Vitor Palmela Fidalgo: “A unified court is important for the competitiveness of the EU economy”

Leaders League: One of the biggest IP issues in Europe is the forthcoming Unified Patent Court later this year or next. What is your opinion of the new court? 

Vitor Palmela Fidalgo: Despite the various criticisms that the unitary patent system has been subject to, there is one point that should be stressed: the institution of a unitary patent together with a unified court is important for the competitiveness of the EU economy. As a large economic bloc, competing with the United States and China, it is not possible to maintain a European patent system that has much higher costs and bureaucracy than its peers. 

As for the Unified Patent Court, the main advantage is that it will operate as a single court with jurisdiction over multiple European countries. We now have 17 countries on board. It is hoped that we will 24 countries in total. Spain, Poland, and Croatia will unfortunately remain outside this agreement. The European Patent may be enforced in multiple countries through a single infringement action at the Unified Patent Court. Apart from being less expensive, this will avoid different legal interpretations from the various national courts.  

How are blockchain technology and smart contracts changing the landscape for copyrighted materials? 

I believe that blockchain technology and smart contracts could be a breakthrough for the copyright system but there is still a long way to go. There is huge potential for blockchain and smart contracts for copyright, specifically to improve the management system. As has been well documented, there are several problems with the management of intellectual property rights, especially with regard to musical works. The fact that the copyrights are territorial and there is little uniformity at the international level makes management dependent on several collective organizations, which requires cross-border agreements. This situation makes rights management inefficient, costly, and time-consuming, which no one is happy with. 

The solution will be to establish a unified system that uses blockchain technology to record information and smart contracts for the monetization of IP rights. This could be done through the tokenization of works and other kind of intangible assets. One of the most frequently mentioned advantages concerns the possibility to perform microtransactions automatically, which may completely change the business model, making it, in addition to being instantaneous, more transparent and fairer in the remuneration of authors and artists – which have been appropriated by more or less secret agreements made between major publishers and online platforms (such as Spotify, Beats Music or iTunes). 

However, the use of blockchain technology and smarts contracts on a large scale still requires several problems to be solved. Smart contracts seem to be very expensive, cumbersome, and not environmentally friendly. In the current state, there is still no way to solve these problems. Cryptocurrencies seem slow and they have high transaction costs. You need to record all the information in the blockchain and reward miners for doing their part in blockchain technology. As for the specific problems of smart contracts in IP rights, one that stands out it is the trouble this technology has in matching the complexity of intellectual property rights. It would be very complicated to properly translate all the complex and the interconnected rights, durations, exceptions, and limitations. 

We will see if the technology advances enough to solve these problems. 

How are liability issues for intermediaries changing when it comes to issues like trademark and copyright infringement? 

Addressing the issue from the perspective of the European Union, the regime for the liability of intermediaries is present in the directive on electronic commerce. Inspired by the Digital Millennium Copyright Act, the European legislature decided to introduce a regime that exempts the liability of these intermediary service providers (safe harbors) if certain conditions are met. However, unlike the US system, which is limited to copyright infringement, the European regime applies to any type of violation on the internet, i.e., not only to the violation of intellectual property rights, but also to other illegal acts. 

This already old piece of legislation is about to be replaced by the Digital Services Act (DSA), but the general rule will remain the same: there is no general obligation to monitor the information which providers of intermediary services transmit or store, and no obligation to actively seek facts or circumstances indicating illegal activity. 

However, there have been many challenges over the years. While the liability exemption was established primarily to ensure free access to the Internet, it must be acknowledged that the Internet, as well as the business models associated with it, has changed a lot in recent years. So one of the main questions is: is the activity being carried out by intermediaries still neutral? Can Amazon, when helping a seller to advertise a counterfeit product, be considered to be infringing on the trademark right of a third party? Where is the border between passive, neutral activity, and infringement of IP rights? This question has led to the introduction of special intermediary liability regimes, and this is another point that should be taken into consideration. Such was the case with Article 17 of the Directive on Copyright in the Digital Single Market, which makes providers of online content-sharing services liable, upon certain conditions, for the acts of their users. Will we see the same movement in trademark or patent law? We will see. 

How is the advent of AI affecting IP and what sort of changes do you think it will create in the future? 

Artificial Intelligence will affect intellectual property in almost all circumstances. One of the central problems is that it seems that the intellectual property system is mostly built on anthropocentric premises. This is not only revealed in the question about the inventor or the ownership of rights. It is also revealed in the very theories justifying the existence of intellectual property rights, which, as we know, have no end in themselves. Intellectual property rights exist only in circumstances where there is a public interest. Otherwise, excessive protection of intellectual property rights will have a dysfunctional effect on the market. 

If we look at the philosophical theories that justify the existence of intellectual property rights, all of them to a greater or lesser extent are based on anthropocentrism. Both the labour theory, the personality theory and the reward theory are based on the idea that the protection and allocation of IP rights is shaped towards human beings. For example, is it justifiable to protect inventions or works generated by artificial intelligence agents, given that they do not need to be stimulated or rewarded for their “creative” activities? The answer, at the outset, is negative. The same applies to the protection of works as an expression of the personality of the human being. 

Before the legislature rushes to establish new IP rights, a careful analysis from an economic point of view will be necessary to verify which solutions are best to maintain the incentive for innovation and free competition in the market.