Category : Copyright

Although not limited to software, open source is dominated by this particular technology and by the open source software community. Open source software does not just mean access to the source code. The distribution terms of open-source software must comply with the following criteria:

  • There must be free redistribution.
  • The program must include source code, and must allow distribution of the source code along with the compiled form.
  • The license must allow modifications and derived works, and must allow them to be distributed under the same terms as the license of the original software.
  • The license may restrict source-code from being distributed in modified form only if the license allows the distribution of “patch files” with the source code for the purpose of modifying the program at build time.
  • The license must not discriminate against any person or group of persons.
  • The license must not restrict anyone from making use of the program in a specific field of endeavour.
  • The rights attached to the program must apply to all to whom the program is redistributed without the need for execution of an additional license by those parties.
  • The license must not be specific to a product.
  • The license must not place restrictions on other software that is distributed along with the licensed software.
  • The license must be technology-neutral.

There are many different variants of open source licenses (Apache, GPL, Lesser GPL, Eclipse, etc.) with some subtle and not so subtle differences between all of these variants.

It’s free:

Open source software is software that is freely licensed to use, copy, study, and change the software in any way, and the source code is openly shared so that people are encouraged to voluntarily improve the design of the software.

This is in contrast to proprietary software, where the software is under restrictive copyright and the source code is usually hidden.

This has made open source software very attractive to many companies.

Open source software is free, which is good. But is it really free?

Total cost ownership:

Total cost of ownership is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system. It is a management accounting concept that can be used in full cost accounting.

The average price of a new car in the USA tops $33,000, according to car-buying site Kelley Blue Book, so buying a vehicle is a major financial move. While many consumers may focus on the sticker price or the monthly payments, that overlooks many other costs. You have license fees, registration fees and taxes. You need to buy insurance, fill the gas /petrol tank, have regular maintenance, etc. And your car loses value from depreciation every day you own it. The total cost of ownership of a new car is not the same as the sticker price.

The same applies for a software product. The total cost of ownership is the purchase price of the software product plus all of the additional direct and indirect costs associated with taking the software product into use.

When choosing among alternatives in a purchasing decision, one should look not just at the software product’s short-term price, which is its purchase price, but also at its long-term price, which is its total cost of ownership.

The software product with the lower total cost of ownership is the better value in the long run.

The purchase price of the open source software product is zero, but what is its long-term price or total cost of ownership?

The components:

In order to calculate the long-term price or total cost of ownership of a software product, one needs to identify all of the different components associated with taking a software product into use.

I suggest that these include at least the following:

  • The initial license fee for the software product (zero in the case of an open source software product).
  • Any costs associated with hardware or software tools to develop or test the software product.
  • Any costs involved with customising or configuring the product.
  • Any associated hardware costs to deploy the software product.
  • Any hosting costs.
  • Any maintenance costs.
  • Any support costs.
  • Any additional software license costs.
  • Any costs associated with feature or functionality updates.
  • Any license costs to access other 3rd party software.
  • Any insurance costs.
  • Any direct or indirect costs associated with future updates / upgrades.
  • Any training costs.
  • Any warranty costs.
  • Any direct/indirect liability costs.

This list is not exhaustive and there may be other components to consider.

Costs associated with open source software risks:

Of course, total cost of ownership is an issue for both proprietary software products as well as open source software products.

However, some additional components may need to be consider when trying to calculate the total cost of ownership of an open source software product, namely the costs associated with managing the risks involved, which divide out into the following categories

  • Legal issues
  • IP issues
  • Operational issues
  • Security issues
  • Business issues

(These additional components are explored in more detail in another paper already published).

The bottom line:

When you are comparing cars you like, you should go beyond sticker price. You should research the ongoing costs of driving and maintaining each model, so that you get a true understanding of affordability. A realistic estimate of a vehicle’s total cost of ownership is crucial in helping you choose a car that fits your budget. The same applies to purchasing a software product, regardless of whether it is an open source software product or a proprietary one.

Donal O’Connell

Author: 1 year ago

A trade secret is a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information which is not generally known or reasonably ascertainable by others, and by which a business can obtain an economic advantage over competitors or customers. The scope of trade secrets is virtually unlimited.

A trade secret is therefore defined as any information that is:

  • Not generally known to the relevant business circles or to the public. The information should also not be readily accessible.
  • Confers some sort of economic benefit on its owner. This benefit must derive specifically from the fact that it is not generally known, and not just from the value of the information itself. It must have commercial value because it is a secret. Commercial value encompasses potential as well as actual value.
  • It must have been subject to reasonable steps by the rightful holder of the information to keep it secret. What is reasonable can vary depending on the specific circumstances.

A trade secret continues for as long as the information is maintained as a trade secret. However, information may no longer be considered to be a trade secret once it becomes easily accessible, is no longer properly protected or has no commercial value.

Trade secrets can be one of the most important assets in the intellectual property portfolio of an organization. Trade secrets are at least on a par with other forms of intellectual property such as patents and trademarks. Some would argue that trade secrets are the crown jewels of any intellectual property portfolio.

Trade secrets vs confidential information

Broadly speaking, any confidential business information which provides an enterprise a competitive edge may be considered a trade secret. However, not all confidential information within an organization qualifies as a trade secret.

Within an organization, there may have multiple levels of confidential information, with trade secrets being at the highest level of confidential information. A distinction should be drawn between widely accessible (internal) confidential information and trade secrets which require special governance. This means that the normal processes to manage confidential information may not be considered adequate for managing trade secrets.

Although the terms confidential information and trade secrets as well as proprietary information and even know-how are often used interchangeably, these terms are interpreted differently and the remedies for the unauthorized revelation of such information may also differ.

Although there is substantial overlap between trade secrets and confidential information, they are in fact different things.

The law on trade secrets

Generally speaking, any confidential business information which provides a business with a competitive edge may be considered as a trade secret. The unauthorized use of such information by persons other than the holder is regarded as an unfair practice and a violation of the trade secret.

Depending on the jurisdiction, the protection of trade secrets forms part of the general concept of protection against unfair competition or is based on specific provisions or case law on the protection of confidential information.

A trade secret is a valuable piece of information for an enterprise that is treated as confidential and that gives that enterprise a competitive advantage. European companies are increasingly exposed to the misappropriation of trade secrets. The European Commission is working to harmonize the existing diverging national laws on the protection against the misappropriation of trade secrets so that companies can exploit and share their trade secrets with privileged business partners across the EU, turning their innovative ideas into growth and jobs.

In the United States there is already a unified trade secrets law, the Uniform Trade Secrets Act, or UTSA. Interestingly, trade secret law is predominantly governed by state law. However, every state except Massachusetts and New York has adopted some version of USTA. The language of USTA, and the state statutes that have adopted it, is very similar to the language in TRIPS. TRIPS is the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members.

The US however may strengthen trade secret law. The Defend Trade Secrets Act of 2015 (DTSA), for which identical bills were proposed with bipartisan support in both the House and Senate in July 2015, would significantly enhance US federal protections to curb trade secret theft and secure the value of trade secrets.

There are also two major US federal laws that govern certain aspects of trade secrets. The Computer Fraud and Abuse Act is the federal statute governing computer hacking. The Economic Espionage Act targets industrial espionage.

Shortly after the start of the 2014 Chinese New Year, China’s State Administration for Industry and Commerce (SAIC) announced the opening of a discussion regarding a revision to the 1993 Anti-Unfair Competition Law (AUCL). Since the AUCL includes provisions governing trade secret misappropriation, the up-coming revision may potentially bring important changes to the current regulatory and statutory channels for the protection of trade secrets in China. Regardless of the jurisdiction, clearly unfair practices in respect of trade secret include industrial or commercial espionage, breach of contract and breach of confidence.However it is not misappropriation of a trade secret to independently discover the secret information, or to reverse engineer it from a properly obtained source.

Legal protection is not sufficient

Depending on this legal protection of trade secrets alone is not sufficient. Organizations possessing trade secrets need to take reasonable efforts to protect these assets, such as via some administrative and technical measures.

Administrative measures may include having robust trade secret policies and procedures in place. At a minimum, a reasonable policy should require that a company identify trade secret material as just that, with a big ‘Trade Secret’ stamp on the document itself. Then limit the number of people who have access to the trade secret. Educate the employees about the trade secret policy of the organization. Insist that employees with access to trade secrets sign a confidentiality, or nondisclosure, agreement.

Technical measures may include various access control and security measures to make it difficult for the trade secrets to be stolen. With the increase in cyber security threats, hacking, electronic espionage, malware, etc. trade secrets that are stored in electronic format must be properly protected. Various reports indicate that organizations are increasingly vulnerable to theft of trade secrets, whether due to activities by current or former employees, from corporate espionage or from hackers or cyber criminals. It is therefore most important that organizations take reasonable steps using both administrative as well as technical measures to protect their trade secrets.

The subject matter of trade secrets

The subject matter of trade secrets is usually defined in broad terms and includes sales methods, distribution methods, consumer profiles, marketing plans, supplier lists, client details, and manufacturing processes. Trade secrets may encompass manufacturing or industrial secrets and commercial secrets.

Perhaps the most famous trade secret is the Coca-Cola formula reputedly stored in a vault in the city of Atlanta. Google’s proprietary search algorithm; KFC’s blend of eleven herbs and spices; the compound WD-40, that distinctive spray with thousands of uses, are other famous examples of trade secrets. Trade secrets can even protect negative know-how, for example the results of failed experiments.

A final determination of what information constitutes a trade secret will depend on the circumstances of each individual case, but it is clear that the subject matter is very broad indeed. Trade secrets often protect valuable information that cannot be protected under other forms of intellectual property law.

Advantages of trade secrets

There are many forms of intellectual property. The advantages of trade secret protection are as follows:

  • Trade secrets involve no registration costs. Obviously there may be costs associated with the administrative, technical and/or legal barriers the company puts in place to protect its trade secrets.
  • Trade secret protection does not require disclosure or registration, unlike for example a patent which becomes public information
  • Trade secret protection is not limited in time, unlike for example a patent which only lasts for twenty years;
  • Trade secrets have immediate effect, unlike for example a patent which may take a few years to be granted.

