cheaper and the grounds for rejecting applications
are being reduced will make matters worse. Trade is only likely to be
hindered by allowing traders to gain exclusive rights in marks they have
no intention of using.
In these two examples, at least the owners of the registered marks were
engaged in trade. But since it is not necessary to intend to use a trade mark
for which one seeks registration, anybodywhether trader or notcan
obtain them. Recently there was a press report that the names of well
known streets in London were going to be applied for as trade marks so
as to prevent sellers of souvenirs from lowering the tone of the capital
by selling imitation street signs. A brief search of the UK IPO website
shows that this was not a joke. In August 2001, the Crown Estate
Commissioners applied for and obtained registration of the trade mark
Regent Street in respect of a wide range of goods and services including

Imperial Group Ltd v Philip Morris [1982] FSR 72.

Our domestic legislation continues to include a vestigial and largely ignored require-
ment that the applicant for a national trade mark must state that he has used or has a bona
de intention to use the mark: see Trade Marks Act 1994 s. 32(3).
Art. 15 Council Regulation (EC) No 40/94 of 20 December 1993 on the Community
trade mark (CTMR). This itself is not much of a burden because it can be sidestepped by a
ve-yearly programme of new applications for the same mark and because the amount of
use required to overcome the non-use objection has been set so low by the European Court
of Justice. See Case C40/01 Ansul BV v Ajax Brandbeveiliging BV [2003] ECR I2439 and
Case C259/02 La Mer Technology, Inc v Laboratoires Goemar SA [2004] ECR I6469.
See the searchable database at <http://www.ipo.gov.uk/tm.htm> (accessed 1 September
2008).

Book 1.indb 408 12/11/2008 5:01:22 PM

 The Insatiable Appetite for IP Rights 409

jewellery, paper goods, household or kitchen utensils, glassware, clothing,

personnel recruitment, leasing and letting services, entertainment serv-
ices, cafeteria and restaurant services, and public conveniences. It is
dicult to see how this advances commerce in London. But the Crown
Estate Commissioners obviously thought they were on to a good thing.
In 2006 they applied for and obtained registration of the words Regents
Parkalthough only for paints. It seems somewhat unlikely that the
Crown Estate Commissioners are going to go into the paint business.
Perhaps there is no more dramatic illustration of how far this scramble
for exclusive rights over words in common use has gone than the fact that
in the last two years the British Department of Health has applied for
registered trade marks in respect of the words Healthy Schools, 5 a Day,
and Healthy Start, and some months ago the Department of Work
and Pensions applied to register the words Keep Warm Keep Well. In
the light of this, it should come as no surprise that the British Department
of Constitutional Aairs, now called the Ministry of Justice, whose motto
is Justice, Rights and Democracy, has applied for exclusive rights in a
trade mark, the most important feature of which is the words Freedom
of Information. There is nothing in the UK IPO records to suggest that
the Department made the application out of a sense of fun.
None of this should be dismissed as an irrelevant eccentricity. If these
sorts of right are created and owned, sooner or later some of them will
be used in earnest. Those in the trade mark eld will remember the case
of the Tan Hill Inn, the highest pub in England, which was oering its
customers a meal which included Guinness, stilton pat, roast turkey, and
Christmas pudding. It was unwise enough to describe this in its literature
as a family feast. In April 2008 the BBC reported that the owner of the
Inn, a Mrs Daly, had received a threatening letter from Kentucky Fried
Chicken which had registered the words Family Feast as a trade mark.
Mrs Daly was reported as saying that she thought that the letter was a late
April Fools joke. The story had a happy ending, probably brought about
by the widespread adverse publicity it generated: KFC backed o.
Now everyone is in on the act. A search of the UK IPOs trade
mark site shows that among those who have applied for and obtained
registered trade marks are schools, religious organizations, charities,
government departments, museums, the Metropolitan Police, hospitals,
and universities.

See BBC News Online, KFC Licked by Pub in Menu Fight, 10 May 2007,
at <http://news.bbc.co.uk/1/hi/england/north_yorkshire/6644177.stm> (accessed
1 September 2008).

