Lebanese International University

Project

Sadek Chahine 10830132
Masoud Al-Shaar 10731860
Ihab Sharaf Aldeen 10530251
Bassam Jaafar 10731383

Business Ethics

Beirut Campus
Dr Malek Nayfeh
2009 – 2010

Intellectual Property

I. Description

1. Patents 2. Copyrights

II. Identify Ethical issues involved

1. Global social justice 2. Utilitarian point of view 3. Materialization of intangibles

III. Points of view

1. Public 2. Owners of rights 3. Government

IV. Considering available alternatives

1. Tightening intellectual property 2. Letting loose intellectual property

V. Consequences of the application of protection

1. Extensive protection consequences 2. Less protection consequences

VI. Examples

1. World 2. Lebanon

VII. Conclusion

1. Determining the facts
Most discussions about intellectual property rights are focused on patents and copyright because, as long as they are rationalized, trademark rights are simple rights of identification that only benefit owners or copiers but not affect progress and are not regarded heavily as a beneficial creation for the community.
Arguments for intellectual property protection include increased creation due to financial incentives which leads to economic growth, and possibly a wider and more efficient distribution.
Arguments against it include criticism of its range and length, its infringement of freedom, restraining of progress and diffusion, and its contribution to the global injustice issues. “For developing countries to benefit from providing IP protection to rights holders based in developed countries, there has to be some obligation on the part of developed countries to transfer and disseminate technologies to developing countries” (Michael Geist, (April 2005), WE CAN HELP BRIDGE THE DIGITAL DIVIDE).
The intellectual property pricing is not adequate to incomes of some population who may be in need for the protected innovation. These populations are the ones who usually adopt illegal methods to gain access to tools otherwise out of their reach.
Legal, cultural, and economic (difference in prices versus income) reasons stand behind the variation in infringements rates.
Infringements to intellectual property worldwide are significant. The losses in sales for producers turn out to be staggering. For example, out of all software installed in Armenia, 93% are pirated. The United States stands at the lower end with only 20%, while Lebanon, sharing the 38th position for software piracy with Russia, shows rates of 73% (James (Staff Editor), Software piracy rate (most recent) by country).

2. Identify the ethical issues involved
Global /social justice and development: intellectual protectionism effects are similar to economic protectionism. The issues of globalization and free trade (or at least the versions of these issues proven to be beneficiary to developed countries) are used demagogically and are even shadowed by opposing actions of The north (developed countries) whenever seen selfishly useful. Such issues, when bought up in world disequilibria ( exactly as in the global intellectual production and use) contribute in further disequilibrium or in other terms, bigger gaps between the north and the south and suffocated progress in developing countries. This is in terms of global justice and development unethical as it is with respect to the social injustice created by unfair monopolized pricing that further increases the cultural educational, and informational gap, to the detriment of the suffering classes that cannot access tools key in their progress. In reality these developed countries themselves adhered to more lenient rights during the previous phases of their development which further underlines the idea of the selfish injustice towards the less developed. As stated in the words of James: “There is a strong push by developed nations (who are strong producers of intellectual property) to force developing nations to improve their enforcement of intellectual property rights, despite the fact that they themselves were slow to adopt strong protection of intellectual property during their own development phase” (James (Staff Editor), Software piracy rate (most recent) by country). Combined with the north’s responsibility for the original injustice because the early start was caused by unjust political and economic domination, the ethicality of protectionism becomes questionable. Pragmatism: Pragmatist theorists claim that laws should adapt to realities. If there are general socially acceptable tendencies and actions, that may not be legal, but have deep economic incentives, economic portions of laws should be more adjusted in order to eliminate those tendencies. This does not challenge the main basis of intellectual rights but the relative gray area of intellectual protectionism scope arguing in this sense against the trend of increasing intellectual property protection and in favor of its reduction.

