Institute forInternational Policy Studies・Tokyo・助成

IIPS International Conference“The IT Revolution and the Transformation of Society
Tokyo
November 5-6, 2003
“Basic Questions Raised for Intellectual Property”
byChristopher Gibson
Partner
Steptoe & Johnson
LondonBasic Questions Raised forIntellectual Property
Christopher Gibson
Partner
Steptoe & Johnson
LondonThe IT Revolution andthe Transformation of Society
November 5-7, 2003

A Reinvigorated Debate
X Which of these statements is true?
X Intellectual property has never been more important

X Intellectual property has never been more openly

questioned (or more broadly under attack)

Both!

Evolution in Technology PresentsNew IP Issues
XPrinting press«

publication

XXerox«photocopies

XComputer«

perfect quality digital copies

XInternal Network«

copies (software) shared amongnetwork users

X

Global (open) network«copies shared among infinite
number of anonymous users

X

Increasing bandwidth(“broadband”)«

high data-content copied& shared (documents, music,movies, images)

X

Wireless + broadband«

infinite possibilities to copy,transfer, share unprotected
information & IP`

Evolution of IP
X The manner in which intellectual property rights

are expressed, used and exchanged is constantly
adapting to new developments in underlying
technologies· The intellectual property system, therefore, must itself be

evolutionary in order to properly serve society –including the needs of creators and the public at large

Impact of IT Revolution on IP:
Seven Powerful Trends
X

General “consciousness raising” for IP

X

Renewed/intensified debate concerning appropriate scope of protection

X

Expose the limits of territorial-based (international) IP regime

X

New public/private morality questions posed to a new generation

X

X

X

Business re-evaluates methods in light of digital networks and limits ofIP protection
Technology “arms race” concerning IP protection – burgeoning market
for technology devoted to IP protection / elimination
Educate a new generation of lawyers / law-makers

Driving Factors Affecting IPX

Rapidly globalizing economy

X

Growth & dissemination of ICTNetworks, intranets, virtual private networks, etc.
X Growth in wireless infrastructure
X Wireless technology and Internet merging
X New technologies
XX

Increasing ease of use / convenience
XNew developments in means of access
Hand held devices) Peer-to-peer technologies)

XXAvailable to broader public

Rapidly growing & diversified population of users
10% of world’s population on online (Nov 2002) – increasing faster than anticipated
X New generation of educated users
X Increasing number of countries connected
X

X

Decreasing cost of access
X

Cost of access varies widely and accounts fordifferential rates of penetration

New Institutional Issues for IP
X

Horizontal impact of Internet /electronic commerce) connections with other areas of public policy and regulation (e.g.,privacy, competition law)
) new coordination required among international organizations / nationalgovernments

New issues / new contexts (domain names, privacy)
X The public - private interface re-definedX) Call for openness and transparency

The speed of developments vs. length and slowness ofmultilateral processes
X International medium ⇒ international issues
X

X emergence of issues at international level before, or

simultaneously with, national discussions) Example: online piracy, service provider liability

Where are We Going?
Implications for Still IP Accelerating
X

Greater number of online users
Culture of Internet remains in transformation
X Increasing diversity of users / languages
X Increasing number of users from countries without strong tradition of IP protection
XX

Uses of Internet diversifying
XToday, Internet used mainly for email and searching for information

X

More powerful technology leads to other uses where IP is more directly implicated:• Purchasing goods or services– Physical goods (computer goods, books, clothing)– Digital goods (computer software, music, film, photos)• Listening to music• Watching films

X

Substance of use increasingly subject to IP rights

Need for More IP Regulation?
X

Leading view: ecommerce should be lead by private sector inresponse to market forces) Use self-regulatory or market mechanisms developed by marketparticipants) Governments should exercise restraint) Avoid conditioning future technological development through regulation(or use technology neutral regulation)
X

Internet: no central point of authority) ICANN) National Governments) International Organizations

X

But - intellectual property matters are unique:) Recognition that private sector does not create IP rights / laws
) IP rights do not exist independent of government legislation) “minimalist” regulatory approach preferred(1) General “consciousness raising” for IPXX

