17 Basic Considerations on Forms of Information Transactions—Focusing on Protection and Use of Information Goods in
Cyberspace and Related Legal Disciplines—

Long-term Overseas Research Fellow:Ryu Kojima（*）
Although the emergence of cyberspace brought benefits, specifically, easier information access, easier acts ofexpression and easier information transmission, it has come to show the possibility of restricting the freeexchange and use of information in combination with legal revisions aiming to restrict the circumvention oftechnological protection measures as well as the prosperity of contract-based private discipline.
This study carries forward consideration on the forms of future information transactions in the mass
market. Major subjects for consideration are (1) relationships with contract doctrine and technologicalprotection measures and (2) relationships between intellectual property law, contract law and pricediscrimination theory, which is often used to justify information transactions using contracts. While paying
attention to these points, this study aims to provide consideration by outlining the entire information
distribution process from the viewpoint of fares for information use.
In terms of free use of information, this study aims to acquire knowledge by making reference to the recent
progress in discussion on copyright law and freedom of expression in U.S. law.

1

Awareness of the Issue and Analytic
Viewpoints

With new legislation and legal revisions
aimed
atprohibiting
circumventionoftechnological protection measures, information
providers have been using contracts to take theinitiativein
distributionininformationtransactions in cyberspace. Consequently, asituation has arisen where forms of use, whichhave been cost free in the past, are now
prohibited or charged. Is this present situationconsidered unfavorable because it waters down
copyright laws, or can this situation bereconsidered positively from another viewpoint?
The following confirms the present situation,
which is the precondition of this study. While theadvances of digital technology and global-levelnetworking as represented by the Internet havebrought about the benefits of easy access to
information, they are considered to have createdthe possibility that creation and distribution by
information providers are hindered by illegal
copying of works and exchanges thereof (seeNapster etc.). In the conclusion of the CopyrightTreaty at the World Intellectual Property
Organization (WIPO) in 1996, the Contracting
Parties were required to establish legislationprohibiting the circumvention of technologicalprotection measures that prevent illegal copying(for example, copy protection technology thatprohibits cut-and-paste and access control
technology that makes it impossible to access(*)

information without certain certification). In the
United States, the Digital Millennium CopyrightAct (commonly known as DMCA) was enacted in
1998, and the act of circumvention itself wasprohibited. In Japan, the provision of equipment
mainly used for circumventing technologicalprotection measures was prohibited throughrevision of the Copyright Law and the Unfair
Competition Prevention Law.
The establishment of laws that prohibit thecircumventionoftechnologicalprotection
measures (though the level of protection differs
between the United States and Japan—the act of
circumvention itself is prohibited in the UnitedStates while the act of providing equipment
mainly used for the act of circumvention isprohibited in Japan) means that it has become
virtually impossible to conduct the act of
circumvention at a general user level.
Consequently, the importance of contracts
secured by technological protection measures is
now attracting attention. While technologicalprotection measures have a passive character of
preventing unauthorized access to information byhackers (it would be more appropriate to say“crackers”: who are technically “professionals”),
they also have an active or aggressive characterof promoting or forcing general users, who aretechnically “amateurs,” to conclude contracts
supported by themselves. This point should be
noted.
In plain language, a situation may arise or
has already arisen where forms of use, which

Associate Professor at Kyushu University Faculty of Law

IIP Bulletin 2005

● 126 ●

have been in the territory of free use inconventional intellectual property law, areconstrained by contracts secured by technologicalprotection measures. It is now an urgent task to
consider how intellectual property jurisprudence
should respond to this issue.
2

Area of Law to Be Referred to and Law
Used for Comparison

Based on this reality, this study examines thequestion of how information transactions, mainly
in cyberspace, will be changed by contract law
and technological protection measures. Thoughconventional studies involved discussion over thelegal nature of provisions restricting rights under
the Copyright Law (from Article 30 onwards of
the Copyright Law), they lacked the dynamic
analysis of the actions of parties concerned in
relevant situations. This report aims to acquire abasic, uniform viewpoint for the legal
consideration of future information transactions,through examination of desirable informationtransactions in the future that are based oncontract law and technological protection
measures by using “fares” and “costs” in theoverall order of transactions as analytic
viewpoints.
In analyzing the theme of this study, it isnecessary to adopt such viewpoints as intellectual
property law (especially, copyright law), contract
law and technological protection measures in thesense of restricting access to and copying of
information.
For analysis, the following viewpoints arealso indispensable: (1) trade secret protection law
in terms of the analysis of information to whichaccess is not permitted; (2) the Constitution fromthe viewpoint of relationship to creative/
expressive activities, especially the relationshipto freedom of expression; (3) the Anti-Monopoly
Law and the theory of industrial organization interms of the present situation where information
providers often exercise monopolistic power inthe market. As long as this report considers
information transactions from the viewpoint of“fares,” knowledge in fields such as theAnti-Monopoly Law and the theory of industrialorganization is fundamental in terms of thequestion of what price action monopolisticcompanies take. In addition, (4) consideration on
the public domain, which is a concept contrary to
the confinement of information, is also essential.
Due to space limitations, this report cannot cover
all points in this argument in full detail, but broad
viewpoints as above should always be kept inmind.