Book 1.indb 409 12/11/2008 5:01:22 PM

 410 Sir Hugh Laddie

Excessive Copyright
Thus far this article has illustrated some of the more obvious excesses to
be found in the trade mark eld. Unfortunately things are at least as bad
in the area of copyright. Copyright illustrates as well as anything how far
we have departed from rationality or balance in some parts of IP law. It
will be remembered that the economic justication for IP rights is that
they replace the discipline of competition with the incentive of exclusive
rights where that incentive will bring into existence works, products, or
processes which otherwise would not have been created. Of course, once
the incentive has had its eect there is no further economic justication
for its retention. It has done its work and competition should be allowed
to return. It is for that reason that IP rights are of limited duration. When
copyright was rst introduced into British law 300 years ago, it lasted for
a period of 14 years, with the possibility of a single renewal for another
14 years. Since then, it has grown remorselessly. By the 1980s, copy-
right in all musical, literary, and artistic workswhich covers more or
less everything which is written, drawn, or painted and every piece of
softwarelasted for the life of the author plus 50 years. Consider the
case of a young software writer. With the aid of modern medicine such a
person could be expected to live to, say, 80. If he wrote his software when
he was 20, the copyright so produced would last for over 110 years. It is
dicult to believe that anyone thinks that giving copyright protection to
a work for decades after the authors death will act as an added incentive
to the authors creativity.
When the issue of duration of copyright was reconsidered in the
early 1990s in the process of harmonizing the law across the European
Union, was the opportunity taken to reduce this engorged protection to
a more sensible span? Not at all. Instead, all agreed to increase the term
to match what was available under German lawlife of the author plus
70 years. There is no economic justication for doing this. However,
once done, there is an economic incentive for its retention. The extension
of copyright creates more protectable assets and they have a value. What
otherwise would have been free now is owned. More of the public domain
is privatized. These ghostly rights continue rather like Second World War

Council Directive 93/98/EEC of 29 October 1993 harmonizing the term of

protection of copyright and certain related rights [1993] OJ L290/9, Article 1. See
now Directive 2006/116/EC of the European Parliament and of the Council of
12 December 2006 on the term of protection of copyright and certain related rights [2006]
OJ L327/12.

Book 1.indb 410 12/11/2008 5:01:22 PM

 The Insatiable Appetite for IP Rights 411

mines, long past performing their intended function and now just an
unpleasant and unexpected nuisance to commerce.
Once again, it would be a mistake to think that this is merely
theoretical. The combination of the spread of copyright, so that virtu-
ally anything which is created now is protected by it, and the lengthy
duration, means that we are surrounded by copyrights. It is not possible
to conduct normal life without bumping up against them all the time.
Professor John Tehranian of University of Utah has published an article
in which he analysed what he did during the course of a normal day.
Taking into account his use of the internet and various acts of photo-
copying and singing songs in public spaces, he came to the conclusion
have he commits an average of at least 83 acts of infringement per day.
To put this in perspective he calculated, perhaps tongue in cheek, that
his daily liability for damages for copyright infringement in the United
States would amount to $12.45 million, or in excess of $4.5 billion each
year, if the various copyright owners had sought to enforce their rights.
He pointed out that his calculations had excluded the additional liability
he would incur if he loaded soundtracks onto his MP3 player. The refer-
ence to singing songs in public was not an accident. The words to the well
known song Happy Birthday to You were written in 1935. In some parts
of the world they will remain under copyright protection until 2030. It
is said that the owner currently receives millions of dollars in royalties for
the public performance of this work every year. In America the Copyright
Collecting Society, which is charged with recovering royalty payments
for public performance of copyright works, demanded a licence fee from
Girl Guides for singing songs round the campre. In 2006 a couple in
Essex who wanted to put an engraving of Winnie the Pooh on their still-
born childs gravestone were refused permission by Disney on copyright
grounds until the story broke in the press.
During a recent meeting with a major broadcaster, I asked why it was
that some old television programmes could only be found on the internet
site, YouTube, where presumably they were shown without any copyright
licences. The answer was that there were so many competing copyrights
involved in making most television programmes that it was too compli-
cated to try to sort out who was entitled to what or what the share-out
of the proceeds should be, so marketing an authorized version was not

