Breen, Marcus --- "Open or Close: Parallel Importation and Policy" [1994] JlLawInfoSci 7; (1994) 5(1) Journal of Law, Information and Science 71

• Open or Close: Parallel Importation and Policy
• Abstract
• 1. Introduction
• 2. Legal Limitations
• 3. Policy Context
• 4. Conclusion

Open or Close: Parallel Importation and Policy

MARCUS BREEN

Abstract

In this article the author argues that any discussion of copyright must be made in the public domain and that policy must play an important role in this discussion. He identifies the limitations of the policy process that have existed to date, the legal limitations and then examines the policy context. Finally the author concludes that the least we should expect from policy advisory bodies like the Copyright Law Review Committee are recommendations that no longer advance the closure of industry and policy options.

1. Introduction

One of the few words mentioned in the Copyright Law Review Committee's Draft report on Computer Software Protection is 'policy'. And yet the report is really a key document for the development of software policy in relation to the process of making contemporary the Copyright Act 1968. I found this somewhat puzzling. My presentation will concentrate on policy, in an attempt to bring the discussion of copyright directly into the public domain and to illustrate how copyright is a public and a policy issue.

It is also intriguing that the CLRC has relied heavily on the Prices Surveillance Authority's Inquiry into Computer Software, using it as a counterpoint to its own recommendations about parallel importation. Immediately, I think it is fair to say that the restrictive nature of policy formulation is exacerbated by such policy structures, where creative and imaginative solutions to difficult problems are merely assessed in relation to pre-existing policy documents and their recommendations. I refer to this as the incremental policy process. For example, at the conclusion of the section on parallel importation in the CLRC's report, it works through limitations of the PSA's suggestions for reducing piracy. For the PSA's part, it suggested identifying shipments of software and authenticating those with authorised copies for sale in Australia and prosecuting those attempting to bring in pirated or counterfeit copies. The PSA suggested increasing the investigative powers of the Australian Customs Service (ACS) to examine shipments to which the CLRC sensibly responded that 'such a task, if in fact possible, would have enormous resource implications for the ACS' (p 231). The CRLC went on to say that it did not support the PSA recommendation, thereby merely responding to an existing proposition (from the PSA) rather than suggesting a better solution. Looking at it another way, perhaps a better, more effective means of controlling piracy would be to have authentication of shipments take place at source. Only registered computer program exporters, or those with an order form/invoice can forward material to Australia, where the order is then authenticated. Anything else is put back on the boat, 'return to sender', with the infringer having to pay costs.

This is just one example of the limitations of the policy process in respect of copyright. It is, as I have said in my Institute for Cultural Policy Studies publication, Copyright, Regulation and Power in the Australian Recorded Music Industry: A Model, a closed or internal regulatory system which prevails in the copyright sector, to the detriment of policy creativity, problem solving and more generally public benefit. I consider this 'closure' detrimental to the sector in general because by isolating itself from broader policy concerns, it fails to establish an appropriate methodology for analysis of the difficult problems facing IPRs. There are elements of this sort of closure in the CLRC report. (for the useful discussion of information policy and 'cultural autonomy' see Cess Hamelink, Cultural Autonomy in Global Communications: Planning National Information Policy, Longman, New York, 1983).

2. Legal Limitations

For example, it is not clear what the CLRC policy is on parallel importation. A key sentence the report notes that:

“the Committee is conscious of the need to balance, on the other hand, the interest of the public and society as a whole in having access to copyright materials against, on the otherhand, the need for creators to obtain adequate financial remuneration for their efforts to ensure that they can both continue with, and profit from, their creative activities.” (p 216)

And so on. The rhetoric of this sort of statement is perplexing. There is no documentation, no summation of government policy - either state or federal - and no detailed analysis of what this statement itself means. The hard work is yet to be done on the breakdown of the return to creations, something couched in the euphemism of the market as 'adequate financial remuneration'. I am sure that the CLRC would be well advised to undertake a couple of case studies before advancing the cause of "adequate financial remuneration", because it may be sorely challenged by the results. I say this because I am aware that while the economic theory underlying much copyright law assumes that creators receive their just rewards, contract law suggest that the system does not fairly reward creators. (The impending showdown between singer George Michael and Sony corporation will make this publicly and abundantly clear). The detailed research on this claim is yet to be done, but I am sure that the principal of ownership rights and royalty payments is a Pandora's box waiting to be unpacked in the next unsavoury moment in the history of copyright.

