Mergers & Takeover

Businesses were competitive locally expanded to the national arena. Competitiveness in the national arena is now forcing business to go global. The days of regional differentiation are over. Old strategies that professed “Small is Beautiful” or offered lessons on how companies could “survive in a niche” are no longer viable. Yes it is true that there are still micro-cosmos that thrive at the small business level and there is a new generation of savvy entrepreneurs who will develop and continue to fuel healthy business in the shadows of corporate juggernauts well into the future. One of the most important situations that they eventually face is the key to their survival: acquire or be acquired. In other words the only optimal size is big- grow bigger than last year, grow larger and faster than the competitors. Stagnation or slow growth is a sure recipe for disaster.

Globalization is a strong force that enables industrial consolidation. During the Asian economic crisis in 1997 and 1998, global organizations such as International Monetary Fund, The World Bank and the WTO assisted and encouraged countries including Thailand, South Korea andIndonesia to restructure their financial institutions and open up their economies by reducing trade barriers. A direct result of these policies was that global financial services companies began to acquire and buy equity stakes in financial service players in each of these economies. From 1998 to 2000, Thailand experienced a wave of acquisition activity. Globalization has had a number of drivers including advances in information and communication technology, advances in travel, the reduction of barriers to trade and the growth of overseas markets that could no longer be ignored. What characterizes the current business environment is that we now see all industries are potentially global, and see all industries taking part in the game.

The fact to be noticed is that why are there are so many mergers and takeovers happening at such a rapid pace?

“The history of the world, my sweet, is who gets eaten and who gets to eat.” – SWEENEY TODD

There are a variety of drivers and motivating factors at play in the M&A world. Apart from personal glory (or greed), M&A deals are often driven by many justifiable market-consolidation, expansion or corporate diversification motives. And, of course, ever present as an inspirational force in M&A is the old reliable financial, generally tax related motivation.

Expansion is one of the primary reasons to cross the borders as the national limits fail to provide growth opportunities. One has to look outside its boundaries and play out in the global arena to seek new opportunities and scale new heights. With the habit of creating an empire it becomes difficult for these entrepreneurs to stay within its limits. The simple fact is that most key players in many markets have already extracted a significant proportion of the available value from the domestic resources. They have improved profitability through better cost management and through efficiency gains realized after domestic consolidation.

Another reason is to gain monopoly, the company which has been acquired by the acquirer is always a company which is trembling financially but had something to offer the acquiring company. It may be the market share or intellectual capital or other reasons but one thing that the acquirer looks is for is the untapped resources to be exploited which can lead the company a step higher in the ladder of success.

Globalization is a key to help in the rapidity of the M&A as it is globalization that integrates world economies together and many nations have opened themselves, the countries have made laws and regulations that attract new companies to come into the country and make it easy for the companies to easily perform their operation of M&A.

There are also new forces in play that make cross-border expansion more feasible and capable of creating value. For example, international deregulation is removing old barriers. Institutional investors are taking a more global perspective. Customer profiles across markets are becoming more homogeneous.

At this point a question that arises, what are the legal implications to a cross border merger and takeover?

“The decisions of the courts on economic and social questions depend on their economic and social philosophy” - THEODORE ROOSEVELT

The answer to this question needs has been dealt in many dimensions of law .

International law prescribes that in a cross-border merger, the target firm becomes a national of the country of the acquirer. Among other effects, the change in nationality implies a change in investor protection, because the law that is applicable to the newly merged firm changes as well. More generally, the newly created firm will share features of the corporate governance systems of the two merging firms. Therefore:
· Cross-border mergers provide a natural experiment to analyse the effects of changes–both improvements and deteriorations, in corporate governance on firm value.

· FDI plays an important role with the cross border mergers and takeovers as they are followed by sequential investment by foreign acquirer sometimes large especially in special circumstances such as that of privatization.

· Cross border M&A can be followed by newer and better technology (including organizational and managerial practices) especially when acquired firms are reconstructed to increase the efficiency of their operations.

· Cross border M&A leads to employment opportunity over time only when the sequential investments take place and if the linkages of the acquired firm are retained or strengthened.

The value of cross-border mergers and acquisitions (M&A) grew over 700% during the 1990’s to a value of $720 billion in 1999 (United Nations, 2000). Differences in tax and financial reporting policies across countries lead to a number of different opportunities, motivations and risks, yet there have been few empirical studies that have investigated how differing accounting and tax policies across countries affect cross-border M&A decisions.

Cross-border takeover bids are complex transactions that may involve the handling of a significant number of legal entities, listed or not, and which are often governed by local rules (company law, market regulations, self regulations, etc.). Not only a foreign bidder might be disadvantaged or impeded by a potential lack of information, but also some legal incompatibilities might appear in the merger process resulting in a deadlock, even though the bid would be ‘friendly’. This legal uncertainty may constitute a significant execution risk and act as a barrier to cross-border consolidation.

In some cases, legal structures are not only complex but also prevent, de jure or de facto, some institutions to be taken over or even merge (in the context of a friendly bid) with institutions of a different type. Such restrictions are not specific to cross-border mergers, but could provide part of the explanation of the low level of cross-border M&As, since consolidation is possible within a group of similar institutions (at a domestic level) whereas it is not possible with other types of institutions (which makes any cross-border merger almost impossible).