Materialization of intangible public and human realities: exclusive ownership of life and emotions is one aspect of modern intellectual property trends. It is possible today in the US, to copyright widely used words, living organisms such as bacteria, and even human genes. “Nearly 20% of the 23,688 known human genes are patented in the United States. Private companies hold 63% of those patents” (Clara Jeffery (Ed.), Intellectual Property Run Amok). The fact that certain forms of life can be patented not simply owned is a new debatable issue. While usually regarded as inacceptable, “Biotechnology firms argue that, if they were unable to prevent rivals from imitating their creations, they would not be able to recoup their costs and thus would have no incentive to invest in the research and development necessary for scientific breakthroughs” (William Weston Fisher, The emergence of intellectual-property law).
The fundamental right of benefit from one’s effort: this right is the main reason behind the existence of intellectual property. First introduced by john lock, believers in this right argue “that a person who labors upon unowned resources has a natural right to the fruits of his efforts, and the state has a duty to respect and enforce that natural right” (William Weston Fisher, The emergence of intellectual-property law).
The utilitarian principal of creation incentive versus the vulgarization of creation: from a utilitarian point of view property rights may lead to a higher public good because they cause an increase in innovation that offsets the benefits from diffusion of knowledge (which may be sometimes an increase in innovation due to scaling factors). The same balance can be used against intellectual property rights if the benefits for diffusion can be proven to be great or if the incremental change in creation turns out to be overrated.
The human need for protected creative expression versus the need for unrestrained free speech: on the level of human wants and needs that end up being balanced into regulations, two needs are in struggle. The need for protection of works was inspired by the works of philosophers “Immanuel Kant and Georg Wilhelm Friedrich Hegel and out of a sentiment, common in western Europe, that artists and authors should enjoy certain “moral rights.” This approach is premised on the notion that private-property rights are crucial to the satisfaction of fundamental human needs” (William Weston Fisher, The emergence of intellectual-property law); while the need for freedom of speech is a modern reaction to tight intellectual property laws. The need for protection and the need for freedom of speech are weighted based on preferences. The fact that both essential needs represent extreme mutually destructive positions makes the optimal position subject to a tradeoff. However the latest trends in regulation, notably affected by pressures from innovators and globally by the efforts of developed countries, side with the need for protected creation while drifts in public preferences and technologies favor the freedom of speech (caused by its shrinking consideration, and some illogical overlapping such as the fact that one cannot use innovation produced fully by his own intellectual effort if it has been registered earlier by another party).

3. Identifying stakeholders and considering the situation from their point of view A. Public: the public considers intellectual property rights as a constraint and a detriment both financially and in terms of freedom of expression. The registered and protected innovations are removed from the public’s access and potential discovery except for parties willing to pay a premium that isn’t necessarily competitive or adaptive to the needs of users, real value of the protected material, and the rationalization of the profit of innovators. The public considers paying attention to the difference between low income and high income classes as well as between populations of developing and developed countries to be elementary especially since inadequate pricing is the top reason of intellectual property infringements. The public seeks to have as little protection as possible for the shortest time. B. Owners of rights: owners of intellectual property rights aim to reap as much profit as possible through elongated protection periods, extended rights and better governmental execution of laws. Owners consider that profit to be their compensation for the intellectual effort, the costs of resources and registration, and the risk of diffusing their innovations. Any cost premiums should be considered, not a detriment to society but rather the additional given incentive for creation (an indication of its value of innovation in that society). C. Governments: the governmental role is to try to balance between the two incentives in order to achieve maximum good without disregarding any important moral principal. As long as both parties are subs of the same government ad as long as the government is democratic and benefit seeking misbalance is unlikely and optimal tradeoff is identified, legislated, implemented and relatively respected by the public. Issues arise however if the government is corrupt or being heavily lobbied and pressured, decision making is inefficient, or if parties belong to different governments. In this case, and with the absence of globally comprehensive and accepted policies, conflict arises out of the bias decision making. William Fisher sums it up in a few words when he declares that “utilitarians urge lawmakers to craft intellectual-property regulations carefully in order to strike an optimal balance between the socially desirable tendency of such laws to stimulate the creation of inventions and works of art and their partially offsetting tendency to curtail the widespread public enjoyment of these products” (William Weston Fisher, The emergence of intellectual-property law).