J. Tehranian, Infringement Nation: Copyright Reform and the Law/Norm Gap

(2007) Utah Law Review 537550.
See Telegraph News Online, Disney lifts Pooh bear grave ban, 23 June 2006, at
<http://www.telegraph.co.uk/news/uknews/1522071/Disney-lifts-Pooh-bear-grave-ban.
html> (accessed 1 September 2008).

Book 1.indb 411 12/11/2008 5:01:22 PM

 412 Sir Hugh Laddie

a practical business proposition. In this case, the system has, in eect,

strangled itself.

The Gradual Expansion of the Patent Net

Now consider the question of patents. Over the decades, the type of
inventions for which one could obtain patent protection has gradually
increased. For about 300 years, the guiding concept under British law was
that one could only obtain patent protection for new and non-obvious
inventions, or for what were called methods of new manufacture, that
is to say inventions of new saleable products or new industrial processes
for making such products. Other new and non-obvious creations, such
as plots for books, scientic theories, or how to play games, were not
patentable. Patents were tied in tightly to the development of industry.
Recently however there has been a gradual expansion of the patent
net. This has been most pronounced in the United States. There used
to be a rule, which still exists in Europe, that it is not possible to obtain
patents for ways of carrying out business. However in the late 1990s the
courts in the USA accepted the argument that, if it is proper to grant pro-
tection to, say, an inventive new product or process, it is equally proper
to grant protection to any other creation of the mind which is new and
inventive. This philosophy has no natural boundary. It justies not
only the extension of patentability to new methods of doing business but
also to everything else. So far, Europe has resisted the expansion of patent
protection in this way but there are strong voices in favour of adopting
the same policy. However the types of patent which have been granted
as a result of this expansion of patentable subject matter in the USA, of
which patenting new business methods is only one, has reinforced the
view of some in Europe that the arguments in support of it were a reductio
ad absurdum.
Consider a few examples. Perhaps the warning bell was rung by
Amazon, the internet retailer. At the end of September 1998 it obtained
a patent for a system for making purchases over the internet. The cus-
tomer is encouraged to give the internet retailer his credit card number
and address just once so that on follow-up visits to the website all it takes
is a single mouse-click to make a purchase from that site. It is called the
1-click patent. If valid, that patent could stop other internet retailers

See State Street Bank & Trust Company v Signature Financial Group, Inc, 149 F 3d
1368 (Fed Cir 1998), 47 USPQ2d 1596.
US Pat No. 5,960,411.

Book 1.indb 412 12/11/2008 5:01:22 PM

 The Insatiable Appetite for IP Rights 413

from using the same system on their sites for 20 years. This was no theor-
etical exercise by Amazon. Just three weeks after the grant of the patent,
in the middle of the pre-Christmas shopping surge, it sued its major rival,
Barnes & Noble. It alleged that Barnes & Nobles Express Lane pur-
chasing system infringed the patent. At the beginning of December of
that year a US court ordered Barnes & Noble to stop using its system.
Eventually Barnes & Noble took a licence, as have other major retail-
ers. Had it wanted to, Amazon could have refused to licence anyone.
All online retailers would have been prevented from trading in this way.
Amazon has followed this up with other patents on the way to trade
or communicate over the internet. Others have joined in the rush. For
example, a US lawyer obtained a patent which covered methods of
making online credit card payments. A large number of small online
retailers were sent threatening letters and warned that they would be
sued unless they paid a modest licence feea fee far less than it would
have cost to litigate. Indeed the proliferation of patents which, if enforced
ruthlessly, would undermine e-commerce has prompted vocal opposition
from public interest groups. In much the same vein are a patent for a
method of marketing real estate and a patent for a method for nancing
the purchase of a car.
Once it became widely known that the US PTO would grant patents to
more or less any new and inventive idea, a new feeding frenzy was created.
There has always been a small number of patents which slipped under the
radar and which, to most observers, seem to be unrelated to the primary
objective of the system, namely to promote technical development. For
example, even before the late 1990s a patent was granted for a method
of exercising a cat and there were patents for new ways of golf-putting.
However there has been a proliferation of these types of patent recently.
From an outsiders perspective this expansion has been hilarious.
Perhaps one of the most startling indications of the implications of the
anything is patentable philosophy is that patents started to be granted in
the USA for methods of avoiding tax. Presumably if these covered legal
ways of limiting the tax burden, any taxpayers who reduced their tax bill
in this way could be sued for infringement. If sued, perhaps they would
have to pay over the amount of tax saved as damages. By September 2007,
the US Patent Oce had granted 60 such patents and an additional 99
were pending. Recently the US House of Representatives voted to ban

