The Impact of Copyright Law on Insurance Distribution: The Development of the Insurance Market Within Economic Efficiency/Inefficiency of Copyright Monopolies

There is a tendency to expand the catalog of items protected by copyright to include products, such as an insurance package or an insurance project, which may constitute part of the so-called insurance product (in the broad sense of this concept). ¹ The question arises whether we can talk about a new category of copyright-protected items, such as insurance works, and what impact this may have on the insurance market and its distribution?

The subject of copyright is a work. In the legal systems of states, members of the Berne Convention and in the jurisprudence of the Court of Justice of the European Union (CJEU), it is assumed that a work is a new and individual intellectual product, characterized by originality. The concept of a work refers to an intangible good. A separate subject of law is the thing in which this good is recorded. However, EU doctrine and case law point to the lack of sufficiently precise criteria to distinguish works from other intellectual products that do not deserve copyright protection. Specifying the criteria for the subject of copyright protection in the legislation in this field encounters numerous difficulties. The issues of deciding on the status of a work have been transferred to the courts, which means that most justifications in this matter are based on purely intuitive criteria and not on meeting a specific cognitive paradigm. This results in copyright protection for products containing a small amount of creative work and characterized by even a small degree of originality and individuality.

When determining the status of an “insurance product” as a work within the meaning of copyright law, an analysis should be carried out taking into account various aspects and layers of this product. For the purposes of this paper, an insurance product will be understood as a service defined in the insurance contract that includes the insurance protection provided to the client, along with additional services and the formal aspects of the product (e.g., the method and form of delivering the policy). In this context, we will consider which elements of this product and under what conditions (and when these conditions are met) may be covered by copyright protection.

The aim of the chapter is to examine the impact of copyright monopolies on the distribution of insurance. The research used the economic analysis of law (EAP) method. Therefore, first of all, it will be necessary to briefly present the EAP method itself and the concept of copyright monopoly in the context of assessing its economic effectiveness. Then I will be able to move on to the issues of copyright protection rules in the context of insurance products and the insurance distribution market. This, in turn, will enable the assessment of the impact of copyright law on the insurance market. Therefore, it will be possible to identify opportunities and threats related to extending copyright protection to insurance products (in the broad sense of this concept).

The economic analysis of law (EAL) uses the perspective of efficiency to evaluate legal norms. Therefore, the analyses undertaken in the text will be based on the assumption that in order for the law to „work” it must meet the requirement of at least a minimum level of economic efficiency. These functions belong to the primary functions of law. The extent to which these functions are realized will determine the final efficiency of the law and, consequently, the possibility of its implementation.

The principle of protection adopted in the paper refers to the universal principles of copyright law derived from the Berne Convention, which sets a minimum level of protection for its member states. Although the legal systems of individual countries differ in their methods of defining the concept of a work, the lack of clear criteria to distinguish protected works from other intellectual objects remains a common problem. In this context, the analyses conducted in the text can be generalized, and the conclusions drawn from the economic analysis of law (EAL) can be considered universal. Assuming that copyright encompasses the totality of rights ensuring creators’ protection of their personal and economic interests arising from the creation of a specific work, economic analysis of law is a helpful method in determining the socially desirable (efficient) level/scope of these rights.

Traditionally, within the scope of copyright law, personal rights and economic rights of the creator are distinguished. The differences in justifying the motivation for granting copyright protection have led to the development of two fundamental systems: the Romanic and the Anglo-Saxon. The French term „droits d’auteur” emphasizes the personal nature of the creator’s rights. In this system, primary importance is given to protecting the personal bond between the creator and their work. On the other hand, the English term „copyright” primarily reflects the author’s rights to exploit their work. The Anglo-Saxon system prioritizes the benefits to society as a whole over the interests of the author, with the emphasis placed on the right of the rights holder to grant or deny permission for copying and using the work.

