How You Can Create a Better World: A Primer on Ethical Intellectual Property|Pt. 2

In part 1, I described the creation of the +CAL copyright licenses. I explained how and why our licenses ensure that the people and environmental inputs that comprise global supply chains are protected by the same “duty of care” that we have as consumers in the United States. Wonky lawyers may be quick to see why this is big deal, but fortunately we’re not all wonky lawyers. In this part, I’m going to discuss in economic terms why our licenses are exciting and why they lay the groundwork for a new frontier in economic activism. As promised in part 1, I’ll also discuss whether a corporation would ever willingly adopt a license like ours.

What's At Play?

In economics, “negative externalities” are costs associated with a business dealing that negatively impact people who didn’t choose to incur that cost. Negative externalities can lead to “market failures” (i.e., situations where a market actually creates a net loss to society) if the price of the goods or services fails to account for all the costs necessary to produce and consume a good. A community living in close vicinity to a polluting factory, for example, incurs a cost that is not factored into the price of the good produced in that factory. If the costs incurred by the community on account of the pollution (e.g., higher healthcare costs, shorter life expectancy, property devaluation, etc.) exceed the benefits that the community receives by having the factory operate nearby (e.g., tax revenue, job creation, etc.), then we can say that the community is experiencing a market failure: the community is economically worse off because of the polluting factory than it would be if the factory didn’t exist at all.    

Policymakers are often keen to prevent market failures by creating laws and regulations that require businesses to “internalize their externalities”--to ensure that the costs of goods or services are at least equal to the social, environmental, and production costs of creating and offering the good or service in the first place. Laws protecting human rights and the environment across corporate supply chains are justified in economic terms because they force corporations to internalize externalities that corporations might otherwise push onto workers and the environment through things like forced labor and unsustainable environmental practices. Corporations do not like when policymakers strengthen these types of laws because they reduce corporate profits by forcing corporations to bear higher costs of production through things like increased minimum wages, maintaining safer working conditions, and requiring corporations to responsibly handle hazardous waste.

As of 2015, corporations were spending $34 to every $1 spent by labor unions and public-interest groups on lobbying, to ensure that policymakers would not create laws that force corporations to internalize too many externalities, cutting too deeply into corporate profits. The impact of corporate influence on policymakers today can hardly be overstated: check out Public Citizen’s Corporate Presidency page for an in-depth look, and follow the CAL blog to get a flavor of what’s going on with corporate accountability more generally (including this post that examines how the justice system itself arguably treats corporate accountability as a “club good” available only to other corporations). The tl;dr summary is that if we’re looking to policymakers to hold corporations accountable for negative externalities, we’re looking in the wrong direction.

Our Power|Ethical IP

But fear not: our +CAL licenses empower each one of us to be the corporate accountability hero that our policymakers have thus far failed to be. To do that, we have to first look at our own location within global supply chains. This is where things get both exciting and humbling. Our power to create corporate accountability as consumers is well known, exemplified through the success of boycott movements to stop corporations from unethical practices. But within global supply chains, we’re much more than consumers. We’re also producers of vast amounts of intellectual property in all shapes and sizes. In fact, there’s not a single supply chain entering the United States that doesn’t utilize some piece of intellectual property created by the U.S. workforce.

As I discussed in part 1, intellectual property (IP) like copyright is incredibly “sticky,” ready and willing to make a case for why even the most banal form of creative expression is protected as intellectual property (e.g., one needs only a shred more creativity than what it takes to put a telephone book in alphabetical order to get copyright protection). It’s difficult to provide an accurate estimate of just how much intellectual property we actually produce, but the U.S. Dept. of State estimates that IP-intensive jobs now account for 38% of the U.S. GDP (or roughly $7 trillion dollars). And this yields a hard truth: each of us create vast amounts of IP in all shapes and sizes, yet we do nothing to ensure that our IP is not used in unethical supply chains.

From an economics perspective, this would suggest that we simply do not place any value on stopping corporations from imposing negative externalities (such as unsafe working conditions or environmental destruction) on the communities working in, and impacted by, global supply chains. Or at the very least, that we do not believe our intellectual property should be used to stop this type of behavior. If we did place value on stopping these sorts of things, according to economic logic, we would be negotiating conditions on the use of our intellectual property to ensure that it’s being used in ways that reflect our values.

Personally, I have a hard time accepting a reality where all of us are consciously choosing to not put conditions on the use of our intellectual property if we recognized just how much good we could do to stop unethical supply chains by adopting the practice. I say that as a trademark creator, a copyright producer, and a soon-to-be named inventor on a patent. While I take pride in my intellectual property productions, I think that all of it is worthless if I can’t commercialize my IP without using unethical supply chains. What’s an idea actually worth, after all, if it is fueling supply chains that have human rights abuses and environmental destruction?