In some countries, the privatization of financial institutions has sometimes been accompanied by specific legal measures aimed at capping the total participation of non-resident shareholders in those companies or imposing prior agreement from the Administration (i.e. golden shares). Some of such measures were clearly discriminatory against foreign institutions, when it came to consolidation.

The European Court of Justice has indicated that such measures were not justified by general-interest reasons linked to strategic requirements and the need to ensure continuity in public services when applied to commercial entities operating in the traditional financial sector. Tax problems also occur and it is one of the ways to get out of tax hassles as when a strong company acquires a financially poor company the amount of profit earned is less in the first year therefore the tax burden on the company will be less.

Mergers and acquisitions are complex processes. Despite some harmonised rules, taxation issues are mainly dealt within national rules, and are not always fully clear or exhaustive to ascertain the tax impact of a cross-border merger or acquisition. This uncertainty on tax arrangements sometimes require seeking for special agreements or arrangements from the tax authorities on an ad hoc basis, whereas in the case of a domestic deal the process is much more deterministic.

In a pending case (Marks & Spencer), the European Court of Justice has been asked whether it is contradictory to the EC treaty to prevent a company to reduce its taxable profits by setting off losses incurred in other member states, while it is allowed to do so with losses incurred in subsidiaries established in the state of the parent company.

Specific domestic tax breaks may favour specific, non-harmonised products or services, with the result that every institution has to provide this service or product if it wants to remain competitive. In such a situation, a merger between two entities located in that domestic market may yield synergies of scale, whereas it will be more difficult to exploit comparable synergies for a foreign institution taking over a domestic one, while not being entitled to the tax break in their home state.

In some cases, there may be discriminatory tax treatments for foreign products or services, i.e. products or services provided from a Member State different from the one where it is sold. Therefore, a cross-border group will be at a disadvantage when trying to centralise the “industrial functions” (e.g. asset management functions) as in the case of overall domestic group. Since the latter may keep all its value chain within the country and still benefit from synergies.

The impact of taxation on dividends may influence the shareholders’ acceptance of a cross-border merger. Even though a seat transfer or a quotation in another stock market might be justified for economic reasons, groups of shareholders could be opposed to such an operation if it implies higher non-refundable withholding tax, and thus lower returns on their investments.

What are the challenges in cross-border mergers and acquisitions ?

“Marriage of two lame ducks will not give birth to a race horse.”

The exponential rise in stock prices, due to mergers and acquisitions will have a ripple effect on the whole economy, technology innovation, market roll ups and mergers in addition to splits, spin offs and even corporate breakdown, may happen at speeds never encountered before. Along with this will come uncharted innovations in information technology and knowledge management and an explosion of new services, new products, new industries and new markets? The convergence of all this interconnectedness, interoperability and the value chain rationalization will turbo charge corporate development to a speed that will make unwary executives dizzy.

These all are the management challenges and whatever it takes, management must step up to the challenge. This mends learning to manage the knowledge and information while staying in the driver’s seat.

Executives will also confront perhaps the biggest bugaboo of all, complacency. The old watchword about fighting the lethargy that comes with contentment will be revived in the future throughout history, long term market dominance has characteristically bred complacency among industry leaders. Few can stay lean, mean hungry once the corporate coffers are brimming with success and profit.

But the biggest challenge to a cross border merger and takeover are the cultural issues. According to KPMG study, “83% of all the mergers and acquisitions failed to produce any benefit for the shareholders and over half actually destroyed value”. Interviews of over 100 senior executives involved in these 700 deals over a two year period revealed that the overwhelming cause of failure is the people and the cultural differences. Difficulties encountered in mergers and acquisitions are amplified in cross cultural situations, when companies involved are from two or more different countries. Up to the point in the transaction, where the papers are signed, the merger and acquisition business is predominantly financial valuing of the assets, determining the price and due diligence. Before the ink is dry, however this financially driven deal becomes a human transaction filled with emotions and trauma and survival behaviour, the non linear, often the irrational world of human beings in the midst of changes. In the case of international mergers and acquisition, the complexity of these processes is often compounded by the differences in national cultures. People living and working in different countries react to the same situation or events in a very different manner. Therefore a company involved in an international merger or acquisition needs to consider these differences right from the design stage if it is to succeed.

Individual preoccupation on “How is it all going to impact me?” weakens the commitment to the job at hand. This in turn translates people looking in for work in other companies. Often a firm in midst of transition loses its own talent, strengthening the competition. In countries where people identify largely with groups; people tend to look for support within their group. In France and Italy people caught in midst of mergers and acquisition often turn to unions. If unions cannot provide answers because they have been excluded from the negotiation process, they are likely to go on strikes. These strikes may do much more damage to organisation than any other factor.

Employees’ reluctance within the target company of a cross-border deal might also pose a threat to the successful outcome of the transaction. Indeed, employees may not accept to be managed from another country. A public opposition to the project may influence analysts’ assessment.

Cross-border mergers may imply a change in the place of quotation, or even in the currency of quotation. Shareholders’ acceptance of quotation changes may be limited, even all risks or tax impacts are eliminated. Indeed, the place of quotation may have an important symbolic value.

Given that cross-border mergers are complex and need to overcome a number of execution risks (as evidenced in this document), there might be an impact on shareholders’ and analysts’ apprehension of failure risk when it comes to cross-border mergers.

Consumers may mistrust foreign entities, meaning that all parameters being equal, a local incumbent may have an advantage over a competitor identified as foreign. This explains why foreign institutions often prefer to keep a local brand.