4. Considering the available alternatives
The available alternatives can be summed up to two main ones: A. Further tightening intellectual property laws and opting for better compliance and execution internally and around the globe (governments), keeping and expanding the length and amount of monopolistic and exclusive right’s extortion (innovators and owners), accepting and conforming to the regulations and the domination of the owners or taking the risk of illegally accessing protected IP (public). B. Letting loose intellectual property laws and opting for a minimal incentive policy that aims at maximizing diffusion and minimizing infringements pragmatically with less rigid rights (governments), adopting a more competitive more efficient strategy and forgoing benefits of monopolies for reduced costs of illicit activities and increased sales (owners), increase consumption and switch to the production of the rightful owners benefiting from the more adapted strategies.

5. Considering how a decision affects stakeholders A. 1- the application of longer, more extensive protection would result in certain consequences:
Empirical data shows that the progress created by innovators is “frozen” during the protected period and that the effective usage of the intellectual creation starts after the intellectual rights expire.
Also, because innovations do not grow in vacuum but are rather incremental improvement built on mixtures of older ones, any additional innovation is then disabled by the protection period of previous ones. A common example would be Watt’s steam engine that s regarded as the spark of the industrial revolution. We see in the clear words of Boldrin & Levine that “The evidence suggests that Watt’s efforts to use the legal system to inhibit competition set back the industrial revolution by a decade or two. The granting of the 1769 and, especially, of the 1775 patents likely delayed the mass adoption of the steam engine: innovation was stifled until his patents expired; and very few steam engines were built during the period of Watt’s legal monopoly” (Boldrin & Levine, Against Intellectual Monopoly).
In reality, and in spite of very protective laws, “only about 5% of patents end up having any real commercial value” although intellectual property in some countries such as in USA rises to heavy amounts such as “$5.5 trillion, equal to 47% of [the US] GDP” (Clara Jeffery (Ed.), Intellectual Property Run Amok).
The owners will feel compensated for their effort; they will feel more induced towards further creation.
It is also argued that the owners of rights usually focus on extracting as much of financial benefits as possible from their creation (provided they turn out to be beneficial) wasting in the process valuable time and resources that could’ve been otherwise spent in additional creation. This realty partly appears in the number of lawsuits on the basis of intellectual property that “more than doubled since 1992” and the amount of money spent on registration, monitoring infringements, turning around, implementing and lobbying for more protective laws.
The public would also try to adjust for the economic disadvantage reducing prices through piracy and other infringements. 2- This course of action relies on the following duties, rights and principles explained earlier:
The fundamental right of benefiting from one’s creation
The utilitarian principle of creating incentives (as shown in the consequence on owners)
The human need for protection of the creation B. 1- the move for shorter, less protection would result in these consequences:
Owners may feel less motivated to further create. But this decrease may not be as dramatic as feared because the notable noneconomic incentives for creation remain unharmed.
Also in many areas (especially the ones with low adjustability) the risk of losing profit for imitating competitors is minimal. It is also argued that a more balanced non-monopolistic approach to IP business use is, in a way or another, financially more efficient. Losses from a lower more competitive pricing may be offset by increased sales and the possibility of the consequential complete elimination of illicit infringements (ex: piracy).
Infringement of freedom is due to the lost opportunity of creation to the benefit of the exclusive registering party. The fact that someone would’ve came up with the same creation becomes unimportant as the issue of time and registration is given the priority and the use of innovation that one could’ve came up with becomes restraint. This restriction on freedom of speech is not agreed upon as the fair price for innovation everyone is willing to pay. Less rigid rights mean more freedom.
Returns are above and beyond what inventors require and regard as fair. This is an added weight on the public that will aim at decreasing this gap. Had they been rationalized, no illegal actions for decreasing prices would’ve been necessary.