This study considers U.S. law for comparison
due to the following reasons.
Firstly, in the United States, there is a judicial
precedent which recognized a shrink-wrap license,
dramatically enhancing the position of contract
law in cyberspace (ProCD case appeal decision).
Secondly, the United States was the first country
to take legislative measures that prohibit thecircumventionoftechnologicalprotection
measures accompanying the progress ofdigitization (Digital Millennium Copyright Act).
Thirdly, the United States aimed for alegislative
solution(Uniform
Computer
Information Transactions Act) in terms of thehandling of information in contracts.
Fourthly, in line with movements in the realworld, there are principle considerations
established by several groups with a view not
only of neighboring areas of law, but also with aneye on neighboring science fields.
From the viewpoint of future legislation andestablishment of global views, the accurate
understanding of U.S. law is indispensable. Thisis also considered meaningful from the viewpointof the importance of steady work beyond mere
“imitation of the outer structure” of U.S. law.
3

ProCD Case

To analyze a certain phenomenon, it isnecessary to go back to the point when thephenomenon first occurred and seek theprehistory of or the prerequisites for its
occurrence. In line with the main subject of thisstudy, that point is the ProCD case(*1) in which ashrink-wrap license was first recognized.
The plaintiff ProCD, Inc. developed a
database covering the information of more than
3,000 telephone directories, and set the price of
one set at 150 dollars for general users and at ahigher price for commercial users. On thisoccasion, the products for general users were
subject to prohibition of use for commercial
purposes. This is known as a “shrink-wrap
license.” The defendant Zeidenberg bought the
product for general users and started databaseservices contrary to the usage restriction. In sodoing, Zeidenberg set a lower price forcommercial users than the price set by ProCD. A
noteworthy point in dispute in this case is theestablishment and enforceability of a shrink-wrap
license. The establishment of a shrink-wrap
license was denied at the stage of the trial court.
The appeal court(*2) is controversial. Judge FrankH. Easterbrook of the Seventh Circuit affirmed
both the establishment and enforceability of ashrink-wrap license. The grounds for justification(*1) ProCD, Inc., v. Zeidenberg, 908 F. Supp. 640 (W.D. Wis. 1996).
(*2) ProCD, Inc., v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996).

● 127 ●IIP Bulletin 2005

used there are known as the price discrimination
theory. That theory is to be explained later, but an
example cited by Judge Easterbrook can besummarized simply as follows.
A law student uses the Lexis database,containing documents in the public domain, undera contract limiting the retrieval results to
educational endeavors, and Lexis charges a law
firm a much higher hourly fee. In such a case,
may the student resell his access to the databaseto the law firm?
ProCD offered software and data at two
prices: a lower price for personal use and a higher
price for commercial use. Zeidenberg tried to use
the data without paying the latter price. If the law
student could not sell his access to the databaseto the law firm, neither can Zeidenberg use thedata.
As can be seen from the price discrimination
theory, two important points for analyzing the
ProCD case are as follows: (1) the viewpoint of“fare” for the use of information and (2) the pointthat consumers can choose from several forms ofuse. In these points, the costs to which attention
should be paid in the process of use anddistribution of information are questioned.
Therefore, before proceeding to discussion on theprice discrimination theory, the next part verifies
one model for the use of information, which has
been discussed in U.S. jurisprudence in recent
years.
4“Fair Use,” “Fared Use” and “Price
Discrimination”