Of course, some of these challenges are not new-but the penalties for mis-steps will be greater and swifter than in the past. There are no longer any safe havens.It is expected that by 2010 there won’t be 50-60 undisputed global industry leaders as they exist today; there will be hundreds, each in its respective industry. Companies in such dominant positions will deal with high volumes of merger transactions- perhaps 10 or more per year. The companies will have to keep in mind that cross border mergers are not only business proposals but a corporate marriage of both the entities which require deeper and insightful solutions. The merger and acquisition activity in the past few years have become quite predictable and this trend is going to grow parallel with the desire and competetiveness of the society. Now let time be the emperor and decide the fate of this growing trend.

Source : ,http://www.legalserviceindia.com/article/l80-Mergers-&-Takeovers.html

Implementation of Supreme Court Order

While the landmark judgment of the Supreme Court on civil services could go a long way in allowing the bureaucracy to function without fear of political interference, civil servants doubt whether there is the political will to implement it. On Thursday, the Supreme Court directed the Centre and the state governments to fix a minimum tenure for bureaucrats and to issue service rules to ensure all instructions are recorded in writing to protect civil servants from “wrongful and arbitrary pressure exerted by the administrative superiors, political executive, business and other vested interests.”

“This judgement applies to all central services, not just the IAS. We have been saying for last 15-20 years that the laws should be appropriately amended so that civil servants can work without fear or favour. Now our main concern is that the judgment should be complied with both in letter and spirit,” said Sanjay Bhoos Reddy, secretary, IAS officers’ association. While Thursday’s Supreme Court judgment has been compared to the 2006 judgment on police reforms (Prakash Singh Versus Union of India) which has remained on paper, experts say, the SC directives on civil services is simpler to implement. According to the IAS officers’ association, implementing the SC order will require a couple of amendments to the relevant All India Service Rules, which the Centre is empowered by Parliament to make. But even when amendments are issued by the Centre, their implementation can be held up by states that are unwilling to comply. And so, while the necessity of a minimum tenure has already been endorsed by the Centre by amending the relevant All India Service Rules, notifications have been issued only in13 states that have accepted the amendment. As per the annual report 2011-2o12 of the Ministry of Personnel, Public Grievances & Pensions, the 13 states include Karnataka, Himachal Pradesh, Haryana, Andhra Pradesh, Jharkhand, Orissa Chhattisgarh, Goa and six of the north eastern states. But with the Supreme Court now setting a three month deadline for the Centre and the state governments to “issue appropriate directions to secure providing of minimum tenure of service to various civil servants,” there is renewed expectation that the truant states such as Uttar Pradesh, Bihar, Gujarat, Punjab who’ve put up stiff resistance to fixing a minimum tenure will now have to fall in line. “These administrative reforms can take place the day that the government has the will. If the government decides, it will happen 24 hours, otherwise it will not happen in 24 years,”said Reddy.

Source:ttp://www.firstpost.com/india/implementation-of-sc-order-on-bureaucracy-might-see-hurdle-1207097.html?utm_source=ref_article

Apology enough after a sexual assault?

More than 17 years ago, the Supreme Court had in its landmark Vishaka judgment laid down guidelines to rein in office Romeos. It had asked every office to have a permanent grievance redressal mechanism to inquire into sexual harassment complaints by women employees. 

Despite Vishaka guidelines, women still faced a not-so-friendly atmosphere in male-dominated offices where it was difficult to go against the boss even if he made sexual advances towards colleagues or subordinates. 

But something changed in the last few weeks. First, it was a law graduate who, albeit after a lapse of almost a year, summoned enough courage to lay bare in a blog post the agony she bore all these months after being allegedly sexually harassed by a now retired Supreme Court judge. 

The accusation did not erase the halo around the Supreme Court, but its lustre was dimmed a bit. To be fair, the Chief Justice of India immediately constituted a three-judge inquiry panel without attempting to sweep the incident under the carpet. A right decision, since a lot is at stake — above all, the faith of a billion in the apex court.

Around the same time, audio tapes of snooping on a woman by Gujarat Police allegedly at the behest of the then state home ministerAmit Shah, who again allegedly acted on behalf of chief minister Narendra Modi, surfaced. If true, it gave a glimpse of what obsession could drive a man to do, no matter what the law and what right to privacy means to others. 

And now, the biggest of these accusations — outright sexual assault charges against top notch media celebrity Tarun Tejpal. A junior colleague accused him of gross acts of indecency which under the new definition of Section 375(b) of Indian Penal Code clearly come under the ambit of 'rape'. 

The excuses followed — I have apologized; it was a gross lapse of judgment; I have recused myself as editor-in-chief of Tehelka; and it was an internal matter. 

When the Goa Police registered a rape case and the possibility of arrest loomed large, the tone changed, claiming it was a consensual act. But is apology, the first reaction of a person accused of sexual assault, enough? 

It reminds one of an identical case, Apparel Export Promotion Council vs A K Chopra [1999 (1)SCC 759]. The council's chairman had taken a steno-cum-typist to Taj Palace Hotel in Delhi on August 12, 1988 on the pretext of giving her dictation at the hotel's business centre, which had a more professional atmosphere than the office. 

Chopra, the chairman, acted smart with the woman by trying to sit close to her, then touching her inappropriately on the ruse of trying to teach her how to take dictation and trying to molest her in the hotel lift. She pressed the lift's emergency button to force open the doors and foil the chairman's evil design. She lodged a complaint with the director six days later. The director acted by the rule book, especially since the Vishaka judgment was the law, and placed the chairman under suspension. 

