April 01, 2020 Feature

Cultivating the Economic Benefits of Creativity: Finding the Right Balance in IP Laws

Laura Possessky

©2020. Published in Landslide, Vol. 12, No. 4, March/April 2020, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

For the past decade, policy makers, governments, and nonprofit organizations have embarked on a concerted global effort to harness the economic benefits of creativity. As one of the highest growth sectors in the global economy, the creative industries are both strong drivers of economic growth and great disrupters to economic infrastructure. With patents, trademarks, copyrights, and other property rights as the principal assets of creative activities, intellectual property (IP) is a critical component of the health and growth of the creative economy. Consequently, optimal growth of creative industries depends on IP laws balancing owners’ interests and public access to protected IP. For the U.S., finding the right balance is a pressing concern because it is essential to ensure U.S. IP laws and, accordingly, the U.S. itself remain competitive in the global economy.

The Creative Economy

The creative economy consists of several creative industries “whose principal orientation is to apply creative ideas.”1 These industries represent an increasing share of the global economy, generating over $500 billion globally with an average annual growth rate of 7.5 percent.2 The most prominent participants in these industries are large multinational conglomerates, like Sony, Disney, Google, Amazon, and Apple. However, businesses in the creative industries are predominantly microenterprises and entrepreneurs, like graphic designers, writers, Etsy makers, and other independent and freelance service providers of creative activities.

The concept of the creative economy originated in John Howkins’s book, The Creative Economy: How People Make Money from Ideas.3 In the U.S., the creative economy discussion gained traction from The Rise of the Creative Class by urban studies theorist Richard Florida.4 In his book, Florida identifies the “creative class”—creative and knowledge-based workers—as a leading force in economic development because of their ability to spur growth through innovation.5 Howkins and Florida were among a cadre of theorists, economists, and public policy experts at the forefront of a global effort to quantify and measure the economic impact of creativity and innovation.

The creative economy has many attributes that make it a viable driver to promote economic growth, development, and cultural identity. Unsurprisingly, the parameters of how to define the sector depend on the policy goals. The United Nations Conference on Trade and Development (UNCTAD) describes the “creative economy” as “an evolving concept based on creative assets . . . [that] foster income generation, job creation and export earnings while promoting social inclusion, cultural diversity and human development.”6 Further, UNCTAD identifies the versatile aspects of the creative economy that contribute to its successful role in driving economic growth:

• It embraces economic, cultural and social aspects interacting with technology, intellectual property and tourism objectives;
• It is a set of knowledge-based economic activities with a development dimension and cross-cutting linkages at macro and micro levels to the overall economy; [and]
• It is a feasible development option calling for innovative multidisciplinary policy responses and interministerial action.7

Creative industries uniquely intersect with societal benefits like social inclusion and cultural diversity. These noneconomic attributes, which make the creative economy sector attractive for public policy solutions, are also more difficult to quantify.

Creative industries constitute the core of the creative economy but are not always the sole activities included for purposes of classification. In some contexts, the creative economy is limited to conventional creative arts industries. The United Nations Educational, Scientific and Cultural Organization (UNESCO) defines cultural and creative industries as activities “whose principal purpose is production or reproduction, promotion, distribution or commercialization of goods, services and activities of a cultural, artistic or heritage-related nature.”8 While there are several classification models used to identify creative industries, the industries commonly included are: literature, music, performing arts, visual arts, film, museums, photography, print media, television, radio, computer games, advertising, architecture, design, and fashion.9

In other contexts, the creative economy sector encompasses a much broader scope of activities including science and technology. UNCTAD defines the creative industries expansively by enlarging the concept of “creativity” from activities having a strong artistic component to “any economic activity producing symbolic products with a heavy reliance on intellectual property and for as wide a market as possible”10 More specifically, creative industries:

• are the cycles of creation, production and distribution of goods and services that use creativity and intellectual capital as primary inputs;
• constitute a set of knowledge-based activities, focused on but not limited to arts, potentially generating revenues from trade and intellectual property rights;
• comprise tangible products and intangible intellectual or artistic services with creative content, economic value and market objectives;
• are at the cross-road among the artisan, services and industrial sectors; and
• constitute a new dynamic sector in world trade.11

For quantifying metrics about the creative economy, UNCTAD adopts a classification method that cuts across different industrial sectors with the commonality of being knowledge-based activities. UNCTAD’s first report on the creative economy in 2008 describes the sector’s advantages for economic development:

It entails a shift from the conventional models towards a multidisciplinary model dealing with the interface between economics, culture and technology and centred on the predominance of services and creative content. Given its multidisciplinary structure, the creative economy offers a feasible option as part of a results-oriented development strategy for developing countries. It calls for the adoption of effective cross-cutting mechanisms and innovative interministerial policy action.12

Because the creative industries involve a cross-section of sectors and disciplines, the creative economy provides a unique opportunity for cooperation across ministries and for collaborative solutions.

