“You will own nothing and like it” – the importance of proprietary rights and a look at the subscription model.

by | Jun 26, 2022 | Articles, Intellectual Property, Public Law

“A proprietary right is a right over or in respect of property that can be asserted against others, that is not personal to a given individual but that exists by reason of and as an incident to ownership of other property.”

It is a very important right at law that we should be keen to protect.

The exponential advancement in technology taking place right before us is changing the methods that busineses use to deliver us the goods and services we like. A question that arises from the modern business models that are becoming increasingly popular is whether our proprietary rights, in some instances in respect of goods which are subject to political pressues, are at risk and if so, should this be a cause for concern?

The Subscription Model:

Consider some of today’s largest businesses that dominate the marketplace. One of the most successful models they use is the subscription model. The subscription model has revolutionised how businesses operate.

Subscriptions are nothing new. There are plenty of industries that have used subscriptions for decades, such as Magazines or membership clubs.

Gyms have long operated by monthly membership fees to allow members use of their facilities.

Finance has also been offered in a way that emulates the subscription model. The catalogue introduced “buy now, pay later” and credit cards too allow borrowing lump sums upfront to be paid back over a longer period of time; the lender happy to give the lump sum in return for a repayment plus interest. Monthly insurance premium is another example of a quasi form of subscription which is well established; taking away the need to pay the full annual costs upfront in favour of a more manageable regular payment.

From the pure subscription model to instalment payments, all of these methods of buying are based on paying on the drip as a way to tackle affordability issues or providing a convenient way to stop paying if a person no longer requires the service.

The subscription model can be great for both the business and the customer.

For the business, it provides a healthy and predictable cash flow which can increase the value of the business to outside investors. It can also create customer loyalty and repeat purchases.

It can even allow businesses to make sales without having to actually provide their service; gyms have notoriously relied on the fact that people don’t actually use their memberships, by selling memberships over capacity, allowing them to leverage their resources and make more profit.

During the COVID Pandemic, the hospitality sector was severely damaged as lock downs ensued. Pret A Manger introduced a coffee subscription: unlimited coffee for an affordable monthly price. It resulted in Pret securing a bigger market share and a large increase in regular sales during a time when demand was very low.

Chinese all-you-can-eat buffets rely on the fact that for the most part, people don’t eat all that much – it is worthwhile for them to sell an “all-you-can-eat” deal on their menu.

If the value given can be priced right the subscription model or similar ‘buy now pay later’ provides obvious benefits to businesses.

For the customer, it offers access to goods and services which may not otherwise be affordable. A subscription or payment by instalment makes things more manageable. Alternatively, it allows people to enjoy things which would not otherwise be possible to buy for themselves. The fitness equipment in a gym is worth tens of thousands of pounds which a person does not need. Their membership fee gives them access to that equipment at a fraction of the cost.

The subscription is a powerful sales model which has benefits for both the business and the customer.

The Danger of Subscriptions:

Subscriptions however can be a double-edged sword that the customer must be aware of because it can easily result in a person unknowingly overspending and living beyond their means.

Credit card debt is a very serious problem and cause of poverty. Similarly subscriptions can be a cause for poor financial decisions. A subscription appears affordable, yet multiple subscriptions soon add up and depletes a person’s disposable income which slows or wholly prevents the accumulation of wealth and can easily lead to a person’s outgoings outweighing their income, creating serious debt issues. When applying for a mortgage, significant regular outgoings can hamper a persons ability to borrow making it difficult to get on the housing ladder and people must be alert to this risk.

It is imperative that consumers do not cripple themselves with subscriptions.

Once signed up to a subscription it can be difficult to leave. It is also not uncommon for the business to increase the monthly cost. If a person is already subscribed, a small increase here and there does not seem significant, but in the long run it can be. Streaming fees for Netflix have been steadily rising over the years from some £4 to near £16. The improvement in technology for HD TVs meant that anybody watching Netflix on a modern TV with a basic subscription would see a pixelated image and be forced to upgrade to the higher subscription fee whether they wanted to or not.

Subscriptions in recent times:

Whilst the subscription model is not new, it’s use has significantly increased over the past few years with traditional businesses opting to move over to subscription models.