Just over 15 years ago IP was viewed (by those even aware of it) as
relatively quiet, specialist area
IP today is daily news) Record industry’s battle with online piracy

XWorld Summit on Information Society (Dec. 2003) – Draft Declaration of Principles“Intellectual Property protection is essential to the Information Society. Existing
intellectual property regimes and international agreements should continuously
provide this protection, thus promoting the necessary balance between owners
and users of intellectual property.” Art 40CX

Fundamental shift: investors now value companies based
significantly on intangible assets) Value of business assets reflected, increasingly, in intellectual as opposed tophysical property) Example: value of many online companies found in their vast databases of customer
information which may be the subject of IP protection (EU Database Protection
Directive, No. 96/9/EC, March 1996)) Example: purchase of DHL by JAL and Lufthansa
X

Much greater involvement by stakeholder groups

(2) Intensified Debate on Proper Scope of Protection:
Definitions
XX

X

The nature of an intellectual property right – to control and exploit theproduct of one’s own creativity and/or innovation – remains relatively
constant
The definition of rights – which determines their scope – is the key issue
as IP is neither more nor less than the sum of the rights granted by the law
New dimension: intellectual property has “migrated” to the Internet – thishas intensified the debate:) Internet has affected both form, context and substance of IP) this migration has raised questions about the appropriate scope of protection

in new contexts for each of the traditional categories of IP: copyright andrelated rights, trademark and patent rights
XThe character of the IP system must be evolutionary because the mannerby which IP rights are expressed / exchanged is constantly adapting todevelopments in the underlying technologies

(2) Intensified Debate on Proper Scope of Protection
The Network Effect “Network effect” – Internet gives immediate access, exposure, interlinking opportunities to growing worldwide community and market
 Direct impacts:­ Copyright¶ Vast potential: digital distribution for copyrighted material (text, music)¶ Infringement concern: ease of making multiple, perfect quality, unauthorized,
copies (piracy)¶ Open source movement: question whether any protection at all should beaccorded to certain digital expressions­ Trademark¶ New exposure for SMEs and their trademarks / brands to international markets¶ Debate about protection in new areas: domain names, meta-tags¶ Concern with infringing, unauthorized uses (cybersquatting)­ Patent¶ New possibilities and opportunities for invention¶ Issues: business method patents & multi-jurisdictional
infringement

What is Creating the Pressure?
X The Internet facilitates exchange both in physical and intangible products• For commerce involving physical products Internet functions as a global
system facilitating sales – place order and goods themselves are deliveredseparately)For commerce involving intangible products Internet serves not only as a system topromote sales, but also as system to effectuate delivery of the intangible productitself (software, film, music or publication))The distribution can take place almost instantaneously and the intangible productmay travel virtually without restriction across national borders)There is an inherent logic to using the Internet to buy / sell (or copy) intangible

products that need never be more than digital “bits”. John Perry Barlow has
spoken of the “digitization of everything not obstinately physical.”X But – there are massive infringement concerns:

The Internet is “the world’s biggest copy machine” (PC Week, Jan 1997)
X Difficult issues are raised by (i) vast availability of IP on the Internet, (ii) the easeof copying and distribution of copies, and (iii) the relative
anonymity afforded these transactions

Lively Debate: Emerging Copyright Issues forDistribution of Digital MediaX Debate operating at extremes

greatest risks posed by digital networks for piracy andinfringementvsnew technologies have potential to completely lock-up content,
thus eliminating traditional limitations and exceptions (fair use)
existing under copyright law

IP and Ecommerce
X

Electronic commerce more than other business systems
involves selling or transacting in products and services thatare based on IP and its licensing) music, pictures, photos, software, designs, training modules, systems,

other services, etc. are all traded through ecommerce) IP is the main component value) IP is important because things of value that are traded on the Internet

are protected by technological security systems and IP laws

XIP also makes ecommerce work) the systems that make the Internet work -- software, networks, designs,chips, routers, switches, user interfaces -- are IP and often protected byIP rights) The technology-intensive nature of ecommerce means that many of its

constituent processes may be patentable subject matter so long as thelegal criteria for patentability are met

Debate in this Area Too:
IP and the Internet Engineering Community
X

Current and continuing debate on Internet
X Internet was made successful because it is an open network
X “open source” software and code
) facilitate or deter innovation and research?