Balancing Intellectual Property Interests

As creative economy policies have proliferated globally, questions have arisen about whether existing IP legal systems adequately support growth in creative industries. Because IP is integral to the creative economy’s success, laws protecting rights owners’ interests are essential for creators to benefit economically from their creative pursuits. Equally important for creative industries growth is a flexible legal framework to accommodate innovative sharing of and public access to these ideas. Thus, an effective legal framework for sustaining creative industries ensures mechanisms to balance IP protections and public access.

Because of the unique attributes of the creative industries, navigating this balance of interests can be complex. The process of frequent interactive and collaborative exchanges is a core characteristic of the creative economy that distinguishes it from the industrial economy—under which many IP laws were established. John Howkins explains these distinctions more fully:

In the Industrial Economy Structure (IES), generally speaking, the scientist or the engineer who blew up a blueprint and handed it over to somebody else saying “this is what I want you to do,” that’s what he did. On the other hand, in the Creative Industry Structure (CIS), there is a conversation taking place between equals. The originator will talk to the producer and the producer will talk back to the originator; so it’s much rather circular. “Distribution” is very important. I like the word “User” because increasingly the people sitting in the houses under “consumption” are the same people under “origination.” So whereas the IES was about the linear development of a product—from “origination” to “consumption”—the CIS is about a collaborative, sharing process.13

Therefore, an effective IP legal system permits creative industries both to promote the generation of IP and to share that property for collaboration by creative industry professionals and consumers, or “users,” of that IP.

While balancing IP stakeholders’ interests remains an effective legal approach in a creative economy paradigm, assumptions about how, and which factors to weigh, are different. The existing legal doctrines are challenged by disruptive economic factors like the emergence of a sharing economy, ubiquitous digital copying, and the noneconomic implications of creative products and services (for example, establishing cultural identity).

The aspects that make creative industries such vibrant activities for economic growth also challenge conventional legal analysis under IP law. Collaborative business models, common to creative industries, stretch legal concepts of exclusive rights and use of IP. The collaborative aspects of creative industries have a beneficial economic effect. However, these aspects also present challenges for enforcement against unauthorized use of IP. As Howkins points out:

[T]he critical decision is when to share ideas freely and when to decide to own them. I am working with a successful media company about their software. Question: should they get patents and assert copyright or should they allow their staff and their customers to modify their products? Absolutely critical question: When to possess; when to give away.14

Fundamentally, in a creative economy system, IP law is about striking an economic balance for the purpose of promoting creativity and innovation. Even when the business models for developing IP do not fit neatly within defined legal frameworks for rights protection, it is vital to establish effective legal solutions to address these new models and to ensure appropriate exceptions to exclusive rights.

Another disruptive force that challenges established legal analysis is technological innovation, considered the Fourth Industrial Revolution “powered by the convergence of numerous innovations in the physical, biological and digital realms.”15 Digital technologies have made copying, distributing, and publishing creative material much easier, cheaper, and faster—tipping the balance of interests away from copyright owners. The rise of the creative economy has coincided with a seismic shift in technological innovation, which has paved the way for creative efforts to become more omnipresent with more connectivity, more interactivity, and more cost-effective on-demand content streaming through mobile and smart devices. This mobile and ubiquitous access coupled with users’ appetites for new digital experiences have increased the demand for creative material and content. Much of the creative industries’ growth is due to engagement with users on new digital platforms. However, legal responses to protect IP often involve adopting enforcement measures that overcompensate by limiting or prohibiting legitimate uses as well as unauthorized ones.

Similarly, noneconomic aspects of creative industry activities, particularly how creative products and services contribute to cultural identity, present issues that are not always consistent with the common understanding of economic gain. Creative works tend to have attributes of public goods.16 While public goods have noneconomic benefits, economists typically consider them to be market failures because of two characteristics: nonexcludability (i.e., it is hard to restrict unauthorized use of all aspects of a creative work) and nonrivalry in consumption (i.e., the value of a work for an individual user will not decrease with the number of other users).17 As products created or services provided in the creative industries may also be created for noneconomic reasons, as in the case of expressing cultural identity, the intent at creation may be for them to be widely available and accessible. Therefore, settling on a legal outcome that restricts use may not be appropriate.