Here are some examples:

Software as a service (SaaS):

1. Microsoft office moved to selling users an annual licence for a monthly fee or subscribing to use of cloud-based Office 365. Previously it had been sold on CD which could be installed on your computer forever (although it would become outdated, you still owned it after the year and could continue to use it forever).

2. Adobe Illustrator moved from being downloadable software which you could buy to an annual or monthly licence fee to use it. Stopping payment results in an inability to use the software.

3. Hubspot and other customer relationship management software provides a freemium version but charges a licence fee for full access.

Entertainment and Other retail services:

4. Netflix, sells a licence to watch its streaming content.

5. Amazon Prime sells access to premium services for an annual fee, including faster delivery and streaming content.

6. Paid for Mobile phone apps.

7. Apple Music and Spotify charge a subscription to access their music streaming services.

8. Pret A Manger charges a monthly fee for unlimited coffee.

The subscription model has been readily adopted for things such as music and streaming content for reasons of ease of access, convenience, and premium content available to enjoy without having to purchase each item separately. There is, no doubt, benefits to this.

Although, for services that pump out new content payment gives access to the latest things; but for a person who, as an example, enjoys 1970s music, then in this case paying for Apple Music over a number of months or years to listen to that music ends up becoming significantly more costly than it would be to buy all the 1970s albums you like and owning them outright.

The most recent and Future Subscription models including Pay As You Go are:

9. Electric scooters in city centres provide modes of transport available.

10. Electric car delivery services propose to deliver cars to your door within an hours notice for use so you need not own your own car.

11. San Diego is trialing convenient and accessible driverless vehicles that you can access to get from A to B.

12. On Cloud Running NeoCloud offer a sustainable clothing recycling service where you don’t own your clothes and shoes but instead pay for the use of them and send them back after 6 months to be reused.

The difference between recent subscriptions and previous subscription models:

One of the notable aspects of the recent subscription services gaining popularity, particularly in comparison to the old catalogue ‘buy now pay later’ concept is that the subscription is for a licence or service, rather than ownership of a product. Now, this has always been the case for some services: gym memberships have never given a person ownership of the gym for their money, but instead enjoyment of use of the equipment.

However, with the increase in modern sale by subscription services it’s interesting that many of the traditional businesses, such as Microsoft have stopped the sale of their products, and instead opted for models where people pay the same price, but receive a licence for use of the product, compared to previously having receiving ownership of the product. Another way of putting it is that a lot of businesses have switched from selling their products, to selling a licence to use their products.

Streaming sites selling access to viewing content has almost entirely replaced buying DVDs. Napster and later iTunes revolutionised the music industry by selling music without the physical CD; yet a more subtle revolution has taken place since then; that is Apple changed its model so that now you pay for access to listen to the music on Apple’s music platform by licence rather than actually owning a digital copy.

Games consoles have replaced ownership of physical disks with digital copies and then in the same direction as Apple, they have created downloadable games and in-game content for sale by subscription that you do not own.

There is a definite ease of use to this model made possible through technology, but it comes at a cost (an ongoing one which you must continue to pay otherwise you lose access) and  there is no doubt that these practices are more restrictive to the customer compared to if they actually owned the thing that they have paid for.

Another issue that further restricts customers is that each large service provider, such as Android vs. Apple, has their own eco system on which their services can be enjoyed, meaning the more of a businesses services you acquire, the more entrenched in their ecosystem you become and therefore it is not easy to switch providers creating anti-competitive and monopolistic industries with an increasing lack of consumer choice and autonomy.

Notably, exclusive content is becoming a USP for businesses to attract customers to their own particular eco-system. For example PlayStation have games developed exclusive to them that are not compatible with other consoles. This creates a sense of staunch loyalty to a particular brand amongst customers, but can also result in people becoming over-subscribed to multiple platforms unnecessarily.

It is common to have a subscription to more than one provider in order to gain access to all the content. Previously a person may have subscribed to Sky or Cable to watch TV. Now they subscribe to Amazon Prime, Netflix, Disney+, NowTV – all providers providing their own streaming content for a monthly fee.

There is a notable shift in consumerism from buying goods and services, to paying for a licence to use goods and services.

