A key attraction for entrepreneurs and startups is solid intellectual property rights protection (IPR) laws. It “is immensely important for entrepreneurs as it provides legal protection for their innovations and creative works, offering a competitive advantage in the market and safeguarding valuable assets for small business ventures,” James Dooley, a U.K.-based entrepreneur who founded four startups, wrote on Linkedin in January 2024.
IPR laws traditionally protect the ideas behind real-world products, company logos, marketing material and other assets. However, the proliferation of the virtual landscape (metaverse) is sparking new types of innovations that are testing the limits of traditional IPR laws. “The metaverse invokes legal challenges of [IPR] in a limitless world of imagination,” said a spring 2024 research paper from the American University in Cairo (AUC) School of Public Affairs and Public Policy.
In the long term, Egypt needs an effective IPR legal framework for virtual innovations. “While entrepreneurs continue to invest in developing new products and services and marketing through traditional means, a shift toward digital transformation is evident,” said the 2024 GoDaddy Global Entrepreneurship Survey, referring to Egypt. “This transition to a more digital-centric approach can be crucial for unlocking new growth opportunities and achieving long-term success.”
Good for business
According to IpriQ, creators of the trademark application tool Reggster.com, patents “represent an important financial and legal asset.” They estimate IP in some companies could equal “more than 80% of the company’s value.” That makes them “attractive investment targets.”
Patent ownership is good for business because, “unlike most asset classes, the value of intellectual property can increase indefinitely,” IpriQ said. “If a company owns a factory, its value is fixed and, if anything, likely to depreciate … Intellectual property protects whatever value there is in the company.” That includes brands, innovations and design.
“Intellectual property can be leveraged in many ways,” noted IpriQ, highlighting how Rovio, the creator of the Angry Birds mobile game app, generates 20% of its revenue from licensing the “Angry Birds” IP to several smaller companies.
“We represent many startup companies whose business models are essentially about licensing their brand, technology or both,” IpriQ noted. “It [is] a very profitable business model for startups … since there are very little costs involved.”
A third benefit is that owning IP “reduces operational risks,” IpriQ noted. “Protecting the brand name in important countries can ensure that nobody else gets better rights to the name in those countries. Changing a brand name even in one country is a costly operation, not to mention losing the investments already made in promoting the brand.”
Lastly, companies with a solid IP portfolio “seem more trustworthy partners,” as investors find it “hard to take seriously … a company that does not protect its investments.” IP also builds a company’s stature among consumers, boosting marketing impact and growing sales. “The ® symbol informs the public that the brand owner believes in the product and does not want competitors to ride on its reputation,” IpriQ said.
Struggling with IPR
Egypt published its IPR law in 2002, covering “trademarks, copyrights, patents and industrial designs,” said a paper from Andersen Egypt, a law firm. That law applies to individuals and corporations with patent-eligible ideas for the physical world. It does not apply to purely digital or hybrid services or tools.
Egypt was among the lowest-ranked countries in the International Property Rights Index (IPRI) 2024, published by the Property Rights Alliance, an advocacy organization. Overall, the country ranked 87th out of 125 countries.
The lowest-performing categories were “political stability,” “registering process” and “copyright protection.” The highest-performing were “rule of law,” “physical property rights,” “access to financing,” “IPR,” “patent protection,” “physical property protection” and “trademark protection.”
The report also classified Egypt as the third “weakest” country in the “fourth quintile,” above Zambia and Peru. That quintile comprises 28 nations. Versus the 2023 IPRI ranking, Egypt ranked the fourth most improved, “not a trivial” feat.
IPRI also classified Egypt among 38 nations in “Cluster 1,” a grouping of countries that exhibited a “high degree of similarity,” which shows “the relevance of property rights systems in shaping societies.” Almost 53% of those nations are lower middle income, 28% are low income, and 18% are upper middle income.
Geographically, Cluster 1 countries are from the Middle East and Central Asia, Sub-Saharan Africa, Latin America and the Caribbean and emerging and developing Asia and Europe.
They are characterized by “poor or inadequate policies to enhance key elements for progress and development, and thus also reflect the lack of a robust property rights system,” the IPRI report said. “Countries in Cluster 1 should make particular efforts to strengthen their legal and political environment to protect physical and intellectual properties, which are still weak.”
IPR protection 2.0
The Property Rights Alliance index shows why the Egyptian government needs to fix issues with the 2002 IPR law quickly., as local tech startups are growing fast and need protection for their innovations.
Updating conventional IPR laws to cover digital innovation must offer traditional IPR protections for “special devices and technology … such as virtual reality [headsets] and augmented reality appliances … that cannot operate without patents,” noted the AUC paper.