It has been pointed out from the viewpoint of
the overall distribution process that a transition
from “fair use” to “fared use” is expected tooccur in future information transactions.(*3) An
important matter there is transaction cost, whichis also counted as an element to be considered indetermining the establishment of fair use. In thecase where a license is easy to acquire, theestablishment of fair use is liable to be denied.
Therefore, the area of fair use will be reducedwith the development of information andcommunications technology. This knowledge isvery valuable for the reason that it indicated thepossibility of fares being charged for the forms ofuse stipulated in provisions restricting rights,
which have been cost free up to now, because
transaction cost is taken into consideration inseveral provisions restricting rights underJapanese law (from Article 30 onward of the
Copyright Law).
Seen from the viewpoint of cost, there isanother question of whether fair use is “freeuse,” that is, cost-free use. This idea applies tothe area of information use only, but users pay
costs such as copy fees and time and transport
costs necessary for going to a place where
information can be collected. Moreover, since theboundary between fair use and the act of
infringement is unclear, the possibility of beingsued is also included in the cost. These are“hidden costs” for the use of information.
Purely theoretically, if all sorts of hidden costs are
reduced through fared use and development of
information and communications technology, andthe application of the price discrimination theory
expands the scope of choice for goods andservices, consumers will be able to choose goods
according to their own state of interest and goods
providers’ profit will increase, which is desirablefrom a welfare viewpoint.
In this manner, considering information
contracts with the mass market from theviewpoint of overall price in the process of
information transactions, one of the important
keys for the solution is the price discrimination
theory. The price discrimination theory is amechanism in place of the acceptance of theestablishment of shrink-wrap licenses andclick-on licenses, which requires information
providers to prepare several options in advancedepending on the form of access to or use of
information, and to allocate different prices forthe respective options. This framework forthought is the one advocated by Judge Frank H.
Easterbrook in the appeal court (Court of Appeals
for the Seventh Circuit) on ProCD Inc, v.
Zeidenberg (commonly known as the ProCD case),
as mentioned above.
There are wide-ranging discussions over thisissue. For example, there has been fierce debate
on the issue at the stage of revising the Uniform
Commercial Code Section 2B (commonly known
as UCC 2B) to make it applicable to information
contracts. This issue was tentatively settled in
the form of the enactment of the Uniform
Computer
Information
Transactions
Act(commonly known as UCITA), but judicial
precedents are lacking and problems are yet to beclarified in many points.
In this regard, some argue that theestablishment of shrink-wrap licenses should beapproved since mass-market licenses themselves
increase social efficiency. However, it must be
noted that a descriptive statement that theestablishment of shrink-wrap licenses andclick-on licenses brings about Pareto superior(this point must also be reserved) is not directly
linked to a proposition that “contracts should beformed.” Another step of justification is required(*3) See Tom W. Bell, Fair Use vs. Fared Use: The Impact of Automated Rights Management on Copyright’s Fair Use
Doctrine, 76 N.C. L. REV. 557 (1998).

IIP Bulletin 2005

● 128 ●

to accept the formation of a contract, which is akind of “fiction.”
Apart from discussion on contract formation,
another subject being hotly debated is thequestion of whether price discrimination itself
increases social efficiency. On this point,
efficiency increases according to economic
analysis. However, it is also said that social
conditions premised in economic analysis are
hard to achieve. As one of the conditions for theeffective functioning of the price discrimination
theory, it is said to be necessary for information
providers to completely understand consumers’
preferences as well as the amount of fares that
consumers are willing to pay (that is, willingness
to pay). In this point, there is a strong tense
relation between the introduction of the pricediscrimination theory and privacy, which must be
noted.
5

Points
Revealed
byDiscrimination Theory

the

Price

However, taking into account the legal
protection of technological protection measures
such as copy protection and access control,
discussion over price discrimination seems to beunavoidable in seeking the establishment of a
new legal system in anticipation of theinformation society of the future. Problems
revealed by the price discrimination theory are
pointed out below.
Firstly, the price discrimination theory
revealed the location of “costs” in the entire
information distribution, as mentioned above. The
theory is thus considered to have shown thepossibility that the overall costs of informationtransactions will be reduced as a result of “fareduse” and price discrimination.
Secondly, there is a problem that appears
through price discrimination and arbitrage, whichis related not only to cyberspace but also to theworld of corporeal things.
It has been repeatedly questioned why alicense contract is necessary in terms ofshrink-wrap licenses despite the fact that theownership of the corporeal thing has essentiallybeen transferred to the consumer. In the casewhere we buy books or music CDs, we neverconclude a contract such as a “reading license
contract” or “listening license contract” before
enjoying information attached to such media. Why
do we need to conclude a contract only in the caseof shrink-wrap licenses? Which is to say, it isnecessary to clearly recognize that there areseveral hurdles to clear before software license
contracts can be established as an obvious thing.
On the other hand, for books, music CDs andsoftware games, regulations on the secondhand
market and rental market have been frequently

