Taulant Ramabaja

Ahmet Morina
Xhenis Mazreku
Nexhat Peci
Vesa Radoniqi

Introduction to Qualitative Policy Analysis

Research Paper
17.05.2010

The possible economic costs and benefits of Intellectual Property Right reinforcement in Kosovo

Abstract

Despite the very pressing issue of Intellectual Property (IP) in Kosovo we have not seen any serious

public debate in the media or through scholar text which might asses the true economic and political

dimensions of this problem. We define and propose three different legislative models with which the

issue of IP Rights in Kosovo can be tackled.

This paper addresses parts of this issue by providing the basic information needed to understand this IP

related problems.

Introduction

Considering that this paper is intended for an audience which is concerned rather specifically with

Kosovo's economic development and its integration in international structures and institutions, we will

for the sufficient reach of this paper focus mainly on three distinct concepts: Intellectual Property (IP),

Copyrights, and Trademarks.

Key Terms

Intellectual Property

Intellectual Property or as an acronym IP refers to a specific idea, complex information or simply

“creation of mind” which can under specific laws be legally owned by a single legal person. IP is a

rather broad term which includes such complex property types as copyrights, patents, trademarks,

industrial design rights and in some countries such as the U.S. trade secrets. More specifically IP can

include literary, musical, and artistic works; inventions, designs, symbols, and often even phrases and

specific words.

IP, similar to other legal forms of property is meant as a framework for financial incentives and

compensations for one's very specific and new contribution to society[1].However, even this basic

incentivised scheme has been disputed since IP's very creation[2].

It is assumed that all post-industrial or information-centric economies depend to the largest extend on

“Value added” or “IP intensive industries”.Most research in the past decades has shown that greater

economic growth is almost always associated with greater IP protection. However, some scholars argue

that this is more of a correlation that a causation. Already existing foreign companies and institutions

might set up their offices and industries in less developed economies for several reasons but IP

reinforcement. As a result Intellectual capital and with it IP could potentially flow into that specific

country even against the will of the owners of the specified IP.

Opponents of IP or specific laws concerning IP often state that IP is useless in a non-scarcity economy

altogether. Markets make sense wherever there is some kind of scarcity which then in return can lead to

ownership and proprietary use and distribution of the scarce good. IP is a non-scarce good. Ideas can by

definition flow freely and be copied, manipulated and transferred without any problems normally

associated with almost any tangible good [3]. As such, making a non-scarce good artificially through

laws scars could be seen as a market distortion itself.

Copyrights

Copyrights are a set of specific rights reserved to the creator of an original work. The most
fundamental rights associated with is "the right to control copying". However, more specifically

copyright is the right to copy, distribute and adapt the work. Anyone who has a copyright on something

has the right to sell, transfer or license the rights or usage of the original work to a second party. In

most countries copyright on an original work last only for a specific time period after the authors death,

typically 50-100 years, after that the work will become part of the public domain.

In the last decades copyright laws have been greatly standardized throughout the world. Leading to

better IP and copyright cross-compatibility [4]. Similarly to the global standardization of other laws this

has led to better business conditions in the global market.

Since the 1980's the European Community has been working extensively on streamlining copyright

laws throughout its member states. Today the EU regards streamlined copyright laws in all its member

states as a fundamental precondition for the free movement of goods, services and labor [5].

According to the World Intellectual Property Organization there are two justifications for the existence

of copyright:

"To encourage a dynamic creative culture, while returning value to creators so that they can lead

a dignified economic existence, and to provide widespread, affordable access to content for the

public." [6]

Copyright always refers to an intangible good which is generally associated with a tangible good. An

example would be that if one buys a book one buys only the tangible book itself, not the right to the

content of the book [7].

Trademarks

A trademark is a specific sign or indicator which represents an individual, business or other legal

entity. Generally trademarks are distinct through additional symbols such as TM, SM or ®. All of these

symbols refer to to a different registration type and/or level of legal protection.

In many countries a trademark can also be an individual characteristic which is generally attributed

exclusively to a specific individual, business or other legal entity. An example would be a certain color

scheme used by company, not just in its logo but throughout the company.

A trademark serves to attribute a good or service to e specific legal entity. The unauthorized usage of a

trademark can lead to a litigation such as an action against trademark infringement. However, in many

countries a trademark can be sold, transferred or licensed to an other legal entity. Some countries do not

allow this for reasons of consumer protection.