What is the difference, you say? On one level it is a subtle one; you still get to enjoy the products you have paid for, so what is the difference? On another level it is a huge difference that has gone relatively unnoticed; you pay the same price (or in some cases more), yet receive less. Further still, in a number of circumstances you must keep paying in order to retain access to what you have already paid for.

The gradual erosion of our proprietary rights:

A right can be personal (in personam) or attach to a thing (in rem). A right in personam is enforceable against that person. A has a contract with B and can enforce against B alone. He cannot enforce against C. Privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to that contract. Equally, a person not party to a contract cannot enforce the contractual rights of another.

In contrast, a right in rem attaches to a thing and can bind third parties. By example, if a person has a proprietary right in a house, that right (if operating properly) binds not just the landlord and tenant but also third parties. The existence of the proprietary right in rem protects the person who owns the right.

The right in rem is there to make people respect the rights of other people around them. A right in rem is a right in a thing vested in some person and is available against the world at large. By taking ownership of something you obtain rights that operate to protect you against those who seek to interfere with your property and use of it, whether an individual or a collective body.

Tort means a breach of some duty independent of contract giving rise to a civil cause of action for which compensation is recoverable. Tort law exists to make the people adhere to the reasonable and appropriate behaviour that is expected of them in society and to make people respect the rights of other people around them. Hence, a tort is a violation of a right in rem.

Through ownership rights, an owner is afforded protection by law against the world.

A proprietary right is a right in rem that attaches to a particular piece of property. Ownership in property, or a right in rem that attaches to it, such as a lease which gives a person exclusive possession and enjoyment, is a type of right that is exclusive to that person and offers protection from those around them.

Taking away proprietary rights takes away the protections afforded to the person who owns the property; namely that person’s ability to benefit from the enjoyment of ownership and/or being able to enforce such right against others in order to retain such enjoyment.

Subscriptions and quasi-subscriptions do not give a person those rights in rem that can bind third parties but instead vests the powers in the body or company that gives the rights to enjoyment of use of the thing (i.e the company which offers the good or service you subscribe to, whether it be Apple or Spotify or Local transport authority or other).

With a licence to use goods and services, you still have the ability to enjoy the “thing” that is licenced (in some instances in perpetuity), but you do not have the right of ownership and in the event the licensor took away your enjoyment, then your legal protections to retain use would not be found in tort under the common law against the world, but would only be available against the licensor itself under the relevant contract you have with them in accordance with their terms. This gives significant power potential to organisations who own the goods and services that the masses want to use, as they can dictate the terms on which they are to be used or who is able to use them. This also gives them great power in how those goods and services are delivered.

Where it could lead:

Whilst the issues may sound remote right now, the principles remain. We find ourselves at a pivotal moment in history, not unlike the privatisation of common land, Welfare, the Industrial Revolution or the advent of the internet, where real change is underway in how society operates.

Technology has allowed businesses, currently mainly in the entertainment industry to sell their products without giving up ownership or control over them. For music and TV, legally the effect is not going to be given much thought. However, this concept of using a good rather than physically owning it is applying to more than just entertainment. Council owned personal transport, such as bikes and scooters are available for use rather than ownership; in some cities it is unlawful to ride a scooter not owned by the council meaning if you want to benefit from their use you must subscribe to the unilateral terms on offer. Electric car delivery services are now growing in popularity with the vehicle delivered to your down within hours for you to make your trip. Day-to-day, it all sounds very convenient, but where could it lead?

A primary reason that government exists is to protect its citizens personal and property rights. John Locke’s theory of government claims that a reason for creation of government is to protect property, which is what one owns and oneself, at law. He refers to property as a person’s “life, liberty and estate”.* Locke sees the preservation of “property” as the sole reason for society’s existence, “the chief end whereof is the preservation of property“, therefore it follows that the erosion of proprietary rights leads to the loss of liberty.*

By removing property rights in place of licences for use, a large portion of a persons rights are taken outside of the ambit of protections afforded to them by law. Consequently those rights will reside with the unelected entities that offer the goods and services.