Trade secret management

It varies greatly from one company to another how they actually manage their trade secrets. Good practice however suggests:

  • Assign ownership of trade secret management process to someone senior in the organization.
  • Have a trade secret policy and associated procedures in place.
  • Utilize confidentiality agreements as these play an important role in protecting trade secrets.
  • Have an awareness and education program to ensure that all employees are aware of this trade secret policy and associated procedures. This can be included within a broader intellectual property awareness and education program.
  • Determine which types of information should be deemed as trade secrets within the organization, and the qualifying criteria.
  • Identify all of the trade secrets across the organization and mark these documents in the proper and professional manner. Of course this inventory of trade secrets will change over time as new trade secrets are identified and perhaps some older trade secrets no longer warrant being treated as such.
  • Classify these trade secrets in terms of the nature of the secret, the date created, responsible person(s), etc. etc. plus of course the value of the trade secret to the business.
  • Determine the administrative, technical and legal measures that are needed to properly protect each trade secrets. The exact measures may differ from one trade secret to another.
  • Ensure fit for purpose access control measures are in place.
  • Ensure IP issues in general and trade secret issues specifically are addressed in both entry interviews of new employees and exit interviews of departing employees.
  • Develop contract provisions and working mechanisms in relationships with outside business partners, including joint venture partners, to protect trade secrets.
  • Conduct regular trade secret audits.

Trade secret management process & system

Trade secrets are valuable assets for any business, possibly among the most important that it possesses. It is therefore imperative that whatever trade secret management process is taken into use is fit for purpose, and add some value to those using the process. Whatever trade secret management system or tool taken into use should properly underpin the processes, and the process, system and associated data all need to be synchronized.

A process can be seen as an agreement to do certain things in a certain way and the larger the organization, the greater the need for agreements on ways of working. Processes are the memory of the organization, and without them a lot of effort can be wasted by starting every procedure and process from scratch each time and possibly repeating the same mistakes. A first class trade secret process facilitates good communication between the information originator and the information receiver, because they help to set and manage expectations and the consistency of the information being given.

The trade secret process defines what and how tasks are done and by whom, to ensure repeatability. This is especially important as a trade secret may originate in one part of the organization but be utilized elsewhere in the organization or even externally. The trade secret process also enable an organization to set performance criteria and measurement, which can be utilized when identifying the source or root-cause of any problems.

The trade secret process must never be allowed to become static, because it is there to serve the organization and not vice versa. Ways and means to take identified improvements systematically into use should exist within the organization and well-established processes can be used as a tool to accomplish this aim.

If the organization only has a handful of trade secrets to manage, then it is possible to live with some handcrafted approach. However, once the number of trade secrets increases, then it is best to put a trade secret management system in place to underpin the process. Such a software system helps ensure that the company is managing its trade secrets in an efficient and effective manner. Such a system can help to manage the trade secret management process, even if the trade secrets themselves are captured in non-electronic format.

Trade secret audits

You typically get what you measure. It is therefore crucial that there are regular audits conducted. It is strongly recommended that regular audits of the trade secrets policy and procedures are conducted as well as of the trade secrets themselves and the associated protection measures in place. Companies generally gain tremendous value by taking a proactive, systematic approach to assessing their trade secret assets, trade secret policy and associated procedures through regular audits. A proper trade secret audit should involve people with business, technical and legal skills and competencies, knowledge and experience, given the unique nature of trade secrets. The findings of these regular trade secret audits should be reported to and discussed with senior management in the organization.

Not an island

It is indeed possible to maintain a trade secret yet share it with others, so long as this sharing is well managed and the trade secret is not dispersed broadly. In today’s business environment, valuable business information must be shared with employees across diverse organization functions, plus externally with key suppliers and customers as well as with other collaboration partners. Technology transfer licenses, joint venture agreements and other contractual arrangements can provide for trade secrets to be assigned or shared on a limited basis.

It is also important to realize that the trade secret management process is not an isolated process, disconnected from other processes or activities across the organization. Good trade secret management means having a good understanding and appreciation of the links with other organizational functions and their key processes or procedures.

Some of the links worth considering are:

  • Human Resources – given their role with employees.
  • Sourcing & Procurement – given their role with key suppliers.
  • Technology Licensing – given their role with key collaborative innovation partners.
  • Research & Development – given that many trade secrets originate here.
  • Document Management – for example the technical document management process of the organization.
  • Legal – given the legal underpinning of trade secrets.
  • Intellectual Property – given that the organization’s trade secret activities and patenting activities should be in sync.
  • IT – given that many trade secrets are now in digital form and various technical solutions must be deployed to protect such trade secrets from theft by for example hackers.
  • Finance – given that these trade secrets are valuable assets and impact the financial performance of the business, now or in the future.
  • Facilities – given their responsibilities for the physical buildings occupied by the organization, and such issues as access and security.
  • Corporate Communications – as some organizations may wish to advertise and promote the fact that they possess important trade secrets.

Final thoughts

Trade secrets are an important, but an invisible component of a company’s intellectual property portfolio of assets. They can add tremendous business value, so they need to be properly and professionally managed, and looked after. Trade secrets should be on the agenda of any in-house intellectual property function as well as on the agenda of any Legal or IP Firm advising organizations. As stated earlier, trade secret legislation is likely to strengthen in key jurisdictions, interestingly at a time when patents seem to be weakening in some locations.

Trade secrets can be the crown jewels in an organization’s intellectual property portfolio. As listed earlier, they possess some clear advantages over other forms of intellectual property. However, trade secrets only work if managed properly and they are well looked after.

Trade secrets also have some disadvantages which need to be properly understood. It is not misappropriation of a trade secret to independently discover the secret information, or to reverse engineer it from a properly obtained source. An organization should therefore take a broad holistic approach to intellectual property and consider how to leverage all of the different forms that exist, such as trade secrets, patents, publications, etc. as each form has different pros and cons.

Proper and professional trade secret management requires a thorough understanding of this particular form of intellectual properly, a fit for purpose trade secret management process underpinned by a robust trade secret management system, plus a good governance process together with regular trade secret audits.

Trade secrets are fragile and therefore require some TLC.

Donal O’Connell, IPEG Consultancy (www.ipegconsultancy.com)

Tradesecrets

Author: 2 years ago

E-commerce is the buying and selling of products and services, or the transmitting of funds or associated data, over the Internet. These business transactions occur either business-to-business, business-to-consumer, consumer-to-consumer or consumer-to-business.

It is estimated that there are about 20 million e-commerce stores selling products on the internet around the world today, and generating more than one trillion US dollars in revenue. The world’s largest markets for e-commerce are the United States of America, China, and the United Kingdom with electronics, fashion, services, books, and tickets being the top categories for e-commerce. The details, however, do vary greatly by country and my product category.

The primary advantages of ecommerce revolve around the fact that it eliminates limitations of time and geographical distance. In the process, ecommerce usually streamlines operations and helps to achieve lower costs.

E-commerce is simply huge and it is projected that e-commerce spending will grow at double digit rates for the foreseeable future.

Home Page 26NOV15

Brands and consumers have embraced the online world

 Consumers increasingly rely on e-commerce, irrespective of how they make the actual purchase: via clicks, bricks, or a mix. Retailers and brand-builders cannot overlook this phenomenon and clearly many brands have now embraced this online world in one way or another. More and more brands are working to optimize their online presence, protect their brand equity and drive profitable e-commerce sales growth.

With only a few days to go before the shopping frenzy of Black Friday 2015, new research suggests retailers could expect spending to double this year compared to last year. Here in the UK, experts are predicting that Black Friday 2015 could be the UK’s first ever £1bn online shopping day. Mobile transactions are also set to soar, as nearly one in three shoppers are now making their purchases on mobile devices.

Not all Good News

This sounds all very positive, but it is not all good news. Here are some recent news stories which highlight one of the major challenges facing e-commerce and people wishing to purchase goods online.

Prior to the recent World Rugby Cup in England, the City of London police investigated the production and sale of counterfeit Rugby World Cup tickets, with a number of fans being ripped off by fake websites.

In 2015, the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) announced that they had seized dangerous counterfeit and unlicensed medicines worth nearly £16m. Slimming pills, drugs for erectile dysfunction and cancer medicines were taken in a series of raids. Nearly 1,400 websites were closed as part of the operation. The seizures were part of Operation Pangea, an international clampdown on the illegal trade in fake medicines by 115 countries.

Black Friday bargain hunters here in the UK are set to be scammed out of hundreds of thousands of pounds through ‘fake’ retailer websites set up by cyber criminals, experts have warned. Criminals are going to great lengths to produce sophisticated but fake websites that offer the most popular items at unbeatable prices.

Two thousand websites selling fake luxury goods have been removed since the start of 2015, UK police say. Counterfeit goods from brands such as Burberry, Longchamp and Abercrombie & Fitch were among the products offered. The raids were the result of a collaboration between brand- protection groups and internet registries. The Police Intellectual Property Crime Unit, run by City of London Police, also warned many of these fake websites were also harboring malicious software.

Although these stories above were published here in the UK, similar examples exist in most other jurisdictions.

Counterfeit products

Counterfeit goods can include fake designer clothes, bags, watches, accessories and perfumes as well as pirate DVDs, CDs, smartphones and computer games. They can also include medicines and components of automobiles and aircraft.

Many counterfeit goods are sold at car boot sales, pubs, markets or fairs. This makes it extremely difficult to trace the fraudster once a customer has purchased the item.

The size of the problem posed by counterfeiters is staggering. According to FBI, Interpol, World Customs Organization and International Chamber of Commerce estimates, roughly 7-8% of world trade every year is in counterfeit goods. That is the equivalent of as much as $512 billion in global lost sales.

IP theft poses a risk to all industry sectors; those most commonly affected by IP theft are manufacturing, consumer goods, technology, software, and biotechnology, including pharmaceuticals.