XStandard-setting exercises for open, interoperable technologies) Internet Engineering Task Force (IETF)• “The Internet Engineering Task Force is a large open international
community of network designers, operators, vendors and researchers
concerned with the evolution of the Internet architecture and smooth
operation of the Internet.”) World Wide Web Consortium (WC3)• Patent policy: “All who participate in the development of a W3C
Recommendation must agree to license essential claims (that is, patents thatblock interoperability) on a royalty-free (RF) basis.”) ICANN(3) Expose the limits of territorial-based(international) IP regime
XWorld Summit on the Information Society (Dec 2003) – Draft Declarationof Principles:“The Information Society is intrinsically global in nature”

X

Territorial-based system for registration and enforcement of IP rights) Internet creates clashes between rights registered in different territories) Examples:• domain name disputes: Seoul District Court decision: sex.biz• WIPO Standing Committee on Law of Trademarks (SCT) – ongoing study– What constitutes “use” of a sign on Internet– What constitutes use within a territory↔ there must be a “commercialeffect”– Enabling coexistence– Use of disclaimers

(4) New public/private morality questions
posed to a new generation
X

What is wrong or right?
X

X

Expectation among many users that information and IP sourced and downloaded from theInternet should be free

Current levels of online piracy described by music industry as “a 21st Century piraticalbazaar.”)

X

Fight continues worldwide: Tokyo District Court issued temporary injunction against
Japan MMO to prevent it from operating the P2P service File Rogue (April 2002)

Some statistics:
950 million pirated discs were sold in 2001) World pirate-music market valued at US $ 4.3 billion) More than a million users are typically online with Morpheus, a P2P site that enables users
to trade video files) Estimate 400-600,000 films downloaded illegally every day)X

Education of online consumers is key, through programs designed to raise awareness at
an early age of the value of IP and recognition that unauthorized copying of works istheft(5) Business re-evaluates methods in light ofdigital networks and limits of IP protection
XThe business models are changing – and must change

XFor IP, businesses are taking very different approaches
X When existing businesses move too slow, new businesses are being

developed quickly to take advantage of new technology
X Music:) eMusic, MusicNet, FullAdio, Rhapsody, Liquid Adio, Press PlayX Mobile content) identifying the value chain and new coordination requiredX

Licensing arrangements become paramount(6) The technology “arms race” for IP protection“Computer security and digital rights are so vexing because their solutions
seek to protect technology from itself.” Washington Post, June 2002
XXX

How does one make computer systems secure from code writers whose
goal is to defeat such security?
How does one protect digital content when technology, by its nature,encourages copying?
WIPO Copyright Treaties (1996) introduced new norm at international
level) WCT & WPPT: recognition of vital role played by technological measures –established “technological adjuncts” to exclusive rights (Arts 11-12)) prohibition against circumvention of(i) technological measures of protection, and(ii) rights management information

(7) Educate a new generation oflawyers / law-makers
X Implications for the legal profession and hence future law& regulation
X Only one IP course offered when I went to law school

X Law schools have extensive IP and technology programs
X There are cases being decided daily & world-wide thatare addressing the new issues created by digital networks) Two quick examples:• meta tags
• Ecommerce Directive

Web Browser

Typical Web Flow:
Web Client

An HTML Document is served
via the Internet from a web
server to a web client and ismanifested in a web browser.

Great Ford Cars!