The New Frontier|Economic Activism

It’s in this spirit that I see the +CAL licenses as laying the groundwork for a new frontier in economic activism. To be the corporate accountability hero that we want and need, we have to create our own law. And that’s what a copyright license amounts to: private law enforceable as a contract. Our licenses create private law that requires corporations to internalize the negative externalities that corporations create across their supply chains. Or put differently, our licenses empower the copyright producer in all of us to take the economic worth of our copyrighted works and to require corporations to invest any profits that they make off of the work into improving the working conditions and the environmental impact of the supply chains in which the copyrighted work is used. I think that’s a pretty cool and innovative way for copyright producers to directly invest in the protection of human rights and the environment.

The Morals Clause

The intellectual property morals clause baked into our licenses provides the legal technology that enables our licenses to work. A morals clause is a term in a contract that allows a party to the contract to terminate the agreement if another party does something immoral or unethical. Historically, morals clauses have been used by corporations to discipline people rather than the other way around. Anytime a celebrity is publicly shamed and corporate sponsors subsequently drop the celebrity, a morals clause in the sponsorship agreement is being flexed in some backroom corporate legal department. To our knowledge, our licenses are the first to utilize an intellectual property morals clause (i.e., a morals clause within an intellectual property license that terminates the license if the licensee does something immoral or unethical). Madison Clark, one of CAL’s rockstar interns from the Univ. of Chicago Law School, deserves all the credit for discovering how we could use a morals clause in our licenses.

I find morals clauses to be so promising for economic activism because the law looks kindly upon these clauses as catchalls for negative economic externalities. Against a backdrop of case law wherein judges have regularly rejected arguments that morals clauses are too vague to be enforceable, the morals clause is a piece of legal technology ripe for exploration by people wanting to stop corporations from the harmful behavior that corporations currently do as well as other unethical or immoral behavior that corporations might contemplate in the future.

An intellectual property morals clause is especially potent type of morals clause because intellectual property infringement is a strict liability tort. This means that you can be found liable for intellectual property infringement even if you did not know that the intellectual property existed, let alone intended to infringe it. This feature of intellectual property law has wreaked havoc on the patent market, as so-called “patent trolls” extract patent license fees from dumbfounded corporations in what has grown to a ~$10 billion-per-year market in recent years. Regardless of what one thinks about patent trolls and strict liability, the patent-troll market has taught valuable lessons, including the following: intellectual property creates risk for corporations and that risk causes corporations to enter into intellectual property agreements that they would otherwise never enter into. And in that lesson lies the rub for economic activism: an intellectual property morals clause can serve as an effective and efficient legal tool to transfer the risk of intellectual property infringement onto the risk of *not* protecting human rights and the environment across global supply chains.

For example, by conditioning a licensee’s right to use your copyright on compliance with the morals clause baked into +CAL’s licenses, you can create the economic effect of transferring the economic risk of copyright infringement onto the economic risk of violating a duty of care to people and planet across a supply chain. This, in turn, causes corporations that want or need to use the copyright to make a decision: is it cheaper for the corporation to accept a duty of care to the people and planet across its supply chain in exchange for access to valuable intellectual property it wants or needs, or is it cheaper for the corporation to accept the risk of getting sued by an intellectual property troll and to continue treating the people and planet across its supply chains as disposable commodities?  

That’s a question that most multinational corporations will not enjoy answering publicly. But it’s more than fair for us to ask. And it also provides the answer to the question I promised I would answer in part 1: would a corporation ever willingly enter into a license with an intellectual property morals clause? The short answer is that, it depends. If you work for a corporation that believes your intellectual property is at least as valuable as contractually committing to use ethical supply chains, then the answer should be yes. If not, then the answer is probably no.

If you’re curious as to how your corporation would respond, we have good news. The intellectual property morals clause introduced in CAL’s licenses should be portable to any type of intellectual property contract, license, or assignment, including the IP clause of an employment contract. So feel free to take the +CAL intellectual property morals clause and go ask your employer if it would agree to honor the terms of an intellectual property morals clause inside your employment agreement similar to the one in the +CAL licenses. And let us know what happens! I’m hoping to curate the history of people asking these types of questions through activistartmachine, but more on that in part 3, where I’ll also be discussing how we can use intellectual property morals clauses to awaken a new artistic movement capable of fundamentally transforming the role of intellectual property in the global economy.

Chris Byrnes is an intellectual property attorney, one of CAL’s co-founders, and a current CAL Advisor.

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