From a public policy perspective trademarks are used to protect consumers from non-original and/or

low quality products and services. Through trademarks consumers are able to tell the origin of a good

or service and therefore continuously distinguish the quality of that specific origin.

Open Source

Open Source can be defined as as the practice, methodology or even philosophy which promotes open

access to any end material, tool or product. The open nature of these assets creates a self-enhancing and

self-evolving decentralized structure of development and usage throughout the product market [8].

One of the main principles of Open source is the massive and mostly decentralized peer production

model which enhances collaboration. This approach mostly brings down development costs and makes

the end-product in one form or another openly available to the public [9].

Arianit Dobroshi President of FLOSSK (Free Libre Open Source Software Kosova) and Shkumbin

Brestovci owner and manager of the web-design and programming company Rrota both state that they

prefer in almost every occasion Open source software because of its security and adaptability. Due to

its open nature, open source products tend to be more stable and reliable in almost every way than most

proprietary products.

Even though mostly applied as a practice or methodology to software and digital content development
the Open source model is being applied to ever more fields. Some newly touched fields touched by

Open source are: Biotechnology, robotics, agriculture, health & medicine, literature, urban planning,

and even broad fields such as public policy and economics.

Linus Torvalds, the initial creator of the Linux (or GNU/Linux) kernel (core) is said "the future is open

source everything" [10].

Even though many opponents of Open source have argued that it may destroy IP and consequently the

legal form of property itself

Intellectual Property and Globalization

The general situation concerning IP around the globe is very diverse, if not fragmented. The situation

stetches from strict IPR reinforcement to straight out open piracy. Several supranational organizations

exist which help to manage the transnational streamlining of laws and regulations. Without uniform

laws around the world transnational corporations could not be active in all of these countries without

infringing some law in at least one country.

Several trade agreements exist concerning IP and copyrights. The biggest and most influential today is

the TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement which was developed

during the 1990s and finally negotiated in the Uruguay Round of the GATT ( General Agreement on

Tariffs and Trade). The agreement contains many provisions on IP and specifically copyright. If a

country wishes to join the WTO (World Trade Organization) it needs to comply to the TRIPS

agreements specifications [11].

IP proponents state that without uniform laws effective diffusion of knowledge around the world could

not happen in a controlled and economically wise way [12].

IP opponents state that strict international laws and regulations have taken away an individual country's

ability to control the knowledge which flows within its borders [12].
Industries:

Music

The production/consumption chain

Music starts in in Kosovo very similar if not the same as in other countries. Most artists/singers

do not start their carriers because they see an immediate economic return. In fact, according to many

various insiders of this rather big industry, most musicians never make it to TV or even radio, most

often they sing on various festive days and national or religious holidays.

Hana Cakuli is a young Albanian singer currently studying at AUK. She has had the chance to sing at

TOP Fest Albania and on special occasions such as club nights and other festive days. She has been

singing ever since she was a little child and has shown her talent publicly in young age. In the last four

years she has been singing professionally, however, without any real financial return. Just recently has

her musical endeavor turned profitable. According to her this is very normal in the the Albanian

speaking market. Rather fittingly, not just for her but also for most Albanian singers, she has stated that

the song "When you believe" by Whitney Houston and Mariah Carey has given her the inspiration to

sing professionally.

How music is consumed today

Kosovo's youth is online. Many unfortunately rather unscientific studies have shown that

Kosovo has one of the highest Internet penetration rates per household in the Balkans [13]. Accordingly

most of the population consumes music through the Internet. Websites and services such as YouTube

and Facebook have had a tremendous effect on the way Kosovars consume, experience and distribute

music.

Even Hana Cakuli listens almost exclusively to music over YouTube and services alike. She is not the
only one, as almost every young Kosovar can tell. People have developed a very interesting mix of

distribution and content channels to get to their music.

One might argue that this is the direct aftermath of the low average income of most Kosovars, however,

Hana Cakuli is adding that that it is close to impossible to buy a legal physical or digital copy of some

song or album. She also adds that the few illegal copies available on the local market are of such poor

quality that one might as well listen to YouTube.

The ownership problem

As with most IP related content there is no functional institution which might actually license the

musician's work. Hana Cakuli also added that she effectively does not own her own work because of

the lack of such institutions. In Albania something is being done in this direction. AlbAutor, an agency

which will hopefully license and protect musical work is in the makings.

As such one cannot legally protect what is not legally one's own. Even if some other artist uses musical

content without the consent of the original author he could not legally protect it.