See <http://news.cnet.com/21001017854105.html> (accessed 20 July 2008).

US Pat No. 6,263,601. US Pat No. 6,263,320.
US Pat No. 5,443,036.

Book 1.indb 413 12/11/2008 5:01:22 PM

 414 Sir Hugh Laddie

tax-planning method patents, a rare example of legislation designed to

roll back the IP tide.
Other instances of this proliferation of patents which seem to do
nothing to encourage or advance industry may be mentioned. For
example in 2002 a patent was granted to Steven Olsen, a ve-year-old
child from Minnesota. It is for a new way of swinging on a swing
side-to-side rather than front-to-back. Patents have also been granted for
a new method of painting which consists of dipping a babys bottom
in paint and then applying it to paper and for peanut-butter-and-jelly
sandwiches without crusts.
It would be a mistake to think that this sort of patent activity has been
restricted to eccentrics or to those with a nely tuned sense of humour.
At least on the latter score, the UK had a world champion. In the 1960s
and 1970s a patent oce examiner in the England, Mr Pedrick, obtained
more than 150 patents for deliberately stupid inventions. There are many
who think he did so with the intention of pointing out just how easy
it was to get silly ideas through the Patent Oce. Among his most
notable contributions to technical development in the UK was the
nuclear-powered cat ap designed to admit Mr Pedricks ginger cat but to
exclude his neighbours cats. The patent recounts detailed conversations
on nuclear physics between Mr Pedrick and his cat. He also patented a
ying saucer. Mr Pedrick may have been on a mission but many others
who have sought and obtained patents which do not appear to advance
technology are not.
One of the great patent owners of the United States is IBM. It is
thought to own in excess of 40,000 patents. It was estimated that in
2000 it received $1.7 billion in patent licensing fees, representing about
15 per cent of its prots for that year. The extent to which it values its IP
rights is to be seen on numerous corporate documents. It has everything
to gain from an IP system which commands respect. Notwithstanding
this, in 2001 four of its developers obtained a patent for a system for
organizing a queue of people wishing to use a toilet. In fact the
inventors said that their patent covered over sixty allegedly novel concepts
which they claimed to have invented. The most important and broadest
of these consisted of no more than the idea that someone who wants to
use a toilet requests permission to use it and is then told when the toilet
is vacant. One of the other allegedly inventive concepts covered by the

H.R. 1908, Patent Reform Act of 2007. US Pat No. 6,368,227.

US Pat No. 6,022,219. US Pat No. 6,004,596.
US Pat No 6,329,919.