A departmental inquiry followed, Chopra was found guilty and was sacked. But the Delhi high court said he only attempted to molest the employee and ordered reinstatement without back wages. 

The Supreme Court took exception to the high court order. Finding its approach tough and uncompromising, Chopra pleaded that he was repentant and was ready to go to the employee and tender unqualified apology for his misdemeanour. 

The court said, "At the conclusion of the hearing, learned counsel for the respondent (Chopra) submitted that the respondent was repentant of his actions and that he tenders an unqualified apology and that he was willing to also go and apologize to Miss X. We are afraid; it is too late in the day to show any sympathy to the respondent in such a case. Any lenient action in such a case is bound to have demoralizing effect on working women. 

"Sympathy in such cases is uncalled for and mercy is misplaced. Thus, for what we have said above, the impugned order of the high court is set aside and the punishment as imposed by disciplinary authority and upheld by the departmental appellate authority of removal of the respondent from service is upheld and restored." 

After 15 years, we are back to square one with Tejpal offering an apology to the colleague whom he allegedly assaulted, terming his act as "lapse of judgment". Nothing has changed actually!

Source:http://timesofindia.indiatimes.com/india/Apology-enough-after-a-sexual-assault/articleshow/26331445.cms

Ending the Monopoly of Ideas: Compulsory Licensing in Intellectual Property

The term ‘intellectual property’ seems innocuous. If property just is ‘intellectual,’ how important could it be? The truth is that intellectual property law is easily one of the most destructive forces in our economy. Nearly one-fourth of scientists responding to a survey by the American Association for the Advancement of Science, the largest general scientific body in the world, reported that patents were hampering their research.[1] In the European Union, over €60 billion are wasted every year on research and development of products that are already protected by patent law.[2] An experiment using a virtual world to simulate the effects of the US patent system found that the “participants were more likely to innovate when there was no intellectual property system at all, or when they could open-source their innovations and share them with people.”[3]

Virtually every business that holds a dominant position in its field has gotten there not simply through good business practices, but also through the advantages afforded to them by intellectual property law. In 1998, Google filed patent number 6,285,999 on the “PageRank” system, laying the foundation for them to become the dominant force in internet search.[4] Monsanto has used its patents to control 95% of the soy and 80% of the corn markets, respectively. It used this power to increase the price of each by 28% and 25%, respectively, from 2008 to 2009.[5] “Patent pools” led to monopolies that had to be broken up using antitrust laws in the airplane [6], computer, and motion picture industries.[7]

Our society has not always been like this. In 1790, the year the US Patent Office first came into being, only three patents were granted.[8] Patents had to be deemed “sufficiently useful and important” by the three-person Patent Board, comprised of the Secretary of State, the Secretary of War, and the Attorney General. By July of 1836, only ten thousand patents had been granted.[9] In 2009 alone, 167,350 utility patents, the most common type of patent, were granted. IBM was granted 4,914 of these, a 17% increase over the previous year. Microsoft was granted 2,906, a 43% increase over the previous year and a 400% increase over 2003. Fifty companies received 29% of all patents granted in 2009.[10]

Patent and copyright terms have also expanded dramatically. The original US patent term was for fourteen years, should the Patent Board approve it. The patent term is now twenty years. “Under certain circumstances, patent term extensions or adjustments may be available.”[11] The original US copyright term was for fourteen years with an option to renew the copyright for another fourteen years if the author was still alive. The current copyright term is now for the life of the author plus another seventy years. For works of corporate authorship, the copyright term is now one hundred and twenty years after creation or ninety five years after publication, whichever endpoint is earlier. This means most works will be copyrighted for over a hundred years. Trademarks, which didn’t even exist in federal statute until 1905, are in force as long as they are in use.[12]

This isn’t even to mention all the costs associated with the intellectual property bureaucracy. The US Patent Office has approximately six years of patent applications, over one million filings, waiting to be evaluated.[13] Approximately, seven out of ten patents were approved at the start of the 2000’s. Today, the number is less than half.[14] The average patent lawsuit will cost between $3 million and $10 million to litigate, and take between two to three years.[15] This amounts to a litigation cost of, at the minimum, $15.6 billion a year.[16] Merely getting a patent approved can cost $10,000 for a domestic filing and $100,000 for an international filing.[17] This amounted to a cost of $25.8 billion in 2009.[18] This isn’t even to mention that, according to Barack Obama, the paper-based tracking system of the Patent Office is woefully “outdated.”[19] As far as I know, nothing has been done to correct the situation.

Clearly, there is a problem. Our system is bogged down in waste and innovation is stifled. How do we correct it? Is the solution simply to eliminate intellectual property rights? I don’t believe so. Piracy during the 1800’s was a profound source of frustration for many authors [20] and inventors.[21] It also doesn’t make sense that people shouldn’t be rewarded for their creative work. Rewarding creators helps encourage more creation, something most people want.

The solution is to eliminate the ability of one person or entity to have the sole right to use a piece of intellectual property, while still rewarding the original creator of the intellectual property. The system that does this is compulsory licensing. In this system, every piece of intellectual property can be used in a derivative work, yet the original creator of the work is still compensated. The rate of compensation is either determined by the parties privately, or if an agreement cannot be reached, by a court.

