Private and Public Enforcement of IPR

In a news report in INQ7, the Intellectual Property Office is asking different local government units (LGUs) to pass a model IP ordinance which is described as follows:

The template IP ordinance x x x requires all business permits issued by the city or municipal government to carry the express condition that the licensee will not engage in the sale, rental, transfer, distribution, manufacture or production of pirate, counterfeit, or fake goods including VCDs, DVDs and videos.

Violating this ordinance would be grounds for the revocation, suspension, or cancellation of the violator’s business permit.

The validity of such an ordinance is, in my view, legally questionable.  Congress has already passed upon the matter of intellectual property when it enacted the Intellectual Property Code.  Nowhere in the law does it penalize infringers by denying them the right to pursue any other legitimate business.  Therefore, it appears that the LGU enacting the ordinance would be expanding the penalty for infringement beyond that imposed by Congress.  The issue is whether or not the Local Government Code grants the LGU this power.

More to the point,  the ordinance overextends when it penalizes the infringer with the revocation of it business license.  It assumes that the only business of the infringer is selling fake DVDs.  But the fact of the matter is that the infringer may be engaged in other legitimate businesses.  Why should those businesses be affected when the infringement is only one part of their entire operations?  If one operates an Internet cafe and incidentally, makes copies of business applications for its customers, the ordinance will shut down the whole place including the Internet cafe.  Even under the IP Code, this kind of wholesale punishment is not contemplated.  If an infringer is otherwise pursuing a legitimate business, the IP Code does not prevent him from continuing the same despite the infringement.

But the more troubling aspect of the ordinance is the fact that LGUs are now being recruited to enforce IP rights.  As I’ve said before, IP rights are private rights that have to be enforced by their owners.  If no IP rights holder complains, there’s no basis for the government to enforce the law. 

Here’s a real world analogy:  Let’s say you have a car and it’s stolen.  You haven’t reported it to the police because frankly, you’re glad someone finally took it off your hands.  Question: Can the police now run after the car thief if you don’t complain first?  Of course not!  They wouldn’t even know which car was stolen.  In fact, they have no basis to assume that any car is stolen (even if the driver looks like he can’t afford the car he’s driving).  Enforcement of your private property rights can only happen if you initiate the process.  Without your involvement, the law enforcement agencies cannot act on their own.

Let’s move back to the LGU’s and this ordinance.  How then will the LGU’s know that the business owner was violating IP rights if no IP rights holder complains?  On the one hand, you would think that this makes the ordinance impossible to enforce.  But you’d be wrong.  Under the recently-enacted Optical Media Act, the mere absence of certain codes on a CD makes it illegal and subject to seizure.  This means that even if no IP owner complains that his movie or audio CD is being pirated, the Optical Media Board (OMB) can initiate criminal proceedings simply upon the basis that the optical disk itself is illegal (that it doesn’t contain certain codes that the OMB specifies).  In this respect, the OMB is engaged in the public enforcement (at taxpayers’ expense) of private rights.

It’s as if the government said, “We’re going to spend your tax money to protect your car whether you want it protected or not! We will pursue all car thefts, whether you report it or not!” When you consider that much of the intellectual property in this country belongs to foreigners, and those rights being enforced may be those of people who don’t even pay taxes to the Philippine government, you might think it’s a little unfair.  It’s entirely possible that the rights of an American movie producer who doesn’t care if his film is being pirated in the Philippines are being protected by the OMB using your tax money.

This is what we’ve come to:  the public enforcement of private rights.

But this is part of a larger trend calling for stronger intellectual property rights.  In the case of the Philippines, IPR enforcement is tied into free tradeso we don’t have much of a choice.  Even though there may be strong arguments favoring a weak intellectual property rights system, those become irrelevant given the promise of free trade — that is, cheap imports.  But then again, what’s the value of free trade when you have nothing to trade?  In the case of the Philippines, our biggest export is labor but the free flow of labor isn’t a free trade issue, it’s an immigration issue.  Once you look at immigration policy in the first world, you’ll see that it severely resitrcts the flow of people from here to there.  So, I guess I’d like to see if free trade has really delivered on its promise.  If not, then maybe we should reconsider our intellectual property policy and move further away from where we find ourselves today.  I recall one Conrado de Quiroz column where he urges the government to pursue a policy on intellectual property that promotes the national interest.  I think this is what he was talking about.