However, as any Albanian can tell, this has not stopped people from creating music and making money.

Film

The production/consumption chain

Kosovo is a very small market for any film/movie industry. Therefore most film directors look for a

broader audience in the Albanian speaking population in the Balkans and in the diaspora. Esat

Brajshori, long lasting TV and documentary director and deputy in the Kosovar Parliament states that

considering the low economic expectations of the majority of Albanians in the Balkans one can not

expect high enough returns for a thriving local film industry.

Due to these circumstances the number one problem of most directors is where to find the money to

produce the film. Mr. Brajshori states that once he send requests and applications for investment and

budget for a documentary he had planned to 30 different banks, government institutions and

businessmen. According to him the problem of the local film industry is is not piracy or illegal use of

content but rather the lack of investment and buying power of the general audience.

Today the state subsidized Center for Cinematography in Kosovo (Qendra Kinematografike e Kosovës)

has only 700'000-800'000 Euro on its disposal to invest in local projects. According to Mr. Brajshori

the getting a subsidy by this center is close to impossible considering the high number of applicants.

And even if a director gets some money it will be at most 51% of the overall budget.

Therefore, according to Mr Brajshori, only 3 movies have been made in Kosovo since the 1999 war.

There have been several documentaries but the majority of them were substandard because to cut costs

local TV equipment or worse was used.

How Film is consumed today

Different from most other IP content which has been affected tremendously by the rise of the Internet

in Kosovo, locally produced film content is rarely pirated. Most of this consumption still happens over

traditional means such as TV or DVDs.

This however does not apply to foreign content. International Blockbusters are being illegally

downloaded and even commercially pirated as in other countries around the world.
The ownership problem

Since most of the documentaries done in Kosovo are either of poor quality or simply a collage of

already existing material one can expect to see illegal use of IP. Mr. Brajshori has seen several

documentaries which used parts of his recordings without his consent, however, due to the lack of

functioning institutions such occurrences continue to happen.

The lack and/or functionalization of institutions

Mr. Brajshori also added that he believes that the only non-commercial film industry which is currently

feasible in Kosovo, which is the documentary industry, is being sabotaged in various ways by political

forces. He thinks that there has been a clear and disproportional underinvestment in war documentaries

compared to “internationally friendly” multi-ethnic one's. Whether this is a completely political

situation remains to be analyzed, however, it is clear that international donors prefer so called “multi-

ethnic peace documentaries” over passed oriented war documentaries.

Digital Content & Software

The production/consumption chain

Various kinds of purely digital content such as scholar or scientific data and software are being used

illegally throughout Kosovo. This is of course not just a purely Kosovar problem. This has been

happening for years now around the world. One might think that this is therefore no problem for

Kosovo, however, one way for Kosovo to rise economically is the digital/programming industries.

These high-return industries which need comparably low initial investment (without considering higher

education) may change Kosovo's economic landscape tremendously.

Today Kosovo has a relatively high number of programmers and web-designers. Currently the biggest

domestic company which does programming and web-design is “Rrota”. Shkumbin Brestovci, owner

and manager of Rrota says that they are having a working business. Their clients Kosovo companies

but also very often foreign one's.

His company uses almost exclusively Open Source tools and material to create their products which in

return are also almost always Open Source. Mr. Brestovci states that it has happened that other Kosovar

companies have used their Open Source software code in their own Closed Source proprietary

environments. As such they have acted illegally. However, Mr. Brestovci does not try to litigate does

companies, considering that the legal system in this area is non-functional; he rather outperforms and

out-innovates the competition through Open Source tools.

How software is used today

The absolute majority of all software in Kosovo is illegally in use and/or commercially pirated. The

latest high-end software package can be bought for 1 Euro and most people are not aware of their

illegal act.

The lack and/or functionalization of institutions

Interestingly enough Mr. Brestovci states that the very strong IP and software patent reinforcement in

the U.S. has lead to the situation that the lack of software patents in Europe has created a favorable

environment for small to medium software companies to thrive.

The big IT companies currently still favor the rigorous software patent system in the U.S. But this

might change in the near future once the so called “patent wars” start. “Patent wars” are essentially

litigations of huge IT corporations which own thousands of diffuse patents which they use to sue one

another. Generally this leads to out-of-court settlements because even the winner of such a massive
litigation would loose his business due to fees and other costs [14].