HTML Document<meta name="Keywords" content="GE,General Electric, GE products,electric, General Electric Co., GE
Corporate, GE Business, appliances,lighting, silicones, plastics"><a ref=“http://www.ford.com">GreatFord Cars!</a>

WebServerInternet

HTML Hyper Linking:
A Closer Look
X

HTML facilitates linking through use of “references”

X

HTML references look like:<a href=“http://www.ford.com">Great Ford Cars!</a>

X“FORD” is a registered Trademark of the Ford Motor
Company – e.g., U.S. Reg. No. 1,575,166

Meta Tags: What is Permitted Use ofAnother’s Trademark?
“Nominative use” is permitted use
X Only so much of another’s mark may be used as is reasonably

necessary to identify the product or web site¸ reasonable use suggests only one or limited number of instances; andX US: web site operator must do nothing that would suggest

sponsorship or endorsement by the trademark holder.

See Terri Welles, et al. v. Playboy Enterprises, 279 F.3d 796 (9th Cir. 2002)
X UK: similar legal approach¤ targeted, repeated use is trademark infringement & passing off
See Roadtech v. Mandata [2000] ETMR 970 (High Court)EU e-Commerce Directive*
False Hope of Harmonization?
X

Minimalist legislation - intended to harmonize practice in 15
EU Member States“The development of information society services . . . is hampered
by a number of legal obstacles . . . which make less attractive theexercise of the freedom of establishment and the freedom to provide
services [within the EU] . . . Obstacles arise from divergences innational legislation and from legal uncertainty as to which nationalrules apply . . . .”X

Was due to be implemented by 15 States on January 17, 2002
) Implemented in Austria, Luxembourg and Germany) Still being transposed in other States* Directive 2000/31/EC of June 8, 2000

EU e-Commerce Directive
X Intended to address B2B and B2C.
X Broad scope covers X Information society services
X Information Requirements
X Commercial communications
X On-line contracts
X Service provider liability
X Dispute resolution
X Country of origin rulee-Commerce Directive
X Information society services (ISS) (art. 2)
X spans a very wide range of services and economic

activities, including services offered by means ofelectronic licensing -any service normally provided for remuneration at a distance by means of electronic equipment for processing and storage ofdata - at the individual request of the recipient
X For IP: includes licensing of services and products on-line) games, software; content; video on demand;) tools for search, access and retrieval of data;) commercial communications by email;transmission of information on networks;) providing access to networks; and hosting)Country of Origin Rule
X Key term ¨ country of origin rule (art. 3)
X avoid complying with laws in 15 different EU Member States

ISS should be regulated at the source of the activity £ service
provider must comply with national laws in country where
it is “established”) place where a service provider pursues an economic activity using afixed establishment for an indefinite period (presence of technicalfacilities alone not enough) (arts. 2 & 4)
) if several places of establishment ¨ look to place where provider

has “center of activities”

Country of Origin Rule(cont’d)
X Member States cannot restrict freedom to provide ISS fromanother State for activities falling within the “coordinated field”) includes all ISS activities such as service provider qualifications andauthorizations, quality or content of services, advertising, contracting andliabilitybut ) countries may derogate (i.e., restrict) from freedom to provide ISS for reasons of• public policy (e.g., hate speech, religion, sex, nationality),• health and security,• protection of consumers) does not apply to• copyright and industrial property rights or• contractual obligations in consumer contracts

Uncertainty in harmonization
X Uncertainty remains for licensing and ISS activities
X What the Directive appears to provide in some areas, ittakes back in others

X broad potential derogations for licensed content) seek indemnification from licensee if reseller

X contractual obligations in consumer contracts) remains potentially subject to 15 country regimes

X formal requirements for on-line licensing of copyright works) writing and signature needed for exclusive licenses and assignments?

X does not ease licensing requirements for on-line music) need license of rights in each country State) Harry Fox / BIEM - mechanical rights for national societies of authors) record industry - recording and performance rights

X Copyright/trademark infringement left to national law) actual knowledge?

) notice and takedown left to national level(law or voluntary code)

Sum: Role of Intellectual Property
X The intellectual property system is of critical importancein maintaining a stable and positive environment for thedevelopment of electronic commerce
X Electronic commerce raises complex challenges for theexploitation and protection of intellectual property on
global digital networks
X Developments associated with the Internet and electroniccommerce have potential to affect virtually every aspectof the exploitation and protection of IP

Christopher Gibson
Partner
Steptoe & Johnson
Londoncgibson@steptoe.com