Counterfeit products online

The counterfeiters have also taken note of the growth of the online world and have adapted their approach accordingly. Many counterfeit goods are now sold online.

Counterfeiters create fake websites that mimic the ‘look and feel’ of the genuine brand’s own web site. Some fake websites can be used by scammers to trick consumers into paying for goods that will never arrive, and also to harvest the consumer’s credit card and bank details. These fake sites can look very convincing, and it may be difficult to spot any differences between them and the real thing.

Getting fake websites down can be a challenge. Some options available to the brand are:

  • Send a notice to the ISP hosting the website and request the website to be taken down based on it infringing the brands copyright/trademark.
  • Contact the payment provider used by the website and request the payment facility is withdrawn on the grounds that the products being sold are counterfeit and contra to their terms and
  • If the website’s domain name contains the trademark of the brand then it may be possible to reclaim the domain name through the UDRP
  • When the website is built on the eCommerce platform of a third party it is possible to request the eCommerce platform provider to turn off access to the website on the grounds of illegal

Search Engines 25NOV15

The growth of e-marketplaces has also helped the counterfeiters as many sell their counterfeit good using these platforms. An e-marketplace is a type of e-commerce site where product or service information is provided by multiple third parties, whereas transactions are processed by the marketplace operator. In an e-marketplace, consumer transactions are processed by the marketplace operator and then delivered and fulfilled by the participating retailers or wholesalers. Other capabilities might include auctioning (forward or reverse), catalogs, ordering, wanted advertisement, trading exchange functionality and capabilities like RFQ, RFI or RFP. In general, because e-marketplaces aggregate products from a wide array of providers, selection is usually wider, availability is higher, and prices are more competitive than in vendor-specific online retail stores.

In recent years, there has been tremendous growth in e-marketplaces. There are many different types of e-marketplace based on a range of business models with some estimating that there are almost one thousand such e-marketplaces in existence today. They can be broadly divided into categories based on the way in which they are operated. Examples of some online marketplaces are Amazon.com, Alibaba, eBay, and etsy.

Removing infringing listings from online marketplaces is fairly straight forward on sites such as eBay and Amazon. Certain China based sites such as Alibaba, Aliexpress and Taobao have online portals that you can submit listing take-down requests. Unfortunately, there are also some marketplaces such as tootoo.com that do not provide any obvious method for requesting a takedown. In these cases you have to resort to instructing a local law firm to issue take-down notices which is costly and time consuming.

Marketplaces 25NOV15

Social Media Platforms

Social media platforms are websites and applications that enable users to create and share content or to participate in social networking. Websites and applications dedicated to forums, microblogging, social networking, social bookmarking, social curation, and wikis are among the different types of social media. Facebook, Twitter, LinkedIn, Wikipedia and Pinterest are some of the most popular.

However, social media platforms are also being leveraged by the counterfeiters, with many establishing private groups on such platform to link sellers and buyers together.

Social Media 25NOV15

Infringements on social media come in broadly two areas. The first are profiles or accounts that have been registered containing a trademark. Removal of these accounts can be done using the IP reporting tools provided by Facebook, Twitter etc. The second area is users offering for sale counterfeit products through their accounts or in the case of Facebook in groups. Taking action against people offering counterfeit products for sale on social media is largely left to brands.

Social media sites tend not to be interested in tackling this issue.

The Challenge for Brand Protection Managers

The scourge of counterfeiters utilizing this online world needs to be tackled but that is easier said than done. Brand Protection Managers or those tasked to help and support such Brand Protection Managers face a challenge tackling this scourge.

Some Brand Protection Managers are in denial, believing that counterfeit products are not an issue for their particular companies, rather it is a problem which adversely impacts only others. Some Brand Protection Managers acknowledge that counterfeit products exist, but believe that only an insignificant percentage of their products are counterfeit and that such type products in the marketplace may actually enhance their brand to some degree.

Some Brand Protection Managers accept that they do have a major issue with counterfeit products but believe that the problem is so big that it is impossible to do anything about it. They have given up without a fight, accepting that the problem of counterfeit products is just part of ‘doing business’.

Some Brand Protection Managers do wish to try to address the counterfeit problem but are unsure where and how to start. They lack a fit for purpose process to follow, to help them go through the key phases in online brand protection or they lack data to guide them in making informed decisions about what to do. Many Brand Protection Management functions within companies are not well resourced either in terms of people or money, and such functions are under intense pressure to do more with less.

Good Practice

However, some Brand Protection Managers have adopted good practices, and have commercial and professional procedures in place that are efficient and effective. The methods or techniques these Brand Protection Managers have adopted consistently show superior results in their fight against the counterfeiters online.

The fight against counterfeits online starts offline. Primarily counterfeit products are bought on Chinese marketplaces and then shipped to the EU or US via courier. The goods are then sold on local marketplaces such as eBay, Gumtree, Craigslist and Amazon. Increasingly they are also being offered for sale via posts on social media in particular Facebook. To try to stop the movement of goods from China the following things need to be in place.

  • Make sure trademarks are registered in the jurisdictions that you
  • Ensure China and Hong Kong are registered
  • Register domain names covering your trademarks plus associated products to reduce the chance of the counterfeiter doing it for
  • Register your trademark with customs in China and the EU and US so that you can have counterfeit versions of goods
  • Put in place a customs training program and deliver it on a regular basis to customs officials to ensure you are top of
  • It is important to adopt a zero tolerance approach giving a seizure of five items the same level of importance as five Customs officials take a dim view of brands that ignore their requests to cooperate with a seizure only to be told it is too small for the brand to do anything about it.

Online marketplaces, search engine results and social media should be monitored on a regular basis and infringements acted on quickly. Allowing infringing listings to go un-actioned will invite more counterfeiters because they feel they can operate online with little interference.

Monitoring and measuring the activities of the counterfeiters is crucial. Having good quality data allows the Brand Protection Manager to make informed decisions, and to utilize their limited resources efficiently and effectively.

eBay Turnover Report 25NOV15

Brand Protection Managers are not alone

Brand Protection Managers should realize that they are not alone in this fight against counterfeiters. Depending on their jurisdiction and business sector, there may be good help and support available from their industry association, from special IP focused units within the Police, from Customs and from Trading Standards or their equivalent.

Many brands benefit from being members of their local anti-counterfeiting group. In the UK that is ACG, the US IACC, France UNIFAB and Germany APM. They hold networking events and arrange for brands to meet and train law enforcement officers. These events are opportunities to share intelligence and views on brand protection matters. Some anti-counterfeiting groups such as ACG in the UK coordinate raid action against counterfeiters where a number of brands are involved.

Technology can also assist the Brand Protection Manager. One of the most effective ways to keep on top of online counterfeit sales is to invest in an online brand protections solution. It enables the brand to be much more productive. Multiple listings can be removed at a click of a button. Reports that might take hours to produce manually can be generated in a matter of minutes.

Not a Victimless Crime

Counterfeiting is not a cictimless crime. While such products they may look like the genuine article the can often be dangerous. Over the past 12 months, Trading Standards officers in Birmingham in the UK seized nearly 15,000 fake items worth more than £111,200, ranging exploding phone chargers, fake UGG boots, poor quality designer clothes and fake cigarettes and alcohol. Produced cheaply, counterfeit goods often fail to meet safety standards and have shorter lifespans than legitimate products.

Missing and poor quality components in counterfeit electrical goods, such as phone chargers, can lead to electric shocks, fires and explosions, while fake children’s toys and clothes can pose hazards through dangerous small parts, long cords or from toxic materials.

Counterfeit cosmetics may contain toxic ingredients like arsenic, lead and mercury which can lead to rashes, swelling or poisoning, while fake alcohol may be mixed with substances like methanol or anti-freeze which can also cause health problems.

As well as being potentially dangerous to consumers, traders selling counterfeit goods are also harming the local economy, undermining legitimate retail businesses and traders, who support the economy and provide genuine jobs for people. It is still cool to tell your mates about the counterfeit Rolex watch you bought on holiday. Not so cool though when it has been shown that the trade in counterfeit products funds drugs, arms used by terrorists and slave labor.

Final Thoughts

Online brand protection against the scourge of counterfeiters is a major challenge for many Brand Protection Managers, but it is not impossible. By understanding best practices in this area, by putting a robust fit for purpose process in place, by underpinning that process with a creative and innovative technology platform, by establishing a network of contacts in the industry, with the Police, with Customs and Trading Standards, and by appreciating how the counterfeiters are themselves embracing the online world, then Brand Protection Managers give themselves a fighting chance of winning.

Although they are criminals, the counterfeiters are very creative and innovative. It is therefore imperative that the Brand Protection Managers or those tasked to help and support the Brand Protection Managers are even more creative and innovative. They need to step into the shoes of the counterfeiters and really understand how they are utilizing this online world to their advantage. It is only then that strategies can be developed, and action plans implemented to tackle this scourge.

The counterfeiters are using the amazing technology of the online world. Brand Protection Managers would be foolish not to do likewise and leverage the power of the internet.

Screen shots included in this paper are taken from Brandstrike’s IP Curator system, a creative and innovative solution to help Brands tackle the scourge of online counterfeit goods.

Author: 2 years ago

On Tuesday March 24, the Lisbon Council  launched a new Study,  “2015 Intellectual Property and Economic Growth Index: Measuring the Impact of Exceptions and Limitations in Copyright on Growth, Jobs and Prosperity” by Benjamin Gibert. The Index – the result of a of a year-long research project – examines the relationship between economic growth and intellectual property regimes in some of the world’s most innovative economies.

The report builds a system for measuring the impact of exceptions to copyright on economic growth and finds that countries that employ a broadly “flexible” regime of exceptions in copyright also saw higher rates of growth in value-added output throughout their economies.

Out of many countries it appears that copyright protection in Europe is almost nowhere as strict as in the Netherlands. According to the Study, in this digital age this puts a brake on the growth of the Dutch economy.

