By Desmond Oriakhogba

A major recurring issue during the public consultations on South Africa’s Copyright Amendment Bill – in which the UCT IP Unit actively participated – centered around how best to balance copyright to safeguard the public interest when promoting creativity, while affording adequate reward and incentives for creators. As expected, the option was between, on the one hand, adjusting and expanding the current set of specific copyright exceptions and limitations and, on the other, transforming the current fair dealing exception into an open and flexible fair use exception, modelled on similar provisions in countries like the United States, Korea, Israel and Singapore. These two options form part of copyright’s internal mechanisms for adequately balancing the competing interests of the stakeholders involved.  This article aims to draw attention, however, to external mechanisms afforded by competition law that may, in addition, be deployed towards a balanced  copyright regime in South Africa.

The article is relevant when placed against the backdrop of government’s recognition of the intellectual property/competition law interface and how to clarify its ‘remit and scope’ [IP Policy, p25]. South Africa’s jurisprudence on the IP/completion law intersection is still at the wee stage. The few cases on the issue relate to patents and trademarks within the context of merger control, abuse of market dominance and restrictive agreement. Even so, the competition courts did not directly discuss the ‘complex interface’ between both legal fields; either because the cases were settled by the parties, were based on procedural issues, or were not caught by the Competition Act.

A detailed discussion  of the interface is beyond the scope of this article. Suffice to note that both fields of law were once regarded by some as inherently conflicting fields that should be kept separate within the bounds of their respective legal territory. This was based on the view that while IP law creates monopolies, competition law seeks to avoid monopolies. However, the prevailing view now follows a complementarity approach, according to which both fields of law are regarded as adopting different methodology but with a similar goal: the enhancement of consumer welfare through the promotion of innovation. This view does not regard IP law as creating a dominant market position as such. Competition law only intervenes to prevent IP rights from being exercised anti-competitively in a given market. Examination of the interface originated from the patent/innovation paradigm. Nonetheless, the complementarity approach also fits the copyright/creativity discourse.

The core goals of copyright law are well known: reward/incentive for creators and preservation of the public interest through facilitating equitable access. It seeks to achieve this by conferring creators with exclusivity over their works, subject to certain substantive and time-based limitations and exceptions. The exclusivity typically enables creators to permit uses of their works, or not, and request payment from users as condition for access to their creations. Copyright limitations and exceptions, however, provide opportunities for users to access and re-use copyright works without permission and at no cost. As such, they may be regarded as ‘incentives’ against infringing copyright. Undoubtedly, many users would seek any means, including unlawful measures, to access copyright works where copyright owners unreasonably prevent access. Thus, limitations and exceptions may be seen as copyright law’s mechanism to discourage copyright infringement.

Further, by protecting only the expression of ideas, and not the ideas themselves, copyright law ensures the continuity of creativity for consumer welfare. It does so by prohibiting competition by imitation, copying or creation of perfect substitutable works, while promoting competition by way of making imperfect substitutable goods. To this end, it empowers the owners of copyright in existing works to sue for infringement against makers of the perfect substitutes; while allowing the creation of works regarded as imperfect substitutes of existing works by restraining owners of copyright in existing works from preventing the creation of imperfect substitutes.

This way, copyright law promotes dynamic competition or ‘Schumpeterian competition’, which, according to Sidak and Teece, ‘is a style of competition that relies on [creativity] to produce new products and processes and concomitant price reductions of substantial magnitude. Such competition improves productivity, the availability of new goods and services, and, more generally, consumer welfare’.

Competition law is generally meant to promote consumer welfare in a given market by safeguarding competition. Competition law does not abhor monopolies obtained by innovation or creativity per se. Rather, it ensures that monopolies are not exercised to bring about unfair trade and prevent free movement of goods and services within a given market. Thus, it may be seen as preferring the existence of several firms within a market competing against each other for consumers while offering similar goods and services at lower prices to the benefit of consumers (static competition). Indeed, classical economics which shaped competition law is usually concerned about price and output. But modern competition policy also focuses on dynamic factors of competition, which is more in sync with the goals of copyright law. The emphasis of modern competition law is not so much on the availability of similar products at reduced prices but the existence of ‘new products and the co-creation of new markets that allow latent demand to be realised by consumers’.

In this regard, competition law behaves like copyright limitations and exceptions in that it promotes the public interest by ensuring that the exclusive rights which copyright law confers on copyright owners are not exercised to prevent dynamic competition in a given market. Put differently, competition law ensures that a ‘copyright monopoly’ is exercised efficiently and to the promotion of consumer welfare in a given market. Katz observed that competition policy had always been at the heart of copyright legislation. Copyright law’s internal balancing mechanisms like fair dealing and fair use; the idea/expression dichotomy; the first sale doctrine (principle of exhaustion); the concepts of originality; among others may be utilised to advance the ends of competition law.

According to Drexl competition law prevents the anticompetitive exercise of copyright in essentially two ways. The restrictive approach reflects competition law’s ability to limit the exercise of copyright exclusivity under the rules against ‘abuse of market dominance’ which ‘may specifically be applied to the effect of imposing a duty to license’ on the copyright owner. Competition law’s proactive role forms ‘part of a more holistic government policy that does not purely rely on the prosecution of copyright infringement’ to curb infringement. It is more apparent in the rules against market sharing, market foreclosures and price-fixing agreements by copyright owners. Such agreements have the tendency to act as barriers to market entry and may lead to copyright infringement if not tackled. The agreements may cause users to deploy any means, including copyright infringement, to get around such entry barriers.

Nonetheless, there remains tension between both fields of law in view of their different methodologies. Competition law usually involves ‘fact intensive rule of reason analysis of a particular challenged practice and its effects in specifically defined market’. On the other hand, ‘copyright law […] does not require [the] same rigour’. In effect, competition law will not apply where the alleged abuse of copyright does not involve market dominance on the part of the copyright owner, whereas copyright exceptions will apply under copyright law regardless of market definition. Further, competition law is not well-suited to curb the harm that copyright law principally seeks to tackle. It seems to favour the party against whom copyright law would ordinarily be deployed: an alleged copyright infringer. In this regard, competition law may seem as a shield. However, it is better regarded as a sword because an alleged copyright infringer intending to rely on competition law to compel the copyright owner to license in cases of refusal to license (for instance) would have to initiate a different procedure under the competition legislation. Yet, although such person may obtain some remedy under competition law, this person cannot escape liability under copyright law merely by reason of success under competition law as competition law cannot annul or suspend copyright.