The government sometimes uses compulsory licensing in antitrust cases, but only when it considers a firm’s dominance to be a problem.[22] Moreover, when the government does use compulsory licensing, they do not use the market to determine rates. They simply determine the licensing rate themselves. In 1953, a district court used this power to order General Electric to license its light bulb patent for “free,” a price General Electric surely was not happy with.[23] There have also been times when the government only allows a small handful of companies to license a piece of intellectual property. It is not open to the market at large.[24]

The next step to solving our intellectual property crisis is to eliminate the Patent Office and to replace it with a single repository for intellectual property that people want protection for. This idea was actually put forth by Jefferson in a 1791 bill, but unfortunately, it did not pass.[25] Without the government deciding what ideas are able to be protected, private firms spring up to search the registered intellectual property and inform individuals if they believe an idea or invention infringes upon something already registered. This eliminates long wait times, as people could presumably pay for faster searches. Plus, if a company does not perform well, it will presumably go out of business.

The elimination of the Patent Office may not even affect the number of intellectual property infringement law suits. Even with the Patent Office, there are still over 5,000 patent, copyright, and trademark suits every year.[26] The Patent Office also does not ensure that only “sufficiently important” creations receive protection, as was in its original mandate. Well, unless you consider “the bird diaper,” “the pat on the back apparatus,” and the “initiation apparatus,” a “harmless” way to initiate a candidate into a fraternity by shocking him with electrodes, to be “sufficiently important.”[27]

These solutions are simple, but achieving them is difficult, because they would mean the government doing less. The government, and the powerful parties who benefit from government intervention into the economy, typically do not like the government to do less. Intellectual property law has also historically been a very important tool for government-sponsored censorship, an important tool of the state. This side of intellectual property law has started raising its ugly head again in recent years. Laws and treaties such as the ACTA treaty,[28] Britain’s Digital Millennium Copyright Act,[29] and Canada’s Copyright Modernization Act [30] all threaten to bring millions people across the world under the heel of a digital dictatorship. Clearly, our intellectual property system must be reformed before any more damage is done.

A commonly cited beginning to modern intellectual property is when Fillipo Brunelleschi was granted a three year patent for a barge with hoisting gear that carried marble along Italy’s Arno river in 1421.[31] This patent was given not only for technological innovation, but also because Brunelleschi was working on one of the most important projects of the day: building the dome on the Santa Maria del Fiore. This was like the Super Bowl to the people of Florence. People would gather to watch the dome being built. Santa Maria del Fiore was “the great spiritual center of the city,” and it “served as the venue for diplomatic visits, housed important political events, and welcomed within its walls many of the cultural, spiritual and intellectual leaders of the time.”[32] It had remained without a dome for over 100 years. Thus, the granting of the first patent had a decidedly political aspect to it.

The first patent in England was given by Henry VI in 1449 to John of Utynam for a technique on manufacturing stained glass.[33] This was the start of a long tradition whereby the Crown issued monopolies to “favoured persons,” or to people willing to pay. The granting of monopolies became a key source of revenue for the Crown. Soon, monopolies covered a whole range of known goods, such as salt,[34] and the right to provide services, such as the use of inns, ale houses and gold and silver thread.[35] The Statute of Monopolies of 1623 curtailed some of these abuses by stating that the Crown could only issue letters patent (a.k.a. monopolies) to the inventors or introducers of original inventions for a fixed number of years,[36] but the system was still far from without its flaws.

The most significant monopoly granted by the Crown from an intellectual property standpoint was the one given to the Stationers Company. In 1557, the Stationers were given a monopoly over printing in all of England. The Stationers Company was not a “company” so much as a guild. There was no stock to be owned. There were only positions of power to be attained within the guild. The guild was comprised primarily of bookbinders, booksellers, and printers,[37] although text writers and lymners (or illustrators) also played a role.[38]

At the head of the Stationers Company was the master, the principal officer. Below him were the upper and under warden. The master and wardens were given plenary powers of search at any time “in any place, shop, house, chamber, or building of any printer, binder or bookseller whatever […] for any books or things printed, or to be printed, and to seize, take, hold, burn, or turn to the proper use of the foresaid community.”[39] The master and upper and lower wardens were elected from the “Court of Assistants” and held their positions for a year.

The Court of Assistants was the real seat of power. They arbitrated disputes, collected dues, and decided admittance into the Company. They were supposed to be elected from the general body of the Company, which included apprentices and yeomanry, for a limited term, but in 1557, the year the Stationers were granted their monopoly, nine of the most senior members of the Company formed a court of eighteen assistants. They took control and membership in the court became for life unless the member was formally dismissed or retired.[40]

Although censorship may not have benefited the printing industry as a whole, it was clearly a motivation for Queen Mary in issuing the Stationers a monopoly. According to Lyman Patterson, “The charter itself, however, is dominated by the idea of suppressing prohibited books, and Mary’s motive in granting it, whatever the source of the initiative involved, was to obtain an effective agency for censorship.”[41] The Stationers became a de facto police squad.