Economic growth, according to the study benefits from ample opportunities to software, music, movies and news sharing over the internet. “In the digital age, access to basic content, as well as opportunities to link that to mix, copy, and especially to share, writes Benjamin Gibert, the author of the report.

The conclusion is especially relevant for the Netherlands, that of the eight countries surveyed, the least flexible legislation on copyright. On a scale of 1 to 10 scores a 5.9 Netherlands. France and Japan stand with a 6.3 on a shared sixth place, and are thus slightly more liberal than the Netherlands. The sharing of creative products via the Internet is the easiest in the United States, which leads to a 8.1. European countries score lower than the US because the number of exceptions for libraries or for educational purposes, is limited. Netherlands accepts exemptions from copyright slower when it comes to parodies, reviews and scientific purposes. In Europe, the copyright legislation around has hardly harmonized, in contrast to the patent legislation.

A flexible interpretation of legislation on copyright, the study clearly contributes to the growth in the publishing industry, the world of television and in the ICT sector (Information and Communication). At the same time show greater freedom to software, music and written articles to share, contribute to employment and growth in the economy as a whole.

The conclusion of The Lisbon Council goes against the idea that it is necessary precisely stricter legislation to boost economic growth. The creative industries, including many media companies and software makers have long lobbied for a strict interpretation of copyright because only in this way could recoup their investments

The study signals a change in trend, especially in the music industry. The International Federation of the Phonographic Industry (IFPI), lobbied in the past always tough legislation, but now realize that the value of creative products is increasingly determined by the attention she managed to generate. Through social media arise communities generate income in a different way. The paid acquisition of the product is correctly less important.

(from Het Financieele Dagblad, Netherland’s main financial newspaper of Wednesday March 25, 2015)

Author: 3 years ago

Computer software (or just software) is a general term primarily used for digitally stored data such as computer programs and other kinds of information read and written by computers. Today, this includes data that has not traditionally been associated with computers, such as film, tapes and records.

Software is a lot more than just the Microsoft applications which run on a desktop PC or the enterprise applications which run on servers. Software includes such diverse things as video games, web sites, flash applications, mobile phone ring-tones & screen savers, smart phone applications, Google Earth, Wikipedia, and Wii games.

Some tend to segment software in layers, such as

  • Application software, such as word processors which perform productive tasks for users.
  • Firmware which is software programmed resident to electrically programmable memory devices on board mainboards or other types of integrated hardware carriers,
  • Middleware which controls and co-ordinates distributed systems.
  • System software such as operating systems which govern computing resources and provide convenience for users.

In the past, there was a clear distinction between …

  • software (application logic that provided functionality)
  • data (which was stored in databases or on file systems, and was manipulated by software)
  • “media” (which was not yet digital, and so was stored on cassettes – e.g. audio and video content, music, films, etc. – or on paper, books, photos)

Today, when you look at something like a Flash application, or an interactive web page, or an iPhone app, or Google Earth, or a Wii game, they all combine functionality (logic), data and audio/video content into one “application”.

Software can refer to all computer instructions in general, or to any specific set of computer instructions. It is inclusive of both machine instructions (the binary code that the processor “understands”) and source code (more human-understandable instructions that must be rendered into machine code by compilers or interpreters before being executed).

The Challenge with Software

Software is abstract, complex, hard to measure and even more difficult to value.For those who develop, buy or invest in software products and businesses, understanding all aspects of software and their interrelation is essential for business success.

Today, software impacts every business. Whether you are looking to develop a piece of software to enhance your enterprise or are investing in a software product or company, software presents a management challenge. Software projects are often late and software can be poor quality or difficult to use resulting in customer dissatisfaction or increased cost.

Some of the challenges faced by companies include

  • Lack of understanding of the software business case or its viability
  • Not realizing the total cost of ownership
  • Not having the ability to measure the quality level of the software
  • Poor understanding the legal or compliance issues
  • Selection of the right technology to ensure future enhancements
  • Not knowing what are the intellectual property assets that should be protected and what are the risks
  • Ensuring that the user experience is competitive

To address these issues, companies need a process for evaluating their current situation from all these perspectives and identifying the key actions they need to take to ensure holistic management of their software.

Assessing software

Software project, software product and/or software business assessment or evaluation is said to be “very important”, yet many tend to be frightened of it because they see it as a test and a threat. Yet, if handled properly and professionally, then taking the opportunity to understand whether you achieved what you set out to, how well you did it, what impact your activity has had and to reflect critically on both the activities and processes will benefit you. This knowledge can be used internally by your team to drive improvement and externally to demonstrate achievements.

“The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong question”

Peter Drucker

Software assessment or evaluation can be formative – that is taking place during the development of a concept or proposal, project or organization, with the intention of improving the value or effectiveness of the proposal, project, or organisation. It can also be summative – drawing lessons from a completed action or project or an organisation at a later point in time or circumstance.

A Holistic Approach to Software and Software Management

Success with any software project or software business means adopting a holistic approach to software management and appreciating that a variety of issues have to be addressed:

  • The business model
  • The technology
  • The user interface and user experience
  • The legal framework and commercial considerations
  • Software development
  • Quality
  • Intellectual property

The types of questions that need to be asked are:

  • Has the software business model being thoroughly reviewed to ensure its viability? This means fully understanding the market opportunity, the business environment and customer and end-user expectations.
  • How has the technology selection been validated considering the competitiveness, structure, security and potential for future innovation?
  • Has the user interface and user experience been studied from both a subjective and objective view to give insight into customer behaviour?
  • Has the necessary legal framework or commercial aspects that may impact upon use or operation of the software been understood and risks identified and mitigated?
  • Are both the business management and development team’s processes resilient in order to improve the company’s capability and maturity of the software?
  • What are the metrics around software quality in order to understand the maturity level based around a qualitative and quantitative assessment?
  • Does the company understand both the intellectual property risks and potential opportunities associated with th1is software?

Final thoughts

To deal with the complexity and abstract nature of software, a model is needed to enable a holistic view of software business management that supports evaluation of the current state and actions to improve

by Donal O’Connell

(IPEG consultant and partner at Waves Associates. (Waves Associates provides a Software Evaluation and Valuation service to a range of clients including start-ups, VC fund managers and other investors, receivers liquidating a company’s assets, companies purchasing or outsourcing software or those involved in mergers and acquisitions)

Author: 4 years ago

For quite a long time publishers, notably in the UK, have found a smart way of making big money out of lawyers and IP professional’s vanity. Legal 500, Super Lawyers, The Best Lawyers in America, Chambers and Partners, to name a few among the many, are rating and ranking lawyers and their firms. It’s not enough to be a good lawyer you need to be a “top” lawyer. Not only the legal profession has been affected by this. In the culinary world you are only be taken serious in many publications, TV series and the like, if (s)he is a “top” chef. Are you an artist doing well in your small community or even only within one country? International fame is only yours if you are a “top” artist.

Isn’t all this reaching the absurd? Do you really need to be a Picasso to be a reputable painter or artist? Of course not. But publishers have made us believe that only those lawyers that are being ranked as “top” in their respective fields are worth hiring. That only those IP pratcitioners that are “top” or “most influential” make the difference. Nonsense of course, but the profession has fell for the publishers trap, by the dozens. Almost all sizeable law firms these days will go out of their way to reach the ranks of being “top” attorneys. IP professionals are only taken serious if they reach the heavly ranks of “top strategists”.

Five years ago IAM (Intellectual Asset Magazine, a publication of Global White Page Ltd.) started  “The World’s Leading IP Strategists” now expanding to 300 “top” advisers on IP strategies. As IAM states on their webpage: “those individuals identified by our research team – with a great deal of help from the wider IP community – as offering operating companies and other IP owners world-class advice on maximizing the value of their intellectual property”.

In that same year, 2008,  we asked ourselves in our blog IP Strategist – What’s in a Name? what makes someone a true strategist in intellectual property, let alone a “top” strategist? IAM claims there are now 300 instead of the 250 initially covered. Strategy is a sexy business to be in. It makes you important, right? Who doesn’t to be seen as “strategically” strong and be seen as a “top” professional?

Competition could not stay behind. Euromoney (what’s in a name?) has their own publisher’s brainchild. Over the years they “nominate” masters of the IP universe as “most influential people in IP”. In the July/August issue of Managing Intellectual Property they present “50 people determining the future of intellectual property”. Can you imagine? Not only is it enough to be a top IP lawyer or Top IP strategist, you can only be taken serious now if you can shape the future. Nothing less than that. Surely we can see the new book coming out”300 most influential people in IP”. Not part of the list? You must be a loser, left out from the real world, where it all happens.

The source? According to MIP they have “journalists in New York, London and Hong Kong” who “hold  few conference calls”, speak to some of their “most forthcoming contacts” and voila there you have the must-be list of the best-of-the-best in IP. To make the result of the research more persuasive, MIP calls the identification of the 50 most influential IP persons “a tricky process”. So who are they? MIP: “people who create it, legislate for it and defend it, as well as those who spend their careers thinking about its impact on society and the economy, and those who push back against it”. I guess I will never be one of them although I have done all that, pushing against the absurdum of this be-part-of-the top-or-lose game.

Wouldn’t it be great if we just held a poll among all IP blog readers in the world not only to hear names but rather more hear about deeds of persons who in their live made a real difference in intellectual property? What about the IP attorney in Belgium defending a trademark case successfully before a Belgian court, it made all the difference for the trademark owner. What about the member of parliament in Lithuania who spoke knowledgably about IP and made a difference in Lithuania’s IP laws? It made all the difference for Lithuanians. What about the district court judge in Spain who wrote an IP ruling that people even after years still refer to as making all the difference in Spain? What about the Dutch blogger with a couple of thousand readers who first grouped all EU IP case law on his website? What about the German law professor who made all the difference to his students being critical on IP and it role in innovation?

I bet there will be hundreds of names of real heroes, some to small, some to a larger audience. Aren’t they the real IP mind changers, the persons who make IP what it is today? Isn’t that much more relevant than stimulating narcissism among IP professionals?