In the literature on copyright law, the issue of defining the subject of protection repeatedly arises with varying intensity. For instance, it is pointed out that “the concept of a work has been blurred, copyright law has been devalued, and not only creative freedom but also freedom of economic activity has been restricted by creating numerous copyright monopolies” (Jasińska 2009). The difficulties in delineating the boundaries of copyright protection have been shifted to the courts, resulting in most justifications for recognizing or denying recognition as a work under copyright law being based on purely intuitive criteria rather than meeting a specific cognitive paradigm. There is noticeable terminological inconsistency in the case law. This is evidenced by the inclusion of creations with minimal creative input and characterized by even a slight degree of originality and individuality under this protection. Courts use various terms referring to the criteria for copyright protection and the work as the subject of protection: protectability, originality, individuality, individual character, creativity, novelty, manifestation of intellectual effort, intellectual product, creation. Furthermore, they present different concepts regarding the definition of protection criteria, such as the concept of objective novelty, subjective novelty, non-repeatability of sufficiently significant differences, or, as in the CJEU case law, “creative choices” ²

The primary sources of problems in defining a work under copyright law are circumstances such as the great diversity of copyright objects, the difficult measurability of the necessary characteristics of a work, and the lack of precision in terms and criteria provided in copyright law. It is undoubtedly clear that the lack of precise features distinguishing objects protected by copyright from those that belong to the public domain results in significant legal uncertainty. In turn, legal uncertainty reduces the effectiveness of the law.

In copyright law, whether we are referring to continental law or the Anglo-Saxon system, the principle is established that copyright protects the expression of ideas, but ideas, concepts, and principles themselves are not subject to legal protection. This means that the mere idea of an innovative insurance product will not be protected by copyright law. The ideas and concepts contained in the product can be used by competitors. Protection in the form of expression will apply to the formulations and formats used in the insurance product. The subject of copyright protection is a work that must exhibit originality in its mode of expression. According to the established doctrine, it must originate from a human and be a subjectively new product of intellect. Copyright is divided into personal rights and economic rights. Personal rights are non-transferable and can only be held by the creator. According to the established principle in copyright law, the creator must be a natural person – an individual human being. Economic rights are time-limited (in European Union countries, they expire 70 years after the creator’s death). Economic rights are transferable and subject to inheritance. They may belong to the employer (cesio legis) if the work was created as part of the obligations arising from an employment relationship. In such cases, we refer to employee copyright.

Insurance products are most often created by insurance companies or insurance distributors. Such a work may have more than one creator, and from the perspective of copyright law, we would then discuss co-authorship. A joint work exists when two or more individuals contribute their individual and original input to create the work. The creation of a joint work may arise from factual actions, such as participating in and collaboratively executing the work, or it may result from an agreement, including a relevant contract.

Regarding the potential attribution of copyright in the case of insurance works, according to the principle that only a natural person can be a creator, personal copyright rights will belong to the individuals responsible for creating the work. Economic rights may belong to the insurance company, for example, if the work was created as part of obligations arising from an employment relationship or as a result of the transfer of copyright by the creator (co-creators). Economic rights may also belong to the agent or broker who created a specific insurance product that meets the characteristics of individual creativity. If the insurance distributor acts as a co-producer, the principles regarding product oversight and management should take into account issues related to the potential authorship of the work or those fragments that meet the necessary criteria for protection through creativity. However, as previously indicated, there is a lack of sufficiently precise criteria to distinguish protected works from those intellectual objects that do not meet the originality criteria.

Insurance plays a crucial role in the financial market. The insurance activities, which involve the execution of insurance operations related to offering and providing protection against the risks of unforeseen events, differ significantly from the nature of services offered by other financial institutions such as banks, investment fund companies, or brokerage firms. The specific characteristics of insurance products – namely their intangible nature and complex structure – complicate the assessment regarding the applicability of copyright protection.

When evaluating insurance products from the perspective of copyright law, it is essential to consider the established principle that ideas, concepts, and notions are not subject to legal protection. Only the expression of a work can be protected by copyright. Therefore, in the case of a work derived from a broad range of insurance products, it is necessary to distinguish between the business idea, concept, or notion and its method of expression. As noted by A. R. Luciano, another important factor in the context of insurance policies is that much of the terminology can be classified as “specialized insurance terms”. When the only original (or copyrightable) aspect of a work resides in its literal expression (rather than its fundamental essence or structure), a significant degree of similarity, approaching identity, is necessary to establish copyright infringement. In conducting copyright qualifications, the author proposes the application of a “sliding scale” analysis. Utilizing this approach in the context of an insurance policy could aid the court in differentiating between unprotected ideas and protected expressions, as well as in appropriately balancing competitive policies. For instance, certain insurance provisions, such as definitions or specific clauses regarding the scope of coverage, may be articulated in a limited manner due to their established legal significance or consequences. Consequently, even a literal reproduction of these provisions may not be sufficient to constitute an infringement. Conversely, other provisions may be expressed in diverse ways. In such cases, according to the “sliding scale” analysis, these provisions would warrant greater protection, as the idea and its expression are more easily separable (Luciano 1984, pp. 419–434).