The penalties for violating censorship rules were harsh. If someone was found importing a book from overseas, they could lose all their possessions and be put in prison. No book could be printed without examination by the Privy Council. No book of scripture could be printed without examination by the King, one member of the Privy Council, or a bishop. “If a person other than an allowed printer set up or worked at any press, he was to be set in the pillory, whipped through London, and suffer any other punishment deemed proper.”[42]

Despite all this, there was still a sizeable black market for books. “Only between sixty and seventy percent of London-printed books were regularly entered in the registers, and the proportion of printed books entered fluctuated violently from year to year.”[43] Even with the threat of public whipping, imprisonment, and the taking all of one’s possessions, a black market still arose to meet a demand. Some things never change.
As a British colony, America abided by the same intellectual property laws as Britain. There was no Stationers Company, but books did have to be licensed. There also was an “informal cartel” of publishers who colluded “to keep prices artificially high.”[44]

After the revolution, America continued to follow British intellectual property law closely. America copied much of Britain’s intellectual property law verbatim, and even used the same time limits for intellectual property protection. (Luckily, Britain didn’t sue for copyright infringement.) In fact, America followed British intellectual property law so closely that a misreading of British law led America to legalize the pirating of foreign books. The original British law had forbid “the importation, vending, or selling” of books in a foreign language printed beyond the sea; it didn’t legalize piracy.[45] America’s law was a constant thorn in the side of British authors, such as Dickens, who thought they were losing a fortune in America through piracy.[46]

As time went on, intellectual property law began to grow in importance in America. From 1860 to 1890, over 500,000 patents were issued for new inventions, ten times the number in the previous seventy years.[47] By 1904, more than two hundred copyright bills had been introduced into Congress.[48] Yet even with this growth, a popular movement never gathered enough steam to move intellectual property law from its foundation. Despite some minor disturbances, intellectual property law continued to grow into the monstrosity it is today.

Like with any good story (one that is not a tragedy anyway), there have been a few glimmers of hope. The first came in the rulings of Judge Learned Hand when he defined the concept the “web of expression.” The second came when Congress amended the Copyright Act in 1909 to allow for compulsory licenses in the music industry. When these two concepts are combined, I believe they lay the groundwork for where intellectual property law needs to go.

As Siva Vaidhyanathan writes, “No jurist or legal scholar has had a greater effect on the business and content of American culture than Judge Learned Hand. For most of his career, Hand served on the US Second Circuit Court of Appeals in New York City. A student of William James and George Santayana at Harvard, Hand was passionate about matters of freedom, creativity, and intellectual progress. […] Hand played a part in most of the major copyright decisions of the day.”[49]

Hand thought that the plot of a story itself could not be copyrighted, but that the “value added” to it could. Hand’s central point was that when judging the extent of infringement between works that tell similar stories, one must distill the “very web of the author’s dramatic expression.” This “web” he defines as “the sequence of the confluents of all these means (plot, character, means of revelation, setting, themes), bound together in an inseparable unity.”[50]

Hand broke down the whole down to its parts to help see what was original and what was not. This is exactly what needs to be done in all intellectual property cases. As Mark Twain said, “As if there was much of anything in any human utterance, oral or written except plagiarism. […] [S]ubstantially all ideas are second-hand, consciously and unconsciously drawn from a million outside sources.”[51] We all are dependent upon past ideas for present ones. The question is how much. Hand’s framework helps guide us for making those decisions.

It’s been shown that Steamboat Mickey, the first Mickey Mouse film, relied heavily on Steamboat Bill, Jr., a film by Buster Keaton, who was enormously popular at the time.[52] Did Walt Disney rely exclusively on Keaton’s material? No. Should we barred from seeing Walt Disney’s film because he relied on Keaton’s material? No. But we could have been. That is the situation we are currently in. We are in an “all or nothing” scenario: a judgment of guilty means a work that is “too” derivative and cannot be seen or profited from. A judgment of not guilty means it can. We need to move to a system where both the original creator and “second user” are compensated according to what they each contribute to a derivative work.

The second glimmer of hope was Congress’s amendment to the Copyright Act in 1909 to allow for compulsory licenses in the music industry. This was strictly to allow greater freedom of expression in the music industry. As Lawrence Lessig writes, “Congress was quite explicit about its reasons for granting this right. Its fear was the monopoly power of rights holders, and that that power would stifle follow-on creativity.”[53] It has worked. The music industry allows far greater rights to “second comers” than any other artistic field.

If a person wants to create a derivative work from a book, he or she must get permission from the original author. The original author may allow for derivative works to be created, but may require the “second comer” to sign over any profits, as is the case with the Star Wars franchise.[54] The only problem with the compulsory licensing in the music industry is that is that Congress determines the rate instead of letting individuals try to determine it first.[55] The author of a song may want to license a song to a celebrity at a lower rate, because the author might feel the celebrity may make them more money in the long run than the typical recording artist. The original author simply does not have the freedom to do that.

Why should compulsory licensing be good for the music industry and not good for every other field? Clearly, it shouldn’t. All genres of art and all scientific creations would benefit from compulsory licensing. An active “second user” culture can also lead to an even greater appreciation of the original product. In Japan, there is something called doujinshi, which is “second user” manga. There are over 33,000 “circles” of doujinshi creators across Japan. Two times a year more than 450,000 Japanese gather to exchange and sell doujinshi. According to Lessig, “[I]n the view of many, it is precisely because [doujinshi] exists that Japanese manga flourishes.”[56]

Some people may see a problem with compulsory licensing. They may ask, “If a person is able to use intellectual property at will, what is to keep that person from modifying an original creation just a slight bit and selling at a severely reduced price, thereby undercutting the competition?”