 

Author: 5 years ago

At a secondhand bookstore in Palo Alto, California (the location is relevant, as shall be seen below), I once paid US$5 for the first volume of Jean-Yves Tadié’s biography of Marcel Proust from the Éditions Gallimard “Collection Folio,” a book printed in France. Liking volume 1 so much, I feel an urge to buy volume 2 also. However, if I want to buy secondhand from an American bookseller, as I so often do, I need to hurry up, because the Supreme Court of the United States may ban all secondhand sales of foreign-made books in the United States.

Bans on gray market imports are a familiar phenomenon in the trademark and patent domains. In both, the owner of the intellectual property right may prevent imports, into the United States for example, of goods covered by that right.  What is more, the owner may even get to prevent the import of goods which it has authorized to be sold in the country where they were bought, and even of goods which were manufactured in the United States and then exported. See, e.g., Jazz Photo Corp. v. International Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001).  This helps American pharmaceutical manufacturers, for example, to sell the same patented drugs cheaply in Canada – obeying the price controls exercised in that country by the Patented Medicines Price Review Board – and at a much higher price in America, where such price controls do not apply. Similarly, Nestlé may license the Perugina chocolate mark to a Venezuelan company to mark chocolates made in Venezuela, yet prevent those chocolates from being imported to America to compete with the Italian-made Perugina chocolates that Nestlé sells there.  See Société des Produits Nestlé, S.A. v. Casa Helvetia, Inc., 982 F.2d 633 (1st Cir. 1992).

A similar legal right has long been on the books for owners of copyrights:  depending on the circumstances, they may get to prevent importation if they wish.  Like owners of patents and trademarks, seemingly, only they have the right to import goods as to which they have a copyright interest.  The right to prevent import of copyrighted goods is found in 17 USC § 602(a)(1):

“Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501.”

There is, most curiously, an exception for tourists in § 602(a)(3)(B), as well as an exception for one-off importation, allowing:

“importation or exportation, for the private use of the importer or exporter and not for distribution, by any person with respect to no more than one copy or phonorecord of any one work at any one time,  or by any person arriving from outside the United States or departing from the United States with respect to copies or phonorecords forming part of such person’s personal baggage.”

I have personally made use of this exception, for example to bring some Chilean and other foreign books with me following trips to Chile, my home country, and to Mexico. The one-off exception seemingly also authorizes me to buy foreign books from foreign booksellers over the Internet, as I have occasionally done as well.

This brings us to Thai immigrant Supap Kirtsaeng. After he arrived on American soil, Mr. Kirtsaeng set up a business importing for resale foreign-made copies of American textbooks that he bought in Thailand, paying less for them than what the textbooks would cost in America. The making of the foreign copies was authorized by the books’ American publishers, but their importation into America was not.  Mr. Kirtsaeng was sued by Wiley, a major textbook publisher.  His textbook resale business was seemingly illegal under the provisions quoted above (unless, perhaps, he brought the books in his baggage on airplane trips to Thailand), but he argued that his activity was authorized by a different provision of law, 17 USC § 109(a), often called the “first sale” rule:

“the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”

Mr. Kirtsaeng’s argument was, and is, that the copies he brought into the United States were lawfully made under license from the copyright owner Wiley, and thus, as owner of a copy lawfully made, Mr. Kirtsaeng was entitled to sell it in the United States.  The argument lost in the district court and lost 2-1 in the United States Court of Appeals for the Second Circuit.  In his majority opinion for the Court of Appeals, Judge Cabranes expressed deep concern about the drafting of § 109(a).  The concern was curiously all about just five little words, “lawfully made under this title.”

“The relevant text is simply unclear. ‘[L]awfully made under this title’ could plausibly be interpreted to mean any number of things, including: (1) ‘manufactured in the United States,’ (2) ‘any work made that is subject to protection under this title,’ or (3) ‘lawfully made under this title had this title been applicable.’ . . . Confronted with an utterly ambiguous text, we think it best to adopt an interpretation of § 109(a) that best comports with both § 602(a)(1) and the Supreme Court’s opinion in Quality King [v. L’anza Research International, Inc., 523 U.S. 135 (1998)].”

In Quality King, a unanimous Supreme Court found that if a copyrighted article is made in the United States, sold abroad, and then imported back into the United States for resale without the copyright owner’s authorization, § 109(a) applies, and there is no copyright violation because the importer is “the owner of a particular copy . . . lawfully made under this title” under § 109(a) and therefore “is entitled, without the authority of the copyright owner, to sell or otherwise dispose of” it.  This is so even though § 602(a)(1), on its face, would seem to bar the importation.  Quality King goes on to explain that the right to “otherwise dispose” of the article granted by § 109(a) includes the right to import it.  Furthermore, in dicta which Judge Cabranes called “instructive,” the Court considered a hypothetical in which a book had separate British and U.S. editions (a common practice today and long ago) and mused that “presumably only those made by the publisher of the U.S. edition would be ‘lawfully made under this title’ within the meaning of § 109(a).”

Although the Supreme Court’s opinion in Quality King was unanimous, Justice Ginsburg filed a concurrence in which she noted “that we do not today resolve cases in which the allegedly infringing imports were manufactured abroad.”  And nobody on the Quality King Court explicitly considered, in connection with their British-edition hypothetical, the possibility that the American publisher, too, could have had its copies made abroad.  Based on my personal observation, this is common, for example, for art books, and was common even in 1998.  Outsourcing of manufacturing in general is of course a very American practice.

As a consequence of this reasoning in Quality King, Judge Cabranes’s majority opinion for the Court of Appeals panel concluded in Mr. Kirtsaeng’s case that “the phrase ‘lawfully made under this Title’ in § 109(a) refers specifically and exclusively to works that are made in territories in which the Copyright Act is law, and not to foreign-manufactured works.”  Under this holding, works made abroad, even under contract to an American copyright owner, are not “made under this title,” and so do not enjoy the protection of the first sale doctrine of § 109(a).

The implications of the holding against Mr. Kirtsaeng, if upheld by the United States Supreme Court following its grant of certiorari, are amusing to contemplate.  I can buy Tadié volume 2 from a bookseller in France (or Québec or Chile), because the bookseller is presumably not subject to a national law forbidding resale, and my importation of a single copy is allowed by the one-off exception in § 602(a)(3)(B), quoted above.  I cannot, however, buy the same volume used from a U.S.-based bookseller with the same impunity, for Éditions Gallimard could sue the bookseller and seek statutory damages of up to US$150,000, for selling a book that seems to have a going price of approximately US$10 for resale on the Web.  The person who sold it to that bookseller, if the sale was in America, is likewise potentially liable.

Of course, it is not just foreign-made texts, written in languages like Spanish and French, whose resale is forbidden.  A lot of American books, particularly art books, are printed abroad.  My copy of The Sibley Guide to [American] Birds, for example, is printed abroad, and so cannot be resold.  (My copy, naturally, was bought used.)

Continuing a little further down the path of this decision’s consequences, we all know in America that electronic books are popular.  People tell me that I should stop having so much paper in my home and office, and instead get a Kindle, an electronic device that allows one to read books encoded in a proprietary format with suitable digital rights management.  There is even a Web page that suggests (I express no opinion on whether American copyright law actually allows this procedure) taking all your paper books, slicing them into individual sheets, running the sheets through a scanner, keeping the scan, and recycling the paper:

“I’m a bibliophile. I have thousands of books (including great piles of obsolete programming and tech manuals). The problem is the sheer size and weight of them — I cower at the prospect of moving. I’m also a hoarder, and so am unable to throw them away. So I decided to scan them, which would enable me to throw the physical book away, and yet satisfy my hoarding compulsions. . . .

“Scanning is straightforward and fairly quick. I slice off the spine with a stack slicer from eBay, and run the result through a hopper-fed scanner. It takes about 5 minutes for a regular paperback.”

http://www.drdobbs.com/mobile/reading-pdfs-on-the-kindle-fire/232200675.

This brings us to electronic books, of the sort that may be read on a Kindle.  From a publisher’s point of view, there is much to be said for electronic books.  But one of their biggest advantages from the standpoint of the copyright holder is that – at least with proper digital rights management – they cannot be resold or even given away.  The seller can even make them vanish after a time: for example, in selling electronic books to libraries, the well-known American publisher HarperCollins “allows e-books to be checked out 26 times before the library has to buy a new copy.”  http://paidcontent.org/2012/09/14/hachette-to-raise-ebook-prices-for-libraries-by-220/  While such vanishing tricks are not yet in the cards for good old paper books, the Second Circuit’s ruling has at least made them more equal to electronic books in one important respect – as long as an American publisher takes the trouble to have the book made in a foreign country, it can sell a paper book which cannot be resold.

The implication that publishers can make paper books unsalable makes some people uncomfortable, so it is important to note for the record that the Solicitor General of the United States disagrees with it.  The ancient case of Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), created the first sale doctrine of copyright in common law.  Per the brief of the Solicitor General (pp. 27-28), even if the codification of that doctrine in § 109(a) fails to protect people who resell foreign-made books which were legally imported, the Bobbs-Merrill case could.  In effect, the codification was imperfect, and so some common law must be mixed in to understand what copyright law allows and does not allow us to do.

There is much else that could be said here, but let me note only that a case presenting similar issues, Costco Wholesale Corp. v. Omega, S.A., 131 S. Ct.  565 (2010), came up to the Supreme Court not long ago.  Justice Kagan recused herself.  The Court then split 4-4, a situation in which no opinion is handed down.  Nonetheless, this event has led people to assume that a similar split will occur in the Kirtsaeng case, and that Justice Kagan holds the casting vote.

Oral argument before the Supreme Court is today, October 29.