Even with disruptor influences, the economic value of creative products derives largely from IP rights. Therefore, the protection and enforcement mechanisms of IP legal systems are critically important. Given the challenges to existing legal systems, the World Economic Forum18 developed recommendations to promote responsive IP legal systems:

  • Governments should regularly review and update copyright laws and policies.
  • Policy makers should reduce incentives to obtain pirated content by developing frameworks enabling increased lawful access to content via the internet.
  • A voluntary global registry for copyrighted content should be created to facilitate licensing of copyrighted material.
  • New approaches to addressing orphan works should be developed and formalized.
  • Attention needs to be given to ensure that all players, like collective management organizations, right holders, and policy makers, should work together on global standards for acquiring and distributing content use information.
  • Policy makers and content distributors should encourage the development of globalized digital marketplace approaches that could reduce geographical impediments to commerce in digital works.
  • Policy makers and right holders should adopt a common set of digital copyright principles that can help ensure a fair balance between the interests of copyright owners and users.19

These recommendations provide useful guidelines for thoughtful evaluation and reform of IP legal systems in ways that will support growth in the creative economy. For example, if registers, potential licensees, and others have a clear means to identify owners of all protectable IP (as with orphan works), it will facilitate and encourage legitimate use. Similarly, digital systems to facilitate legitimate access to protected IP and improved coordination among various legal registers will harmonize enforcement efforts to identify and deal with piracy. Because these recommendations propose improvements to the legal mechanisms to protect, enforce, and record information about IP, there is a significant advantage to pursuing solutions in the interest of supporting the economic activities of cultural industries.

Improving IP legal systems to be more responsive to the characteristics of a creative economy market will strengthen the likelihood for consistent growth of the creative economy sector. The drawback of ineffective IP laws is uneven and unpredictable growth in the creative economy sector. This situation presents a particular challenge for developing countries. For a large percentage of these countries, this sector is the least likely to have the benefit of a functioning system of registered copyrights or designs, or strong institutional support. “The result is often an unreliable source of income and no ability to claim attribution when works are appropriated by third parties.”20 Therefore, there is a strong correlation between an economy with flourishing creative industries and effective IP law systems.

Even with a robust IP legal system, national IP laws do not operate in a vacuum. Countries with more effective IP protections and a dynamically responsive legal system will have a comparative advantage. Therefore, it is important to resolve any weaknesses in the U.S. IP laws that would have a negative impact on creative industry growth. It is also important to evaluate the U.S. legal system for IP to assess how it compares with protections in other countries. If the protection or the enforcement mechanisms are less effective, it can even have negative consequences on U.S. domestic creativity and innovation:

[I]n the case of non-excludable creations such as many copyright works, domestic innovation may be stifled if new ideas developed abroad are available at low cost. A famous example regarding copyright is the situation of US authors in 19th century US. Only domestic authors enjoyed full copyright protection, but foreign authors did not. Thus, US domestic authors were faced with very competitively priced editions of British works in particular and may have suffered as a consequence.21

Further, the temptation to manipulate laws for economic advantage should also be avoided, as it may produce the unintended (and unfavorable) consequences of encouraging anticompetitive behavior:

There is some concern that firms use IP strategically to attain competitive advantages, for instance by registering many patents not to use the technologies themselves or license them, but to inhibit innovation by competitors. . . . [W]here public regulation has strong effects on economic activities, firms may conduct so-called rent-seeking: lobbying to ensure public policy is beneficial for their partial interest. Firms may thus not focus all their efforts on efficient production and innovation, but also on influencing governmental policy.22

Continued harmonization of laws will also ensure that there are more efforts to arrive at common approaches to navigating the novel legal issues arising from a creative economy framework. All of these measures support creative industry growth by creating stronger networks of information to provide information on rights holders, IP with protected rights, and other aspects that IP records serve.

The Need for a National Creative Economy Policy

The competitive advantage largely enjoyed in the U.S. for decades in the creative industries may be disrupted by the creative economy initiatives in other countries. International organizations and several national governments have developed centralized policies and economic plans to support and to grow creative industries. Meanwhile, countries like the U.K., Columbia, and China have invested substantial resources in building, developing, supporting, and promoting their creative industries to yield substantial economic growth. Given the pace of innovation and the increased stakes to economic advantage from innovation in a competitive world economy, it is incumbent on the U.S. to ensure that the development and reforms in IP law are consistent with supporting and sustaining growth in the creative economy.