When determining the status of an “insurance product” as a work within the meaning of copyright law, it is necessary to conduct an analysis that considers various aspects and layers of this product, especially in the context of the creation of such a product. The criteria for distinguishing an “insurance product” should encompass the marketing aspect, the legal aspect (understood as the structure of the insurance contract and general terms of insurance), and the economic-mathematical aspect (concerning economic efficiency, the amount of premiums, and the size of benefits) (Sokołowska 2013, p. 84).

In case law, there have been approaches granting copyright protection to insurance product or its elements. The originality of such intellectual objects manifested, for example, in the creative combination of insurance products, which involves their specific selection and integration into a whole, as well as the creation of a special, simplified, and entirely new tariff structure for them, and also in giving the package a simplified and useful form for agents. In assessing whether the criteria for copyright protection were met, it was also crucial that the project had no counterpart in the insurance market, although the general formula of an insurance package is well-known in that market. ³

In the case of Dorsey v. Old Surety Life Insurance Co., ⁴ the court articulated that the copyright associated with life insurance policies does not pertain to the right to use specific words or to employ the ideas they convey. Instead, it encompasses the unique arrangement of words chosen by the author to articulate those ideas. Moreover, copyright protection does not cover <<isolated ‘key words,’ ‘themes,’ ‘arrangements,’ or ‘plans’>>. These elements represent abstract ideas rather than tangible expressions and, in a technical context, offer minimal, if any, protection.

In the context of judicial precedent, a innovative idea involving combining two different types of insurance into a single package with a new tariff and service approach (a ready-made insurance package project) may be recognized as a work, despite the technical knowledge of bundling insurances into packages being known previously. The originality was found in the fact that the insurance package project extended beyond a simple combination of two packages. The preparation of the project took considerable time (several months), involved collaboration among several individuals, and initially included a licensing fee for its use. This package resulted in a specific product ready for sale and presentation in training sessions to employees and agents, rather than just being a conceptual idea. Furthermore, in the court’s assessment, the qualification of the plaintiff’s development as an insurance product under current regulations was irrelevant for granting copyright protection. ⁵

The insurance project, constituting the general terms and conditions of comprehensive insurance for the consequences of accidents and cyclist’s liability, has also been recognized as a work within the meaning of copyright law. ⁶ In this case, we are dealing with the aforementioned insurance project, which is the subject of the lawsuit, as an independent work and an inspired work created based on it (the general terms of cyclist insurance). It is worth noting that the court of first instance did not recognize the insurance project as a work, stating that it lacked individuality; however, this position was not upheld in subsequent rulings. Therefore - interestingly and significantly from the perspective of the issue addressed in the article - the matter of qualifying the insurance project, constituting the general terms and conditions of comprehensive insurance for the consequences of accidents and cyclist’s liability, for copyright protection in its unfinished form (where only sketch proposals were placed alongside the finalized clauses), as well as the matter of such qualification for the subsequently created insurance product based on the consolidated forms of the template (project), was not in doubt.