Flavio Rose, Bandgap Engineering Inc. and Goldberg Lowenstein & Weatherwax LLP

Have copyright holders become their own worst enemies? Poorly drafted bills in the U.S. Senate and Congress designed to curb music and other Internet piracy, in some cases by holding information aggregators who enable it responsible, is fueling a new wave of anger towards lawmakers and copyright holders. SOPA, Stop Online Piracy Act, and PIPA, The Protect IP Act, will need to be heavily reworked if they are to pass and be accepted.
Part of the problem is that for the past 20 years or so the music industry failed to successfully enforce its copyrights on the Internet and curb piracy from Asia. Now, experiencing the desperation of a dying industry, it believes it must do something. They reason that even the Wild West was tamed, eventually. A generation of file-sharing listeners and content users does not agree. There is fear that any intervention in the Internet or restriction is a potential threat to individual freedoms and will promote spying and stifle innovation. Many believe that controls do not have to play out that way.

In our not-so-humble opinion the Internet — and social networks in particular– can and should have some borders. Rampant abuses, not just to copyright holders but individuals’ personal information, have been swept under the rug. It’s difficult to say what form the oversight should take, or how much is onerous, but the current situation is dangerous and too important to ignore.

The film and book publishing industries are not far behind the foibles of the music business. Google has tried to post all books and force blanket agreements on authors, great for readers and even some writers, but not for those who live by book sales. For better or worse content-capturing or file sharing has become to many an acceptable way of life, and piracy is now simply the new technology doing its digital thing — not.
Enablers or Pirates?

Some say content providers need new business models that incorporate innovative technologies and the current culture. I’m not so sure the problem is that easily resolved. Sweden-based Spotify, for example, relies on copyrighted content deals negotiated directly with the labels and some artists. Not all agree that is they best place or deal for their content. Eventually, they may not have much of a choice. The major recording artists at least may have some bargaining leverage, the lesser names not. The French, ironically, have been tougher on file sharing than most countries, possibly because of its history of  respect for artists and innovators.

Part of the problem in the U.S. is that (1) it is the largest content provider, (2) expectations have changed from years of failed enforcement, (3) content can be expensive, and (4) today, well established, new economy information aggregators and social networks are o.k. bending privacy and ownership rules. (Their advertisers don’t seem to mind.)

Google, Facebook, YouTube and other business models depend on compelling but highly accessible content to prosper. So, to put it crudely, it’s sort of Hollywood (content providers) vs. Silicon Valley (device and distribution owners).

While there have been attempts to work together, the fundamental differences between old and new economy businesses have kept them apart. A few artists may benefit from the free Internet visibility which may support their (paid) performances or what they can sell or license; most will not.

Bruce Berman, this blog was first published at IP CloseUp

Author: 6 years ago

What if a government created obstacles for the entrepreneurs innovating in low cost railways and trains, simply to protect the stakeholders of water channels, steam-engine technology and barges? What if libraries were prohibited in order to protect stakeholders of book printing and book shops? And what if a government ‘criminalized’ the users of these services? As the railways and libraries have transformed our economies and societies, and as they are complements and not substitutes to our system of innovation, production and employment, this would seem like daft policies.

Similarly, new digital technology has the power to revitalize the cultural industries and the service economy, and to create more value for its businesses and its consumers. Through access to resources, low cost virtual premises, and worldwide exposure, it opens up opportunities for businesses (no matter how small or big) and individuals, who have the determination and ideas to do something, providing they understand digital technology.

However, these opportunities are now being threatened by the Digital Economy Act of the UK which entered into force June 12, 2010. It was first introduced in the Queen’s speech on 18 Nov 2009. Originally, it was Lord Mandelson‘s plan to grant the government wide-ranging powers to tighten copyright law, especially to combat any forms of online piracy.  For ‘serious offenders’ of file-sharing this includes limiting the speed or capacity of an individual’s broadband service or temporarily suspending their service. For public wi-fi services, this include that the owner of a connection (e.g. cafe owners, universities, libraries) can be held liable, even if they are not personally responsible for downloading pirated material. The Labour government said that it wanted to protect the UK’s creative industries, which it said is under threat from piracy. The Digital Economy Act was passed (8th April 2010) in the ‘wash up’ period before the General Election, where it was generally supported by the Conservatives, but not supported by the Liberal Democrats. The Digital Economy Act is supported by senior figures and forceful lobbyists from the music, film and television industries as well as sports and union representatives. It is generally not supported by the Internet Service Providers, among others.

By ‘shackling’ (1) I mean how the governments in the UK and in many other countries (such as France which has adopted a file-sharing policy similar to the UK Digital Economy Act) believe that the solution for economic growth for the cultural industries in the digital economy is to be found in an increased privatization of our cultural assets, in the form of strong intellectual property rights, including strong copyrights, and strong enforcement regimes. However, in this blog, I argue that there is a need for a policy approach which better balances the protection versus sharing of our intellectual property in the cultural industries. If we get the balance wrong, which I believe we are at the moment, there is ‘less for everyone’.

By ‘less for everyone’ I mean reduced welfare effects throughout the digital economy,-  weather we talk about producers, consumers, users  or other stakeholders.  More sharing and open access our intellectual property in the cultural industries will not only increase our value pie but also create opportunities for increased socio-economic equality. The evidence to support my argument follows below. 

The power struggle across technological regimes

On the one hand we have the old economy dominant players whose business models are developed around content production for analogue distribution channels which they have been in a position to control and dominate for decades. Companies include the British Phonograpic Industry (BPI) which is the British representation of Warner, Universal, EMI, and Sony, and they were forceful lobbyists in support of the Digital Economy Act in the way in which it is shaped today. These music industry majors control about 75% of the global music market, and have close ties with the International Federation of the Phonograpic Industry (IFPI).

On the other hand we have the Internet service providers who have grown up with digitalization and the Internet and who are not developing content or products but selling services using the technological and business opportunities of digitalization. They include Google, Facebook, Yahoo, eBay, TalkTalk and BT. They have acted as a forceful interest group against the Digital Economy Act in its current form, and they are even joined by the British Library in this respect. Other new Internet service providers for the music industry and who have grown up with digitalization include Spotify, MySpace, and You Tube and other. As they are becoming established service providers, more musicians and artists are signing up with these new Internet service providers.

The new Internet service providers are also able to add more value to consumers by providing a broader range of material at a low price, while promoting a broader range of musicians and artists in a bottom up forum and giving everyone a chance of exposure and true competition. Analogue broadcasting and distribution via fixed format (CD, LP, vinyl, tape) have been around for ages but they involve size limitations as to how much data they can carry, and they are expensive business models. High venture capital is required to cover risk in volatile music markets, which is one of the reasons why the music majors (Warner, Universal, Times, Sony) achieved control over artists and markets (radio, clubs, retail, etc.) and were able to sell cultural services to listeners at a reasonable high price.

However, the music labels are now threatened by having to face true competition from the new Internet service providers, whose revolutionary business models exploit the business opportunities of the new digital technology. They operate radically different from models around analogue technology, as they are based upon inclusiveness, interaction and competition through exposure between artists, as well as high variety and low price for users. The business models are spurred by access, participation and low copyright protection (soft or no intellectual property rights). The direct and indirect economic effects can be huge, and they open our cultures up.

This can only be an improvement of our outdated business models developed around analogue technology which are spurred by a narrow selection of artists and expressions (usually pop and mainstream) which are over-exposed and played to death on the radio (so very little competition), and a highly copyright protected content (mainly owned by the labels) in order to make the expensive business model work. If copyright is infringed, the industry can experience institutional market failure, so a costly enforcement system of royalty collecting societies and court cases has to be implemented to make the business work. The result is a narrow range of products at a high price, and closing of our cultures.

As digitalization has moved the edge of the competitive game to the digital service providers, the labels push hard to switch it back to the content providers. They do this by providing limited access to their content, through high enforcement of strong copyrights, and by making it difficult for Internet service providers and software writers (e.g. BitTorrent software writers) to launch new competitive business models based upon the technological opportunities of digitalization, as they easily fall into dispute with the law as soon as content arrives to their electronic or Internet implemented sites. The Digital Economy Act’s institutional attack on wi-fi services by making them legally liable, even if they are not personally responsible for downloading pirated material, can be regarded as a tool in this direction.

While keenly lobbying for clauses in the Digital Economy Act (especially clause 17) when it was discussed in parliament, the BPI and IFPI also made sure they had the loudest voice outside parliament, i.e. in national newspaper publicity. They uncritically publish their claims, numbers, and reported effects of P2P file-sharing. Numbers coming from IFPI include a study of Jupiter Research claiming that between 2007 to 2012 the cumulative cost for the industry of illegal file-sharing to music companies will be £1.2bn, and the BPI website states that copyright infringement costs the UK music sector an estimated £200m in 2009. In such claims there is only a mentioning of a substitution effect of P2P file-sharing (for discussion, see below section “What if we wrongly blame the P2P file-sharers?”) and there is no mentioning on how money in the new business models are made elsewhere in the value chain than directly from pre-recorded music (for discussion, see below section on “Witchhunt on P2P file-sharers”).

To move from the old economy into the digital economy it is important that content producers and service providers speak and collaborate. It is therefore disappointing to see that the Digital Economy Act does not encourage such collaboration, but instead empowers the old economy analogue content providers’ expensive business models spurred by strong copyrights, and thereby discourages investment in new digital entrepreneurship.  

Witchhunt on P2P file-sharers

What strikes me is that the general public do not understand copyright law, the rationales for copyrights, and their rights. It is easy to pay for TV and radio licence and the licence fee is also incorporated in the CD price, so no consumer education is needed. However, when the wine pours down the digital highway and it is not protected by the bottle, then it is difficult to trace which drops are copyright protected and which are not or are free. How the system works online is not transparent. That we live in a gift-economy where mobile telephones, computers, TV free-view, software, computer games, and more, are totally free when we subscribe to certain services (sometimes for free) does not make it less confusing.

Transparency is one of the key elements for a marketplace to work, and when this is gone it is commonly argued within economics that institutional market failure is to be expected. We cannot victimize file-sharers because the industry has lost control of transparency in the marketplace. Music lovers simply then follow their instincts, and sometime this means tripping or stumbling over copyright protected music including pre-releases.