Book 1.indb 414 12/11/2008 5:01:22 PM

 The Insatiable Appetite for IP Rights 415

patent is the idea that people who want to use the toilet are allowed to
do so on a rst come, rst served basis. The criticism which followed
the grant of this patent was both loud and public. So much so that IBM
decided to abandon it.
Of course most of these examples are light-hearted and have been
selected for that reason. But they represent the humourous tip of a
serious iceberg. There are numerous cases of absurd patents but most of
them are not accessible enough to engage the attention of the popular
press. Shaming proprietors into jettisoning these rights does not work.
Furthermore, because patents, like all IP rights, create assets of value, and
as the importance of these legal creations is advertised and promoted, ever
larger numbers of people and companies have a nancial interest in main-
taining and expanding the system. As mentioned above, there are some in
Europe who argue that we should follow the USA in granting business-
method patents. There are also calls for the expansion of copyright. For
example there is a current campaign to expand from 50 to 70 years the
copyright in sound recordings (that is, the records themselves rather than
the underlying musical works) led by an alliance of record companies and
well known but mature pop musicians. The European Commission has
now weighed in on their side with the suggestion that the term for this
sort of copyright should be extended to 95 years. Furthermore there
are constant calls for reduction in cost and delay in granting procedures
operated by patent oces. In Australia, this has led to an expedited sys-
tem for granting quasi-patents. In 2001, Melbourne patent lawyer, John
Keogh, obtained one of these new Australian patents. He dressed it up
in suitable scientic language. His invention was described as a circular
transportation facilitation device. He had done the impossiblehe
had patented the wheel. He claimed that his intention was to point out
the risks of this headlong rush to hand out IP rights to all and sundry.
Once again we can look to the USA to illustrate the consequence of
the proliferation of IP rights. There a vibrant new industry has been
created. Small companies, frequently set up by lawyers and well funded
by investors, buy up portfolios of patents and use them to generate large
royalty streams by threatening lengthy and costly patent infringement
lawsuits against operating companies. These rights exploiters, which
thrive because of the proliferation of patents and the high cost of litiga-
tion, are called trolls. Normally a troll has no trading activity of its own.

See the Proposal for an European Parliament and Council Directive amending
Directive 2006/116/EC of the European Parliament and of the Council on the term of
protection of copyright and certain related rights, COM(2008) 464/3, 16 July 2008.
See W. Knight, Wheel Patented in Australia, New Scientist, 3 July 2001.

Book 1.indb 415 12/11/2008 5:01:22 PM

 416 Sir Hugh Laddie

Its only function is to extract value from IP portfolios by licensing. This

has caused particular concern where electronics or business-method
patents are concerned. For example a major internet or electronic
company may use hundreds of pieces of technology in its daily oper-
ation. If a troll owns one or more patents which appear to cover some of
those technologies, it can threaten to seek a court injunction against their
continued use. If successful, the target companys products or services can
be taken o the market. The loss to the target company therefore can be
enormous while the risk to the so-called troll, since it has no commercial
operation other than royalty collection, is small. There have been spec-
tacular examples of very large sums being extracted from major trading
companies by this technique.
There is no requirement that the patents owned by the troll be of the
highest quality. If a parcel of weak patents is owned by the troll, there is
always a risk that one or more of them may be upheld at the end of expensive
patent litigation. As it has sometimes been said, a bad patent is a bad patent
but ve bad patents are a protable licensing opportunity. Frequently the
troll will oer to licence technology at a royalty rate which is very consid-
erably below the cost of litigating. The target companiesand there may
be many of themare, in eect, being asked to pay nuisance money to
get rid of the patent threat. Since the cost of patent litigation is high, the
nuisance money is substantial as well and since the troll will demand this
payment from all the players in a particular industry, the benets to it may
be large indeed. In their book, Rembrandts in the Attic, Kevin Rivette and
David Kline referred to the exploiters of these so-called trash patents as
get-rich-quick internet carpetbaggers. It illustrates the aection with
which they are held. The activities of so-called trolls has caused widespread
alarm in the United States but the truth is that it is an inevitable conse-
quence of the grant of ever greater numbers of doubtful rights tied into the
draconian result of the success in court. It should not be thought that this
type of activity is limited to the USA. It is to be found in any developed
market where there is a proliferation of patent rights.