Possible Models/Solutions

EU/US or TRIPS model: Rigorous IPR reinforcement

The EU or US model which is best represented by the international TRIPS agreements foresees

rigorous IPR reinforcement [12]. This kind of rigorousness has shown itself to be in favor of big

supranational corporations and against smaller countries, businesses and in general smaller economies.

Short-Term

▪ Economically

The main argument fro this model is the faster integration of Kosovo's market and

institutions in other international markets and its institutions. One criteria for joining the

EU is more or less uniform IP laws with the EU, meaning rigorous reinforcement of its

laws.

With such a move Kosovo's products might have a better export possibility since its

ISO, copyright and trademark standards would be much more favorable to the global

market.

However, in the short-term such a model would be devastating for Kosovo. Considering

that the majority, if not all, software which is on sale and in use today within Kosovo is

pirated. Most of the small to medium businesses, which means almost all of Kosovo's

economy, is directly dependent on cheap pirated software. Under rigorous IPR

reinforcement most of Kosovo's businesses could not afford to buy the otherwise very

expensive legal copies of these software packages.

 If such a model would be applied within a comparatively short time period, Kosovo's

small to medium sized businesses could neither afford to buy the legal copies nor to pay

for the switching-costs to cheaper Open source or proprietary alternatives.

Additionally, there are various domestic companies which are currently misusing in one

way or another trademarks and copyrights. Some of them might get sued into

bankruptcy by foreign companies once they start exporting. Some of these companies

might not even be aware of their IP infringements considering the low general education

on IP in Kosovo.

▪ Politically (EU)

Currently the EU and other supranational institutions are not pushing in any

considerable way for stronger IPR reinforcement in Kosovo. However, if Kosovo wants

to join any of these institutions it will need to streamline and apply its laws.

The end to this political question might again be one of political accountability. To

whom do Kosovo's politicians need to be more accountable, the Kosovar people and

their economy or the global market?

▪ Socially/Education of the general population

The main winners in loose IPR reinforcement are the end users. In Kosovo's case they

rarely produce any of this IP. Kosovars are more passive consumers of IP from

foreigners than domestic producers.

We can safely assume that part of the very fast modernization of Kosovo's society,

together with its very young population, the huge number of people living in the

diaspora and the rapid spread of the Internet, was the loose IPR reinforcement which

lead to the spread of the most cutting edge software, digital content and even pure ideas.
 A continuation of this fast cultural and ideological development under strict IPR

reinforcement can not be thought of.

Long-Term

▪ Economically

Even though there are different strong arguments regarding the long-term economic

effects of IPR reinforcement, we can safely assume that the speed of Kosovo's

development would be similar to other Eastern European countries development such as

Bulgaria and Romania after they applied IPR laws.

▪ Politically (EU)

Together with the generally stabilizing effects of a globally integrated economy one can

predict that the domestic political scene would stabilize too.

▪ Socially/Education of the general population

Considering how the general education of society went after similar measures in other

linguistically small European nations preceded, one can safely assume that some kind of

intellectual monopoly on educational material such as books, music and other media

will happen within Kosovo.

The effectiveness of this model depends due to the creation of IP monopolies more on

the management of the monopolies themselves than on other, bigger factors such as

politics and the general economy.

Scandinavian/Swiss model: More user-friendly IP laws.

This model foresees a more end-user friendly legal IP framework. In most of these countries IP can be
used copied and sometimes even modified for personal use. On the interpersonal level the same

international TRIPS laws apply.

Short-Term

▪ Economically

The the majority of innovation in such a small economy as Kosovo comes from small

businesses and individuals. Kosovo's economy would most likely even in this rather

mild scenario experience some kind of shock to the sudden change.

Most businesses would still have to switch their illegally copied software packages to

expensive legal once. However, individuals and private households could theoretically

continue most of their day to day small business without having to switch to expensive

legal packages.

▪ Politically (EU)

Kosovo's political situation with the previously mentioned supranational institutions

would in this case depend much more on its government's ability to walk the median

walk. Considering that the majority of these supranational institutions and most of its

bigger member-states have a direct interest in applying a rigorous and rather exploitative

TRIPS model Kosovo would need a strong and determined government which would

not buckle down.

On the one hand, if Kosovo's government is not able to withstand the pressure coming

from the international scene then Kosovo will most likely have to buckle down to a

more conventional TRIPS agreement.

On the other hand, if Kosovo's government is able to withstand the pressure then the
 positive effects will not be seen until several years later. Considering the fast pace of

change within Kosovo's politics this seems rather unlikely.