Arguably the U.K. is the leader among developed countries in developing creative economy infrastructure. Early on, the U.K. invested in a centralized policy strategy to grow and develop the creative industries. As part of its initiative, it conducted a full independent study of its IP framework, the Hargreaves report. The report provided a comprehensive analysis of the U.K. IP framework, complete with recommendations on how to approach IP protection for various creative industries.23 Since then, the U.K. has made several reforms, including establishing an orphan works register and the Copyright Hub, a nonprofit organization formed through a public-private partnership to create a copyright exchange to lower transaction costs of licensing. These and other changes have bolstered the creative industries. The value of the creative industries to the U.K. in 2017 was £101.5 billion, and has grown at nearly twice the rate of the economy since 2010.24

The regional efforts in Latin America, and Columbia in particular, have developed strong public policies around the creative economy to support creative industries. Latin America has dedicated substantial resources to developing a regional strategy. The Inter-American Development Bank’s 2013 report, The Orange Economy: An Infinite Opportunity, made the case for advancing creative industries for the purposes of developing economic growth and provided a regional road map.25 In September 2019, Columbia, under the aegis of its president, Iván Duque, and its cultural minister, Felipe Buitrago (the authors of The Orange Economy report), convened the Cumbre de la Economía Naranja (Orange Economy Summit) attended by over 100,000 people representing 17 countries, symbolically hosted in Medellín, a center of Columbian art and culture, and internationally recognized for its successes in urban development.26 The Columbian government sees these creative sectors as a major economic driver for economic growth, and through the summit event seeks to enlist ambassadors to participate in implementing its creative economy policy.

Among developing nations, China dominates in creative industry growth. The growth rates and development are so significant that UNCTAD in its latest report excluded China from the developing nation analysis because it skewed the statistics.27 In 2009, China’s government made cultural and creative industries a strategic priority, declaring it should represent 5 percent of its gross domestic product (GDP).28 China was the leading exporter of creative goods in 2015 with exports totaling $168.5 billion, four times that of the U.S.29 China is primed to expand its key creative industries in areas such as film, television, and artificial intelligence. Despite the phenomenal performance of creative industries in China, weak IP laws are, at least for now, a major shortcoming. In recent decades, poor IP protection and enforcement has fueled the growth of the Chinese economy. Weak IP laws in China have allowed for substantial economic activity through pirated content, accounting for $25.2 billion of sales and 670,600 jobs. “Piracy rates are especially high in the music, TV, movie and gaming industries: 90% of DVD sales and 95% of recorded music sales in Asia are estimated to involve unlawful copies.”30

In contrast, the U.S. policy has been fragmented. While nonprofits and state and local governments in the U.S. have participated in creative economy initiatives and conducted studies on its economic benefits, the U.S. has no formulated national creative economy policy. As one of the world’s substantial producers of creative products and services, which represent a significant part of the country’s GDP, the lack of a cohesive national policy risks putting the U.S. at a competitive disadvantage in a changing global economy. In the U.S., the creative economy planning has been largely on regional and local levels.31 While there has been some national acknowledgment of the economic benefits of creative industries and how the U.S. could measure creative industries in a cohesive way, there has been no centralized commitment with dedicated funding to support creative economy growth. In addition to a more cohesive and mainstream focus on creative industries, the U.S. IP system must be updated to reflect current technological and market realities. For example, on the enforcement front, the coordinated efforts initiated under the Prioritizing Resources and Organization for Intellectual Property Act of 2008 (PRO-IP Act) need to be bolstered and reviewed to ensure efforts are adequately addressing piracy and other unauthorized uses.32

Promoting Economic Growth and Innovation

Research and experience over the course of the past decade have demonstrated that creative industries have the capacity to promote dynamic growth both in local communities and in the world economic system. Because IP is essential to the creative economy, continued economic benefit and success requires that the IP laws remain responsive and flexible in balancing stakeholder interests.

In 1969, the U.S. drive to put a man on the moon led to a centralized national policy for scientific space exploration. If the U.S. could succeed in sending a man to the moon, it should be possible to identify a centralized creative economy policy to promote the creative industries. A national U.S. creative economy policy can provide cohesive economic growth, substantial opportunities for community economic development, and innovative scientific discovery. If the U.S. is to remain competitive, it must match other countries’ efforts and adopt a robust policy that extends beyond market forces guiding the success of creative industries. Further, efforts to ensure flexibility in the U.S. IP legal system to support the creative industries is essential for continued U.S. leadership and success in the world economy.