Curbing IP Rights
The trouble with these sorts of activity is that they help polarize the debate
on the future direction of IP law. Amongst IP lawyers the most famous

K. Rivette and D. Kline, Rembrandts in the Attic: Unlocking the Hidden Value of
Patents (Boston, Mass: Harvard Business Press, 2000), 186.

Book 1.indb 416 12/11/2008 5:01:23 PM

 The Insatiable Appetite for IP Rights 417

example of strident advocacy was the late Jack Valenti who was CEO,
president, and chief lobbyist of the Motion Picture Association of America
for 38 years. He was the master of uncompromising rhetoric. For exam-
ple, on behalf of the lm industry he expressed hostility to the introduc-
tion of the videocassette recorder. During a hearing before the Committee
on the Judiciary in the United States House of Representatives in 1982
he expressed the industrys opposition as follows:
We are facing a very new and a very troubling assault on our scal security, on
our very economic life and we are facing it from a thing called the video cassette
recorder and its necessary companion called the blank tape. And it is like a great
tidal wave just o the shore. This video cassette recorder and the blank tape
threaten profoundly the life-sustaining protection, I guess you would call it, on
which copyright owners depend, on which lm people depend, on which tele-
vision people depend and it is called copyright. [He went on to say:] [Some say]
that the VCR is the greatest friend that the American lm producer ever had. I say
to you that the VCR is to the American lm producer and the American public
as the Boston Strangler is to the woman home alone.
This sort of rhetoric, and there was much of it, has been matched by
equally obdurate statements on the other side. For example, in 2004 one
commentator opposed to Valenti said:
And in the face of this onslaught of copyright extremism, we try to make change
based on moderation and balance. No wonder were losing this war. Personally,
I think the only strategy left is revolution. Completely throw out copyright laws
and thoroughly ignore them. Then let the content owners come back to the
bargaining table to renegotiate.
The language of war, revolution, rape and death destroys the middle
ground. All of the examples of excesses of IP laws given above are real.
They represent a threat not only to the idea of competition but also,
perversely, to IP rights themselves. The unyielding attitude on either
side of the debate makes it ever more dicult to secure a sensible revi-
sion of IP rights to better meet the commercial environment in the
21st Century.
Consider copyright. Whatever its origin, the copyright which is most
commercially signicant now is that which protects software, lms, sound
recordings, and broadcasts. In relation to all of them, the market now is
one of quick growth and quick obsolescence. We live in a world of instant

Hearings before Sub-Committee on Courts, Civil Liberties, and The Administration

of Justice of the Committee on The Judiciary, House Of Representatives, 97th Congress,
Second Session, On Home Recording Of Copyrighted Works, 12 April 1982, US
Government Printing Oce, 15168 O, Washington DC: 1983.

Book 1.indb 417 12/11/2008 5:01:23 PM

 418 Sir Hugh Laddie

gratication and quickly changing tastes. It is undoubtedly true, for

example, that old lm libraries have valuebut that is because copy-
right has extended their life. It has nothing to do with the justication
for copyright, namely encouraging new creativity. A lm maker who
thinks that he will need 40 to 50 years to make a prot will never secure
the nancing to make his lm. What happens decades down the line is
irrelevant, from the point of view of generating the works. If IP rights
are designed to create an incentive to make these works, what needs
strong protection is the immediate market. The same applies to books.
Nearly all books are remaindered or pulped in a few years, if not a few
months, of publication. If copyright is retained in them for decades it
certainly is not for the purpose of encouraging authors to write. In these
cases old copyrights are either valueless or, worse, an obstacle to future
creations.
This ferocious determination to hang on to everything as it is has other
casualties as well. Consider again the question of patents and pharma-
ceuticals. In the days before our patent law was harmonized with those
of our continental neighbours we had a system in which patents lasted
for 16 years but it was possible, where inventions of great worth were
involved and the returns had been insucient, to obtain extensions of
patent life of up to 10 years. The mechanism was far from perfect but
at least it gave eect to the underlying imperative of rewarding those
who had advanced science or the arts. These extension provisions were
used a lot. Many of the applications were in respect of patents for leading
pharmaceuticals. They were normally successful.
That exible system should be compared with what exists now. A new
pharmaceutical takes years and an enormous research budget to nd,
develop, and exploit. The lengthy testing which all new drugs have to
undergo to prove both ecacy and safety is necessary, but results in new
drugs being left with only a few years of commercial life left before they
fall into the public domain. Some small compensation for this has been
put in place by the creation of what are called supplementary protection
certicates which extend for a few years the protection of the marketed
product but do not extend the life of the patent. The manufacture of
closely related drugs made within the scope of the same patent can
proceed with no regard to the interests of the originator and without
making any payment. The result is that we all lose. In a recent news-
paper article, Jean Paul Garnier, the outgoing chief executive of Glaxo
SmithKline, referred to the development of new pharmaceuticals as a
do-or-die business model. Faced with only a few years to recoup their
R&D investment and to make a prot, pharmaceutical companies have

