The (Copyright) Remainders of the Day

My exchanges with Thomas Abraham are available on Divya Dubey’s blog. She has not posted the latest exchange, and I will do so in a separate post on SpicyIP.

For those that wish a lighter poetic take on this debate, see here and here.

And lastly, here is my Mint piece for those interested:

Remainders of the day: a case for parallel imports

“Provided that a copy of a work published in any country outside India with the permission of the author of the work and imported from that country shall not be deemed to be an infringing copy.”

Book publishers are up in arms against this rather innocuous line, proposed by the Indian government as an amendment to the country’s copyright law. As part of an orchestrated media campaign, it has even been claimed that this section, if enacted, would sound the death knell of the publishing industry.

Section 2(m)’s apparent danger lies in its attempt to authorize the import and sale of legitimate copies of copyrighted works that have been purchased abroad. In other words, if I were to buy a copy of a Harry Potter book from a London bookstore, I would be well within my rights to bring it to India and sell it in the local market. Commonly referred to as the “parallel imports” or “international exhaustion” exception, provisions such as this are found in the intellectual property regimes of several countries, including Australia, New Zealand and Japan.

The global publishing industry is predicated on a business model in which copyright owners grant exclusive publishing and sales rights to different publishers in different territories. Section 2(m) challenges this territorial monopoly by facilitating free movement of books across markets.

This protectionist impulse, however, goes against the principle of international exhaustion: since an intellectual property (IP) owner has already milked the IP once by charging a monopoly price in one territory, it is unfair to let her extract further rents on the same good just because it ships to another territory. To this extent, section 2(m) entails that her rights in relation to the specific IP good stand exhausted and the good can now be freely traded.

Leading IP scholars and economists argue that intellectual property rules are essentially anticompetitive and ought to be tolerated only when there is concrete evidence that their benefits outweigh the harm caused by monopoly rents. Do we have such countervailing evidence to support a clampdown on parallel imports? Such a restriction is not only likely to harm consumer choice by leaving access to books in the discretionary hands of a small coterie of publishers, it will also hamper competition and curb the growth of newer and more creative forms of distributorship.

Further, given the advent of e-publishing and Google Books, it is only a matter of time before the firmly-etched principle of territoriality begins to yield. If section 2(m) and others spur this business model revolution, it will be so much the better.

The Indian legal regime already provides for “parallel imports” exceptions in its trademarks and patents Acts. Why then should we not have this socially progressive clause—which can enable Indian consumers to access a wider range of books from across the globe in a timely manner—for copyrights too?

The key objection stems from a fear of “remaindering”, a phenomenon triggered by excess stocks of book titles, which forces publishers in Western markets to sell copies at dirt-cheap prices. Indian publishers worry that these remaindered copies will flood the domestic market and kill their business. However, even in countries that permit parallel imports, such as Australia, there is little real evidence of such flooding. Therefore, the India’s government ought to insist on empirical proof substantiating the magnitude of this alleged remaindering threat.

Assuming that remaindering is a danger potent enough to hurt booksellers here, the solution is rather simple. Given that Western publishers have effective control over “remaindered” copies before they are released into a “parallel” market, a contractual safeguard would redress this issue. In other words, the Western publisher can be contractually bound by the copyright owner to ensure that surplus copies of books that are of interest to India are returned by bookstores and shipped to the Indian publisher. This will cut out third-party “remaindering” profiteers who wish to plunder the Indian market. Further, it will yield extra profits for publishers and authors.
Alternatively, one can simply carve out an exception to section 2(m) to prevent copies labeled as “remaindered” from getting into India. This would be a far better solution than dispensing with the section altogether.

IP rules are not meant to serve the private interests of industry alone, but the public interests of society as well. The policy presumption ought to favour free market competition. Where the law does decide to stifle such competition, there had better be good reason. Unfortunately, the reasons offered so far to restrict parallel imports are far from convincing, rendering the policymakers’ choice a quintessential no-brainer. With a parliamentary standing committee deciding to retain section 2(m) in the interest of consumers and free competition even after it had heard representations from publishers, there is every reason for the government to proceed cautiously.