Endnotes

1. Christine Harris et al., Creative Econ. Coal., America’s Creative Economy: A Study of Recent Conceptions, Definitions, and Approaches to Measurements across the USA 7 (2013).

2. Paul Kuku et al., UNCTAD Creative Econ. Programme, Creative Economy Outlook: Trends in International Trade in Creative Industries, 2002–2015, at 9 (2018) [hereinafter Creative Economy Outlook].

3. John Howkins, The Creative Economy: How People Make Money from Ideas (2001).

4. Richard Florida, The Rise of the Creative Class (2002).

5. See id.; see also Richard Florida, The Rise of the Creative Class: Revisited (2012).

6. United Nations Conference on Trade & Dev. (UNCTAD) & United Nations Dev. Programme (UNDP), The Creative Economy Report 2008: The Challenge of Assessing the Creative Economy: Towards Informed Policy-making 4 (2008) [hereinafter The Creative Economy Report 2008].

7. Id.

8. Ernst & Young, Cultural Times: The First Global Map of Cultural and Creative Industries 11 (2015) [hereinafter Cultural Times].

9. See, e.g., id.; United Nations Educ., Sci. & Cultural Org. (UNESCO) & UNDP, Creative Economy Report 2013 Special Edition: Widening Local Development Pathways (2013).

10. The Creative Economy Report 2008, supra note 6, at 13.

11. Id.

12. Id. at 4.

13. Donna Ghelfi, Understanding the Engine of Creativity in a Creative Economy: An Interview with John Howkins 9–10 (June 2005), https://www.wipo.int/export/sites/www/sme/en/documents/pdf/cr_interview_howkins.pdf.

14. Id. at 12–13.

15. World Econ. Forum, Agile Governance for Creative Economy 4.0, at 5 (2019).

16. Christian Handke, Intellectual Property in Creative Industries: The Economic Perspective, in Research Handbook on Intellectual Property and Creative Industries 57, 60–61 (Abbe E.L. Brown & Charlotte Waelde eds., 2018).

17. Id. at 62.

18. The World Economic Forum is an international nonprofit based in Geneva, Switzerland, which counts the world’s largest corporations among its members, and “strives in all its efforts to demonstrate entrepreneurship in the global public interest while upholding the highest standards of governance.” Our Mission, World Econ. F., https://www.weforum.org/about/world-economic-forum (last visited Feb. 14, 2020).

19. World Econ. Forum, Intellectual Property Rights in the Global Creative Economy 16 (2013).

20. Cultural Times, supra note 8, at 18.

21. Handke, supra note 16, at 73 (footnote omitted).

22. Id. at 74.

23. Ian Hargreaves, Digital Opportunity: A Review of Intellectual Property and Growth (2011), https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/32563/ipreview-finalreport.pdf.

24. Press Release, U.K. Gov’t, Britain’s Creative Industries Break the £100 Billion Barrier (Nov. 28, 2018), https://www.gov.uk/government/news/britains-creative-industries-break-the-100-billion-barrier.

25. Felipe Buitrago Restrepo & Iván Duque Márquez, Inter-American Dev. Bank, The Orange Economy: An Infinite Opportunity (2013).

26. Isabella Morales Quiceno, Medellín, el Epicentro de la Cumbre de la Economía Naranja, Tiempo (Sept. 9, 2019), https://www.eltiempo.com/colombia/medellin/cumbre-de-la-economia-naranja-en-medellin-410270.

27. Creative Economy Outlook, supra note 2, at 10.

28. Cultural Times, supra note 8, at 35.

29. Creative Economy Outlook, supra note 2, at 9.

30. Cultural Times, supra note 8, at 34.

31. See, e.g., DC Office of Planning & Wash., DC Econ. P’ship, Creative Capital: The Creative DC Action Agenda (2010); Amanda M. Spratley, Connecting Law and Creativity: The Role of Lawyers in Supporting Creative and Innovative Economic Development, 8 Hastings Bus. L.J. 221 (2012); The Creative Economy: Art, Culture and Creativity in New York City, N.Y.C. Comptroller (Oct. 25, 2019), https://comptroller.nyc.gov/reports/the-creative-economy.

32. U.S. Gov’t Accountability Office, GAO-10-219T, Intellectual Property: Enhancements to Coordinating U.S. Protection and Enforcement Efforts 1, 9 (2009).

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Laura Possessky is a media law attorney and a board member of the Center for the Creative Economy in Washington, D.C.