Although the Digital Economy Act mentions that they do not criminalize P2P file-sharers and that they will only allow the disconnection of broadband to serious P2P file-sharers, then this is not how it works in practice. There is no evidence that court cases especially involve serious P2P file-sharers. P2P file-shares attending court are charged with fraud or copyright infringement offenses of one or just a few singles or albums, and prison sentences for copyright if they lose can be several years. It is not about how much you share, but about if you share a particular music file. The cases are random in the sense that almost one in three households engages in P2P file-sharing of free music (Andersen and Frenz 2007) so anyone could come in conflict with the law, but some people are just unlucky to be noticed.

Government helps to facilitate these court cases, as the victims are often arrested by the police, prosecuted by the government, and the tax payers pays for the hearing. For example, I have been involved as defence witness in two such cases: Oink’s Pink Palace (frequently written as OiNK) was a prominent BitTorrent tracker which operated from 2004 to 2007. Following a joint operation codenamed Operation Ark Royal, between Interpol, the International Federation of the Phonographic Industry (IFPI), the British Phonographic Industry (BPI), and some other organisations, on 23 October 2007 the site was closed. The site’s creator, software engineer Alan Ellis (24 years old at time of arrest), was arrested by British police and Dutch police.  He was being prosecuted by the state (Regina -v- Alan Ellis), and the case was paid by the tax payers. He was found not guilty of conspiracy to defraud (a common law criminal offence which carries no maximum custodial sentence) on 15 January 2010. Furthermore, Matthew Wyatt was arrested in 2007 (17 years old at the time). He was charged with distributing copyrighted material that would prejudice the copyright holders, a criminal offence that carries a maximum 10-year custodial sentence. He was being prosecuted by the state (Regina -v- Matthew Wyatt), and the case was paid by the tax payers. With a trial fixed for June 2010, the case was dropped by Teesside Crown Prosecution Service 30th of March 2010. There are at least three such other cases from 2008 (but they did not walk free).

In my view such court cases should be unlawful due to lack of transparency in online music markets (as described above), the randomness in prosecution, and finally, there is no evidence that the individuals have caused direct harm to the industry (Anderse and Frenz 2007, 2010, Oberholzer-Gee and Strumpf 2007; For discussion, see also below section “What if we wrongly blame the P2P file-sharers”). The cases throw an unflattering light on the behaviour of the authorities and the music industry in fighting illegal file-sharing. They can be compared to modern-time witch-hunts where random people are being blamed for the drop in revenue to the labels from pre-recorded music (mainly due to the demise of the CD format).

However, the overall income to the industry has increased as a whole due to diversification of the ways in which music markets work in the digital age. For example in 2008, the UK music industry was worth £3.6bn, and a record income was reported to be up 4.7% from 2007 (Page, Performance Rights Society – PRS Music 2009). Although income from pre-recorded music is down, income from performance rights, live concerts, subscriptions, master-tones, advertisement, sponsorship etc, is up.

The adverse social and economic consequences of the Digital Economy Act criminalizing P2P file-sharers could be huge. Uneducated individuals or households who do not really understand how the online music industry works, may decide to chose a strategy to abstain from music on the Internet in order to avoid coming into conflict with the new law underpinned by the Digital Economy Act (just as many households do abstain from purchasing, banking, etc., on the internet due to lack of trust of credit card fraud and security). Also, potential or existing public wi-fi services (i.e. owners of connections, including cafes, youth-clubs, housing-estates and other) could stop connecting people if they are held liable, even if they are not personally responsible, for downloading pirated material. It is here that we need to keep in mind that e-commerce would not thrive if people did not trade online. This will not only damage music businesses online, where file-sharing is generally not unlawful, but also leave individuals, households and businesses on the wrong side of the digital divide.  

What if we wrongly blame the P2P file-sharers?

If we wrongly blame the P2P file-sharers for the market struggle the music industry majors are facing, then policy can only fail.

An independent report produced for Industry Canada prepared by myself and Frenz (2007) shows that free music downloading, including P2P file sharing, is neutral to CD purchase. That means that there is no difference in CD purchase between those who file-share and those who do not. The analysis was carried out for 2100 Canadian households and the data are representative of the Canadian population age 15 and above.  Furthermore, focusing only on the behaviour within the P2P file-sharing group, we found that the more people engage with P2P file-sharing, the more music they purchase. And this is even after we adjust for the effect of ‘music interest’ so the result do not simply reflect the fact that music lovers engaging in more P2P file-sharing also buy more music.

In particular we found that people engage in P2P file-sharing because they explore, and this leads to subsequent purchases due to a ‘hear before buying’ effect. Another significant market creation effect is that people look for music which is ‘not available elsewhere’ (e.g. in the mainstream outlets) boosting new markets. Other reason for people to engage in P2P file-sharing is a market segmentation effect, i.e. that people are ‘wishing to not to buy ‘whole album’’, but prefer the single digital file. We found that the increase in music purchases of more active P2P file-sharers was explained by the fact that the ‘market creation effect’ of P2P file-sharing outweighs the ‘market substitution effect’, where people download freely as they are unwilling to pay.

There seems to be a misguided obsession by the industry and the politicians supporting the Digital Economy Act with focusing on the substitution effect of P2P file-sharing. I believe that everyone can agree that the better and more diverse data we examine, the closer we come to uncover true economic relationships with respect to the market effect of P2P file-sharing of free music. The situation is very complex and this is not acknowledged in many industry claims from the BPI and IFPI. As described above, for each individual various behaviours result from P2P file-sharing, for example music purchase. It is the combination of these effects, which have to set the scene in the debate on the complex effect of P2P file-sharing on music markets.

A key problem with the claims from the BPI and IFPI is that they compare macro data in terms of music sale (or revenue) finding that CD sale has dropped and online music (e.g. MP3) sale not taken off in terms of the money the industry used to make from pre-recorded music, and they simply assume that this is caused by P2P file-sharing. An added problem is that the industry treats file-sharing as it automatically means music less purchased. For example the IFPI claim that 95 per cent of music downloads are unauthorised, with no payment to artists and producers (IFPI Digital Music Report, 16th January 2009) shows how out of touch the music industry is with the online communities. The statement also suggests that all downloaded material automatically means music less sold and therefore less income. Instead, it should be of interest for those who manage music businesses to know more about how consumers follow their interests in the new digital economy, and implement this into their forward looking business models.

Looking at the sale of pre-recorded music in isolation our results of the Canadian population (Andersen and Frenz 2007) also indicate a change in technological paradigm explaining the fall in CD sale. For example, we found that people who purchase online electronic music are less likely to purchase CDs and that people who own MP3 players are less likely to purchase CDs.

Volume sale of full-length albums 1973 – 2008 reported in the IFPI Handbook (2009) also show a change in format. LP markets peaked around 1980, magnetic tape around 1990, and CD markets around 2000. Data reported in IFPI Handbook (2009) also shows how online electronic music markets (reported in volume) are growing speedily, and that consumers now prefer music singles rather than full-length albums. Their data do not include music singles sold via mobile, but BPI Handbook (2009) show how music purchase via mobile sale accounts for about 42% of all single sales.

Unfortunately, the change in the technological paradigm in the music industry is associated with a digital divide. People who report greater internet-skills and younger age groups are more likely to purchase electronically delivered music and to engage in P2P file-sharing. However, there is no gender related digital divide, as we found that women are as active as men online. (Andersen and Frenz 2007)

Finally, it should be mentioned that music is acquired freely in many different ways. Our results of the Canadian population show that 29% of the population engage in P2P file-sharing, 29% are ripping music from CDs, 23% are downloading free music from promotional websites, and 9% are downloading free music from private websites. Finally, 21% of the population are acquiring free music by copying electronic music files (e.g. MP3) from other people. (Andersen and Frenz 2007) 

Disconnecting the networked economy

The Digital Economy Act permitting the slowing down or temporary suspension of broadband connections to households will surely have adverse effects throughout our entire national system of innovation, production and employment.

Households use the internet for other things than downloading music unlawfully. The study by myself and Frenz (2007) on the effect of P2P file-sharing found that there is a positive relationship between P2P file-sharing and purchase of other entertainment products, such as videogames, cinema tickets, and concert tickets. PRS Music has also confirmed that live concert revenue is up 13% from previous year (Page, PRS Music 2009), and a huge increase in revenue from live concerts is also confirmed in Sweden (Johansson and Larsson 2009).  By ignoring such network effects from P2P file-sharing the government is surely shackling our national system of innovation, production and employment.

In general, and besides P2P file-sharing, the internet is used for a full range of different activities, such as purchasing online (electronically delivered music, travel, books, CDs, DVDs, food), online auctions, email, surfing, homework and education, obtaining information (e.g. related to health or hobby), social networking, working from home, playing or downloading computer games, watching TV, telephone via skype, telebanking and paying bills, doing tax returns, and more. Do we really want a situation where a mother cannot prepare an important work-meeting for the next day, or a father cannot look up important health information or do his self-assessment tax return online, because their daughter has engaged in P2P filsharing, or that children cannot do homework because of their parents’ behaviour?

Also, people engage in downloading activities at work, schools, internet-cafes, while visiting friends or at grandparents’ house, so the targeted enforcement of logging off individuals or households engaging in serious and unauthorized P2P file-sharing is unrealistic. Furthermore, targeting wi-fi services (or connection hubs) would exaggerate even wider social welfare problems, as discussed at the end of above section on ”Witch hunt on P2P file-sharers”.

In that way, the Digital Economy Act surely provides a danger of over-regulation. Disenabling a section of the UK economy, as a copyright enforcement tool, will paralyse the digital revolution and create less for everybody. Rather, we need to invest in better and stronger broadband connections to all households, better mobile networks, closing the digital divide, and not spend public resources disciplining society which will be hugely expensive in terms of monitoring online behaviour, dis- and reconnecting households, continuation of policing and random court cases, etc.. 

The question of rights, but whose rights?

The supporters of the Digital Economy Act assumes a lot of rights for holders and controllers of copyright, but seem to forget a whole range of other rights.