discussed. Secondhand goods are capable ofsubstituting for new goods, which means that asort of arbitrage is conducted at the stage of asecondhand market. As mentioned above, theprevention of arbitrage is cited as a condition for
the effective functioning of the pricediscrimination theory, and relevancy can also beseen here.
The above indicates problems arising fromoverlap of ownership of corporeal things, thediscipline of contract law and the use of
information. In information transactions incyberspace, click-wrap licenses, in which
information providers and consumers are in a
direct contractual relationship, are becoming
mainstream, beyond shrink-wrap licenses.
However, it cannot be overemphasized thatshrink-wrap licenses are not relics of the past, but
are in fact shedding light on an old but new
problem, which is relationships between theownership of corporeal things, intellectual
property rights and surrounding contracts.
Considerationofdesirable
informationtransactions in cyberspace seems to be a good
example indicating that a classic problem is being
redefined with a new face.
Thirdly, there is a question of who will takethe initiative in information distribution as aresult of price discrimination, “fared use” andtechnological protection measures. If the scopeand level of protection under the current
intellectual property law remain the same, thepower of information providers will naturally
increase. In this regard, the way of considering
free use by small-scale creators and consumers isquestioned.
6

Intellectual Property Law, “Freedom ofExpression”
andEnrichment
ofInformation

The previous intellectual property laws haveaimed to enrich information. It is now necessary
to improve the understanding of the meaning of“enrichment of information.” In the first place,can this remark itself be talked about in avalue-neutral way? It has been argued recently in
the United States that the strength of the rightfor commodification of information, including
contract-based commodification of information, isclosely related to the political form. That is,paraphrasing this into the context of intellectual
property rights, the protection of strong
intellectual property rights by necessity promote
information
distribution
bylarge-scale
information providers (they often have many
“strong” intellectual property rights) in some
aspects. If the level of protection of intellectual
property rights is lowered, in other words, if thefree use of information is promoted, user-level● 129 ●IIP Bulletin 2005

creative activities will be encouraged.(*4)
Also interestingly, there are views assertingthat it is unconstitutional for the authors or
copyright holders of original works to exercise
their right to request an injunction against thecreation of derivative works.(*5) This issue issuddenly getting attention because a lawsuit was
actually instituted in the United States in relation
to the publication of a parody of “Gone with theWind.” In this regard, the idea of “profit
allocation” has been advocated in place of theright to request an injunction. This idea aims for
coordination between authors (copyright holders)
and the creators of derivative works at a low cost,and it seems to be an idea close to the right toclaim fares, which has been discussed in Japan. At
any rate, it is worth noting that constitutional
scholars express doubts about the existence ofthe right to request an injunction, though only interms of derivative works.
A clear strategy can be seen in thesearguments for the review of copyright(intellectual property right) and freedom of
expression. That is an intention to strengthen thestanding of small-scale creators in information
distribution, which is virtually dominated bylarge-scale creators and information providers.
This is an indication that is unavoidable when
considering future information transactions, if
criticism against the price discrimination theory,“welfare loss,” is taken into account.
This also corresponds to the move towards
transition from property rules to liability rules,
which has recently been proposed in intellectual
property law (in Japan, there are views proposing
transition from the right to request an injunction
to the right to collect fares).
A pioneering study on “property rules” and“liability rules” is a paper by Guido Calabresi, etc.
in the Harvard Law Review in 1972. In terms of adesirable choice between “property rules” and“liability rules” in considering property law andtort law, Calabresi, etc. drew a very clear
conclusion. That is, the amount of “transactioncost” determines which to choose between thetwo rules.
Applying this idea to information contracts,
it is considered reasonable to a certain extent tointroduce liability rules by using the pricediscrimination theory as leverage in the situation
where some people point out a low predictability
in cyberspace, that is, the possibility ofincreasing transaction cost in the network