The tradeoff between incentives of creation and total benefits from diffusion leans towards the later for it is capable of attaining the aim the first without its heavy costs. It is rather intuitive (and proven) that the more knowledge is diffused the more the creation. This policy would match the benefits to creation with the gains from diffusion.
More adjusted pricing resulting from reduced monopolies would, not only decrease piracy and increase profit, but also contribute to a better global justice and balanced development. 2- This course of action relies on the following duties, rights and principles explained earlier:
Pragmatism
Global and social justice and development
The utilitarian principle of the vulgarization of knowledge
The human need for the freedom of speech and thought 6. Examples
World:
Under the title “Smart pricing in China discourages piracy” Brian Fuller discusses an interesting case. This case includes the issues of global justice, utilitarian adaptive pricing, and counter-piracy measures. Fuller describes how piracy in developing countries –here china- can be reduced or eliminated by adaptive prices. Taking income as a basis, pricing should be acceptable and affordable in developing as in developed countries. Piracy is the product of need for and remoteness of software and it creates an opportunity for the producer suffering from it for it gives him publicity and market power that could be transformed into real profit with smart measures (Auto Cad considered its 90%, mostly pirated, domination on the Chinese market an asset). With competitive pricing software producers can increase sales in the detriment of pirates rather than competitors. What helps them is the fact that they are the originators of the product, and that their product has been promoted by others for them, so they already have an advantage over the competition (here the pirate and usual competitors).
Lebanon:
To illustrate more about cable piracy in Lebanon, one of many examples from Lebanon might clarify the consequences of one of the huge problems that Lebanon faces. In 2006, days before the Soccer World Cup, the Arab Radio and Television (ART), which bought the exclusive right to air Word Cup 2006 in the Arab world, has refused to grant any Lebanese television the legal authorization to transmit the soccer matches in Lebanon. ART related the reason behind its decision to the existence of hundreds of illegal cable operators that offer illegal broadcasting services without any license and in the absence of any laws that prevent such services in the country. However, people in Lebanon were able to watch the World Cup after an agreement between illegal cable transmitters and the satellite network in the Middle East. The agreement was made within two days after paying $500,000 to ART collected from the illegal cable operators. However, it stated that the illegal operators would only transmit ART channels to home subscribers and not to restaurants or hotels, since ART forced restaurants and hotels to register to its channels, for extra charges, before airing World Cup matches. In case illegal operators transmit to restaurants or hotels, ART will cancel the agreement and stops its transmission in Lebanon. Two main conclusions can be derived from this single example. First, Lebanon is an open area to many illegal businesses that benefit at the expense of the legal and licensed businesses without having any strict laws banning such acts and punishing wrongdoers in a way where people adopted to existence of illegal operators and normalized themselves to dealing with them. Looking at the above example, one may conclude that both the illegal operators and ART were acting in an illegal and unethical way. Starting with the illegal operators, services they provide is illegal for not having a legal license to distribute it. In addition to that, they are generating profit by harming legal satellite networks and acting in a utilitarian way that pleases their desires and those of their subscribers.
Weighing the advantages of both the illegal operators and the subscribers to the disadvantages on the legal networks, we find that the advantages overweight the disadvantages. The percentage of people benefiting is more than those being harmed, and that is why the wide spread of cable piracy is accepted among people especially that the cost of services provided range from LL10,000 to LL15,000 per month only. Although a utilitarian might support the existence of illegal operators, they are in return weakening the Lebanese television channels since they are enabling foreign television channels to broadcast in Lebanon without legal license agreements.