Book 1.indb 418 12/11/2008 5:01:23 PM

 The Insatiable Appetite for IP Rights 419

no alternative but to push up the price of their new drugs, sometimes to

levels which now are aecting their very availability. It is well known that
there are some recent life-saving drugs where the price of a years supply is
in the tens of thousands of pounds per patient. This price level inevitably
results in the drug being rationed. A depressingly common occurrence
follows. NICE, the National Institute for Clinical Excellence, tries to
limit the availability of new pharmaceuticals taking into account cost-
to-ecacy considerations. Patients denied the new drug on the NHS
because of NICEs restrictions then bring court proceedings, frequently
funded by the pharmaceutical company, to force NICE to change its
mind. Frequently these proceedings fail. Patients feel cheated.
It is not fair to dismiss this as being simply the result of pharma-
ceutical companies charging too much for their new products. We have
promised them, through the patent system, a proper commercial reward
for investing in R&D. We cannot complain if they take us at our word.
But the reality of the market place is that the exceptionally high price of
new pharmaceuticals is, at least in part, caused by the very limited time
during which research expenditure and prots can be recovered before
the products go o-patent. This has other eects, beside the immedi-
ate one of high prices and restricted supplies. Long-term planning is
made all the more dicult when, because of the short eective life of
the patents, there is no reliable long-term income stream. At least one
possibility would be to acknowledge that not all inventions are of the
same merit. There is no reason why a patent for exercising a cat or swing-
ing on a swing should be of the same duration as a patent for a life-saving
drug. What would be wrong with extending the life of patents in some
elds, if necessary with the safeguard of compulsory licence provisions
in the later years? Dening classes of technology which deserve patents
of longer duration would, no doubt, be dicult but refusing to do it
imperils the system itself. Furthermore, acknowledging that patents for
pharmaceuticals are worthy of longer protection than patents for some
other types of so-called technology would nally put paid to a great but
pervasive untruth, namely that all inventions deserve the same treatment
under patent law. It is the same untruth which supports, for example, an
eective copyright term of over a century for computer software. And it
is a cousin of the other great untruth, namely that there is nothing wrong
in creating trade-mark rights for words which perform no function or are
not intended to perform the function of protecting trade.

See e.g. Eisai Ltd v The National Institute for Health and Clinical Excellence (Nice)
[2007] EWHC 1941 (Admin).

Book 1.indb 419 12/11/2008 5:01:23 PM

 420 Sir Hugh Laddie

We should be trying to hone the system so that the greatest rewards

and encouragement go to those industries which need and deserve them
most. Where IP rights perform their function of advancing the sciences
or arts, they should be encouraged to do so. Where or to the extent that
they do not, they have no economic justication and the normal dis-
cipline of competition should prevail. The gluttony which has resulted
in the growth of completely unnecessary or excessively long IP rights
undermines the system itself. As Shakespeare put it: With eager feeding
food doth choke the feeder.

Book 1.indb 420 12/11/2008 5:01:23 PM

Reproduced with permission of the copyright owner. Further reproduction prohibited without
permission.