First of all, it should be noted that the opinion of court-appointed experts was of significant importance for judicial decisions. Additionally, in determining the necessary feature of a work, namely the feature of creativity with an individual character, the courts used the criterion of statistical uniqueness. This criterion was formulated in German doctrine by M. Kummer (Kummer 1968, p. 30), and it seems that due to its potentially objective nature, it has gained popularity in judicial decisions regarding the granting or denial of copyright protection. According to M. Kummer’s concept, the so-called statistical uniqueness test requires, in the first stage, determining whether an identical object has been created before. An affirmative answer eliminates the individual character of the work, while a negative answer moves the examination to the next level. Here, it must be determined, using statistical methods, whether it is likely that an identical work could be created by another person in the future. In the aforementioned decisions, the courts, citing this criterion, do not sufficiently explain why it has been met in the given case. They merely limit themselves to the laconic statement that there is no likelihood of the given creation being made by another person. With such an approach, it is difficult to consider that the granting of copyright protection has been adequately justified in the cases in question. It must be emphasized that merely stating the presence of the feature of creativity (originality) or individuality in a given creation, without explaining the reasons/circumstances of its occurrence, cannot be considered sufficient for granting or denying copyright protection. In this context, the granting of protection to an insurance package or insurance projects can hardly be considered adequately justified. Nonetheless, beyond the issue of the lack of a methodologically consistent method of justifying the qualification for copyright protection, meeting a certain cognitive paradigm, the cited decisions highlight a highly significant social issue: the creation of exclusive rights to human intellectual creations in the context of the excessive monopolization of broadly understood creative efforts. It should be noted that the liberal approach to broadly defining the feature of creativity with an individual character is present not only in the jurisprudence of Polish courts but also in other countries. This approach can also be seen in the stance of the CJEU (Rosati 2013, p. 97).

Interestingly, in the literature on insurance law, the inclusion of insurance packages and other components of broadly understood insurance products under copyright protection has been met with favorable assessments. In contrast, in the doctrine of copyright law, the excessive expansion of the scope of such protection is met with strong criticism. In my opinion, this divergence of views may stem from a misunderstanding of the nature of copyright protection, and most importantly, the economic consequences arising from this fact.

The cited rulings seem to expand the catalog of works protected by copyright to include creations such as an insurance package, an insurance project, or even the terms of reference, which, in a broad sense, can be a component of the so-called insurance product. This raises the question of whether, in the future, we will be able to speak of a new category of copyrightable objects, such as insurance works.

From the perspective of economic analysis, a work, due to its intangible nature, differs from other goods in the economic sense in two specific ways. First, the use of a given work does not reduce the amount available to others, so the marginal cost of providing the good to another person is zero. Second, the ability to exclude others from consuming the work is severely limited. These characteristics indicate that works can be classified as public goods, which contribute to market failures because the free market is unable to supply an optimal quantity of them. In simple terms, this situation can be described as follows: an individual creator will be interested in providing only such a quantity of works where their private marginal benefit equals the price (marginal cost) of producing the work, meaning they will not consider the benefits others derive from their work being available on the market.

The protection granted by copyright gives the creator monopolistic control over the produced work. The assumption that the creator has monopolistic control implies that they will supply a quantity of works where the price is higher than the marginal cost. Therefore, when the creator behaves like a monopolist, the price of the supplied works is higher, and their “production” is lower. As a result, consumers are in a worse situation than if the creator operated in a competitive market.

Economic research clearly shows the inefficiency of monopolies, and copyright protection, in addition to the inequities resulting from monopolies, generates a range of other costs, including the significant issue of access to knowledge. The costs of operating such a protection system are greater when there is more uncertainty regarding the application of the law, especially when the subject of protection cannot be precisely defined.

In the case of works where the criterion of individual creativity is replaced by the criterion of novelty, such as insurance packages, the risk of restricting the freedom to conduct business through the creation of copyright monopolies appears to be significant. In situations of uncertainty about the ability to use an insurance project or other elements of a broadly understood “insurance product”, due to the costs of enforcing the law, there is a serious risk of refraining from economic activity (the so-called chilling effect). Copyright holders can increase their profits by blocking competitors from conducting business activities merely by possessing exclusive rights. For example, an insurance distributor, often a broker, includes a clause in the agreement stating that the policy draft they have prepared is protected by copyright. This aims to prevent the client from seeking another policy draft and entering into a contract through a different intermediary.

However, courts must refrain from the error of reflexively denying protection in situations where such denial would not contribute to incentivizing the creation of new works or preserving the underlying idea within the public domain. While it is unlikely that exact duplication of any segment of standard insurance products would suffice to support a finding of infringement, courts should nonetheless be prepared to employ the analytical flexibility necessary to balance all relevant interests (Luciano 1984, pp. 419–434).