In the case of ART decisions, one may clearly conclude that they acted in an unethical way that ends in them benefiting most. ART agreed to deal with illegal cable operators, disregarding the law, because of the tempting offer of $500,000 they received from them. Up till now, the utilitarian approach can be applied considering that most parties engaged in the decision are happy and benefiting. However, ART's decision in charging extra fees to restaurants and hotels was purely selfish and contributed none to the society. ART decision is unethical, cannot be explained by either the utilitarian or the Kantian approach, and can be considered merely selfish. Considering that ART is the only legal party engaged in this issue, it is better for it to adopt the Kantian approach and practice itself to perform only legal deals and agreements so it can contribute more to the society and become a role model to other satellite networks as a pace into a healthier and more ethical society. 7. Conclusion
Obviously, banning software piracy is not going to be surely guaranteed and applicable simply because of few insistent organizations. For example, if one internet piracy website is shut down, five more will appear. The way our situation is at this point, means there is no one definite approach to prevent it.
However, the impracticability of entirely avoiding software piracy should not lessen our determination in reducing it up to the maximum. Several ways can be adopted in order to reduce it.
Another eminent method is to invest efforts in manufacturing anti-piracy program imbedded in every product. This sophisticated software does not allow copying and it can also report the abuser online or erase the original copy. This method takes less effort than what lobbying and pressuring governments would require. This is why it is more or less the preferred methods for companies like Apple. However, this method only benefits innovative companies since it requires constant updating of passwords and nonstop actualization of methods that are always subject to hacking.
Another way to fight piracy is to go around it rather than facing it. Aware of the benefits of piracy and the rooted, possibly justifiable, causes behind its proliferation, parties suffering from piracy have come up with a way to turn the table on pirates. They will try to take their role by lowering their prices and adopting a more adaptive income-based pricing. In addition to that, they will also try to legalize and enter in a pragmatic relationship with illegal pirates to transform them into a useful network of distributors. Such action would mean that piracy would cease to exist, simply for lack of purpose, if producers acknowledge a (usually lower) loss. This is what ART had in mind when it purchased ECOnet (a legal cable operator that provides an identical service to the pirates’ with very close pricing) and when it entered into an agreement with local cable pirates.
In conclusion, the damage done to the industry and legitimate end user outweigh the few advantages that piracy has. The chances of being caught, the fines, and the jail sentences are constantly increasing. Contrary to what many of the uninformed pirates believe, most of their arguments are invalid. With anti-piracy organizations lobbying the government to pass new laws, the few valid arguments that they still do have are disappearing and the number of their successful methods is diminishing. Even though anti-piracy organizations have made great strides in their fight, with the enormous growth of the Internet, current anti-piracy methods will not completely stop piracy. Organizations and industry need to come up with solutions to increase copyright protection, inform the uneducated, and negate the advantages that computer piracy has.
As well, the best alternative to be adopted is the policy of reducing intellectual property rights’ scope for it leads to a better good and requires less sacrifices. The moral principles of benefiting from ones creation, creating financial incentives and the need for protection are offset by the equally important principles of global justice, the diffusion of knowledge, the need for freedom of speech and thoughts, and finally the less holy but realist principle of pragmatism.

Source

Clara Jeffery (Ed.), (March/April 2006), Intellectual Property Run Amok, The Comedy of IP Overkill, http://www.motherjones.com/politics/2006/03/intellectual-property-run-amok
James (Staff Editor), (2nd May 2005), Crime Statistics, Software piracy rate (most recent) by country, http://www.nationmaster.com/graph/cri_sof_pir_rat-crime-software-piracy-rate

Michael Geist, (April 2005), WE CAN HELP BRIDGE THE DIGITAL DIVIDE, http://www.michaelgeist.ca/resc/html_bkup/april252005.html

William Weston Fisher, The emergence of intellectual-property law, Britannica, http://www.britannica.com/EBchecked/topic/911774/intellectual-property-law/231531/The-World-Trade-Organization-and-intellectual-property-law

Boldrin & Levine, Against Intellectual Monopoly, Chapter 1, http://levine.sscnet.ucla.edu/papers/ip.ch.1.m1004.pdf