Reto M. Hilty«Open Approaches»

Reto M. Hilty, «Open Approaches», in: Rolf Sethe/Andreas Heinemann/Reto M. Hilty/Peter Nobel/Roger Zäch (eds.), Festschrift für Rolf H. Weber, pp. 83–108 (Berne 2011).

Background

In June 2011 Rolf H. Weber, chair professor at the University of Zurich, celebrated his 60th birthday. For this event his friends, collaborators and scientific colleagues published a tremendous commemorative volume with the title «Kommunikation». Information and communications law has played an important role in Weber’s career, mainly during the last 15 years (cf. Weber, 1.3/2.1/4.2/4.4). Therefore, the tribute focuses – among others – on this subject. The commemorative publication contains texts from science, justice, legal practice and legal policy and is divided into: (1) individuals and businesses, (2) markets, (3) states and (4) media. Reto M. Hilty’s text analyses the so-called open approaches in information law.

Hilty assumes that – from a starting point of view – communication means sharing (of information). The social interaction allows for the creation of solutions that a single person would have never found alone. This simplified thought is in contradiction to a proprietary world in which there are specific legal regulations (in particular, intellectual property law).

The aim of Hilty’s text is not just to repeat the discussion of already debated topics. Instead, Hilty attempts to outline specific aspects that have so far not been adequately developed. The text is about the impact of different forms of information ownership on the mechanisms of competition. Based on unhindered communications with available information, optimal framework conditions could be created allowing new knowledge to be established in a collective process.

Reto M. Hilty is a professor (ad personam) at the University of Zurich and honorary professor at the Ludwig Maximilian University, Munich. His areas of interest are contract law, competition law, intellectual property law and new technologies. Furthermore, Hilty is interested in the harmonisation of international property rights. He has been a faculty member of the Max Planck Society and director of the Max Planck Institute for Innovation and Competition since 2002 (managing director 2005–2006 and 2011–2012).

Summary

According to Hilty it is widely recognised that the interactions of property rights and competition law (in particular antitrust) will not lead to a conflict of objectives; moreover, the objectives seem to be comparable or even rectified. However, some market participants tend to obtain individual benefits that have a negative effect on the other participants. Such an imbalance can cause an imperfect market with the consequence of an undersupply of the relevant goods. This situation would ultimately lead to a market failure. In order to prevent a market failure, the law has to limit the freedom of action of some market participants; this effort is implemented with specific legal arrangements.

Hilty distinguishes three groups in which such legal arrangements are identifiable:

  • The legal arrangement can be directed towards dysfunctional appropriation of (foreign) innovations or creations, particularly in the form of patent, design or copyright law.
  • Furthermore, legal arrangements can be directed to dysfunctional behaviour of market participants; other market participants, for example consumers, might be negatively influenced. This situation can occur in case of relevant market information.
  • Finally, legal arrangements could tend to prevent the dysfunctional use of a relevant market power.

This grouping into three areas is of relevance for Hilty’s analysis. There is a basic difference between the first and the second group of legal arrangements on the one side and the third group on the other side. The first two groups focus on third parties that should be hindered from invading a foreign sphere. In contrast, the third group emphasises the role of the respective rightsholders.

Notwithstanding the question into which group a legal arrangement falls, all regulations are directed towards congruent goals, namely limiting the freedom of action of specific market participants to prevent a dysfunctional distortion of competition.

Hilty states that in each of the above-mentioned groups, the ownership of rights has a more or less wide-ranging influence on the competition mechanisms. For the first group of legal arrangements, the situation seems to be evident. The point is to prevent the appropriation of foreign innovations or creations. With respect to the second group of legal arrangements, however, the extent to which ownership has an influence on the mechanisms of competition is less clear. In the third group of legal arrangements, which is directed against the dysfunctional practice of market power, it is evident that the ownership must have an influence on competition. Consequently, Hilty attempts to answer the question of what kind of influence the different forms of ownership have on the mechanisms of competition. Hilty’s text mainly analyses a specific form of ownership, namely, the collective ownership. Hilty examines whether there are special possibilities for organising an ownership in a collective way. The aim should be to connect the benefits that are obtained from exclusionary effects of property rights towards third parties with the advantage of common availability of information.

A definition for the concept of «collective ownership» is not easy to formulate. Hilty states that it is a (purely hypothetical) legal construction. This assumption can be based on certain theoretical considerations regarding how a more cooperatively operating world should be organised within the current legal system. Having an indefinite number of rightsholders involved, Hilty proposes in view of the given vagueness to introduce further terminology: «open».

Hilty’s text proposes that the term «open» is mainly relevant in three areas:

  • Open source: Software use was the first area in which the term was applied in order to show the problematic character of exclusive rights.
  • Open access: This term was often used as a buzzword around the turn of the millennium; originally, it focused on the access to scientific information.
  • Open innovation: This term is based on a relatively new concept, but it is sometimes classified as an unclear term; it mainly refers to more or less theoretical approaches.

In copyright law, the open approach has various facets. The first two use forms of «open» and provide a more or less clear perspective. Both are ultimately based on the existence of copyright. At the same time, it is the ownership that enables specific forms of licensing; for example, the creative common license. Such specific license regimes allow the use of the subject of protection with certain conditions imposed. As the most important element, the so-called «creative use» of the subject of protection is allowed since the result of further creation is again open for third parties. Therefore, it can be said that in such situations a collective ownership exists. However, from a formal point of view, the collectivity is limited due to the fact that several individuals collaborate in the described manner resulting in one or more creations.

In contrast to the open model in copyright law, the open approaches are based on different legal frameworks. The involved legal field, for example patent law, formally does not arise with the act of innovation. It begins with a de facto ownership (article 39 of the TRIPS, undisclosed information). In principle, the patent application implies a disclosure of the invention-related information. This creates a different situation than in the case of copyright law where the access to information is one of the most controversial issues.
Hilty is of the opinion that the question of the influence of open approaches on the competition mechanisms is substantial. The collective understanding of a group of connected rightsholders, not to fully exploit their exclusive rights, has positive effects (so-called network effects). However, it is questionable whether this means that collective ownership also has a positive impact on the mechanisms of competition (in the sense of openness). Since the answer to this question depends on a number of other factors, a clear statement cannot be made especially because competition hardly takes place at the level of the creator or inventor.

Overall, Hilty concludes that the ownership rules with regard to the competitiveness of a system are only one factor among many others. It is relevant how the market participants react in general and how their role as entrepreneurs influences competition in a broader context. However, in every phase of ownership the creator or the inventor (depending on the legal framework) has a significant influence on the further fate of the subject of protection.

The text outlines the often-discussed conflict potential between secrecy and information access. Nowadays, openness and transparency have become important cornerstones of our society. This can be seen in the federal administration, which has newly established an open government data portal, and in the private sector with the new regulations concerning broad disclosure duties of management salaries. Therefore, the approaches of Hilty concerning how to deal with «openness» merit further attention.

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You can find a scan (PDF) of the original text here: Hilty – Open Approaches.