Firstly, P2P file-sharers do have rights. When their activities cause more purchase of music, and more of other entertainment products, than they substitute on average (see above section of “What if we wrongly blame the P2P file-sharers?”), they create more value to the copyright holders on average. Thus, it makes sense that they (and their households or the places they have operated from) have the right not to have their Internet service slowed down or suspended. Furthermore, to inhibit all members of households from participating in the digital economy (including education of school children via online services, etc.), by making them victims of the crime of other household members (via a general slowing-down or temporarily disconnecting of households), can only be against the principles of basic human rights.

Also, what about the users’ rights in general? For example, as consumers we have right to high variety (more choice), high quality and low price of music, if we are in a position where this can be achieved. The digital revolution supplies us with new business models that can do just that. Also, if we have already purchased an expensive CD, record or tape (often the same music is already purchased by the same individuals in several music formats), what’s wrong with downloading a replacement copy online, given the marginal cost of reproduction of digital products is zero?

The heavy downloading of free music could also demonstrate that the general public have no moral problems with their activities, but focuses on their perceived rights. When the over-exposed celebrity-artists, such as Lili Allen, James Blunt, Gary Barlow (Take That), Gary Kemp (Spandau Ballet) and other, back the labels in their style of curbing P2P file-sharing and in the promotion of the Digital Economy Act in its current form, they are truly out of touch with their fans and the views of the general public. Their voices, which once connected with music lovers, are becoming associated with ignorance and self-interest over community.

Also, all artists (and not just the few over-exposed artists selected by the labels) have the right to be promoted and enter competition, and the new technology gives everyone an opportunity. E.g. artists which are discovered and making their career through online music or networking sites can now make a living from their talent independent of a major label. They are hired to give concerts and even selling their music online in many cases. There are also several recognized artists who are lining up against Government’s stance on P2P file sharing, and who does not agree that P2P file-sharing necessarily harms the music industry, but see new business models based upon the opportunities offered by digitalization as opportunities for artists’ independence. They include artists as Nick Mason (Pink Floyd), Ed O’Brien (Radiohead), Dave Rowntree (Blur), Billy Bragg, and Mick Jones (The Clash).

In turn, new business models where more artists are able to enter competition, could also lead to a more equal income distribution. The current situation is that empirical studies of cultural markets consistently show a winner-take-all distribution of earnings. For example the Monopoly and Mergers Commission’s study of the UK collecting society PRS (1996) revealed that the top 10% of composers/songwriters earn over 80% of total earnings. This was again confirmed more recently by Kretschmer and Hardwick’s (2007) comparative survey of 25,000 British and German literary authors which showed that the top 10% of writers earn about 70% of total earnings. Similarly, a recent study of the Swedish music industry (2000-2008) show how both music revenue overall (and especially from live concerts) have increased, and so has the value pie to artists (Johansson and Larsson 2009).

Finally, the internet service providers (as Google, Facebook and other internet service providers) have the right to challenge the old technology, to challenge established markets, and the right to challenge established business models. This is especially so, when they are in position where they can improve our services and create higher welfare effects and socio-economic equality. It seems as the music labels are content for the music industry to restrict the size of the music pie as long as they take the biggest slice. Their once defended rights have turned into privileges via the Digital Economy Act, because the technological and business opportunities in the digital economy can offer better solutions. It allows the economic pie to growth rapidly and many more artists and entrepreneurs can take a slice of the pie. This is what normally would be considered as a progressive economy. 

… and what about globalization?

It is of course not difficult to understand why the British Phonographic Industry – BPI (the British representation of Warner Music Group, EMI, Sony Music Entertainment, and Universal Music Group) are lobbying to enforce their market position if they find it difficult to develop new capabilities to exploit the business opportunities of the digital economy. However, in this power struggle between the old (analogue) and the new (digital) economy, it is disappointing to see how the International Federation of the Phonographic Industry – IFPI (who represents 1400 companies across the globe) seems to mainly represent the interests of the labels in this case, given many poor regions of the world are not poor in cultural expressions and work hard on developing an independent music industry. Music industry figures from the Caribbean, South America, Africa, and Asia (e.g. India) have discussed for years (already at the UN Least Developed Countries (LDC)-III Conference in 2001 which I attended) how the Internet and the new digital technology could enable them to become independent from the music majors and how this would stimulate local development, local employment and wealth through global connections. However, they need to develop capabilities in order to do just that. It is therefore a worry that only 8 per cent of online music services identified by IFPI are hosted in developing countries (International Trade Forum 2009), and this should be a concern of the IFPI.

Broadening of cultures and welfare in more regions of the world should really be on the agenda. “Despite being the “home” of world music, developing countries are for the most part unable to provide the production and promotion capacities expected by rising stars. As a result, revenues are mostly channelled through record companies in Europe and the United States, and very little trickles down to the countries of origin” (Labbé, International Trade Forum 2009). As Daba Sarr, coordinator of the Export Bureau for African Music (BEMA) in Dakar, Senegal, puts it, “Either African artists are signed up by the big labels in Europe and the US, or they struggle to get noticed and make a living” (cited in Labbé, International Trade Forum 2009). This situation could be changed in the on-line world, but this is not happening. Of course pop-concerts (LiveAid and like) supported by IFPI and the labels are useful in creating awareness of the suffering in poor countries and financial aid. However, their role in facilitating proper long term economic development, and finding ways of maximising the economic contribution music can play to poor economies (who are rich in music talent) in a digital world where music is produced, shared, and consumed in new ways, seem not be on the agenda.

To correct for this failure of a true global representation of the music industry, The Digital Economy Act in the UK could have presented an opportunity to set a president for increased inclusiveness and been looking forward in ever increasing digital global society. Instead, we are now shackling such welfare effects. 

Shackling the Digital Economy means Less for Everyone

Wealth creation in the Digital Economy is based upon sharing and access.

It is a paradox that while digitalization has allowed sharing of information, that we are shackling this via strong intellectual property rights. Such policies are based upon orthodox theories, or belief systems of the rationales for IPRs, rather than evidence based research. It is also a paradox that while policies are making our IP stronger and more exclusive and with increased enforcement, – that practices embedded the new digital economy business-models and other modern organizations are governing IP in less exclusive environments and create wealth via non-proprietary models or by other means in the value chain.

Supporters of the Digital Economy Act have no idea of the power of the Internet. If the new LibDem-Conservative coalition government has any business sense, it will recognize that if we don’t embrace the digital economy we will be shackling British businesses, innovation, skills and markets and there will be less for everyone in the future.

Birgitte Andersen
Professor of the Economics and Management of Innovation, Birkbeck College, University of London

(1) This  blog was first published in DIME, “Shackling the Digital Economy means Less for Everyone:  Why the DIGITAL ECONOMY ACT is bad for the music industry and the digital economy”

Author: 7 years ago

One of the largest and most closely-watched intellectual property disputes in the United States right now is the lawsuit that Viacom, a major media company, filed in 2007 against Google. This is a copyright case, not a patent case, but it has major implications for the types of technologies that will be valuable in curbing copyright infringement in the digital age. Many such technologies had their core patents granted ten or more years ago, and many of the patentees went through periods of trying to sell their technologies but finding that those who wanted online copyright enforcement (media companies or content owners) were generally not willing to pay for the technology.  Thus, much of the potential for monetizing these technologies is now arising out of patent licensing rather than technology product sales.

A key question being decided in the Viacom vs. Google litigation is which copyright enforcement technologies will be mandated by law and who will pay for them; the noted cyberlaw expert Jonathan Zittrain of Harvard Law School called this issue the “gravamen” of the case.

The last couple of weeks saw a development in the litigation that should set the stage for decisions to be made at high court levels in the U.S. that have the potential to change the law, and thus change the outlook for certain technologies. On June 23, Federal district judge Louis Stanton granted summary judgment in favor of Google in the case.  In his 30-page opinion, Judge Stanton found that YouTube is covered under the safe harbor specified in section 512 of US copyright law, which was enacted as part of the Digital Millennium Copyright Act in 1998 (leading to the nickname “DMCA 512″ or more simply 512).  The DMCA was primarily enacted to bring the United States into compliance with the WIPO Copyright Treaty of 1996.

DMCA 512 states that a network service provider such as YouTube (which is owned by Google) can avoid copyright infringement liability for content posted on its site if it responds to properly-formed takedown notices from copyright owners by removing the content in question.  This law is often mischaracterized as “Websites are legally obligated to respond to takedown notices.”  They aren’t actually obligated to take content down when asked; they just avoid secondary liability for copyright infringement if they do so. Many are calling this decision (which means that the case will not go to trial) a victory for Google and a defeat for Big Media.  But that is hardly the case. In fact, it’s quite possibly the outcome that Viacom was hoping for.

As I noted last October, Viacom should not have wanted to win this case at the lower court level.  Its preferred outcome ought to be to get the law changed so that website operators like YouTube have the responsibility to ensure that unauthorized copyrighted content doesn’t go up in the first place.  Certain technologies such as video fingerprinting are necessary in carrying out this responsibility.

District courts don’t normally change laws; higher courts do.  There are various examples of Supreme Court decisions that have changed the course of copyright law in the U.S., including Sony v. Universal (known as the “Betamax” case for the videotape format involved) in 1984, New York Times v. Tasini in 2001, and MGM v. Grokster in 2005.  Even appeals court decisions such as RIAA v. Diamond Multimedia (“Diamond Rio,” 1999), Universal v. Reimerdes (2000), and  A&M v. Napster (2001) have had major effects on copyright.

Of course, Viacom intends to appeal the case up the legal chain.  It is worth noting, however, that Judge Stanton relied heavily in his opinion on the recent district court opinion in Universal Music Group v. Veoh, in which Judge Howard Matz similarly sided with the website operator by asserting that it did enough by complying with 512 takedown notices.  The media industry’s push to hold network service providers and website operators more responsible for protecting copyrights has not stopped and will not stop here.

Bill Rosenblatt, IPEG consultant, GiantSteps Media Technology Strategies

Author: 8 years ago