There is a solution to this. The “second user” is able to change the price only in accordance with how much they contributed to the derivative product. Let’s say either the originator and “second user” agree, or a judge decides, that a “second user” contributed 10% to the derivative product. Let’s say the “second user” contributed a new drum track to a song. If the original song was being sold for $5, then the “second user” would have the right to sell the derivative version for anywhere between $5 plus or minus 10% (i.e. $4.50 to $5.50.) 90% of the revenue generated from the derivative product would still have to go to whoever owned the rights to the original product.

Another objection someone may bring up is, “What if it is not in a company’s interest to release a piece of technology? Like let’s say something crazy happened, like Chevron owned the patent on the battery for the electric car.[57] What is to keep them from pricing a product so high it effectively removes the product from market?”

The government may be forced to have them re-price it. This can be done within limits. In the scenario painted, the intellectual property owner is pricing their product so high that if they decrease the price, they would actually make more. Because at a lower price, the owner would sell a higher quantity. The government could mandate the owner lower the price until the point when he or she stopped making more money through increased quantity sold. That is point is where the company is making the maximum amount of profit for that product.

I do not see a better scenario than this. We are being forced to either allow the domination of society by one individual, or the domination of the right to price this product by society. The rights of society must be respected too. This is not historically unprecedented. Before the ratification of the US Constitution, five of the original thirteen states, Connecticut, South Carolina, North Carolina, Georgia, and New York, all contained intellectual property-related price-control provisions in their state constitutions.[58] If the original party loses money by lowering the price, the party who initiated the suit could be liable for the losses.

Once this price is set, individuals or companies could license the intellectual property in its entirety. This would allow for competition based on production quality and customer service. If a company is able to charge more for an product based on superior brand recognition and/or customer service, that company should be able to keep whatever they earn beyond the price set by the original company.

I believe these provisions eliminate the need for time limits on copyright and patent protection. Time limits seem to be built upon the belief that intellectual property law causes prices to be higher and for there to be less competition than there should be. My suggestions, however, eliminate these concerns. Why, after all, after a certain point should a publishing house profit from an author’s work rather than the author’s estate, or to whomever the author ascribed the rights of his or her work?

We need to change to a compulsory licensing system and eliminate the Patent Office. Current intellectual property law and bureaucracy leaves us as peasants, looking up at the one dome being built in the city. Intellectual property law that has been reformed under the guidelines I have outlined will unleash the creativity of human spirit, and help fill the skyline with as many domes as we desire.

Source:http://www.globalresearch.ca/ending-the-monopoly-of-ideas-compulsory-licensing-in-intellectual-property/19959

The Anti-Counterfeit Trade Agreement (ACTA): U.S. Dictating Canada’s Intellectual Property Laws

In March, the Canadian government introduced a bill that would bring about sweeping changes to its copyright and trademark laws. This includes giving more power to customs and border protection agents without any judicial oversight. The move is intended to prevent counterfeit goods from entering the country, but has been criticized for being less about protecting Canadians and more about caving to American demands. With the U.S. dictating global intellectual property standards, the new legislation represents the return of ACTA and would pave the way for Canada to ratify the controversial international treaty.

Over the years, the U.S. has been critical of Canada’s efforts in addressing trade in counterfeit goods and has been pressing for intellectual property reform. In the 2009 United States Trade Representative (USTR) Special 301 Report, Canada was placed on a priority watch list of countries that do not provide adequate intellectual property enforcement. As part of its 2013 Trade Policy Agenda, the USTR is now pushing Canada to comply with the Anti-Counterfeit Trade Agreement(ACTA). The multinational treaty is designed to standardize intellectual property laws around the world. Although it has been signed by a number of countries, including Canada, so far only Japan has ratified ACTA. It was the result of public pressure associated with risks internet privacy and online freedom of speech which lead to ACTA being rejected by the European Parliament in July of 2012. At the time, many assumed that ACTA was dead, but it still remains a top priority for the U.S. and they are attempting to revive the discredited agreement by trying to get the six necessary ratifications for it to come into force. In an effort to satisfy U.S concerns, Canada recently announced legislation which is aimed at bringing them in line with ACTA.

Last month, the Conservative government introduced Bill C-56, also known as the Combating Counterfeit Products Act. Academic researcher and law professor Michael Geist explained how the proposed legislation would, “ensure that Canada is positioned to ratify ACTA by addressing border measures provisions. The core elements of the bill include the increased criminalization of copyright and trademark law as well as the introduction of new powers for Canadian border guards to detain shipments and work actively with rights holders to seize and destroy goods without court oversight or involvement.” He emphasized that, “Customs officials are not copyright and trademark experts, yet they may now be forced to assess infringement cases including determining whether any copyright exceptions apply.” Mike Masnick of techdirt acknowledged that, “For many years, Canada has strongly resisted U.S.-style copyright laws, despite tremendous pressure to do so. Watching them cave on ACTA is certainly a disappointment.” He went on to say, “It shows a Canadian government who doesn’t seem to care about what the public wants, but rather feels the need to kowtow to U.S. entertainment and pharmaceutical lobbying interests.”