society of the future.
7

Toward Establishing an
Information Transactions

Order

of

This part briefly points out problems withactually establishing an order of informationtransactions by using the price discrimination
theory.
The first problem is the overlap between theconfinement of information and the use ofservices. For example, in terms of database,although access to information appears to beunder control at first glance, it actually involves
the mere use of retrieval services. In this case,relationships with intellectual property law do notmatter. However, the situation differs if the use of
information itself is restricted beyond the use of
retrieval services. In such a case, a tense relation
with intellectual property law becomes apparent.
It may be permissible to put restrictions on use
conditions in the case of confidential informationsuch as trade secrets, but information confined bytechnological protection measures cannot betreated in the same way. It becomes necessary to
work on setting detailed conditions for access anduse according to the characteristics of individual
information, such as paintings, music, literaryworks and factual information. In doing this work,
it will be necessary to borrow knowledge fromneighboring academic fields, such as aesthetics
and semantics.
Secondly, there is a possibility that forms ofuse, which have been cost free up to present,such as quotation, will be charged due to “fareduse,” bringing about the effect of fading academic
freedom and other kinds of fundamental freedom.
A noteworthy point here is the actual condition inwhich when researchers and students access
commercial databases, they are, in general,
substantively exempted from the payment of
fares for access within the scope of academic
research on the basis of attribution to a researchorganization or other organization. It isconsidered necessary in the future not only toview such actual conditions as mere fact, but toalso normatively create situations where
fundamental freedom is ensured.
The meaning of “fared use” also requiresconsideration. Under the current system of theright to request an injunction, information users
always take the risk that their freedom of action
will be bound by right holders. Such a risk may be(*4) See Wendy J. Gordon, Market Failure and Intellectual Property: A Response to Professor Lunney, 82 B.U. L. REV. 1031
(2002); Noguchi Yuko, “Dejitarujidai no chosakukenseido to hyōgen no jiyū (ge)” (Copyright system in the digitalera and freedom of expression (2),” NBL, no. 778 (2003): 36-.
(*5) See Jed Rubenfeld, The Freedom of Imagination: Copyright’s Constitutionality, 112 YALE L. J. 1 (2002). Professor
Rubenfeld’s paper is very interesting since it reveals relationships between the creation of derivative works andthe freedom of expression by using two concepts, “freedom of imagination” and “fiction,” as key elements.

IIP Bulletin 2005

● 130 ●

settled as a mere monetary matter or may cause
fear of being deprived of creative activities. The
right to request an injunction even functions to fix
a relationship between right holders and users
into a hierarchical relationship.
However, under “fared use,” it is possible forusers to defect from such a hierarchicalrelationship and take an equal position to rightholders by paying a certain amount of fare. That is,a hierarchical relationship is reconstructed into ahorizontal
relationship.
Dynamic
creative
activities are carried out based on thecontinuance of such a horizontal relationship totertiary and quaternary creation.
Although this study mainly considers
information transactions in cyberspace, it is not
as if information can only be obtained incyberspace. The “off-line” world exists
authoritatively, and its importance has not been
reduced in the least.
An important point is that it is desirable that
there is more than one access route to
information and alternate means are available.
This is also related to the point that users canchoose from several forms of use under pricediscrimination. The significance of secured
possibility of choice does not remain within theprice discrimination theory.
In short, a desirable situation in the future
information society is a pluralistic one whereusers can choose from several channels, such as
the public domain, commercial retrieval systems
and databases, open sources, information
provision by administrative organizations,libraries, art museums, museums, universities
and other social infrastructures, depending on
their own situation.(*6)
8by the prima facie pomposity of the phenomenon.
Based on analytic viewpoints obtained though thisstudy, the author intends to conduct fully-fledged
considerationondesirable
informationtransactions in the international society, including
relationships to contract law in general, in light ofthe characteristics of individual types of
information and in consideration of trends in
Europe, which are not mentioned in this study.

Conclusion

This study aimed to obtain analytic
viewpoints and legal viewpoints for considering
information transactions, through examination ofdesirable information transactions in the futurefrom the viewpoint of “fare.” Since the problem
covers a wide area, the whole picture thereof
cannot be grasped without analysis from various
viewpoints. Although it is an undeniable fact thatthe author intended to conduct this study becauseof his stay in the United States whereinterdisciplinary studies are vigorous, to be frank,
the author keenly felt the lack of his ability.
Though the theme covered by this study ismodern, problems questioned therein are quite
classical. The author strongly felt the necessity ofcontinuing steady study without being deceived(*6) See Pamela Samuelson, Mapping the Digital Public Domain: Threats and Opportunities, 66 L AW & CONTEMP. PROBS.
147, 153 (2003).
● 131 ●IIP Bulletin 2005