Those devices also need “digital” IPR laws to protect their software and platforms. “This imposes a nontraditional sense of trademark protection for new categories of [virtual] goods and services” used in the real world, the AUC paper said.
Digital IPR laws also need to protect and manage content user access in the metaverse, even if it is copyrighted in the real world. Examples include videos, designs and images in the digital space.
The AUC paper said digital IPR regulators should accommodate the “fair use doctrine.” It is “the right to use copyrighted work under certain conditions without permission of the copyright owner,” according to Harvard University. “The doctrine helps prevent a rigid application of copyright law that would stifle the very creativity the law is designed to foster.”
That could prove tricky. “In the virtual realm, the author of the creative work is usually its copyright owner,” said the AUC paper. However, platforms showcasing the product, such as social media or specialized websites like Shutterstock, have an inherent right to influence where and how the material is showcased and used.
In those cases, content creators fully or partially sell (licensure) usage rights to platforms. A complete sale means the new rights holder “effectively controls all intellectual property created on it and maintains the right to decide how it will be used … both inside and outside the platform,” the AUC paper said.
Licensure gives creators a say in how the platform displays their content. They can also decide, without the platform’s consent, to publish their content on other digital or physical mediums. That generally doesn’t sit well with platforms, which prefer exclusive control.
Another platform-related issue is the “joint authorship” dogma evident in video games. “Players are encouraged to generate new content incorporated into the game environment, [while] developers frequently only create the framework of the virtual world, leaving a vast space for the players’ creation,” the AUC paper explained. “In such an environment, neither the developer nor the player could solely claim exclusive creative ownership of the new and developing elements produced by this collaborative cycle.”
To resolve that issue, players agree to the terms and conditions page before accessing a game, which clarifies content ownership and usage ambiguities.
The risk is that leaving platforms and creators to rely on contractual agreements to determine content rights would likely “deprive [the latter] of the fiscal benefits of their creation in the platform, and consequently, they lose the incentive for creativity,” the AUC paper said.
To avoid such a scenario, it is essential to have a third non-biased party (the government) set rules and regulations to ensure creators and platforms have a balanced, fair relationship.
Virtual IPR laws
One issue facing IPR lawmakers is deciding what happens if contractual agreements between content developers and platforms conflict with national laws. For example, regulations may stipulate authors can stop sharing their work with the platform at any time. Yet, the platform contractually obliges creators to permanently “license or wholly transfer” their content “for royalty-free use.”
Another topic digital IPR laws need to address is when “legally obtained work is presented differently … transposed from one medium to another, or when even minor, reversible alterations are made to the way it is presented,” the AUC paper said. For example, what happens if “architects object to their buildings being … altered for use in digital environments.”
Digital IPR lawmakers also need to consider the “first sale doctrine.” It “permits someone possessing a previously sold copyrighted [digital] work to … loan, lease, [rent], sell or exhibit it in public without the original copyright owner’s consent,” the AUC paper said.
The first-sale doctrine is relevant to non-fungible tokens, where developers use blockchain technology to prove the uniqueness and ownership of a piece of digital art, allowing successive purchases, sales and rights transfers.
Regulations also need to consider IPR protections if commercial or personal avatars “adorn … branded accessories, or include pre-existing works including textual, music and artistic works in the background.”
IPR and AI
The commercial rise of artificial intelligence (AI) with ChatGPT in 2022 is fueling debate over whether content generated by a human prompt to an AI system should be subject to IPR protection.
“If yes, who would be considered the author of the copyrighted work?” the AUC paper asked. “Moreover, to what extent do the contributions of the programmer and the users qualify for authorship and, in particular, joint authorship?”
The answer “may overturn the traditional conception of authorship in copyright,” the paper noted. “The unprecedented development in AI tools foretells that the upcoming debate will be about AI technology as an author.”
The AUC paper recommends that digital IPR laws create “a distinction … between the work created with machine help, such as computer programs, and the work created by AI.” While computers are “a tool in the creative process, [AI] with the absence of a human factor, [is] no longer a tool in the creator’s hands, but the creator himself.”
First steps
In Egypt, adapting the 2002 IPR law to the virtual and AI realms would require expanding the legal definitions of “content authors” or “owners” and content eligible for IPR protection beyond “human” intellect, character and intelligence. That means creating an all-new “virtual legal personality” definition for AI-powered applications, given their “ability of self-thinking that works independently from human thinking,” the AUC paper said.
The AUC paper stressed Egypt’s new digital IPR law also needs to “establish a special legal and ethical system for [IPR protection of] AI entities.”
Ultimately, given the speed at which various technologies evolve, the AUC paper stressed the need to accelerate “the process [of approving new laws] to cope with vigorous technological change.” Those laws must also “be one step ahead by scrutinizing and examining the standing texts [of] cases [to] predict legal issues.”