Insurance plays a very significant role in the financial market. The insurance activity, which involves performing insurance operations related to offering and providing protection against the risks of unforeseen events, differs significantly from the services offered by other financial institutions, such as banks, investment fund companies, or brokerage houses. The specificity of insurance product – intangible form and complex structure – complicates issues related to assessing whether copyright protection applies or not.

In assessing the status of an “insurance product” as a work under copyright law, it is imperative to undertake a comprehensive analysis that takes into account the diverse aspects and dimensions of the product, particularly regarding its creation. The criteria for defining an “insurance product” should incorporate the marketing dimension, the legal framework (which includes the structure of the insurance contract and the general terms of insurance), as well as the economic and mathematical considerations (related to economic efficiency, premium amounts, and benefit levels).

The problem of establishing criteria that will allow for precisely delineating the limits of copyright protection has been raised for years in the copyright doctrine. The clear approach in court decisions, also at the European level, to lowering the requirements for granting the status of a work to given works is also widely criticized. Although it is impossible to resolve these dilemmas in the article, in the light of the latest rulings creating exclusive rights to components of broadly understood insurance products (such as, for example, an insurance package or an insurance project), it was worth pointing out the economic consequences of such decisions.

Lowering the level of creativity required by the courts to cover a given product of the human mind with copyright protection results in the fact that the private benefits for the copyright holder (and often it will not be the creator himself) do not correspond to the social benefits. The so-called privatization of knowledge may lead to serious distortions of competition. In the case of works with a negligible level of creativity and individuality, the social costs of legal protection significantly outweigh the benefits of its introduction, therefore the recently observed tendency to extend copyright protection towards information protection should be considered an economically ineffective solution, which in a broader perspective may limit the development of the insurance market and seriously impede the free movement of insurance intermediation services.

In the light of the ever-increasing legal complexities related to the financial market, from the perspective of the economic efficiency of law, we should strive for the greatest possible legal certainty and transparency. As shown in the article, the most serious problem facing copyright today is the problem with defining protection and distinguishing objects protected by copyright from those that belong to the public domain. Introducing copyright protection to the financial market does not seem to be a good idea because, as EAL shows, the social costs of these solutions may turn out to be too high. The uncertainty related to the granting/refusal of copyright protection may result in long, complicated and costly court disputes as to whether a given business idea can actually be legally protected. The copyright doctrine is well acquainted with the problem of ineffectiveness of protection related to ideas, ideas and concepts. This approach significantly limits the number of creative initiatives and shifts the competitive struggle from the market to courtrooms. Therefore, it is important to demonstrate the ineffectiveness of authorial monopolies, especially where we are not dealing with art, but rather with works of the so-called references. Leaving broadly understood insurance products and their components in the public domain seems to be a more effective solution from the perspective of EAL. In the context of access to knowledge, technology, and intangible goods, from the perspective of economic analysis of law (EAL), leaving certain resources in the public domain can lead to significant social benefits and mitigate the negative effects of knowledge monopolization. These effects include the reduction of transaction costs, the distortion of competition, the chilling effect on knowledge utilization, and the increased social costs associated with legal uncertainty. Keeping insurance products within the public domain allows for a balance to be struck between protecting authors’ rights and serving the public interest.

This does not mean that intellectual property protection should be completely abandoned in the insurance market. Nevertheless, copyright does not seem to be the best protection instrument. Copyright protection seems to be risky due to the social costs mentioned in the article, related to the search effect, chilling effect and others related to the general inefficiency of copyright monopolies. However, courts should avoid the mistake of automatically denying protection in cases where such a denial does not effectively promote the creation of new works or safeguard the underlying ideas. Although it is improbable that the precise replication of any component of standard insurance products would warrant a determination of infringement, it remains essential for courts to maintain the analytical flexibility required to weigh all pertinent interests appropriately.

It is also worth paying attention to the possibilities of protection under trademark law or possibly patent law. The conditions for this protection are much more transparent, applications are filed upon request and under the control of patent offices, and require a fee. Therefore, investments in this area can be more thoughtful and establish exclusivity where it is needed from the perspective of market strategy.