The World Economic Forum (WEF) was founded fifty years ago. It has gained more and more prominence over the decades and has become one of the leading platforms of futuristic thinking and planning.* WEF’s ‘Global Future Councils’ member, Danish ecoactivist, Ida Auken, stated that “By 2030, people will own nothing and like it”. She elaborates a scenario of a world without privacy or property in which all products will have become services: ““I don’t own anything. I don’t own a car. I don’t own a house. I don’t own any appliances or any clothes,”… “Shopping is a distant memory in the city of 2030, whose inhabitants have cracked clean energy and borrow what they need on demand.”*

The notion for many is abhorrent, and yet the increase in the subscription model and paying for a licence to use products rather than buying your products is the first step for this statement to become a reality.

Political initiatives, regardless of what one’s view is, can impinge upon the property we own and the way in which we use it. The ability for this to happen is made easier via the fluid subscription model. For example, diesel cars are in the process of be phased out. Rather than an outright ban, people are incentivised and penalised not to buy diesel through taxation, tariffs, and to take up the mantle in the name of social responsibility. Such political maneuvering is necessary when individual citizens have property rights, but not so if they do not. It is much easier to legislate change where ownership is not vested in individuals.

There are always losers in advancement of technology as the inefficient method gives way to the new and more efficient development. Yet, whilst the phasing out of certain goods may be good for society there is a personal cost to such actions. In the context of property rights, with the switch to sustainable cars, it will be found in the loss in value of an individual’s current vehicle, or the outlay which they are forced to pay to keep up with the advancement. The government will create grants to encourage the change by individuals who otherwise may not be able to afford to make the switch. In the context of licence for use, the potential cost could be found in the withdrawal of services and products available for use without notice or for ideological reasons, whatever they may be.

Who benefits?

As the adoption of subscriptions for licences rather than ownership grows, it is necessary to ask, who benefits?

The answer has to be overwhelmingly the businesses themselves. Household names are taking on Bond Villain status, and interestingly many of their creator’s names have as well; Tesla, Elon Musk; Amazon, Bezos; Microsoft, Bill Gates, Meta, Mark Zuckerberg; Apple, Google, Twitter.

The danger is that these unelected giants are becoming governments in themselves that have control over a lot of issues, ecosocial and political, and wield great power. The licence for service subscription model not only places the service providers in an untouchable position but also exacerbates the stark difference in balance of power between the elite and the masses, and serves to deepen the problems of unequal wealth distribution that our world faces, resulting in society as a whole being more reliant on a select few organisations and people to survive.

With this in mind, an erosion of proprietary rights allows for a perverse form of nationalisation on a mass scale where power is placed in the hands of elitist privately held organisations and businesses rather than the traditional government.

It is a difficult topic to broach without falling into the territory of conspiracy theories, yet we should not overlook the significance of this current trend of rental and licence for service subscription models that we are adopting for more and more goods and services that we use in our day to day lives. Convenient? Yes, but that is where the sinisterism of it hides, because other than convenient, you are paying more for less, whilst the providers are selling their product again and again without having to give up ownership leaving them with the power to dictate how and on what terms you enjoy the goods and services that you once would have owned.

What’s next:

As new policies are introduced and tech continues to advance, it will be interesting to consider what impact there will be on our property rights. Decentralisation is a buzz word used when discussing cryptocurrency, as a perceived notion that can distribute assets free from corruption by central powers. Yet as it stands, it seems that assets are becoming more centralised not less, and if the subscription trend continues (which seems likely) so that property in the goods and services used do not actually pass to the customer, not only would the control of the goods be held by an increasingly monopolistic collection of controlling powers, but also people’s rights would be subject by them too.

Source:

“No Privacy, No Property: The World in 2030 According to the WEF” December 3, 2020 – 7:30 PM Antony P. Mueller 
 
 
 

https://english.hku.hk/staff/kjohnson/PDF/LockeJohnSECONDTREATISE1690.pdf

Sect. 87. Second Treatise, John Locke “Man being born, as has been proved, with a title to perfect freedom, and an uncontrouled enjoyment of all the rights and privileges of the law of nature, equally with any other man, or number of men in the world, hath by nature a power, not only to preserve his property, that is, his life, liberty and estate, against the injuries and attempts of other men;…

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