The Council of Canadians have questioned whether the anti-counterfeiting bill, “is one of the conditions the U.S. government put on Canada joining the Trans-Pacific Partnership (TPP) trade negotiations.” The group is urging that intellectual property rights be taken out of the TPP and the Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA) talks. There have already been attempts to use CETA negotiations to sneak in parts of ACTA. Stuart Trew, trade campaigner with the Council of Canadians wondered since, “The Harper government seems to have just collapsed in front of U.S. demands for border enforcement of Hollywood’s intellectual property rights despite the global controversy with ACTA. Can we expect Harper to bend this easily to European demands in CETA and U.S. demands in the TPP that will increase the price of drugs and undermine access to affordable medicines?” ACTA also favours Big Pharma with patent protections that would limit generic competition and would lead to higher drug costs.

On March 20, the USTR officially notified Congress of its intention to enter into negotiations with the EU on a Transatlantic Trade and Investment Partnership (TTIP) agreement. In the letter, they also outlined specific goals in different areas such as intellectual property rights. As part of the transatlantic talks, the USTR, “Seek to obtain, consistent with U.S. priorities and objectives, appropriate commitments that reflect the shared U.S.-EU objective of high-level IPR protection and enforcement, and to sustain and enhance joint leadership on IPR issues.” A Civil Society Declarationsigned by European and U.S. groups is insisting that the upcoming negotiations, “exclude any provisions related to patents, copyright, trademarks, data protection, geographical indications, or other forms of so-called intellectual property. Such provisions could impede our rights to health, culture, and free expression and otherwise affect our daily lives.” Some have warned that the TTIP could be used as a way to implement ACTA through the backdoor.

ACTA is part of the international agenda of patent, trademark and copyright lobbies. The agreement favours big businesses over individual innovators and creators. It was designed to protect the interests of multinational corporations at the expense of fundamental civil rights. ACTA is being used by the U.S. to pressure other countries into adopting a new global standard for intellectual property enforcement. The supranational treaty would impose draconian laws which threaten the sovereignty of member nations.

Source:http://www.globalresearch.ca/the-anti-counterfeit-trade-agreement-acta-u-s-dictating-canadas-intellectual-property-laws/5332612

US Bullying at TPP Negotiations for Big Pharma Profits. Intellectual Property Rights and the Sale of Generic Drugs

Outrageous US bullying by US Trade Representative Stan McCoy on intellectual property and health. McCoy puts profits of pharmaceuticals ahead of the lives of people.

“The world should stand up to the United States.  US corporations are not more important than people’s lives.”

A key dispute in the TPP negotiations is the patents on pharmaceutical drugs and medical procedures.  Long patents inflate the profits of the pharmaceutical industry by not allowing less expensive generic drugs on the market.

This means that people around the world will not be able to afford critical, often life-saving, drugs and medical procedures.  It also means that countries like Japan, Australia and New Zealand that have national health care systems will see the cost of healthcare rise to a breaking point, undermining some of the best health systems in the world.

Stanford McCoy of the US Trade Rep. His bullying tactics seek to prop up inflated pharmaceutical profits at the expense of thousands of lives.

In order for the US to get its way,Stan McCoy, Assistant US Trade Representative for Intellectual Property and Innovation, is chairing the meetings on intellectual properties and medicines.  He has been using bullying tactics to force countries to agree to positions that will harm people in the countries negotiating the TPP, including the US.

“The US has adopted a strategy of exhaustion in its bullying of negotiators on the crucial intellectual property chapter to force countries to trade away health in the Trans-Pacific Partnership Agreement negotiations in Salt Lake City,” according to Professor Jane Kelsey from the University of Auckland, New Zealand, who is monitoring the negotiations. ”The US has stepped up its aggression as they move towards their ‘end point’ of the TPP ministerial meeting in Singapore from 7 to 10 December.”

Margaret Flowers, MD a health policy expert from the US says

“The Office of the US Trade Representative is putting the interests of trans-national health corporations before the needs of people. If the US position is forced through, the TPP will extend patents for medications, medical devices and even procedures for exorbitant lengths of times. This will inflate prices, keeping treatments out of reach for those who need them. This will cause unnecessary suffering and death, especially for the most vulnerable populations, and will undermine health systems around the world and at home.”

“This is a loaded game,” Professor Kelsey said. “McCoy sets the agenda and timetable. Negotiators are working from morning until late at night and preparing to work all night, if necessary. ”This is a crucial period for New Zealand and a number of other countries,” Kelsey observed. The text published by Wikileaks last week shows they have tabled an alternative to the US proposed text that has been repeatedly rejected.”

“New Zealand’s trade minister Tim Groser and his counterparts from the other ten countries must tell the US to stop this behaviour now,” Kelsey said. Flowers added: “Countries negotiating with the United States should not allow themselves to be bullied but should stand up to the United States.  It is looking very unlikely that President Obama will be able to get TPP through the Congress. Why would any country negotiate against the interests of their people?”

The US has around twenty people in Salt Lake City for the intellectual property chapter, who can rotate. Some countries have only one delegate for crucial talks on intellectual property on medicines. Their negotiations on medicines have been extended beyond the dates that were scheduled before negotiators came.  They have continued despite the fact that some health negotiators, especially from poor countries, could not extend their stay.

This follows a pattern of abuse over recent rounds reported in Inside US Trade and other media, where McCoy has acted as a gatekeeper, deciding what proposals from other countries are allowed into the text and what are not.

“This is an early warning of the extreme bullying that can be expected in when the trade ministers seek to close the deal off in December,” Professor Kelsey warned.

Source:http://www.globalresearch.ca/us-bullying-at-tpp-negotiations-for-big-pharma-profits-intellectual-property-rights-and-the-sale-of-generic-drugs/5359221