All that to say that the rhetoric of the CLRC comments on parallel importation, and Computer Software reform in general, is unfocused and highly coloured. I am especially concerned that the legal concerns of copyright are heightened to the detriment of other considerations, some of which are clearly part and parcel of the policy context.

3. Policy Context

We have to ask just what is the policy context? At a domestic level it is about fine tuning the agenda of the Social Democracy favoured by some of the Australian Labour Party, against economic agenda of the markets and the international funding institutions. The Federal Government Program is about the maintenance of the social policy agenda which we can safely say was the reason it won the 1993 federal election. This agenda involves a commitment to the high-minded rhetoric of principled terms like Access and Participation, combined with the claim that Prime Minister Keating made during the election campaign that the ALP is a Broadening Party. By this he seemed to mean that the opportunities for Australians have been broadened by the ALP, in the sense that there is more on offer in Australia than ever before. This liberalising policy focus has been the motor behind de-regulation of all sorts of things - from banks to airlines to telecommunications.

It is probably safe to say that we all know this, but when we turn our trained minds to copyright, for some reason we retreat into the closure of nineteenth century epistemology. By that I mean that lawyers, especially those trained at the traditional law schools, are ill-equipped to consider policy issues constructed in terms of the concepts of access, participation and broadening. This appears to be more so the case with copyright, while parallel importation presents the pinnacle of that dilemma. Similarly, legal training is of little help if we move Copyright into the restricted domain of competition policy, as proposed, for example by Margaret Ryan (1992), given that lawyers are not trained in economic methods. Lawyers' prevailing concept of competition appears to be self interest: a point to which I shall return.

This dilemma is borne of the power of relations which support copyright. It is about rights and in most cases, as I suggested earlier, it is mostly the rights of those who can bring the most force to bear at the stage of contract negotiations. And yet that issue receives no mention in the CLRC paper, certainly not in the section on parallel importation.

In particular, the rights that parallel importation challenge are the exclusive rights granted under the current copyright regime. There is little doubt that it is the 'exclusivity' clauses that are at the core of the debate. They are also the node around which the entire parallel importation issue - whether of computer software, recordings or books - congeals. (I use that blood metaphor intentionally, because the defence of exclusive privilege almost inevitably offers confrontation, even in a symbolic form).

If however, we establish what I call a map of policy binary, it is possible to identify the way in which the territory is constructed around simplistic binaries associated with copyright. (See Table 1). The maintenance of exclusive privilege encourages simplistic readings and more importantly, it hinders the development of industry in an unhelpful environment limited by dualistic logic. Instead, policy should be seen as a process where each position is negotiated around a number of propositions with public benefit outcomes in minds. To be slightly more abstract and theoretical for a moment, exclusive importation cannot occur along the same vectors as social democracy. Like many of the issues it discusses, the CLRC overlooks the need for a conceptual means of linking exclusivity and social democracy, or alternatively, it fails to see that the two are probably mutually exclusive. In other words, if the policy of broadening the social environment is what the government wants, then institutions like the CLRC given that responsibility, must attempt to generate the ways and means of pursuing such policy objectives.

Table 1

A Map of Policy Binaries

Copyright	Copyleft
Social	Economic
Social Democracy	Liberal Capitalism
Closed Market	Open Market
Exclusive	Inclusive
Singular	Parallel
Piracy	Trade
Government	Industry
Transnational Corporations	Small Business
Monopoly	Competition

This leads me to my next, more controversial point. Is the equivocation of the CLRC to endorse liberalisation, by way of parallel importation, a manifestation of what institution economists refer to as 'capture'? In other words, are their understandings of the legal and regulatory structure symposiac, to the extent that they cannot see that their reluctance to fully endorse parallel importation is a failure of nerve to improve the social environment? My assumption there is that competition, through parallel importation and open trade, would generate dynamic outcomes with social benefits. This is, of course, a contestable thesis, but it is precisely the intellectual policy formulations igniting debates around such theories that make policy so engrossing.