However, in the short term even this model would hinder the immediate economic

growth of Kosovo.

▪ Socially/Education of the general population

Private, non-commercial copying of digital content would be still possible and as such

social and ideological network effects would still be possible. The diffusion of ideas and

education would remain intact.

Within such a short time IP content monopolies could not develop within the Albanian

speaking linguistic market, therefore the educational situation would remain directly and

organically dependent on the greater market.

Long-Term

▪ Economically

If Kosovo's government is able to withstand the international pressure then Kosovo's

economy might experience greater growth due to the now doubled positive innovation

feedback from both the high-cost, high-innovation economies and the low-cost local

economy.

With this greater growth and a now better environment for a more innovative

information-based economy Kosovo might experience the gradual shift to a value-added

or IP-intensive economy. Such a fast shift has been seen in the past in countries like

Japan, however, Slovenia has shown that even smaller countries can achieve such a fast

evolution of their industries.

 ▪ Politically (EU)

As long as the existing supranational institutions do not exclude Kosovo along its line of

development from their activities, then Kosovo will most likely be fully integrated into

these structures.

With a now stringer economy one can foresee a stronger and more stable government, as

such Kosovo might face its possible future political problems on much batter grounds.

▪ Socially/Education of the general population

The creation of some kind of IP monopoly on educational content would become almost

an impossibility considering that private household would be able to create private

copies for personal use of such content.

Kosovo's population would remain culturally on par with the the rest of Europe and the

world.

Asian/Chinese model: Mo IPR reinforcement until the domestic business sectors have gotten

competitive enough.

The general Asian, or today more specifically Chinese model, knows close to no laws, it only knows

development. We refer to it as the Asian model because Japan, Korea and other Asian countries have

had similar experiences. This model puts gross industrial development and the general fast adaption of

foreign technologies and information before the internal legal development of such technologies.

Short-Term

▪ Economically

We can not predict whether this model is adaptable to such a small country as Kosovo in
 the first place. We have not found references to any other country of similar size which

has adapted such policies and has developed in any similar to bigger the Asian countries.

If it is adaptable, meaning that the total population and its density together with the

political situation and economic dependents on supranational institutions does not affect

for some reason the adaptability of this model, then we might see similar gigantic

economic growth as in those Asian countries.

However, all of the people we have interviewed have given us the same answer to the

Chinese model: It is impractical and probably impossible to be implemented in Kosovo.

Mr. Hasan Zeka Director of the Office for External Relation in the Ministry of Culture,

Youth and Sports who was also heavily involved in drafting the IPR laws in Kosovo has

stated that Kosovo's economy is simply not comparable to China's due to its different

demography and economies of scale.

▪ Politically (EU)

Assuming that this model was adaptable for Kosovo, the political consequences would

be devastating.

Kosovo might get cut off supranational institutions such as the World Bank and other

such institutions might not be willing anymore to create any ties whatsoever. Donors

might retract therefore leaving Kosovo's economy and government vulnerable to all

kinds of threats.

▪ Socially/Education of the general population

With such a mall population Kosovo also has a small market for domestically produced

IP such as books and music. With the implementation of such a model all of these small

industries would be destroyed almost immediately.

 The social/educational sphere in Kosovo would be close to destroyed or at least not

maintainable anymore, leading to cultural desertification or even worse; assimilation

into greater foreign cultural/linguistic spheres.

Long-Term

▪ The long-term view would not be much different from the short-term view. All short-

term interactions would be amplified over time, creating most likely even greater

destruction on all levels.

Open Source

We propose Open source as a way to enhance the existing IP models which we have observed and

present above. As defined earlier in this paper Open source can not exist without strong IPR and

licenes, as such it can not be a model enhancer for the Asian/Chinese model.

Using Open source tools and license would greatly lower the costs, risks, and create greater future

adaptability to potentially arising global problems. Depending on the future structure of Kosovo's

economy we can safely assume that the implementation of such Open source environments in

government and big business would create a cascading effect and therefore lower costs for almost all

economic sectors, hence make Kosovo more competitive in the global market.

Conclusion & Advise

Kosovo is a small country, it has a small population and a micro-business based diverse economy. We

would call for the adoption of the Scandinavian/Swiss model which creates a more user-friendly

environment for innovation and development.

However, considering that Kosovo is a “brand new” country we might as well implement additional

ideas into the already existing model. Therefore, we call for the implementation of general open IP (or
Open source) licenses in the potentially big industries and economic sectors of Kosovo.
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