I appreciate that these comments are highly charged, lacking the tempered control that lawyers pride themselves on. But parallel importation is an emotional issue, especially for those companies intent on protecting their exclusive rights.

Let's look at it from another perspective. Let's examine parallel importation from the perspective of the diffusion hypothesis. This thesis maintains that the democratic flowering of capitalist society can be assisted by the prolific diffusion of innovations. The success of the diffusion depends on the absorptive capacity of the 'dependent' country or sector of the economy. More significantly, the capacity of a nation to absorb new technology appears to rely not just on production routines, but on countless ways of "understanding, interpreting and doing, which are embedded in the social culture" (Hodgson, 223). If the studies of the diffusion hypothesis are correct, it may well be that the effective liberalising of trade, as an adjunct to the liberalisation of technology could have a major role to play in advancing the growth of the economy and the opportunities for the citizens within the society.

It is important to note that parallel importation may be an effective way of introducing another form of diffusion into the Australian economy. By expanding markets, even if they are niche markets, catered to by highly specialised suppliers, this would certainly be an advance on those markets not existing at all.

At another level, competition policy has been advanced, especially by the PSA, as a worthy outcome of parallel importation. There is little evidence to suggest that blind belief in competition is worthwhile. Certainly some of the policy statements from the federal government about competition policy outcomes are highly coloured by the trappings of Canberra's economic orthodoxy. Nevertheless, as an objective, competition may be a reasonable goal. It may encourage smaller players in niche markets to have a go, engendering unanticipated innovations in specialised markets, while promoting the technological diffusion which is recognised as beneficial for the maintenance of economic security and well being.

Before concluding I want to draw attention to two other issues which have yet to be dealt with by the CLRC. This first is that of 'privacy'. I am convinced that this is an overly emotive terms, put to effective use by those players with interests in maintaining the status quo. A considerable amount of emotional energy results from the use of the word piracy, and yet there is some greyness around what is claimed as black and white issue. I recognise this is an unpopular attitude, but the emotional response to piracy is one of the foundations upon which the status quo of copyright is built. Do we need to have a closer look at piracy, especially in the light of the diffusion hypothesis and the rapidity with which technology is changing.

The other point I want to make returns to the one I started with - shipments of software, and follows from what I just said about piracy. The CLRC does not examine what it anticipates doing - if anything - about the movement of software in a non-material form. When software is moved digitally, for example via satellite, old forms of transport such as that provided by ships, indeed the very concept of shipment and transport costs move into another, apparently unconsidered realm. The CLRC would do well to consider this development in relation to parallel importation, especially as the digital age is already here.

4. Conclusion

My own position is interdisciplinary, although my preference is for political economy, which results from the marriage of economy with policy. It is clear that the CLRC report ends to take a much broader sweep in its examination of parallel importation. It is clear that policy formulation occurs within the broader national policy context - and in the case of copyright the international context. But the national policy is fundamental. There is no point in responding to unsubstantiated threats and claims from the Law Council such as:

“On the one hand [that] the current law has effect of increasing the prices and decreasing the availability of copyright articles in Australia. On the other hand, these claims were denied and it was further claimed that the international copyright system is based on a territorial framework and that if the current importation provisions are repealed or drastically altered this may well result in many producer countries not providing for the Australian market and also not subsidising the Australian publishing and manufacturing industries which are reliant on such subsidies.
The Council considers that no changes to the existing law in relation to the parallel importation of copyright material should take place until investigations into the merits of conflicting claims are carried out.” (p 200)

This copyright orthodoxy flies in the face of the CLRC's responsibilities and the need to bring national industry and cultural policy into line with technological and trade developments. Thankfully the CLRC seemed unmoved by the Law Council's dated propositions. There is little point in responding to 'threats' from licensees with exclusive arrangements in place. It is more important to identify what interest those groups represent, before moving on to the real policy work, which is not only about investigations the vested interests of those already in the field, but of assisting those players who could enter the field. In the 1990's the least we should expect from policy advisory bodies like the CLRC are recommendations that no longer advance the closure of industry and policy options.